Why are some estimates so expensive?
Summary of what it means for me:
Cheap or low cost bids can indicate that the contractor is unlicensed or unfamiliar with how to properly run a business. Remember that a business that is not profitable can not afford to take care of your concerns in the future. Signs that a contractor may not be financially sound is refusing to return your calls for warranty work. They most likely can not afford to offer amazing customer service to their customers. At the end of the day, what do you want your final impression of the project to be? “the work was ok, but will not return my calls to make a few items right”, or “I am so satisfied with the outcome, I would recommend them to others I know”.
Do you suffer from “They make more money than I do, and I won’t pay it”
I have heard this many times. This is often from professional and educated customers who have spent a great deal of time and money to get where they are in their career and feel that contractors is a lower class of career choice than theirs. Surprisingly, with all of their education, they never learned the basics of operating a successful business. So let’s breakdown a few items:
It is assumed that we all want to work with successful businesses as clients. We want to eat at successful food service providers. We want to pay for cell phone service with successful cellular providers. We want to purchase vehicles from successful manufacturers. You see where I am going here?
Let’s say a nurse that makes $45 per hour and receives a bid from a contractor for $195 for a couple hours of work. The nurse does some quick mental math and determines that it is unfair, insulting, and just plainly not right that a contractor makes more money per hour that themself.
Now, if I offered that nurse $75 per hour to work for my company as on-staff nurse, providing all the same duties and services that they currently do in their current role.
When the nurse shows up their first day, I direct them to their new office and that nurse quickly notices that there nothing more than a basic first aid kit to work with. The nurse begins to ask me where the supplies are for cuts, burns, wounds, etc. Where is the examination table, blood pressure cuff, lights, EKG machines, MRI machine, etc. I respond that I assumed that they would bring it with them. I hired a nurse to provide all of the same services as their last employer and I assumed they would come prepared.
I also ask the nurse how much the office or hospital that they used to work for billed out per hour to the insurance companies or the cash paying clients. Was it more than their $45 per hour that they were paid?
Contractors charge the fees they charge to pay for the following items to do their job:
Tools- there are so many tools that are needed for the variety of projects they come across
Licensing, insurance, and bonds. Combined this can be several thousands of dollars each year
Vehicle costs: purchasing, insuring, maintenance, repairs, advertising, etc.
Medical insurance
Wages for themselves and employees
Taxes- so many taxes
Administrative and overhead costs- rent, heating, internet, cell phones, utilities, etc.
Advertising- no one can hire you if they don’t know you exist
Customer satisfaction and warranties
So, the $195 is portioned out to so many expense categories, there is often little left for owner wages.
It is just a 5 minute job!
Typically, there are 7-8 hours a day, Monday-Friday, that a contractor can generate income. To run a successful company, they need to generate income for as many billable hours as possible. Generally, when you request the services of a contractor, you are purchasing blocks of time from them. Even if your job is quick, you are purchasing the block of time it takes the contractor to travel to your location, assess the problem, travel to purchase needed materials, install new materials and complete the repair. Additionally, if the remaining time between the completion of your project and the next project is unfillable, then you are likely purchasing that block as well.
For example: Your project is less than 30 minutes of actual time on the job-site. Let’s say it is to replace some damaged trim around a bedroom door. You sent pics of the trim style ahead of time to the contractor and your appointment is for 9:00am. Let’s also assume the contractor has a 2 hour minimum.
The contractor leaves their shop at 8am and heads to the local lumber supply store such as Home Depot to purchase your trim boards. It takes the contractor 40 minutes to travel to Home Depot, walk inside and locate the correct trim boards, stand in line at the cashier and check out, secure the trim board in their truck/van/trailer, and begin traveling to your project site.
The contractor arrives on time for the 9:00am appointment. Due to the years of experience and accrued skills, ownership of the proper tools, and the repair going smoothly (most often hurdles develop during the repair), the contractor is able to remove the damaged trim, cut, fit, and install the new trim with a coat of paint in under 30 minutes. Finally with clean up, waste removal, and time to settle the bill, it is now 9:45am when they are ready to leave. You have paid for the 8:00am - 10:00am block of time.
What if in this same example a difficulty arose during the installation of the new trim. Maybe the surface was not plumb, flat, level, straight, square, or some other hurdle and it required more time deal with it. Now it is 11:00am when the contractor is ready to leave. With their two hour minimum, they can not sell the remaining 1 hour from 11:00am to 12:00pm. Most likely, you have purchased the 8:00am-12:00pm block of time.
Now, outstanding contractors will recognize this and offer to perform other repairs at your project site while they are their since you have purchased the full block of time.
The infamous “It’s only 5 minutes” statement is often never 5 minutes.
Should anyone be financially penalized because they are efficient and skilled at their profession?
Nobody wants to make less money simply because they became really good at what they do and can perform it more efficiently and faster than they have done so in the past. Generally, along with efficiency, you are getting competency. You are getting better quality and a job done right the first time. Most importantly, you are getting wisdom, the understanding of what is best for the project.
