Two Building & Remodeling Pros Share Their Estimating Secrets

Banish ‘Sunny Day Conditions’

“It’s natural for remodelers to want to assume the best, but then they are  disappointed when things don't arrive on time or something else goes wrong,” Richardson says. “I think if you can build in a little bit of tolerance you can learn from it and adjust quickly,” he says. His firm, he says, reviewed the accuracy of estimates monthly “and we would tweak them up and down every month,” he says. It created a level of consistency that was closer to real time, not the performance a year ago.  

“I figured out a way to make it a game. Games are fun, and estimates are not fun,” he says. “I determined there's only about 22 line items on any remodeling project. If you can have the discipline to stick with that checklist, and make sure you're backfilling in the right information for each, the likelihood that you're going to be wrong is much less.”

Embrace the Awkward Discussions

Conversations with clients about markups and detailed cost breakdowns can be uncomfortable, but both panelists agree that they are inevitable.

Panella says he does find such conversations difficult.“You're working with people who want to know what you are paying for things and what you are making on top of it,” Panella says. “People think it's pure profit, it’s not though.” 

Richardson suggests using the discussions as a way of educating clients. Remind yourself, he says, “it's their budget, not your estimate. The more you can make it be about their budget and not your estimate, the more you are then the advisor. You're guiding them on how to spend their money, not necessarily just controlling the cost,” he says. 

When a client asks about markup. “The quick answer is… what we generally target is between five and 10% net profit,” Richardson says. “Nine times out of 10 when you give that kind of response, the client will say ‘oh my god, is that all you really targeted?’” he says. “I would venture to say most of you don't make more than 10% net profit after you have paid for yourself, paid for your office, paid for everything. Therefore, you are disclosing the profit margin and you're able to communicate it with a client in a very effective way.”

What should you do if a client wants the work done with zero markup? “Then I am probably number one, encouraging them to go to the home center and do it themselves,” he says. If their budget does not include working with a professional it simply makes sense for them to take a different route, he says.

Make Documents Good-Looking Too

Panella recalls working with a tile contractor who wrote his pricing breakdown on a napkin. 

“It was a good napkin,” he says. “The guy does amazing work. He could be working with any builder he wants to, but his presentation is lacking.” More doors would open if he held himself to a higher standard and built a better looking proposal using software like Houzz Pro, Panella says.

Estimates need to be as beautiful as they are accurate just as a restaurant menu should be attractive, not just a food-stained piece of paper, agrees Richardson. “Having tools, especially technology tools, like Houzz Pro, make it more beautiful, make it more professional, and it becomes something I trust,” he says. 

Richardson also had some advice for those who are hesitant to adopt tech tools. “Respectfully to everybody here - and I know there's some folks here that have a lot of sawdust in their blood and you like to do things the old way - but using technology is like wearing shoes,” he says. “Get over the old way, and at least integrate in some of the fundamental technologies.” Not only will it make your business run more efficiently and professionally, tech-savvy companies  impress customers,” he says. “It's a sales tool to have the client see you and differentiate you from the pack by having technologies.”