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Are Free Estimates Really Free !?!

By on July 22, 2013 in Pricing and Estimating with 29 Comments

We give them away everyday!

charging for estimatesIt’s a daily occurrence all over this grand landscape of contracting. We run out and give away our time and experience for free hoping we will get a certain portion of the business. It’s one of the few professions where we give away our expertise.

So that’s just the cost of doing business right?

Imagine calling a doctor’s office and the asking the doctor to see you for free and give you an estimate on the cost to fix your broken leg. We pay to have a diagnostic check performed on our car when the check engine light appears on the dashboard.

Let’s look at the real costs of giving free estimates:

The average contractor gives 2 to 3 estimates a week and let’s assume this is for 40 weeks out of the year. If you live in a typical area of the country let’s say it takes 30 minutes to drive to and from the site each way. Let’s throw in about 2 gallons of gas for your truck, here in New York we are spending almost 4 bucks a gallon right now!

In general you probably spend about an hour meeting with the owner to discuss their project, take notes, and perhaps some pictures. Then many return to the office and type up a proposal and send it out via email. Let’s add another hour for your time in the office crunching numbers.

Now you have to put some value on your time right? Here’s a question to ask yourself: “If you were to pay someone with the same level of skill to estimate the job what would you have to pay that person?” Also include taxes, etc into the equation. Here in New York I would say 30 bucks per hour.

So here’s the math: 3 hours time + 8 bucks in gas = $98 x 2.5 estimates per week= $245 x 40 weeks = $9800 per year in free estimates. I invite you to try this exercise with your own numbers and see what the real costs are.

There is also the lost opportunity of not spending some or all of that time on high value, high impact activities. Those activities that leverage your time and talents. Marketing your business and leading your people are high value activities. So another way to look at the cost is: “What would I pay someone to manage my business for me?” $100,000 a year? That is roughly $50 per hour. Now our total costs for free estimates is up to $16,000 per year.

I recommend that my clients trade estimating for marketing time and begin to charge for estimates.

Not possible you say? On August 22nd I will show you a way to begin charging your customers to develop a scope of work for their project. I know several contractors in various areas of the country that are using these methods to get compensated for their time and expenses. They are doing it, why not you?

I have teamed up with Blogging Painters to bring you this webinar,

“No More Free Estimates-How to Get Paid for What You Give Away”.

We are limiting the size of the webinar to 25 contractors so sign up now and reserve your spot today.

I hope to see you August 22nd at 5pm eastern time.

Feel free to comment below if you have any thoughts or questions

John Stahl
Are you looking for more projects, greater profitability, and control in your business? Do you find yourself working long hours with little time for family and friends? Are you able to take a 2 week, guilt free vacation and return with your business running smoothly? Are you frustrated with motivating your people? In short: Do you own a business or does your business own you? When clients come to me they are often overwhelmed with the day to day operations. I help them to find the freedom, fun, profitability, and passion they once had by customizing a strategy to help them achieve their long-term objectives. I understand the needs of the painting contractor with over 30 years experience in the industry.
John Stahl

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There Are 29 Brilliant Comments

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  1. Not charging does not mean they are free. We get paid for it. Sales is about $4-5 an hour of our charge rate. And we see about 12 qualified prospects a week. If charging individually gets us less leads, that is not good at all. The “peanuts” we will collect will need to go to the marketing and more just to compensate for the loss of opportunity.

  2. John Stahl says:

    Hi George, Please help me to understand, do you charge a large majority of your prospects directly or are you building it in to your overhead as a cost of doing business? Either one is ok!
    Here’s something to consider: If you charge say $250 directly to the prospective customer to develop a scope of work and you do 1/2 ( or 6 per week ) that’s $1500 per week just for doing what you are currently giving to the prospective customer for free! Remember to trade estimating time for marketing time. You will find a greater % of those will buy and at a higher profit margin!

  3. Nick dunse says:

    If it can be done more power to ya, but unless you can build it into your OH it’s not going to happen here. Don’t get me wrong I agree with your math but the customers we deal with would not pay for a estimate not while everyone else is giving free estimates.
    If its working for you more power to ya we have a hard enough time just getting the work its still a very very tough economy here. Gas going to 4 bucks sure using helping thanks for a great article.

  4. John Stahl says:

    Hi Nick, I see your down at the Cape area of Mass. Beautiful place!
    Let’s take a look at this issue from the potential customers point of view. I have spoken to many home owners and one consistent comment I get is:” Estimates were all over the place, from a few thousand to ten and more. How could I receive prices so dramatically different?”
    I think you and I both know the answer, they are not comparing apples to apples. The potential customer is at a disadvantage. Their concern is a fear that they will hire the wrong person and get in over their head!
    When I was contracting in NYC I saw the low bid game everywhere. With good conscience I couldn’t bid a job and then knowingly hit them up for a 100 extras once the contract was signed.
    Educating the right customer that values your services on why it’s advantageous to first perform a scope of work detailing the project so that THEY can get apples to apples comparisons.
    Getting paid for estimates is actually incorrect. Your estimates remain free, but use your time, money and expertise to put together a detailed scope of work so THEY can make an educated, informed decision on THEIR project is not free.I believe you can, and should get paid for this.
    I know several contractors who do this on a regular basis and put an extra 5 to 10 grand in their pocket every year AND dramatically increase their closing rate and profitability.
    When I suggest this approach to contractors I am surprised how many say it would never work yet go on to say they have never asked a potential customer. Ask! You might be surprised at the answer.

    “You Miss 100% of the Shots You Don’t Take” – Wayne Gretzky

  5. When people have told me that “your competition does free estimate” I just say well, you are free to work with them. When I come for an “estimate” it is really a consultation about your project. I can’t give an estimate without creative consulting about the project to arrive at the best solution, the subject of the estimate. So, Yes, I’d charge for that and then allow some kind of credit partial or full back when the job is done.

    That was from when I was doing a lot of painted finishes and murals. For the past number of years I’ve just done color consulting work so really it does not involve ‘estimates’ but rather just being there and go from there. They do have an approximate idea of what the cost range will be before I get there.

    But ‘back in the day’ of actual paint work I always charged for initial consultation, and also for creating samples of the proposed finishes. The sample creation was not a refundable or credited amount but rather being paid to do creative work. I just frankly got tired of ‘jumping through hoops” and being shopped-around, all for nothing. So at least my time was covered.

  6. John Stahl says:

    Nice Barbara! I believe some contractors are too concerned about the competition.
    As professionals we must take control of the situation and adjust our marketing and sales strategies.
    I love this statement: “Don’t wait for your customers to tell you what you’re worth!”

    • The other point of view is if you charge for your estimating time you are really short changing yourself.Someone who does not want to pay you for an estimate is not necessarily a bad prospect. In fact you are the one that comes across as very small since you are not able to support a sales team. A full time salesperson needs many leads and appointments.
      All the lost opportunities are very expensive. Do you know the lifetime value of a good customer? Some of them are in the hundreds of thousands. For the sake of 2-3 hundred you are sending your future profits to the competition.
      Great topic and discussion, I can see this has merit for a company where the owner wears many hats.

      • Well it is true that each client is different, and each projects really requires an approach that suits the situation. And each hat fits just a little differently! I tend to follow my principles, but not draw the line in the sand until it’s needed. So to Speak. I do love John’s comment about not deciding for ourselves what we are worth.

      • Chris Haught says:

        Good point George, this is an interesting topic, interested to hear more.

  7. John Stahl says:

    George does make a good point for sure. The name of the game is to prequalify, prequalify, prequalify!
    I ask my clients to take a hard look at the bottom 30% of the estimates you give. If you give up the bottom 30% and spend that time marketing to your best customers and referral sources you can acheive a more profitable mix.

  8. I love this post! It really hits home with us. No estimate is free in our industry! It has come to a point where I ask the customer if they are just shopping for prices or are they serious. B/c here in FL we get more shopper than ever. Those shoppers I do not make my main priority but the ones who are ready for paint are my main concern.

    • growthcoachny says:

      Take a ruthless look at your marketing efforts. Are you attracting the right people who can appreciate and AFFORD your services?
      I have a free e-book now available to anyone here that wishes to take their business forward. Just email me!

      • Chris Haught says:

        John, that is a great point, I was just having a conversation with a colleague about using your website to market to a specific demographic.

        • growthcoachny says:

          Being crystal clear who you’re marketing to and why they should do business with you is critical to success. A fundamental mind-set shift is to fully understand and integrate the thought: “I am a marketing professional that happens to do the work of painting”. This can transform your business and help you find more time for things that are REALLY important.

  9. Heidi says:

    Love this topic. We don’t charge for estimates but I also don’t assume every call I get is for a job I want. That first phone call is the most important part of the entire sales cycle because if I am not asking the right questions and finding out if they are tire kicking or a serious buyer, I could end up wasting time and money on chasing a job I don’t want or never have a chance of getting.

    My site is a perfect example of marketing to a specific demographic. Everything on my site says I am not going to be cheap. I want someone to know that before they call me. I use my site to disqualify as much as to qualify customers. It works (most of the time).

    John, I have started using your technique when it comes to dealing with Homeowners Associations/stratas. If I get a call for an estimate for a large complex or from a property manager, the first question I ask now is if there is a scope of work. Talk about instantly moving into the power position in a conversation.

    • growthcoachny says:

      Wow Heidi, You Rock! I love the power position approach. And how does that make you feel? We need to have the courage to stop giving away our time and expertise! Just because free is a common occurrence doesn’t mean we should follow the crowd!

    • growthcoachny says:

      Weekend question? lol My point is that I haven’t given you enough information about the car for you to make a decision on whether it’s a good deal. It’s ALWAYS about value, never about price alone. So the contractor has an opportunity to show great value and educate the customer on the criteria necessary to achieve the results the customer is expecting by helping to develop a scope of work.

  10. Heidi says:

    I don’t mind providing a “free” estimate for a job that is one we want to earn. I’ll even tell the customer that they should try to meet with us first so that they will know what questions to ask the other contractors they get estimates from.

    That hour or so we spend educating the homeowner, discussing their project details and helping them understand the scope of work involved establishes us as the expert and builds a level of trust. We often get the job, even if our price is the highest.

    Barbara is right when she says we need to educate the customer. The worst case is that I have made the homeowner smarter. If they do buy on lowest price, they know that they have made that choice. If the job isn’t done right or looks bad after a year, the customer learned a valuable lesson in the quality/price equation.

  11. All good comments from above! I have always struggled with giving “Free Estimates”. The best idea we have come up with is to simply add a small cost to the final estimate. This seems to help make up for about 70% of our time spent on the road, educating the homeowner and getting the final estimate into the homeowners hands.

  12. John Stahl says:

    There are basically 4 elements to make the “paid for estimates” approach work. The first is to begin changing your mind-set. A mindset shift is what I talked about in an article I wrote on “scope of work” for APC Magazine several years ago. Here’s a short piece:

    “Then in one long, hard week that all changed. The painting god’s smiled down on me that week with 4 events that changed the way I do estimates.

    It began with a trip to my car dealership the day after my check engine light went on in my car. “How much will it cost?”, I said. The guy behind the counter at the car dealership smiled and said:” I have no idea until we hook it up the the diagnostic machine to find out what’s wrong. After that, we will give you an estimate. The cost for the diagnostic test is $125. ” “Just to figure out what’s wrong? I wish I could do that, what a scam!”, I begrudgingly gave him my credit card and approval. I left a little upset that these guys actually charge for an estimate when I am running around New York City giving out 2 or 3 free estimates per week.”

    The rest of the article can be found here: http://bit.ly/12uZuYc

    In short, we have to believe it’s possible. This can be achieved several ways. The best way is to begin asking, the second way is to find other contractors who already charge ( hint: look above, contact them and have a conversation ). Another way is to look at what architects, designers, and consultants do; they all charge to develop plans, specs, contracts.

    We will cover this and all the details to get you moving towards getting paid for doing what you currently give away. Hope to see you August 22nd!!

  13. John Stahl says:

    A recording of the Aug 22nd webinar is now available here: http://bit.ly/17QgZXE

    For all BP readers have a discount code: bloggingpainters to get 10 bucks off!

  14. Dave Archer says:

    Estimates are NOT free, and it is a lie if they are claimed to be. Estimates ARE worked into the price of the job. Since when was ANYTHING free? Same goes for free furniture or appliance delivery. The truth hurts.

We would love to hear what you think!

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