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| Subject - Charging for a bid | |
| John A. Peters |
I got a phone call from a client today stating that it was illegal to charge for an estimate and that all estimates should be free. My advertising does not state anything about free estimates. She went on to say that it's against the law to charge for an estimate. I asked her who she had checked with besides the other contractors in she alluded to the Better Business Bureau and some other agency. She demanded her checked be return by mail and I said okay, okay. I didn't want to get into any kind of a complaint arena. It reminds me of onetime long ago when s client inherited a house and apparently he had no idea what prices amounted to in the industry. He complained to the contractor state license board that I came up with a number out of my hat. Sadly I had to attend a meeting at the contractors state license board, but happily they declared that it is the job of any contractor to come up with a price, and they basically sent the homeowner away. Our normal policy is to let the client know there's a small fee to do a formal estimate, and then go to the job and do a free guesstimate. If they are agreeable to the rough ballpark price, then I confirm that there is a small fee to type up the estimate and draw up a formal contract. Most clients are happy to pay this fee but once in a while they don't say okay while I am explaining to them the benefits of a detailed estimate with each item on the wish list having its own separate price. If I don't get any kind of a nod of the head or an okay then I ask him if it's perhaps the case that they are getting multiple estimates. If they are then I have the option to do a free estimate, but usually instead I take them for their time and let them know that I'm going to keep my valuable notes of the estimate in my office but that I will file it in the pile called "someday". Does anyone have any information on any particular charge being illegal? I really doubt it, but I would like to know any help you can give me. |
| Pat@amber | I've never heard or read anything about the legality of charging for an estimate. You are using your valuable time to provide your customer with a service. That deserves compensation one way or another. Auto mechanics charge a diagnostic fee and then give you a free estimate. Maybe we should charge for diagnosing the existing situation and then give them the estimate for free. I believe this is how ESI members are told to do it. Pat |
| MONOLITH | I never charge for the first consultation or an estimate. I get the call, I arrange to meet at the project to go over the details, and I create an estimate. I don't charge a dime for any of that. The reason is; I can make all the money I need to from doing the actual work, I don't need to make money just meeting with the client. I also think it gives me a competitive edge over my competition, who are telling people over the phone that they will charge them money just to come out and look at prospective work. People don't like that. It gives the immediate first impression that your customers are just cattle waiting for you to run them thru the process. I'm happy they called me. I want the work. I'll make my money after I close the deal, and my customers apreciate my hospitality. Just my opinion, and I'm still learning. |
| Romex Racer | Customers all think they're massive legal experts. Of course it's legal to charge for an estimate. Ordinarilly I would refund an unhappy customer but if my customer tried to impress me with their supeior legal knowledge and attempt to shame me by informing me of my criminal behavior, I would definately keep the money. If they paid by credit card, I would have used their CC number and responded to all those phishers from "eBay" et al... BTW the Better Business Bureau is a scam and if they're giving legal advice they should be investigated. 'nuff said! ......................RR |
| Russell120 | Unless you KNOW, you don't know. It is often surprising what is illegal, and the laws vary widely at times among the states. I would call you State Attorney Generals office (they probably have someone who deals with contractor issues) and ask. It may be legal, it may be illegal, or it may be illegal under very particular circumstances. |
| John A. Peters | We started charging (again) to filter out the customers that are bid shopping. I like the advice of Charlie Greer which is to use the dispatch and travel charge or the appointment fee or whenever you call it as a variable work load filter. When work is slow quote a smaller number, and when you get busy use a larger number. Right now were using dollar figures that are approximately equal to some where between 25 minutes and 15 minutes of our hourly rate but it is stated in terms of dollars. I've given our CSR (customer service representative) the freedom to quote as low as six minutes worth of time at our normal hourly rate. I advised her to only use that low an amount if the customer questions the amount equal to 1/2 an hour (speaking in dollars) Those customers might be a senior person who is on a fixed income. Kind of a senior discount. At first she was afraid to ask for a travel charge. I explained that I talked with the client after I had restored power on an emergency call the other morning. The couple had no power because when the guy turned off the main, it would not turn back on again. That call the customer had called everybody in the Yellow Pages that had a yellow page add that was larger than ours and got nowhere other than to be told their travel fee and that they "have no one available today" and they can come tomorrow. So they were happy to pay any fee that you ask. It's just the fear of the unknown. Of course were talking emergency calls and service calls, not competitive bids. I have used travel charge fees as a filter in the past. Remember about three years ago. It was in the dotcom boom and shortly after that time. Some people who got laid off decided to invest money in fixing up their house (real estate you know) and it was so busy that we really couldn't handle all the work and I called around and found out most people in Yellow Pages were asking $50 travel charge at that time so we did the same. After a slow down there is a period when almost everybody was doing free bids. Right now or backup to 30 or $35 and it really does push the cheapest jobs down onto the guys who give free estimates which is really fine with me. I really don't enjoy going onto somebody's house in finding out that they're getting five or six bids. As you know we do not win our jobs by price alone but rather lots of other good features. That reminds me that I need to update my list of good features and benefits and memorize so as part of my writing out the customers needs I can clarify to them why people choose to go with us even though we're not the cheapest bid and don't intend to be. |
| Romex Racer | Here's a good link. http://www.nbnnews.com/NBN/issues/2004-12-13/Small+Builders+and+Remodelers/ |
| MONOLITH | That is a good link RR. And I do understand and agree with what it says. Right now, for me, I'm small enough that I can go with my 'free estmates' plan, and it still works for me. When I get larger, and it becomes more difficult to do it all, that may change. Yet I would like to think that I will always have the opinion on it that I do, even years from now. I look at it this way , and perhaps naively, but still.... when that phone rings, someone is offering me an opportunity. I don't wish to make them pay for offering me this opportunity, and I still think that's one more thing I have over my competition. |
| John A. Peters | quote:Except that sometimes the "opportunity" is a chance to bid against three to seven other companies. If you can consistently win under these conditions your prices are too low. Once in a while it is a chance to educate a do-it-yourself person on how to do the work. If you ever get more than one or two of these in the same week, it tends to change your viewpoint. I think the first time you try asking for a travel charge or etc. it is just as hard as asking for a date when you first meet a girl when you were a young man. When you get over your fear, and just try it, sometimes you are rewarded with a wonderful comment. I always feel good when the client says something like, "I understand that it takes time to do good estimate", or even "Will the travel charge be credited toward the job if I hire you?" (The answer is yes) It has been said and it is MHO that if you are winning more than one out of every three bids your prices are too low. Would you care to share with us what your ratio might be? ESI says that you should close 90 percent of your jobs, on site, on the first visit, so of course that would make my rule of thumb inappropriate to the ESI model which is almost totally service calls and emergency calls. It's not very hard to close every sale on an emergency call. You are there and they need your help. The three to 1 ratio is more appropriate for jobs that are competitive bids. Have you ever driven across town and when you arrive at the job site, someone else was already there already working? Have you ever gotten there first and the customers phone rings and you hear them telling the other electrician that "I already have an electrician here working"? As a review, you can regulate the amount of business you get AND THE QUALITY OF THE CLIENTS, by regulating the amount of the travel charge you ask for. I now feel that zero (free) is as too low a number and you should at least ask for something like $10 so you can gauge the reaction and eliminate flat-out the multiple-bid, tire kickers and the past-tense people who say I WAS thinking of... Let me ask you, 1) Would you not be willing to pay $10 to have a plumber drive over your house with his rig and be ready to give you a written bid if you needed the work done? 2) Would you will be willing to pay each of three plumbers $10 each, to come over your house if you just wanted to get the cheapest job, you are not sure if you might do it your self and you were planning to get more than three bids and choose the cheapest one? Does a free penny shopper newspaper have any advantage over one that costs 25 cents? I think it might depend on how serious you are about reading. Just my 2 cents. |
| MONOLITH | quote: Yes, and last time I checked, that was the American way. Competition is a part of our system. I don't necessarily think it should be in my gameplan to avoid competing. It should be in my gameplan to make sure my presentation wins me the job over my competitor, not avoid it. As I said John, I do understand. But remember where I am. I don't have several employees, I don't have ten calls a day, I'm not turning down work because I'm 'too busy'. I've been in business 6 months. When that phone rings, I'm still thinking "Oh thank God". In the future when I'm better established, I'm sure it will be much easier for me to take a different approach with prospective clients. quote: I'm willing to sacrifice ten dollars to be able to get that WOW factor over my competition when I say "No, don't worry ma'am, I'm not going to charge you just to come out and talk to you". Instead of $10, I can add triple that into the invoice when I have the job. I'd rather lose $10 to improve my chances of getting the job, and make $30 walking out the door instead. |
| stedder | I agree with Monolith, for services, rewires, service work etc. I can 80% of the time get the job and then I really don't need to get my money back, my rates are enough to cover my travel time and also to take the extra time to assure a good and good looking job. However I recently finished spending at least 40 hours bidding, no wait, designing a commercial job from a half assed set of prints and then when the customer saw how much info was lacking on his part he redrew the electrical portion and, again I re bid the job and still had a page of questions, THEN he decided to take my design and get a price from another contractor auggh, the other guy came in 22,000.00 lower (customer said he'd give me last looks) this was almost a month ago and I still haven't seen what the other guy bid. I did find out there were major changes (service size, panel types, sizes, locations, # of, changes in lighting, security on and on and on) but apples to apples, NOT. Any way enough whining, the moral is I don't mind the little jobs at no charge but there will be an up front fee for design and price on more time consuming stuff. I'm going to check out the job tomorrow, I have the feeling I'm gonna see electric stubs and such. Oh well, still learning shoulda' knowed when I saw the first set-o-prints. |
| MONOLITH | I agree stedder, if I was design building a small commercial facility or something similar, I would charge for that time. |
| John A. Peters | In the following I'm speaking of a door charge, which you may think of has a dispatch fee, an appointment charge or a travel charge or some other name. What is the best name for this fee? ------------------ I can see it that many of us here on the forum, come from various locales with quite differing price scales as well as differing levels and sizes of business. We pay our men wages ranging from $15 or $20 per hour up to 30 or $40 an hour, right? The retail price we charge our customers ranges from $35 or $40 to $200 or $250 per hour. The lower retail rates are based on contract work in the competitive bid environment and higher numbers are based on service calls were a typical day amounts to only four or so billable hours out of and 8 hour workday. We have a spectrum of business, from those of us building up a new business from scratch while working full-time somewhere else, and some of us have been in business for years, and are trying to slow down from burning the candle at both ends. I think that Monolith is smart to not filter his calls with a door charge, because he gets calls from the results of his direct mail to customers who live in upscale neighborhoods that he chooses. He has filtered his calls before they pickup the phone. Those following the ESI model with a full-page yellow page ad, may get so many service calls that typically they need a filter that equals somewhere between 10 minutes to 30 minutes of the Tec's retail sales price. It looks like Charlie Greer is correct when he says use the door charge as a tool to regulate not only how much business you take, according to how much business you need and want. I would add that it is also a very good way to regulate the quality of the customers you decide to work for, if they are unregulated externally. My advertising discourages commercial calls and encourages homeowners with old Victorian houses. But I still need to filter them a bit. I find that using a small door charge uncovers the tire kickers in the multiple bids artists, before I invest more than telephone time talking to them. I find I need some kind of a minimal door charge or else about 2-4 times a month I get to the job and find out they are looking for the cheapest possible price. Since we do not win our jobs based on price, but rather many other quality issues that I address in person with the client, these jobs and have been a waste of time in my case. I hope to see more opinions here. Don't let my summary close off this thread, please. |
| MONOLITH | quote: This is a very insightful statement John. You have validated my own method, to me.  I hadn't really thought about it in this context before, but you're absolutely right.Hearing it put this way, it sounds like a most desirable situation too, doesn't it? I feel pretty good about this now. Heh heh, Thanks John.  I think it's also impressive that you are actually paying attention, and remembering, the various subtle differences of each members situations here. Cheers. |
| techsol | I hate to admit it but twenty odd years ago I was where Monolith is now. I also never charged for any type of estimate. But then, purely by chance, I was in a supply house waiting on my order when the guy beside me pulled my in depth estimate sheet from his pocket and began ordering from it. Burned more than just my butt! From then on, if they want a ballpark, I try to sell them Rigley Field. I will quote a price over the phone, sight unseen never! If they want a free estimate they have to get it from the guy with the rusted out truck, who'll set a mobile home service, digging and all for the cost of the materials and $150.00. I dont want that type of work. I have been in the business for close to forty years and have managed this one for nearly twenty. I tell my customers that they pay not for my time but for my knowledge. The difference in a "Maybe this'll fix it" and "Yes, Ma'am, that solves the problem!" You have got to place a value on what your time is worth. And you can bet the farm that the companies with ten trucks charge for it one way or another. Is their time more valuable than yours? Not if you want to be around for more than a few years. And by the by, my company has been here since 1926. Just my opinion though. If youre good at what you do and provide professional service, charge what you're worth. You may get lots of work the other way but going broke is still going broke. Norman |
| wilkie | Hoorah, techsol. You keep preachin', and I'll keep turnin the pages. Me likey what I hear. |
| mahlere | quote: Reminds me of a saying my father always told me (still does too) "I can go broke sitting on my ass, no need to work myself there" Always figured it made a lot of sense. |
| John A. Peters | After speed re-reading the several comments above, I conclude that there is less of a need to charge a dispatch fee on service calls because, they need a problem fixed, and there is no competition once you have arrived. The other extreme is the tree trunk sized roll of prints that are from a out of state GC. With these you have do a free bid. It can take quite a bit of knowledge and time to calculate all the details of a large project, but that is how they work as far as I know. The exception is when you have a good general contractor that you work well with and he treats you well, he may offer to pay your time to do an estimate as part of his policy to keep his best subcontractors around. However, the residential jobs, larger than a service call, and especially in the competitive bid owner builder jobs, I really do think it's a good idea to learn how easy it is to talk to the client about a retainer fee. But the real reason to talk about a retainer fee is to feel out the reaction of the client. Usually somewhere in the conversation when I mention the fee they say OK. If they don't then the next question is perhaps you're getting multiple estimates? Or perhaps something like I guess you cannot afford to pay for every estimate when you're getting several bids, right?. Just trying to say that asking for a retainer fee or dispatch charge excellent tool to upgrade your profitability. Currently our policy is - Unless you have a set of plans, then we need a dispatch fee. Commonly, all the client knows is that they "need more power". In this case they need me to use my knowledge to figure out what is needed, and they should pay something for my knowledge (rather than my time), as techsol so eloquently stated. My dispatch fees are fairly low and sometimes I don't even get time to mention them. I do include a line item in my estimate to cover the time I spend working an estimate with all the details properly published. Of course everyone has to factor in something is for the time he spends on so-called indirect tasks which are not actually hands-on tool belt work. Once again really depends on how busy you are. I find it easier together retainer fee when I take the time to them all the good things they get. I am a Master Electrician. I took a code class 25 years ago and refresher course a fiew semesters ago. I will devote an hour of my time to visit your job site and do an estimate. I will give you more answers than you have questions, and I will give you a 16 page booklet called Dealing with Contractors. This is a good deal.The retainer does not pay for my time. It is a token payment that encourages me more than the actuall value of the money. It makes the job real. I would like to ask monolith how many jobs do you win out of each 10 jobs that you bid? |
| MONOLITH | quote: I'm trying. I'm learning. |
| John A. Peters | I had a bit of an usual situation today that upset me a bit. Maybe I was not as well-prepared as I thought. A client called talking about some outage mostly in the bed room and bathroom. I mention that she should check the GFI before I come over there. I was on the way home but I changed my round of it to swing by her house in case she needed me. However when I called her I found that she was on the cell phone and heading home. When I got near her house I called her again and found out the was driving all the from way from down the Peninsula where she sends her kids to a better school. She said it would be another 20 minutes before she got there. So I took a nap in the car. When she finally got home a bout 35 minutes later (not 20) all it was a GFI to reset, which I did. I mention to her that I did not know I should charge half-price or what. She said "Today is my daughter's birthday so maybe..." So I ended up leaving, but when I looked at my paper work, I discovered that I had been there almost an hour. Of course most of the time I was taking a nap. So I did not charge her anything, even though she had signed my invoice with the ok for my rates. I guess such as life. Maybe it's OK because she and her husband had given us several thousand dollars worth the work about five years ago but if I were to do it again I think I'd charge her at least half-price. Is there a better way here? |
| BASE | John, So, the GFCI controlled part of the bedroom? |
| MONOLITH | quote: See, now here is where we differ. Remember the Saturn car commercials? "We're a different kind of car company"? I must be a different kind of contractor. You said as you were driving home, 'you decided to swing by'. So you made the choice to check on her, she didn't call you to initiate the service call, right? That almost sounds like a favor. Then you slept in the car, and only pushed a GFI button. A 'several thousand dollar customer'. I would have said "There you go Mrs. Ma'am. Have a nice day. Just remember who your favorite electrician is". And I would no doubt still be that. Sometimes, I think it's better to let '1 hour' go, as insurance to get that next 'several thousand dollar phone call'. These are your customers John. Give a little. Treat them well. And they'll keep calling you no matter how fancy the competitions YB ads get. It's an hour, on your way home, you initiated the visit, and you slept for half of it. I also find it telling, that you wanted to point out that she got there in 35, instead of 20 minutes. It was rush hour in San Fransisco John. It was 15 minutes, that you napped. Give the people that pay your bills a little slack John. It will repay you tenfold. I'm sure it can be said "yeah but if you do that all the time, you'll go out of business". Think about if that is really true. Nickle and diming a valued customer, that can diminish your client base, weaken the word of mouth endorsements, and allow your competition to become 'their favorite electrician'. As always, just my opinion. But my own empire is growing by leaps and bounds. Cheers. |
| MONOLITH | quote: Sorry John, I didn't see this earlier. I went into business last September. 8 months. In 8 months, I lost only two jobs I went and looked at. Now you're thinking "you have to be charging ridiculously low rates." But I'm not. I used you as a model, and I'm charging the same $106/hour, as a minimum. Sometimes much more depending on my gut feeling about the intended customer. I am not afraid to vary my labor rate on each job, based on all the factors I see before me. That's not profiling, that's smart business. Honestly, keeping ESI type rates in mind, I usually push my labor rate up around $150/hour. And if I told you how low my 'break even' number is for my tiny business, you'd faint. My presentation is professional and impressive. I win my customers over easily. I get tremendous repeat business. The nature of my direct marketing campaign has my client base growing daily. The two jobs I lost, were people who were just looking for the cheapest price, and I thought my prices were already more than fair. ($265 to rough in a bedroom ceiling fan, 2nd floor with attic above). Some people are simply looking for some hack to come in for nothing. I think my biggest 'secret weapon', is somehow I manage to make my customers really like me. And it's not by low prices. I refer you to my post above about your 1 hour GFI visit/nap. Cheers. |
| John A. Peters | One plug on the back of the bathroom wall. Not the best, I agree. |
| MONOLITH | quote: I'm not sure if I can tell from your post, how you're taking mine. I apologize if it seemed too critical. I just think there's a valuable concept that's being lost, and I'm trying to shed some light back on it. All I'm trying to say, is it's easy to become caught up in the science of trying to bill for every minute of the day, that we lose sight of the 'human' side of things. I suppose gone are the days of our grandfathers that made deals on a handshake. I think absolutely nothing of spending an hour at a clients house, on my own time, to make a contact, and close a deal. Anyone can bill for every phone call, every minute spent driving to a house, and every run to a supply house. My customers know I'm different. I seem to really care about the relationship between my customers and my company. If I have to invest an hour of my time to instill that reputation in my clients, who will pass that on to future clients through positive word of mouth, that hour has more than tripled it's original value. I don't need to bill for every second that I'm nurturing my business. Sometimes just being out shaking hands and making contact is worth far more than what you can bill for that time. Did you see the movie Gladiator? "Win the Crowd", John. Win the crowd. |
| John A. Peters | You are correct and very astute too. I like your way of business and may adopt some of it too. She Had calledl my office and it was relayed to me via short text message. Now I am glad I did not charge. Thanks VERY much for the feed back. |