Should your business be charging clients for project estimates?
You can’t ask a doctor to tell you what’s wrong but then say you might not pay for the diagnosis. That’s according to Brian Altmann, president of DBS Remodel, in Poughkeepsie, NY, when asked whether builders and remodelers should charge for providing project and cost information to clients considering their services.
Homeowners are often quick to push back if they’re quoted a price for information they’ve long known to be available for free. Yet there is no shortage of stories from builders who discovered the free estimates they were handing out were being used to negotiate a lower price with another contractor the homeowner had already decided to hire.
Altmann says one reason pros provide quotes gratis is that they don’t think they have an alternative to offer the homeowner. “Because homeowners are asking for a price and we may not have the confidence or believe we have the right to charge, we give in,” he says.
Having an estimates policy in place before the first phone call or meeting with a prospective client can go a long way toward saving valuable time and frustration. That will make it easier to determine what, if anything, to charge.
Rethink your wording
Part of the debate over whether to charge for estimates stems from the inconsistent vocabulary used to define the cost and scope of work projections offered to clients, says Mark Harari, vice president and chief marketing officer for Remodelers Advantage, a consultancy based in Lithicum, MD.
Yet there is a big difference between an estimate, a bid and a proposal. Pros can start by cleaning up the language. Estimates are defined as a rough calculation or approximate value, he says. Contractors relying on past experience can most likely give a broad price range off the top of their heads without investing much time. “If it’s just a ballpark or rough number, that can be free,” he says. “But make sure you’re staying true to what an estimate is. Once you go out to the house, measure and get prices, that’s a proposal and that shouldn’t be free.”
As a builder who once provided detailed, complimentary estimates, Altmann found that some prospects wouldn’t even call to let him know they were going with another company. He has been charging for those estimates for the last 15 years.
Replacing uncertainty with value
When potential clients come knocking for an estimate, pros should first determine whether the client and their project is a good fit for the company. Prequalifying the customer is one way to do this. “If the client is unrealistic about the schedule or the price, then why give them a couple of free hours when you could have done this over the phone and not wasted your time?” says Shawn McCadden, a remodeling industry specialist based in Brookline, NH. McCadden has posted a list of 25 questions on his website that companies can use as a starting point to the prequalification process.
Harari also recommends prequalifying clients and projects. “Tell them you can give them a rough estimate over the phone,” he says. “But when you go out for a project consultation or feasibility study, then you need to charge.”
Educating homeowners on what a useful quote or estimate entails is important. As defined, an estimate doesn’t help them make an informed decision on which contractor is best for their job. In fact, Altmann says, estimates are meaningless if they’re based on vague or hypothetical criteria. “You can’t charge for a rough calculation hastily done and incomplete,” he says. “But you can charge for something of value.”
"If the client is unrealistic about the schedule or the price, then why give them a couple of free hours when you could have done this over the phone?"
Altmann’s project evaluation process considers design, job scope and cost analysis based on project-specific criteria. That benefits the contractor and homeowner by reducing uncertainty, he says. If awarded the job, he applies the fee for the evaluation toward the cost of the project. No one should sign a contract without knowing exactly what they’re getting, he adds, and the method functions well for the type of client he wants to work with. “Someone trying to get something for free or half-price isn’t a good fit for our company,” he says.
Builders can also use these early conversations to their advantage. For example, if a customer asks one business why it charges for estimates but their competitors don’t, that builder can use the opportunity to differentiate their services and explain the value they bring.
Guesses are free
When a prospect asks for a ballpark number, McCadden says he sometimes asks which ballpark they’d prefer, Fenway Park or Yankee Stadium. The purpose of the remark is to open the door to a conversation reminding the potential client that numbers don’t have much value unless there are specifications to give them relevance. It’s also important to clarify what information they’re really asking for.
“Consumers say they need an estimate, but what they really want is a fixed price,” McCadden says. “So ask them if they’re sure they want an estimate, because that’s off the top of your head, based on assumptions, and you’d rather give them a fixed price.”
"You can’t charge for a rough calculation hastily done and incomplete, but you can charge for something of value."
President, DBS Remodel
McCadden encourages builders unsure of whether they should charge for these initial services to consider what they’re really selling. “An estimate is just a commodity,” he says. “But the knowledge, design talent and value-engineering skills you bring to a job are worth something. You have every right to charge for that.”
When remodelers tell Altmann that they’re still uncertain if they can charge their prospects, he recommends starting with a lower fee and raising it in the future, when they’re more comfortable with the system.
The bottom line? “When you charge, you have to give your clients their money’s worth,” he says. “But you’re a professional. Once you believe in the value of the service, it’s easier to ask to be compensated.”