Question about a price proposal

[Matt Campbell]

I e-mailed a price proposal to a possible customer today, and the proposal includes how many labor hours I've estimated with my hourly rate and also my profit. I really thought nothing about including that for the customer to see, but my wife thinks he doesn't need to know how much I'm making off of this.

So what's your opinion? Do customers need to know this information, or should I just give them the total price?

[Matt Campbell]

Also, here's the proposal. I'd like to hear feedback about my pricing. Fair or too much? I'm new at this pricing thing so at times it feels high, but I'm trying to stand firm behind it. This is for built-in shelves on both sides of a fire place. I'll use paint-grade soft maple, 3/4" maple ply, and paint it a white color. Sorry, I hvae no pictures right now, but it's pretty basic actually. What do you think?

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Description Amount Total

Materials
Rough-milled lumber $115.20
Plywood $47.63
Finishing supplies $15.00
Shop supplies $15.00
Sub-total $192.83

Labor
Design (1 hours) $30.00
Milling (1.5 hours) $45.00
Assembly (2 hours) $60.00
Finishing (3 hours) $90.00
Administration (2 hours) $60.00
Other (2 hours) $60.00
Sub-total $345.00

Overhead
11.5 hours at $0.00 $0.00

Profit
30% of above costs $161.35

Terms: 50% deposit; 50% due upon completion Sub-total $699.18

Shipping $10.00
Total $709.18

[glenn bradley]

You do not need to justify your price by sharing hours or profit. This just opens areas of discussion/negotiation with unscrupulous customers. You are worth what you ask. Be confident in that.

[Steve Jenkins]

I agree with Glenn.
Just give them the total price with no breakdown. Two places I can see will bring up questions (disagreements) right off is administration (what's that) and other.
Are you installing them?
Looking at your figures you plan to complete, start to finish in 6-1/2 hours. Seems like that may be a bit optimistic.

[Peter Quinn]

I'm with your wife. Don't share unnecessary information and keep the bid simple. Your profit is your business, as are your costs and over head. If it is a fixed price bid, be very specific about your materials so there is no confusion later and the client knows what they will be getting, but stick to the bottom line. It is a good idea to estimate the hours each stage of production will take as you have and track the actual hours taken for your records, but there is no need to share this information with a client.

On a few rare jobs I will work for time and materials if the total hours required are difficult to estimate up front, but on most jobs its fixed price, or at least a cost plus basis. Your shop rate is very low compared to those in my area. Knives, blades and power are real costs beyond wages that must play into your equation and be covered. You will need to do numerous jobs and track all of your costs before you actually have a clear idea of what your profit is, no need to share this info which may not be correct at this point anyway.

Ever buy a car and have the dealer tell you what there profit margin was?

[Ross Ellis]

I would also question the profit and administration. Build profit into hourly rate, no need for client to know.

[Craig T. Smith]

Matt, I agree with the other guys what your profit is ,is your bussiness.Also in some states it is illegal to charge for shop supplies . You may need to add this in off paper. You may need to talk to a service provider in your area to get specifics. I also agree, your time estimate may be overly optimistic. Happy Woodworking, Craig

[Don Bullock]

I thought I'd answer your question as a customer. I've seen proposals for work we're having done at our new home done several different ways. Some are as detailed as yours and others just list the price. I don't think one is more correct. As a customer, however, I like to at know the cost of the materials and the cost of labor. Not all the people I'm working with will give me that break down, and as long as I feel the final price is reasonable I'm fine with that.

[Barry Vabeach]

Matt, I agree that your breakdown is probably too detailed. BTW I am not a professional woodworker but I have a lot of exposure to billing issues. To me, the only reason to give a breakdown instead of one lump sum is where you are given the customer an option. So you might have a proposal labor - ( one lump sum ) and material ( $ 500 cherry , $350 oak ) . That way the customer can choose whether he wants to spend the extra for a different appearance. You could also do breakdowns elsewhere if the customer can choose for you not to do the service - just go to Lowes and buy some high end appliance and they will let you know that it costs x dollars for delivery and y for installation or you can just pick it up at the store and not pay either of those charges and that is fine with them. One other point, I don't quite understand your use of the term profit. If you are providing all the labor - does it make any difference whether you charge your time at $10 and hour with 30% profit or $13 and hour with no profit. Either way, if you worked 10 hours you earned $130 that goes in your pocket - would you think you made $30 on the job or nothing. While markup on materials seems like pure profit - that assumes the customer pays you before you pay for the materials and that it takes 0 hours to locate, select, and pick up the materials. It is pretty common to include a markup for the materials in doing your estimating to cover for that time, and any financing expense you may incur. Hope the customer selects you but in the future, I would give less of a breakdown. PS , don't tell you wife I sided with her, it will encourage her ( just kidding )

[Matt Campbell]

Yeah, I won't do this ever again. I did already charge for traveling and shopping time and also sandpaper, glue, etc.

By the way, I'm not doing this full-time. Just on the side. Right now, the $30/hr is more than fair in my mind.

[Dave Falkenstein]

I do projects for people on a part time basis. I quote materials and out-of-pocket expenses at my cost, and that typically makes the client happy. I quote my hours at a rate than pays me what I want to make on the job - averages around $40 per hour. I don't even talk about "profit". My bids are estimates, and the client agrees to pay the actual cost of materials and labor. My projects are typically within 10% of my estimate. If I see that something is going to be off the estimate, I let the client know about it during the project, so there are no surprises at the end. Works for me.

[Karl Brogger]

I e-mailed a price proposal to a possible customer today, and the proposal includes how many labor hours I've estimated with my hourly rate and also my profit. I really thought nothing about including that for the customer to see, but my wife thinks he doesn't need to know how much I'm making off of this.

So what's your opinion? Do customers need to know this information, or should I just give them the total price?


No freakin way!! I give a breakdown of everything. When I bid something its so much for the box, so much for a door, drawer, finishing, install, and on and on.

Rarely do I do anything that is time & material, and that's only when I have zero idea of what it'll take to get it done. Never give them any leverage. There are something that I can probably make $100 an hour if things go smoothly, then there are things that I lose money on. The less they know the better.

[William OConnell]

Lately or should I say for the last few years I have been emailing proposals exclusively. It just works better for everyone and is more convienient for everyone. I never give a breakdown of the costs. Its just not necessary. They need to know what it is your going to deliver for how much and thats it. Some of my jobs are very large with hundreds of thousands of dollars involved and even then they don't get a breakdown of individual prices. They start counting my money then. Keep it very simple would be my advice

[Dwain Lambrigger]

Matt,

You are the kind of contractor I would like to work with, however, you could have used the time spent getting that detailed estimate, and finished the project days earlier.

Seriously, if you want to be fair, provide one estimate for labor, and one estimate for materials. If necessary, provide the number of hours to complete the task, but by all means, don't provide it until asked for. The customer usually wants a price, and if the price works they don't care. They only ask for detail when they think you are too high.

[Brad Shipton]

Matt:
If this is a lump sum type contract, then much of this would be none of their business. One thing I would pay attention to is how sophisticated the client is before giving such a breakdown. Some may look at profit as a point for negotiation, whereas it is a pretty common agreement term in commmercial projects. Breakdowns can be very dangerous with some. Its far to easy for people to check material costs, but they may not know a darn think about material grades and this leads to needless debates.

I do agree with some that your time estimate sounds pretty optimistic even for a simple project.

Good luck
Brad

[Rick Fisher]

Your using your budget as a sales tool. Its a mistake.

Quote the fella $755.00 and tell him how much effort your going to put into making his project special.

Tell him how your looking forward to the project, and how excited you are to see the look on his face when its done.

Then ask him for the 50% deposit.

You need to sell your work, not your budget.

If he will pay $710.00, he will pay $755.00.

Think of his concerns; will he like it when its done? Will you slap it together or take pride in it? Will you finish it on time?

Answer all the logical concerns a customer could have, without him asking them, then ask for the order.

ABC.. Always be closing. :)

[Mike Keers]

As a pro, I give one price, delivered, and get 50% down 'to cover the cost of materials' when we sign the contract. That's it. The client doesn't need to know all that stuff, and shouldn't in my book.

If somebody walks in off the street with some sort of repair or small project I simply quote $45 an hour shop time plus materials, if they represent anything substantial or I don't have it on hand. For incidental shop or project supplies and materials, I figure the shop time covers it. At that, they don't get a detailed list of materials, and I add 40% to my cost for all materials, a figure arrived at from long experience and losing too much money on the small stuff.

People don't appreciate that on a large job lasting several months (I design and build commissioned furniture primarily, a one-man shop) the job and expenses ain't over when the piece is delivered; there's tools to sharpen and replace, shop clean up, replenishing supplies, etc. I can spend half a day doing sweep and cleanup, a day or two just resharpening all my planes and chisels, never mind sending out sawblades for sharpening, replacing planer knives and bandsaw blades, on and on--nobody is paying me an hourly wage for that after the job itself is done, it needs to be figured in at the beginning and in the materials markup. Or so sez I.

[Tony Bilello]

Customers dont expect a breakdown. They expect a final price. Once you give them a breakdown, then they will want you to account for your time or may resent the fact that you are charging for your labor at a fair rate of $30/hr and then tacking 30% on top.
All they need is a take it or leave it price.
Keep in mind that if you get 3 out of 5 jobs you bid on, your price is too low.

[Bob Slater]

Just tell them what your price is. I wouldn't divulge the hours, because suppose it takes longer, can you bill more?

[David Keller NC]

Matt - I'm not a professional woodworker, but I do sell most of my work, which are largely reproductions of 18th century pieces. In general, I agree with almost everyone on this thread - breaking everything down to the nitty gritty does two things that aren't good - 1 is giving some customers an opening to challenge your estimations on every point (these are generally the customers that you want to politely walk away from), and 2 is giving away a lot of clues to your business practices.

In general, prices aren't necessarily a business secret (though some prefer to operate that way), but how you arrive at your figures should be, in my opinion.

Moreover, while it's not all that bad an idea to sell work very cheaply when you first start out so that you can get some jobs into the hands of customers and start building a word-of-mouth network, I think you'll find that even generous estimates for design time, communication with the customer, finishing, and shop overhead have a way of being exceeded during the actual job, so your labor rate at $30/hr (which is already near rock-bottom) may turn out to be an optimistic estimate.

Finally, what's really critical for both you and a satisfied customer is for them to know exactly what you'll provide at what cost (lump sum). Ideally, having a sample of your work that they can examine will go a long way in avoiding the "I expected X, but the contractor gave me Y". For built-ins, that can take the form of a small cabinet that uses your customary materials and finishing regimen.

[Derek Hansen]

I think any "profit" should be built in to your hourly labor rate.

[Matt Ocel]

I will never break down my prices.
I recently had a kitchen remodel scheduled, at the last minute my client asked if her daughter could read the contract, I said sure. That led to a meeting with her daughter. Her daughter then wanted me to break down labor and materials. I told her I would not, and the next day called and politely walked away from the job.
Funny thing, the first day I met the client, she asked me what the job might come in at. I ball parked it at $70K, which was in her budget. After running the numbers, the final proposal came in at $65K.

So I feel it opens the door for line item negotiations, then that will ultimately end up making you lower your price or end in an arguemment.

One last thing-My clients daughter was,,,,, yes you guessed it an Attorney!:eek:

[Tony Bilello]

is not a good idea. When I first started my business others had warned me about starting low and they were right.
People loved my work and bragged heavily about me. As soon as I raised my prices just a little bit, I lost my fan club. So, now I have to build a new customer base. Ok, I did, and as soon as I raised my prices again I had the same result. Starting all over again.
Finally I decided to look at some of my competitors and average out their prices. I went for the average price which was quite a bit more than I felt comfortable charging. Then and only then did the decorators, architects and antiques dealers take me serious.
I'm sure others here have had the opposite affect, but that is my story and I'm sticking to it. LOL.

[Matt Ocel]

is not a good idea. When I first started my business others had warned me about starting low and they were right.
People loved my work and bragged heavily about me. As soon as I raised my prices just a little bit, I lost my fan club. So, now I have to build a new customer base. Ok, I did, and as soon as I raised my prices again I had the same result. Starting all over again.
Finally I decided to look at some of my competitors and average out their prices. I went for the average price which was quite a bit more than I felt comfortable charging. Then and only then did the decorators, architects and antiques dealers take me serious.
I'm sure others here have had the opposite affect, but that is my story and I'm sticking to it. LOL.


I Agree 100%!

[Steve Clardy]

I give the total price only. No reason for them to know my investment in materials or anything else. ;)

[Bob Slater]

I will never break down my prices.
I recently had a kitchen remodel scheduled, at the last minute my client asked if her daughter could read the contract, I said sure. That led to a meeting with her daughter. Her daughter then wanted me to break down labor and materials. I told her I would not, and the next day called and politely walked away from the job.
Funny thing, the first day I met the client, she asked me what the job might come in at. I ball parked it at $70K, which was in her budget. After running the numbers, the final proposal came in at $65K.

So I feel it opens the door for line item negotiations, then that will ultimately end up making you lower your price or end in an arguemment.

One last thing-My clients daughter was,,,,, yes you guessed it an Attorney!:eek:
Expect an invoice in the mail!!

[Jacob Reverb]

I would specify only the materials to be used (no prices on them; just descriptive terms, for example "number 2 white pine") and any oddball or special-order construction details (for example "hand cut dovetails on drawers") so that all parties know what to expect ahead of time and then slap a total price on the project. Take it or leave it.

If you break everything down ala carte, chintsy customers will try to cheap you down or be niggardly over niggling details. ("Does it really take an hour and a half to mill the lumber? Can't you do it in 80 minutes?) Not worth the hassle, IMHO. It's also none of their business how much profit you make. Does GM tell us how much profit they make on a $25,000 truck?

[Victor Stearns]

I too have to agree with most everyone in that you give the client one price. They can decide if they want to pay X or not. If not someone else will.
As to the starting low and working your way Up, I have a friend who is a great water color artisit. Spent much of her time in just painting for fun. One thing turns to another and she begins to show at the local art shows. However, when she applies to a "jurored show", she gets no response. Short story is that the judges felt that while her work is great, her prices where too low! She jumps to the prices to match everyone else, and now they call her!
Good Luck
Victor

[Rick Fisher]

This reminded me of a saying I use in business.

If you do business with people who resent you making a profit, you likely wont.

[Brian Penning]

This is very simple.
The wife is always right. Doesn't matter what the question is/was. http://sc.webmessenger.msn.com/10.1.0323.0/session/images/emoticons/smile_wink.gif

[Kelly C. Hanna]

This is very simple.
The wife is always right. Doesn't matter what the question is/was. http://sc.webmessenger.msn.com/10.1.0323.0/session/images/emoticons/smile_wink.gif


Good one Brian!

I also do not reveal any details, even when asked. I get micromanaged from time to time and this disclosure would surely escalate that practice beyond my patience level!!