Over the years I have been asked many times “How do you bid a job?” Well, here are the steps I take in formulating a kitchen bid. I have one hard and fast rule about bids: I only discuss money once, at the beginning. Unless the job changes substantially I don’t change the price, either up or down. Notice, I said substantially. I don’t use changes as a profit center. By that, I mean I don’t use small inconsequential changes as a reason to significantly raise the price. Conversely, I don’t lower my price if a change is made that makes the job easier or faster. Many contractors live for change orders. To me, a change order should only be used when a large (read expensive) change is made. One thing to look for is that when a large change is suggested the customer will ask “Is that easy?” My stock response is “Are you asking me if I’ll be tired at the end or is it expensive?” Then I tell them that the answer to both questions is YES. More often than not, that will end the conversation. People assume that anything easy is cheap. Don’t get caught in that trap. If they persist or insist, give them a price for the change before starting. If you receive a deposit up front, get the same percentage for the change. Now on to the steps I take.
Talk to customers first and look at the physical site.
The first thing is just asking questions of the customer. Remember, they have been planning and thinking about this for quite a while. You; however, are new on the scene. A new kitchen is a large expenditure and deserves thoughtful suggestions. I normally start by asking who will use the space primarily. Ignore that person at your own risk. What will it be used for? Will it be used by a gourmet cook or simply to microwave cold leftovers? Lots of baking? Will it be a place for people to congregate? Will they eat there, and if so, every meal? I normally try to ask these questions in the space we are talking about. It makes it a little easier to visualize their answers and concerns. Don’t forget traffic patterns. How will people get in, out and around in the space? Will there be jams at the refrigerator or stove? What do they want this kitchen to look like when it is done? Then I ask the really important question (the one no one likes to ask). How much were you planning to spend? Often people will not want to answer the question and will respond with we don’t know, we don’t have any idea. None of which is true. I respond that we have to have some sort of ballpark and will throw out a very large number, maybe $75,000. They will say NO, NO. You can respond by dropping to $20,000 or $10,000. At one point you will get some sort of answer. If not, you define the ballpark in large areas. $10,000 to $20,000 or maybe $5,000 to $10, 000, explaining to them that you need some guidelines. I often use the Cadillac and Yugo model. Both are cars, sort of. You should be able to come to some ballpark figure. If you get that rare customer who refuses to give some boundaries it is my suggestion to thank them for their time and refer them to someone who has too little grief in their life. If people are so scared that you are going to cheat them that they refuse to give you the information you need, you really don’t have a customer. On the other hand if a customer gives you a $10,000 limit don’t be worried about giving them an honest price of $12,500 to $13,500. We all spend more than we plan and underestimate how much we what we want costs.
Draw layout.
Now start the layout process. If you are drawing on the computer I suggest that you do it alone, not with the customer there. It is difficult to figure everything out while people are talking and asking questions. It is appropriate to ask for some time alone to draw, even if you are at the house and working on a laptop. Remember, this is an expensive proposition and deserves thoughtful consideration. It should normally take 10 to 15 minutes to draw the kitchen using a laptop. If you do it by hand, this may be step you want to do in the shop. This is just a rough layout, not the final drawing. Make sure that all things that won’t change are properly placed and accurately measured (Windows, plumbing, doors and anything that can’t or won’t be moved). If you don’t have cabinet design software and a laptop, I suggest that you make this a high priority. People, women especially, like to see pictures. It might be that left brain right brain thing. Now bring the customer back into the conversation and start moving and changing things. At this point I usually tell the customer that I will only ask “Are you sure?” three times. Then, if it is structurally sound, I’ll do it. They, quite correctly, get the idea that when I ask “Are you sure?” I don’t think it is the best solution. I have been wrong too many times to think that I know what is best for the customer but I am the only professional at this appointment and they expect input. But try not to get to impressed with your ideas. For customers who have consistently bad ideas, you have the right to turn down the job if you think will reflect badly on you. Also, if you disagree with something strongly, you can require a signed statement that your concerns were made known and discussed and the customer decided to do it anyway. This should be used only in rare cases, were, while structurally sound, it is a terrible solution. People will never say “Hey, you know our kitchen would have been much better if we had followed your advice.” They will say “We aren’t happy with our kitchen” (usually in a loud voice while in line behind you at the grocery store). When you have an approved drawing and you have the correct information in you laptop, giving them a price is a piece of cake. However, if you don’t, then excuse yourself and go back to the shop and figure your bid.
***Note: you should consider getting a good layout program that automatically gives pricing. I recommend KCDW because I have it.
Appliances.
Get the model numbers and manufacturer of the appliances from the customer. Look up the specs and installation instructions on the Web. Have the customer sign a copy of the paper with the model numbers or put them in the contract. Customers will be only to happy to change appliances without letting you know of the switch. Then it can be “I told you about that” when it is too late and the job requires major changes to existing cabinets. I can’t stress how important it is to get the appliances nailed down quickly and firmly. I can remember three or four times over the last 30 years that this has been a major problem, with no easy solution.
Figuring a Price
Figure Material.
Figure the amount of material needed to build the cabinets. Don’t forget waste. I normally figure 15% waste and mistakes. Remember to add delivery charges or your time to pick up and deliver the items. While I am not a fan of paying delivery charges, I was astounded when I actually figured out what it cost to pick something up. Driving and running time is time you lose working, so figure it at you labor rates. It makes the small charges for delivery pale by comparison. On hardware, I figure it even. If you screw up a drawer slide too often maybe you should check into employment in the food service industry, not everyone is cut out for cabinet making. I don’t include any decorative hardware such as knob or handles. There is too much variation in price and you’ll be stuck with a handle or knob that cost way more than you figured. I simply mark them up 35% including tax and delivery or drill holes for items supplied by customer.
***Note: The customer has to be there when I drill and has to show me the exact placement.
Labor Costs.
This is the hard one. Figure the hours and then double it. Then maybe triple it. One thing is certain, you will underestimate the amount of time it takes you to do anything. You can take that to the bank. One good practice is every so often (you chose the interval) attach a follower to the job. By follower I mean a form (you choose the layout) that goes everywhere with the job and you keep meticulous notes on time and material. You will be shocked at how much time it really takes. How much you charge for labor is up to you and the area you live in. What does your labor force make per hour? Wait, don’t forget benefits, workers comp, vacations, holidays and bonuses plus everything that goes to the government. If you do your own installations, remember employees get paid getting from your shop to the job and usually back. What I’m saying is “Don’t just figure how much per hour you pay.” Labor cost is much higher than that. If you physically do all or part of the work, don’t forget your hours, including the bid and layout portion. Your hourly rate shouldn’t be figured in at the profit area.
Overhead.
Overhead should be your fixed costs (rent, insurance, utilities, payments etc). Take this figure and divided by 30 days. Figure the number of days to finish, then add a margin of safety (maybe 10% to 15%) and multiply by the overhead figure.
Profit.
It’s not a bad word. You have to decide what is reasonable to you and your customers. But you have to have it. Something like 70 to 80 percent of business failures aren’t from too little work but from too little profit.
PIA.
Now here is my favorite. PIA stands for “Pain in the Rear.” You know the kind of customer I am referring to. Problematic people. Ones that will require more care than a normal bid would allow for. I have a couple of long time customers that have high PIA factors but have been with me for a decade or more. They require more time and hand holding and therefore a higher factor. My PIA starts at 10% and goes up. I suppose you could put in a reverse factor for the really easy ones, but I’ll leave that to you.
The Bid.
Adding all that up you should have a good bid. I require a 50% deposit of everyone, including my mother. I am not a bank, nor do I borrow money to buy material for customers (even if I use my own money, I am borrowing it from me.) If the customer can’t be ready on time, I get up to 90% of the contract with the balance due on completion. A good contract can shortstop a lot of problems and can resolve issues that may come up. I have to admit that I don’t use a contract. I am going to make the customer happy and in over 30 years I have only returned one deposit and canceled the job. I simply give them an invoice that says “Cabinets as per specs.” I do not recommend that you do as I do.
After the Bid.
Take careful notes of the conversations that you have after the deal is agreed to. Since I use a computer design program I put them into the job. I normally ask the customer, just before I take the deposit check, what they are expecting. I do it then because a little time has passed since we first talked about the job. It is a good idea to go over the job and make sure everyone is on the same page. Some times things get forgotten and are easy to change. I have always thought that there “are no good surprises in construction.” To build a good business requires staying in business. If you don’t lose some of your bids you either are too low or just damn good.
By the way I lost a bid about two months ago.