Itemized Estimates

When a client asks for itemization, they normally add the phrase, “So we can compare bids.” Right.

If you and I and a third contractor were all preparing an estimate for the same job, any job, we would come up with different numbers. The only way we would reach the same cost for the job would be if we discussed it together. Even then, we would probably have different ideas on how we would do things and what it would cost. And as we have discussed time and again, it’s unlikely that the three of us would have the same markup. So, if the three of us working together would have a difficult time estimating a job and agreeing on what it would cost, how can a client with little or no training in construction do a relevant comparison? They can’t.

But that is not why they are asking for itemization. Let’s be clear about it. In too many cases, clients are looking for itemization so they can lower your price. Or even worse, they’ll use it to try to lower your price during the course of the job. We get calls and emails from contractors in this situation at least once a week.

“My client won’t pay me because they say they could have bought their windows someplace else for less money.”

“My client won’t pay me because they say we are charging too much for our work.”

“My client won’t pay me because they say they got another quote from their brother-in-law who is an electrician and his price is half of what you guys have on your sheet you gave me.”

“My client won’t pay me . . . ” and on and on it goes.

What happens is this. You start their job and they start making changes. At about 60-70% of the way through the job, they realize there isn’t enough in their budget to cover the job because of the changes they made. The thought process is, “We have to find the money somewhere.” So they go looking in your pocket.

Suddenly the numbers you quoted on your itemized sheet are too high. Your labor is running way over what it should. How dare you charge that much for a door! They can buy the same door for $____ down at the Big Box store. Tell me you haven’t heard this nonsense. And it all started when you handed them an itemized list of the numbers for the job. Itemization is handing your client bullets so they can shoot at you.

When someone asks for itemization so they can compare bids, the first thing out of your mouth should be,

“John, Mary, let me tell you how we conduct our business. We come out and talk with you about your project. We find out what you want to do, when you want to do it, we set the budget for the work and then we do the work of getting the job ready to start under a design agreement. Part of getting the job to the starting point is developing a firm price quotation or an estimate.”

“Neither you nor anyone else outside our company could read my estimate sheet, so we would have to spend considerable time in putting it in a format that you could understand. If you want an itemized estimate, that is a lot of extra work for us. We charge $75 an hour for itemization and your job will take between six and eight hours to compile such an estimate. Now, if you want me to proceed with that estimate, we will be glad to do so, but only if we are paid for the work we do. Is that fair enough?”

Then you button up and listen to what they have to say. They will tell you real quickly where you are with them. If they ask if the itemization fee will be credited back with the job, the answer is a polite “no”. If they come back with “Everyone else we have called is giving us a free itemized estimate”, that’s your lead into “Are you getting other quotes for this job? What’s your criteria for picking your contractor?” And you now have the opportunity to establish yourself as the contractor of choice.

If they insist on free itemization, walk away. If you don’t, you have no one but yourself to blame when you find yourself in a fight over the details you provided.

(By the way, this is straight from our book, Profitable Sales, A Contractor’s Guide, page 208. If you want to resolve a lot of those nagging sales issues that are costing you sales and/or causing you problems when you get the job, buy the book and read it. It’s worth your time.)

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Clarification for Home/Building Owners

Our website is written for and to contractors, not for home or building owners. Contractors understand the terminology used but that’s not true for some home or building owners.

This article is referring to firm fixed price quotations. That’s when a contractor provides a single price to do a project. The article does not refer to Time and Material or Cost Plus jobs. I talk about those types of contracts here and here, and a few other places on our website.

Estimates are (or should be) provided before a job begins. Itemizating an estimate is the process of breaking down that estimate and providing individual prices for each piece. If that’s what you want, you should expect to pay for that effort. However, your contractor should always provide you with full detail on what work is and isn’t included in the firm fixed price. This should be in the written contract that you sign before a job begins.

If you’re not happy with your contractor before the job starts, find another contractor. If you want an itemized estimate, let them know at the first conversation so they can decide whether or not they want to work with you.

Related Article: An Opinion on Itemized Estimates