# Bid vs Hourly



## Jaws (Dec 20, 2010)

BamBamm5144 said:


> I just can't see it being possible.
> 
> Oh hi, your estimate is 5 guys at $70 an hour plus materials and 10% and it should take a total of 100 man hours.
> 
> Sounds a lot worse then your price is 11000.


I agree.

Some perspective though. If you are going to gut a 4,000 sq ft house, a phase at a time, WHILE the ho is living there, over 6 months or longer, it can get hairy. The site has to be immaculate at the end of the day, lots of over sight and planning, lots of moving furniture to move all the time, a crap load of cleaning at the end of the day, go to make sure water is running and electricity is working everyday. You have to work around them, their pets, s uprise house guests, colds and flus, "I need yall to not be here tommorow or a whole week even though I didn't tell you" ect... I will bid that, but they won't like it. They will save money cost plus paying my crew hourly, because you can believe their will be a big azz margin in my bid for PITA and setup, tesrdown and clean up everyday.

I still have a schedule and milestones to meet, and I still have to come in close to my estimate, or have a good reason (changes ) not to.

Very important to be very honest with estimates with T and M , cost plus, whatever. It will trash your rep to miss them by much, and no referals. I try to come in under and often do on the original scope. Under sell and over deliver is the key to referals.


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## Bonzai (Dec 23, 2009)

For me I have found that a combination of methods applied depending on the size and complexity of the project works well. In the last 3 years I have done 3 purely T&M jobs and they were all under $4000. However I have done lots where there was a baseline fixed price scope and T&M for some specific additional items or some aspects of the scope which were so uncertain they were impossible to estimate without adding a huge buffer. I've used allowances (both materials and labour) in some jobs where the client was clueless about some details at the time of asking for an estimate eg. $750 in design time, or $7/sqft for tile, etc etc.... And I use exclusions a lot as I learnt the hard way that some people assume that you will magically do all the prep for something that isn't really in the scope or that special order items will just materialize at the job site on their own for free ;-)
Basically I keep my systems flexible depending on the size of the job, predictability, and nature of the client as we do everything from small repairs and property maintenance to larger renovations. I have one client who insists on doing his own prep despite my recommendations as he almost always botches it ... I will only ever charge him by the hour as I never know how many of his mistakes I will have to fix before I can really start. 

Estimates which used to take me 2 or 3 days to complete I can now produce in a few hours as I have developed my systems and have more experience to draw on. It's those smaller couple of day or less jobs that are hard to avoid spending a disproportionate amount of time estimating but I am getting better.


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## r4r&r (Feb 22, 2012)

Cost plus is the method that I am having a hard time grasping the concept of myself. T&M for small jobs, handyman eeek, seems the best way for me. There is a point, and it's kinda like the SCOTUS definition for ****ography I know it when I see it, I will throw out the option of a fixed price or service call plus hourly. 
I had one customer ask me if we could just do whatever wound up cheaper and I told her I had to take a risk with the fixed price so she had to take a risk and choose one or the other, she chose in my favor and chose fixed.


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## DemRem (Apr 21, 2012)

Rob1954 said:


> Many of my jobs only last between 4-20 hours. Unless you are doing jobs which last more than a couple of days or involve more than a couple thousand dollars, I think you're better off hourly.
> 
> There is also a cost to estimating. If you don't have that figured into your overhead, you have a profit leak.
> 
> For my business, it's better to be billing for hours than spending much time doing estimates.


The cost of estimating is a good point! On small jobs the cost of estimating becomes greater relative to the profit you'll make. With T&M I can often quote these small jobs site unseen and very quickly.



Ohio painter said:


> A final example: customer wants a bathroom painted. Painter A charges by the hour and it takes 8 hours so he charges $160 (made up price) Painter B (me) paints for 6 hours and charges the same $160 (price very much made up) who would you hire?
> Great topic.


I like this example and I'm glad you posted on this topic because I like how your pricing model rewards efficiency and skill, but avoids some of the downfalls of bidding. 



griz said:


> I have done very well on T&M work...
> 
> It all depends on the clients, scope of work, which sometimes after a few hours is down the tubes, and what you are comfortable with...:thumbsup:
> 
> ...


Well said :thumbsup:


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## Jaws (Dec 20, 2010)

r4r&r said:


> Cost plus is the method that I am having a hard time grasping the concept of myself. T&M for small jobs, handyman eeek, seems the best way for me. There is a point, and it's kinda like the SCOTUS definition for ****ography I know it when I see it, I will throw out the option of a fixed price or service call plus hourly.
> I had one customer ask me if we could just do whatever wound up cheaper and I told her I had to take a risk with the fixed price so she had to take a risk and choose one or the other, she chose in my favor and chose fixed.


i dont assume risk regardless of the method i charge. I have clauses for unforseen, ect... in my contracts. The only risk i assume is my labor calculations. Believe me if i bid an occupied whole house reno or remodel , i would tack 50% to whatever i calculated my daily labor at for set up, break down, cleaning, headaches.... over 6-10 months thats a lot of dough. We have a very good referal base from doing cost plus remodels., so the client usually wants to got that route for a mojor remodel.

If it is a straight forward addition, kitchen or bath, boat dock, deck , custom home, ect... fixed is a good way to go, you reap the rewards when things go right. If you estimate well, it shouldnt have much that you would miss, anyway. As long as you set up your contracts properly, unforseen conditions like Scribles described in a different thread will be covered. A little rot , mold or insufficient framing will be in my estimate regardless of cost plus or fixed. Unless it is major issue, such as improper electrical or plumbing (dont expect my subs to eat it) , or major damage (termites) I dont bring it up to the client.


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## r4r&r (Feb 22, 2012)

That scenario played out on a small job, some paint touch up, I wasn't going to spend half an hour inspecting every square inch of woodwork to quote it so I just gave here a swaq based on rooms she wanted done. Figured I may be off by an hour at most, so I added 1.5 to my swaq and slung her a price. Guess she figured it wasn't worth risking my hourly rate and took a shot at the fixed. I was half an hour high on my swaq so I picked up 2 hours on it. 
I do my best to cya on any quoted job. I verbally point out any areas I may be concerned about hidden damage and include those in my contract and have an unforseen clause as well that I am still fine tuning the wording on.


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## DemRem (Apr 21, 2012)

r4r&r said:


> That scenario played out on a small job, some paint touch up, I wasn't going to spend half an hour inspecting every square inch of woodwork to quote it so I just gave here a swaq based on rooms she wanted done. Figured I may be off by an hour at most, so I added 1.5 to my swaq and slung her a price. Guess she figured it wasn't worth risking my hourly rate and took a shot at the fixed. I was half an hour high on my swaq so I picked up 2 hours on it.
> I do my best to cya on any quoted job. I verbally point out any areas I may be concerned about hidden damage and include those in my contract *and have an unforseen clause as well that I am still fine tuning the wording on*.


Not sure if this is too much to ask but would you or anyone else care to post your contract...I don't want to see the price or anything, just all the wording you use?


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## Jaws (Dec 20, 2010)

I try not to do small jobs (under $10,000) on T and M or cost plus. No money other than a little over wages. If it is a repair for an existing client we will. 

A half day job requires to much time outside of the work to do T and M or Cost plus in my opinion. A trip to look at it, a resource list, get materials and tools, go do the job. In my experience its hard to get paid for all of that time on something small.


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## DemRem (Apr 21, 2012)

Jaws said:


> I try not to do small jobs (under $10,000) on T and M or cost plus. No money other than a little over wages. If it is a repair for an existing client we will.
> 
> A half day job requires to much time outside of the work to do T and M or Cost plus in my opinion. A trip to look at it, a resource list, get materials and tools, go do the job. In my experience its hard to get paid for all of that time on something small.


Thats why I do T&M for these small jobs...and that time includes travel and getting materials


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## Jaws (Dec 20, 2010)

I don't understand what you're saying. You quoted my posts which said I don't like to do time and materials or cost plus on a small job.


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## BamBamm5144 (Jul 12, 2008)

Jaws said:


> I don't understand what you're saying. You quoted my posts which said I don't like to do time and materials or cost plus on a small job.


Most of this thread hasn't made any sense.


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## r4r&r (Feb 22, 2012)

All small jobs have a service call to cover travel and once I'm on the clock I stay on the clock. So any material runs are payed for. T&M for me means I don't spend anytime on the job that isn't billed. 
I would love to have a 10k floor on jobs but I just don't have the referral base yet.


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## Jaws (Dec 20, 2010)

r4r&r said:


> All small jobs have a service call to cover travel and once I'm on the clock I stay on the clock. So any material runs are payed for. T&M for me means I don't spend anytime on the job that isn't billed.
> I would love to have a 10k floor on jobs but I just don't have the referral base yet.


 I don't have a floor :no:

I have taken jobs small is a justing a pocket door , if it was in the right zip code. That was 75 bucks. Just saying if somebody asked me to build a set of steps on the back of their house, I will. But I'm not going to do it by the hour. I'm going to figure out my time materials ana tack on a healthy percentage. 

Not knocking your methods:no: 
Just explaining the way I do it so then I remain profitable.


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## Jaws (Dec 20, 2010)

BamBamm5144 said:


> Most of this thread hasn't made any sense.


 Haven't read the whole thread. But I think it's a good topic.

I just think you've been around too long Bam, It's all the same discussion 20 times:laughing:

If I were in a particular trade , roofer, mason, painter ect.. I would probably not ever want to do time and materials. It doesn't make any sense.

To me unless it is a complicated design build project it doesn't make a whole lot of sense to want to go cost plus on a custom home or a straight forward project , for the client or contractor. But some contractors have the referal base to charge however they wish , and some clients like cost plus if they like the builder , because they know any savings will go to them. Which is why I like fixed cost on straight forward projects :laughing:


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## griz (Nov 26, 2009)

T&M jobs were generally for high end out of the ordinary stuff. 25K on up.

Did several new homes on T&M, but they were not your typical tract home...:whistling

Repair work & Honey Do type stuff was saved for slow times or if some of the guys wanted to work weekends. Depended on who it was for as to how it was charged out.

Run of the mill additions, kitchens, garages, insurance work etc. were all bid out.

Doctors, Lawyers, Dentists, Mechanic, Fishing Guide, Restaurants, Tool Repair Shop, Grocery Store & the kid who mows my lawn are all right up front about what they charge...:thumbsup:

Why is it such a deep dark secret what you charge someone to work on a job?

If you consider yourself a Professional at what you do, and I mean act like one, look like one and perform as one, why would you be embarrassed or afraid to state what you are worth?


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## r4r&r (Feb 22, 2012)

For me it isn't a matter of being up front. I have set prices for hanging a ceiling fan, or replacing a light fixture, or painting, etc. but you want me to fix a broken sprinkler line or look at your slow draining sink or do some loosely defined job (just touch up the woodwork where you think it needs it), it's service call and hourly. 
T&M has lead to bigger and better and it has worked the other way around as well.


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## Rob1954 (Jun 22, 2010)

Agree. That's why when I quote T&M, the time starts when I leave my driveway until I get back home. All time spent sourcing materials is also billed. Before the agreement is signed all materials are specified so I don't get stuck with trying to do good work with cheap materials.

If the customer wants to supply the materials, that's fine but we have to agree on which products are used. I also do not allow the customer to supply labor.

No need to apologize about an hourly rate. The customer is not only paying for my labor but for my overhead, knowledge and reputation that I finish and do good work. If they balk at that concept, then I pass. 

All of that can be discussed up front on the phone for new customers. Existing customers understand it and are ok with it.

Quoting a fixed price has its benefits. You can capture additional profits if things go right. But at this stage of my life, I'm fine with just paying myself a great hourly wage and a decent profit for my business. Makes life a lot more enjoyable for me.


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## CSB (Nov 17, 2007)

jessitompkins said:


> All I have to say is " You never lose when its hourly"


If it costs you $60/hour to operate your business and you quote a client at $50/hour, you lose. Even worse, if you quote an hourly high enough to give you enough of a profit to sustain business but not grow, you become the proverbial donkey chasing the carrot; you spin your wheels for years putting up with the headaches of running a small business, you reap few rewards, and when the inevitable bad times come you lose the hairs on your head and years of your life fretting about the business that runs you.

Pricing is really simple if you know what your overhead, job costs, and profit margins need to be in order for you to stay in business. It will make no difference how the client perceives the price, as that's what you need to charge to be in business. If the client doesn't agree then you wish them a pleasant day and move on to the next one while trying to learn how to sell your company better to future clients so price isn't a determining factor.


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## stanbro3 (Jul 4, 2012)

CSB said:


> If it costs you $60/hour to operate your business and you quote a client at $50/hour, you lose. Even worse, if you quote an hourly high enough to give you enough of a profit to sustain business but not grow, you become the proverbial donkey chasing the carrot; you spin your wheels for years putting up with the headaches of running a small business, you reap few rewards, and when the inevitable bad times come you lose the hairs on your head and years of your life fretting about the business that runs you.
> 
> Pricing is really simple if you know what your overhead, job costs, and profit margins need to be in order for you to stay in business. It will make no difference how the client perceives the price, as that's what you need to charge to be in business. If the client doesn't agree then you wish them a pleasant day and move on to the next one while trying to learn how to sell your company better to future clients so price isn't a determining factor.


Very well said!


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