Quoting Difficult or Unusual Projects
First of all, do you plan to go to Metalcon this year? Held in Charlotte, North Carolina October 10 – 12, this is a great place to learn about the residential metal roofing industry. If you plan to attend, please let me know so that we can spend some time together there.
Next, I want to tackle a different topic this week. We’re going to look at how to bid metal roof installations if you’re new to the industry or have little experience. This information could also be helpful if you run into the occasional project that is a bit on the “unusual” side and makes you nervous to quote at your standard pricing.
I want to work through the basic steps of quoting projects and then look at something that’s even more important – selling the project at the price you need. Again, for those of you who bid metal roofs all the time, I hope your current system works just fine every time. However, if you bid metal roofs only on rare occasion or if you run into an occasional project that scares you a bit, here are the steps to follow.
- You need to have good dimensions. This can be from on-site measuring or from one of the pictometry services such as EagleView. But, you must have dimensions that you trust.
- Send your dimensions to your metal roofing manufacturer and they should be able to create a materials list and quotation within 1 – 2 days.
- Estimate your number of labor hours per square for the project. This is where, obviously, past experience and records from past jobs can be very helpful. In some cases, your manufacturer may also have some estimates for labor time. It is crucial to not underestimate your labor as it becomes a driving number for the entire roof quotation. If the project makes you nervous, be sure to add a buffer on top of what you “hope” will be your labor time.
- Determine any “special direct costs” associated with the project. These could be extraordinary travel costs, “overtime” costs, business and permit fees, and also lodging if the job requires overnight stays.
- Add together your costs associated with steps 2 – 4 above. This is your estimated “direct cost” on the project.
- Based upon your business model and history, you need to know what sort of gross profit percentage you need to sustain your business. You do not want to underestimate this thinking that somehow you will “make it up”. Your gross profit does several things:
- It “keeps the lights on” while your crew is working on this project. This is what it takes to cover your overhead.
- It covers your marketing costs.
- It covers the indirect labor costs in place within the company.
- It provides profit for the owner of the company.
- It provides for retained earnings which fuel future growth of the company.
- Once you know your desired gross profit percentage, divide your total direct costs by the “non-gross profit” percentage of the job. For example, if the job is $100 and you want 60% gross profit, you would divide $100 by 0.40 to arrive at $250 as your selling price. So, of the $250, you will end up with $100 to cover your costs and $150 (60%) as your gross profit.
Special Note: What If You Over-Bid The Job?
If you win the project and, once you’ve completed the job, you find that your profit percentage is higher than you expected, here’s a thought. Consider it a marketing expense but refund a portion of your extra profit to your customer. This shares your good fortune with them and will help tremendously in building goodwill and maximizing referral potential from that customer.
So, we have looked at how to bid these projects. While this may have felt like a challenge, the good part starts next. That is selling the project. You can approach this stage of things with confidence in your numbers, but you also know that your number is what it is – there is no playing around with it. If you’re going to do the project, this is what you must be paid for it. But, you must be able to sell the project first.
As we discuss each issue here in the Executive Report, selling projects requires following a system. Your system of selling must include things like Lead Generation, Making a Great First Impression, Establishing Trust, Needs Analysis, Features and Benefits, and Closing. Short-changing any of these steps will dramatically decrease your chances of selling the project at the price you need.
I always enjoy visiting with contractors about important topics like lead generation and sales and would love to talk to you. Thank you for being a loyal reader of the Residential Metal Roofing Executive Report. Please contact me anytime to talk about what’s working well in your business, or to kick around ideas on what could be better.