When you meet with a customer do you submit a bid or an estimate?

Dictionary.com defines Estimate as “an approximate judgment or opinion”.  Basically an Estimate is a guess.  You’re saying, ‘Hey, it’s probably going to cost about this much’.  So half way through the job you are going back to your customer asking them for more money because you guessed.

I prefer to bid my work.  Dictionary.com defines Bid as “to offer  as the price one will charge”.  See how confident that definition is? A bid is based on facts.  It’s the sum of all the expenses a job will incur plus overhead and profit.

A week or so ago I was accidentally copied on an email that was sent out from one of my customers to another vendor.  From reading the email I could tell that this other vendor had gone back to the customer and requested more money to complete a job. This happened because the vendor had misunderstood the requirements of the job. The customer was very irritated at the request.

Now, I don’t know if this vendor submitted a Bid or an Estimate but I can tell you that the customer was expecting a bid. Customers aren’t expecting you to guess at their work.  They are expecting you to know what you are going to charge them.  They are expecting an expert.

Experts create Bids, not Estimates.

It doesn’t matter if you’ve been a blue collar business owner for 25 years or two weeks chances are you’ve been victim of the ‘per unit of measure’ pricing model.

It may have began with your father or grandfather who told you “Well, that’s how we’ve always done it”. Maybe it was your customers who talked you into taking on a new product and gave you advice on how to price this new service.

That’s how it was for me. When I first started my counter top business I charged per running foot.  Why did I charge that way?  Well, because that’s how my dad charged.  That’s how the guy who taught my dad cabinets charged. That’s how all the big counter top companies did it.  That’s how all the little counter top companies did it.

When we started installing cabinets we started by charging per piece. I think it was $13.00 per piece.  Why did we charge $13.00 per piece?  Because that’s how our customer wanted us to figure it. Why did he want to figure it that way?  Because that’s how they figured it in the last market he worked in.

Do you see where I’m going with this? Can you tell why I dislike this form of pricing so much? It’s because it has nothing to do with YOUR business.  It’s all based on some other person’s experience. Is your work comp rate the same as everyone else? Is your liability rate the same as everyone else? Does your truck get the same gas mileage as everyone else? Do you drive the same distances to your jobs as everyone else? Do you pay your employees the same as everyone else? Do you give the same amount of vacation to your employees as everyone else? Is your phone bill the same as everyone else.  Are your utility bills the same as everyone else? Do you pay the same for your supplies and materials as everyone else? The answer to all of these questions is NO.

You need a pricing model that is looking out your front windshield not looking out the rear view mirror.  You need a pricing model that takes into account your specific financial situation.

Visit our products page to learn more about how we can help you discover the blueprint for your financial idependence.

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-James