Our website has one goal: to help contractors build stronger, more profitable businesses. On occasion, we receive comments from consumers on our website, and I’d like to address one of those comments today. This consumer has a strong belief that contractors should provide itemized estimates.
He clearly stated his distaste with our article. That doesn’t bother me; the posts we make, both in our newsletter articles and on the blog, are focused on helping contractors. I’m not going to change the message, which we know from years of experience is the right approach, to keep contractors out of hassles and arguments with consumers who think they know something about our business.
Let’s have a look at one of his comments:
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I would just like to add a consumer’s opinion to this. I think it is short-sighted to have the mindset that the consumer is out to get, or take advantage of the contractor by asking for a detailed estimate.
A contractor that I hired to do a porch for me recently did a great job and within budget. I have recently bought another house and wanted a lean-to roof over the deck. It is a project that I am capable of, but do not have the time before the summer. So, I asked the same team to give me an estimate – and it was, in my opinion, extremely high. I asked them for a detailed estimate so I could ascertain where I might be going wrong or if there was a misunderstanding on the project. I am not looking to rob the contractor, but I want to see where the extra $1000 in material cost is coming from. They refused, and even though they are in my opinion, the only contractor I trust right now, I am not hiring them. It would be irresponsible as a consumer to hire them for a job that I believe is overpriced without doing my due diligence in protecting the project and my pocket book.
Let’s be honest, contractors do markups on their bids for numerous reasons. One of them being that they have tons of work lined up and unless they are going to make a mint on the job, they don’t want to mess with it. So, they mark it up and if the consumer wants to pay that then it is worth their time. Obviously, a 10% markup on materials for loading, pickup and transport is not going to be a noticeable difference; nor would I even take issue with that.
But, the contractor should absolutely understand when I ask for a copy of their insurance/bonding and a detailed estimate, I am protecting myself. And, you are right, I might find something that is missing which will raise the bid, but that is another good reason to be sure you receive an itemized bid. I want to be sure that the expectation is understood and all parties are on the same page.
I definitely do not appreciate your article’s one sided view that all consumers are out to rip off contractors.
It’s fairly clear that he doesn’t have a lot of trust in contractors or knowledge of the construction industry. His focus is on price. I’ll guess he’s either been burned by a flaky contractor, or he just wants to go cheap. A few comments caught my attention that I’d like to look at.
“Let’s be honest, contractors do markups on their bids for numerous reasons.” There is only one reason that counts, and that’s to cover their overhead and profit.
“A 10% markup on materials for loading, pickup and transport is not going to be a noticeable difference; nor would I even take issue with that.” I should hope not. A ten-percent markup is a classic example of a contractor giving his work away. You can’t survive on ten-percent overhead and profit. By the way, the only way you’d have a separate markup on materials is if you’re building this on a time and material or cost-plus agreement, in which case the time spent loading, picking up, and transporting materials should be a labor cost.
“The contractor should absolutely understand when I ask for a copy of their insurance/bonding and a detailed estimate, I am protecting myself.” It makes sense to ask for a copy of insurance and bonding to protect himself, but how does a detailed estimate protect him? If consumers pick their contractor based on the company representative, the company, customer testimonials and to a lesser degree, time in business and jobs completed, they will choose a quality contractor. You don’t need protection from a good contractor. He’s worried about protecting himself from a price that is higher than he wants to pay.
In a separate note, he compared getting an itemized estimate from a contractor to getting an itemized estimate for a car repair. Buildings aren’t as standardized as automobiles; if they were, we could provide estimates over the phone all day long. There’s a reason that estimating is a time-consuming task in construction.
He makes one good argument, and that is knowing what is and isn’t included in the price. That’s why you need to provide a detailed contract, specifying everything that is going to be done. It also needs to detail the materials to be installed. A solid, detailed contract will eliminate almost all the “problems” that the writer of the above note talks about.
I appreciate the contractors who’ve stepped into discussions like this one to attempt to educate homeowners. In our classes, I talk about knowing when to walk away from a job or a potential difficult customer. Now you know a few more things to look for.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations.
Related Article: Itemized Estimates