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I learned in the early 80s that handing a broken-down bid to a prospective customer is akin to handing them a shopping list. I found this out when calling the prospect after not hearing from him for two weeks. He had taken my sound system design and equipment list, and given it to someone else, and let them do exactly what I had proposed doing. That was a hard lesson for me.

If the bid is one lump price, then the customer is completely at the whims of the contractor if the scope of the work changes mid-project. There is nothing to keep the contractor honest with the pricing of things being added or removed.

If it was me, I'd want to see a breakdown.So when it comes time for change orders there's a basis for reasonable charges, like the hourly rate or what was budgeted for materials

this reminds me of the tale of the old man who was brought up from far in a helicopter to take care of a ship transporting perishable products that has stalled. He came in, and within 20 minutes had the ship back up and running, so the captain asked him how much he said: "$25,000,00! So the captain said: What? You wish to make $25,000.000 in 20 minutes? That's absurd, how do you figure such cost? Whats the break down? How do you justify? The old man paused and said: ______ To fix the engine, $100,00. For the 30 years of experience; $24,900.00! If a customer wish to know your break down cost, labor, insurance, tools, taxes etc they might be interested in knowing your mark up. You can totally break down the description to show them what they are getting, but price line by line although may seem to be good business practices and transparency, in my experience they are looking to compare your mark up to others to pick the least expensive. People interested in hiring you because they want you either by recommendation or because they saw your work, most likely will not care about your mark up.

If I have several bids/quotes that are all in the same ballpark, especially if they line up with stuff I've found online and by asking friends/family, I probably wouldn't even ask for a a breakdown beyond materials and labor. If a contractor refused, their bid/quote would go I to the shredder and I'd never call them again.

As a GC, I want my subs to breakdown cost in some cases. I understand mark up but let's be real... some subs take advantage when they don't think you don't know better on actual material cost. I would rather get the material and just charge for labor if thats the case. And to avoid customers asking for price reduction on labor included travel, setup, and clean up in the scope. Easy fix

From John Q homeowner: I THOROUGHLY APRRECIATED YOUR HONESTY AND CANDOR IN THIS VIDEO. This is a well spoken, clear and easy to understand video which explains a lot of things I personally have never understood about projects, estimating and bids. THANK YOU SO MUCH!

It amazes me to learn how some customers don’t understand the difference between a bid and an estimate

We’ll have put ourselves in the position of breaking down costs.: it’s because of the unscrupulous behavior of let’s say others who have no scruples. Reputation is key no matter how you estimate or bid. I receive more business from word of mouth and references than any other way.

Thank you for your presentation. I’d like to add to the discussion. Your opinion is very difference from the opinion offered by Mike Holmes, of TV fame. I’ll try to echo his views. Mike likes detailed bids. The more detailed the better. He cites two reasons. You mentioned one - further discussion with the customer over the scope of the work - but that’s secondary to his main reason. Think of your quote as a sales tool, as well as a detailed contract.The quote is your chance to detail exactly what you include, what materials will be used, and how things will be done. This sets your bid apart from the rest. The other guy quoted a different price? Was he quoting the same job? Or, was he using lesser materials, providing less service, etc.? This also allows the customer to press the other guy. In a way, you’re using the quote to educate the customer. Let the quote highlight your advantages. Money an issue? Well, educate the customer on how he can get you to lower your price. Perhaps the customer can make changes that will reduce the contractor’s burden. Can the customer adjust scheduling, improve access, provide the dumpster, etc.? There is a role for estimates, as opposed to bids. The customer needs to plan according to their budget.

Great video! Thank you!

Sorry, but when I'm spending the money I want to know what I'm paying for. A simple breakdown is not a big ask. Refusing to provide is a big red flag.

I wish I had seen this video 14 years ago when i was getting into this. i didn't have the confidence (or experience) to just come up with a price so I gave a breakdown estimate to the customer as my way of coping. Ended up being a lot of work and not much help. I don't think I ever thought of the differance between and esimate and a bid either. If I did it again I would follow this example. It makes more sense.

You are absolutely right sir. I know nothing about the contractor business but I did work as a successful business to business sales rep and trainer many years ago. If you give them a bid, you have one objection to overcome. If you break out the job charges, you’ve now got a dozen or more objections to overcome. You’ve just made closing the sale an order of magnitude harder when you didn’t have to. I could sell a job and close a sale with a flat guaranteed rate 100x easier and more successfully than having every little thing broken out. “We guarantee our quality and guarantee our price. If we run into any unforeseen issues and have to do more work than we anticipated, which sometimes happens on jobs, we guarantee not to charge you one single penny more than we promised. Is that peace of mind something you’d like to have on all work that’s done for you? It is?, great, would you like us to start on Monday the 13th or Tuesday the 21st?” Then get the agreement signed along with the deposit and let them know you’re eager to see them bright and early Monday morning. (They’ll pick the earlier day of the two days you give them).

I give a general breakdown but don't give too many details. I've noticed my clients have fewer questions and feel they can trust me. Communication of why I charge what I do is pretty easy. I fully agree with you on not using customer supplied materials. It has never worked out. There is always something missing or a wrong size or they got some cheap junk that won't last a week. If I can do a little extra with some existing materials they have on site is always a nice surprise for them.

If its a fixed price, then the planning has to be done well and accurately.

It’s tricky, and I see both sides. On the one hand, breaking it all down creats a list of things to remove, and the homeowner generally has no idea what that should be. So you end up in negotiations to do the job right. On the other hand, not breaking it down with some people creates distrust.

So my names devan im 24 and i started my masonry business a d have been doing pretty decent, but can you make a video explaining whats a good cause for a change order? Because i did a job when i thought it would be quick and easy and ended up having to rent a jack hammer and spent wayyy more on adhesive and other supplies than i thought

Very cool man.

Just wants no accountability.

Yeah because you're rounding up and taxing. I can't wait till the economy levels out and puts this bullshit out of business

You can’t trust many customers ….you can’t trust many builders…you can hardly trust anyone anymore…maybe yer momma.

If you aren't giving me information to do a technical big evaluation, then I'm not giving you my money.

thank you for your insight and sharing , iam a contractor with a new business and this was helpfull. have a great day.

I tried to do this as an electrical contractor, people just bought their own material. When they had the wrong stuff I made them get the correct material and sat in my truck while charging them extra!

great video ...thanks!!

Just give me the scope of work and the bid

My dad was willing to give a breakdown but he'd need to be paid for it. Took him a day and half just to run on the numbers on his computer program.

Simple - Home Owners are the worst. Pick a number that works for your business and employees mortgages, end of story.

If you won’t break down the estimate, you lose trust with potential customers.

Just learned more in 12 mins than most guys on the job site do in 10 years

I learned a very important lesson a few decades ago: Customer said we could use his trailer, to make the job go quicker, in his own words, my trailer is just sitting there, I'm not using it. Then at the end of the job he withheld $300.00 from the price of the bid we gave him.....because we used his trailer....just to be clear, we didn't damage his trailer while we were using it.

Rule of thumb, never ever ever ever.. ever, ever. Sell yourself short. Bills will get paid in due time.

I got a bid to lengthen my garage by 14x22’. I was quoted $212,000. I mentioned that I was accountant. He lowered his price instantly. I asked how much was labor. I could calculate the materials in my head. He made $0. I am actually going to make up a flyer to warn my neighbors of these price gouges. I am obviously not calling you a gouger.

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What should a homeowner do who is not happy with the work when it's done?

You want to avoid discounting and arguments which is fair. Customers trying for a discount might be an annoyance but you can respect that they don't want to overspend... who would? You wouldn't overspend if you were shrewd in your business or personal life. Or they're unsure of the value or fairness of your quote since others have discounted before for them. But you can't discount because discounting comes directly from your profit. You are letting one individual ,not the market, decide your value at that point. I think that's the point at which you need to stand your ground. I am not a contractor but I agree almost fully with your points. You have the attitude of someone that a business or homeowner would trust to get the job done. Self-assurance and confidence in your abilities and in your fee being the right price. I have to talk fees all day in healthcare as a dentist. Itemising bids can be the decent thing to do though, up to a point. If you itemise everything then it looks like nickel and diming. But I think it's respectful to explain the value in what you're offering and where their money's going. The general public might only see that value when they understand the extent of work and skill involved. That fence now becomes labour, ground prep, machinery use, material cost, transport and procurement costs. You can be proud of the quality of your work and your labour/time fee reflecting that. Skilled workers deserve to be paid. They are the experts in their field and the buyer is asking you for your help. If someone wants work done, then cost is rarely the deciding factor; it is a factor, just not the ultimate factor. You can win them over with a portfolio, your reputation, and a fair quote whether itemised and broken down or not. Itemising proves you can plan a job and gives them confidence in you. But any costs stated on a broken down, itemised bid are not negotiable, except in real extremes. It isn't fair on your employees, managers and other customers to give discounts to some after you've carefully priced a fair cost for a job. Often saying no, I'm sorry, I recognise this is a costly process but we're really careful to set our fees fairly for patients and I can't discount for some and not for others. If I did it would undercut my colleagues and it feels wrong when that's what we charge any other fee-paying patient as our normal fee for this work. Discounting undervalues what we're offering and doesn't reflect the cost of the work. There are other patients that I would see and treat if you don't decide it's for you and I don't want you to feel any pressure if it's something you just can't afford, or don't see value in. If you're struggling with cost then I'd be happy to delay the work if you want to save up for a few months, or we accept credit cards and can offer finance if cost is a concern. But if it's the overall price that simply seems too high, then all I can recommend is acceptance of the situation. If you think I'm over-quoting you and you don't feel we have a good working relationship then I can help recommend you other dentists locally that are good people. They might offer you a second opinion and a cost quote that's a bit lower or higher for their work. This discussion rarely ends up turning work away. Most people realise they're not getting a discount and that they're about to miss a chance to get something they want done. They realise that you have other people willing to pay for your work and they are wasting your time. They usually go with you at that point and won't quibble about it if the work took you an hour rather than 1h 30m or 1 day or 2 days or whatever. Also, payment up front on delivery of the work. And as you say, if it takes you longer, or an error is made, you stay consistent and eat the additional costs yourself.

Great stuff Ray! Real useful advice

Great presentation on this subject. Transaction clarity is the most important thing. Every client has an opportunity to get as many bids from as many contractors as will do the job. It's very difficult to price integrity, and clients who want integrity and the lowest price will not find it.

I hate to tell people this but it would be easy to figure your cost with a slight variable plus or minus, but that would only be worth it if you were deciding on doing the work yourself. That's usually how I look at contractors, is it worth it to me for someone to do it and me do something else.

This is exactly why 90% of all auto mechanic shops do not allow the customers to bring their own parts. One, because there is a markup on all the parts for the mechanic shop overhead, two, the parts that the mechanic shop buys and installs are under warranty from the part shop and protect the customer.

The first person I have seen that was able to explain this in an intelligent and well thought out manner.

As a concrete contractor we do a minimum breakdown labor and equipment is included in there so it would be dirt work....rock....concrete

Your explanations are ridiculous. You might as well say, "I'm out to shaft you. I plan to take advantage of you, by overcharging you for labour and materials" Honestly, yes, you can value yourself, and you should, if you do great work. Those of us with brains know that you get the quality of labour you pay for, so just be honest and don't add on extra profit on materials or extra hours that you won't work. That is sneaky, and it makes you lose all our respect, as you appear dishonest.

I never give them a breakdown unlees they ask, which is rare.

Plumber wanted $500. I fixed it with superglue. Mechanic wanted $300 I tightened a bolt. Furnace guy wanted $17,000 for new system, I replaced the water pump. Car dealer wanted $1,600, I did nothing at all, car was fine. (Wife went to dealer, so dumb.) Roofer is coming, "tomorrow" for a month straight, I yelled at him until he left all his tools and I fixed it with tar. Now ask me how much I love contractors.

I agree with not breaking it down in that way however I always ask if everything is included in that price and I make sure that's in writing. Every single solitary thing that is involved in whatever project you're asking about. Far too many contractors will give you a bid and then at some point during the project they'll say oh I have this other thing I need to do to get your job done and they need more money. Then I'd ask for a failure clause. Is there anything about this project in your professional opinion that would stop you from completing the project? Then I would be sure to get some sort of a timeline on it. If the contractor says it's going to take 2 weeks, what happens if it takes 3 weeks? Do I get money back? (See failure clause) There are way too many shady contractors out there and if you're working with one for the first time you should be aware of these items.

Trying to justify being deceptive looks bad on anybody. I'm sure there's more than one guy in your neighborhood that knows you're a crook :)

What does the breakdown matter as it’s just the total cost that matters! You don’t go to a restaurant and ask for a breakdown…. As for Dealerships we give firm bids not estimates. Takes longer, we eat it….