What is your estimating process? What have you found works really well and sets you for success when it comes to estimating? Do you have a system for estimating? These questions face every contractor in the marketplace today.
In this episode Alex Reschka from @brothersrenovations shares exactly how he does it. You’ll come away from this one with at least one useful tip you can use (and probably more than one!)
In this episode you’ll learn:
- What software Alex uses (and loves)
- The agreement he gets up front from the customer (and it includes money)
- The 3 steps Alex uses every time to ensure the estimating process is a success for his company.
… and more!
This is a short episode, but don’t let that fool you. It’s PACKED-FULL of very valuable experience that Alex has proven to help grow and scale his renovation company.
Listen and learn today!
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>>>Here’s The FULL Blog Post>>>
Martin: All right! Today I have Alex from Brothers Renovations, which I’m quite excited about. We’re going to be tackling a subject today that touches every single contractor. It has to do with estimating and questions around that. So first of all, Alex welcome to the show!
Alex: Hey thanks, Martin I appreciate it.
Martin: Alex, tell us where you’re at, what it is that you guys do specifically, and how long you’ve been in business?
Alex: I`m in the suburbs of Detroit, in Royal Oak. I`m 34 and I’ve been doing remodels since I was 16, but I have an LLC from the last two years. So I’m pretty new as a contractor, as a licensed contractor. I decided to go out on my own, couple of years ago.
Martin: OK. And what do you guys do at Brothers?
Alex: We do a lot of kitchen/bath remodels and some additions. That’s what we’ve been working on since I became a licensed general contractor.
Martin: Yeah, nice. All right Alex. So the question that is presented to us today is, “What is your estimating process that you’ve found or that you’ve created, which works really well for you?”
Alex: What I found that’s been very efficient in the last year are these couple of steps: a letter of intent, design agreement and then a proposal. Instead of me trying to guess job costs, I did not have the background and data that a lot of older contractors have when they do estimates and job costs. So I agreed with the customer that I’m going to bid something up for a certain price. At first, it was hard for me because I didn’t know how much. Then I would sign a letter of intent, in that way I can tell a customer how much a job will cost. So I will show them the letter of intent, then I will get solid numbers from them, then the customer will want to know what the estimated cost is, I can tell them that we can do it for that budget if it’s reasonable.
So, I get bids from all my guys put the numbers together. I’m not guessing how much it’s going to cost for drywall, I`m not guessing on how much it’s going to cost. It was really hard for me, in the beginning, to estimate, it was like oh my God it`s gonna take me all day to do this.
Alex: But if we have the letter of intent, that means we have an idea what we’re doing. I can call my guys and tell the customer, “I need to come in with a couple of trades to figure this out.”
Martin: So, does that letter of intent include any money transfer?
Alex: Yes. So they give me a deposit. For example, if they say it’s $10,000 for a small bathroom, I’ll get five hundred to a thousand dollars. Basically, that letter of intent says “We like your work, we like your reviews online and we want to go with you.“ I try to ask how are you comparing contractors, is it just price? And if they say yes, I tell them I’m sorry but I’m not the contractor for this job, I’m not the lowest price. I do quality work. Some people are really afraid to say that. But really customers sit back and say “Well, I want a quality work too.” So, then they like the fact that they’re getting solid numbers and we’re not fluffing the estimates. I put my right mark up on it and we go from there. At the beginning when I thought something’s going to cost me $2000 it cost me $2,500 or $3000 and it wasn’t good.
Martin: So, do you take that $500, if they get the job it goes into the work or does that just cover your planning cost?
Alex: So what I do is, for a letter of intent, I usually put that cost towards the proposal. In the proposal, I’ll probably put in my time, let’s say, for the job supervision or the paperwork to do it. I always suggest to the customers that we design it and have other contractors look at it and see if our price is the same. I tell them, “I’ll give you a credit of five hundred or a thousand, based on how many hours we use. I can sell that to you for a higher price or I can give you a credit towards your proposal if I build it.” Now, there are small things that we don`t think about, but I always put a contingency in there. So I add about 5% contingency markup on it because there’s always going to be the unknown if I should say.
So there is a letter of intent, a design agreement, and a proposal. And that proposal is now my contract. Then I have a contract that references to that proposal. Some people don’t like to do line optimization but for me as a new guy, I liked the line optimization in the software that I use. It’s just a click of a button.
Martin: What software do you use?
Alex: I have been using Contractor Tools app. They have it for iOS and Mac version. And last year, I was trying to get the prices before I was getting the bits from my contractors to figure out using the craftsman estimator or the craftsman tool book with all the costs. It gives you the right cost for your zip code and that was pretty helpful if I need a linear footage or trim and stuff like that.
Martin: Do you still use that? Or do you have it in your head now? or call a lumber yard guy or what?
Alex: If I’m doing trim, I go to my trim guy and say “I need all these trimmed down, I got five doors, etc.” Then, he’ll tell me the price. I’ve actually been having all my trades paper material as well because then I have to pay for trim if it doesn’t work. I used to buy the drywall from Home Depot and have it delivered. But then if it starts bubbling, They just put it up then it’s on me. So I try to have everything on the trades. They got to make money too. If they want to mark up the material, sure but I know that if something’s malfunctions or there`s a warranty issue then they have to take care of it.
What I like about Contractor Tools is the lay out its very, very clean for customers understand what’s going on. I’m kind of in between using other software, am I allowed to tell you what software it is?
Martin: Absolutely, yeah! We want to know.
Alex: I used to use Buildertrend when they first started, I was actually a beta tester with them. There were too many bells and whistles. We were spending too much time on it. Now I’m using CoConstruct. I just started using CoConstruct to kind of see how it works. From that contractor tools I kind of do the double work, I’m putting it in my quickbooks as well. QuickBooks doesn’t look as clean as the contractor tools but by quickbooks, it helps me understand where I’m spending money and how much I’m spending in subs, materials, job costs and things like that.
Martin: All right. So let’s recap. You have a letter of intent and money exchanges hands there that sets you free to go dig up an accurate proposal. Then you set a design agreement and their in-between and then …
Alex: There’s two. So it’s either I explain to the customer if they want me to build this and give them a proposal, then we give them a letter of intent. If they just don’t know what they want and they’re not sure if they can do it we’ll do a design agreement.
Those two are commitments, I spent a lot of time, wasted time last year on doing estimates without getting paid for it and I wasn’t as efficient as I should have been.
I show a customer what I can provide for them. I make the customer compare other contractors to me. So I will tell them, this is what I’m going to give you and I’m giving you these numbers. These numbers come from my guys and they’re going to be here for you. If someone else can give you a number, solid number, without knowing the design and not knowing the finishes they’re crazy. There’s no way! It’s a bit unfair playing field and then what’s going to happen is, a lot of contractors bid low and then there’s a lot of change orders. I don’t want to give a bunch of change orders. Most customers say they don’t want that to happen either. So that’s kind of how I go about it.
It’s been really working well this year for me and I haven’t had any customers tell me that, “that’s ridiculous.” I inform them why I do it that way and everything’s upfront. There’s not going to be in cost. The only thing is, there is another demo and discovery agreement that I’ve had. If there’s too many what if`s, before we even do anything no letter of intent or anything I say, “Let’s open up walls and I put that in there. ”
Martin: Well that’s nice. I like how you broke it down for us in two or three four different steps and we’ll have that outlined in the blog post. Definitely, this may be one that you want to listen to two or three times. And where can people follow you, Alex, if they want to see what you’ve got going online?
Alex: Instagram – sure at @brothersrenonations. And then Facebook – Brother’s Renovations.
Martin: Go check out Alex today (and) say hi. And with that, we’re going to wrap this up. Alex, Hope you have a good rest of your week and we’ll talk to you again soon.
Alex: Thanks, Martin. appreciate it.
Contractor Tools – https://contractortools.com
Buildertrend – https://buildertrend.com
CoConstruct – http://global.co-construct.com
Quickbooks – https://quickbooks.intuit.com
Instagram – https://www.instagram.com/brothersrenovations/
Facebook – https://www.facebook.com/brothersrenovations
Full website – https://brothersrenovations.com