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Small business invoice example for Product quality

my customer wants me to break down my bid should I we'll answer that question right now unsuccessful contractor a lot of people that are new to Contracting often wonder if they should be breaking their bids down and when I say breaking a bid down or should they be providing one lump some proposal and saying here here's a turnkey project or should I be listing out materials labor markup whatever else you want to do and I'd like to share my take on all that based on my 30 years of Contracting experience I'll tell you how we do it and some of the pitfall s if you do decide to break a bid down that you can fall into with your customers that maybe irritate them so the way we do bids here at swi is we do lump suum and lump suum only I will not break anything down and this isn't to deceive anybody this isn't to hurt anybody basically all we're trying to do is keep it simple so that they can wrap their head around it because not everybody understands all of the costs associated with doing a project when they see a lump suum price they know that my fence is going to cost me $5,000 they can either mentally say that's okay or they they can say that's too high I want to get some more bids but it makes it really easy and simple for them to compare especially if I've given them a good description of the work that I'm going to do for them I've told Mrs Johnson that we're going to do 200 ft of aluminum fence and it's going to cost her $5,000 and for that she's going to get a couple of gates as well makes it super easy we have a diagram we've basically spelled it out she has no questions about what we're going to do for now what we have seen in the past is we've seen customers come back and say that's great I like the price but could you please break this down for me and I'll tell you where I think that's typically headed one of two different places the first reason that somebody might do that is the more innocent of the two maybe they got the bid from you and it's just too expensive and they could be wondering how they can save some money maybe they were looking to spend $3,000 and you handed them a bid for five they might be looking for ways to cut the cost and get it within their budget rather than immediately giving them a cost breakdown the question I would ask is what has caused you to request this bid breakdown what are you trying to gain by doing so and you'll get a better understanding and very quickly understand what they're trying to do so if they say well it just came in a lot higher than I wanted it to and I was trying to look for some ways to save money that gives you an opportunity to say okay well we could maybe do this this and this that would impact your bid favorably to your budget the second scenario is what we've run into a ton of times and that is people that want us to break down they want to see how many labor hours we have they want to see all the materials that we have and this can go many different ways so when it comes to materials they could be looking at okay well if he can tell me how much the materials are and especially if I can get him to give me a list I'll just go down to the local Big Box store I'll pick up all the stuff and then I'll expect him to still do the job for what his labor cost is well it doesn't quite work like that because a lot of people don't understand that we have markup on materials and that helps us cover all the overhead not to mention we've got to go to Lowe's or Home Depot and we've got to pick all that stuff up there's a lot of cost associated with handling that material planning all that stuff that people don't understand and if I don't get it from the material typically going to have to raise my labor rate to recover those same amount of costs my costs don't change my cost of doing business every day don't change just because now I didn't have to go get the material or because the customer provided the material in our company we have a policy we just don't use owner provided material we don't and if there is a case where we did ever do that I would have a higher labor rate to cover that owner provided material cuz what usually happens is is they're going to be missing things it's going to be wrong and you're going to have to go chase it down or you're going to have to wait for them to chase it down so it just opens up a whole host of problems including you not being as profitable on the job which that's not acceptable that's not how we become successful contractors the other thing I've seen happen and we've had this happen and this is how we've gotten to the place where we are today is they say well I need a bid breakdown showing me what you're using and all your stuff and so it gets to the end of the job and we handed them a bid and they say you know what you had 21 posts but I only see 20 out here I need a credit okay that that that happens that's what people do they don't understand the difference between a bid and an estimate at the top of all of our sheets that we hand into our customers it says bid now a bid is a firm fixed price for doing a certain scope of work that means that it will not go up and it will not go down unless there's a change order so if I bid 50 posts on your job that only takes 35 uh and somehow I can figure out how to get it done appropriately and that's a terrible example but if I can get it done without cutting corners and do the scope of work that I've promised you using less material or um maybe we bid some extra because we weren't sure how we were going to lay some stuff out you don't always get a full full section or full 8 ft out of a 2x4 our sections only be space 7/2 ft so we have a certain amount of waste so we kind of build that into the project knowing that we're going to have waste or we're going to have coal boards or coal pickets and so they don't understand that and they go out there and they count everything and they're like well you owe me a credit because you didn't use 200 pickets you only used 176 and now I need a credit so that's one thing that we've seen where customers will actually go through and look at that at the end of the job and expect a credit they really don't understand that there's a huge difference between a bid and an estimate and we only do bids it's all we do that means at the end of the job if we went out there and we fought it the whole time and maybe there was some unforeseen variables that we didn't know about we eat it on the same hand if we go out on that same job and it went way better than we anticipated maybe we thought it was going to be super Rocky and it was nothing but butter and we get it done in 20 hours instead of 30 guess what you're not getting a credit that's the agreement we had we had agreement for a firm fixed price to do the scope of work regardless of how good or bad the project went now an estimate on the other hand is what you get at the auto dealers when you go in you get your car fixed they said it's going to be about this but then if they get in there and they find out there's other things or if it took them longer they're going to charge you for it it's just an estimate it means hey we think it's going to cost about this but good luck we don't do that to our customers but on the same hand when things go extremely well we don't give credits either we take it on both sides whether you break out materials and labor one thing I would definitely suggest you not do is break out your labor so we have Labor at a firm fixed price for the entire project if we have been 30 hours and we only get it we get it done done in 20 we keep the extra labor to ourselves that's a bonus for us for being extremely efficient and the customer got a job done even faster than what we' hoped so they should be happy and it didn't cost them any more than we agreed upon another reason to be happy and on the flip side if it goes really bad they didn't get a bill for more what happens in the labor situation is very much like the material side of things let's say you bid it for 30 hours and you write down 30 hours on the bid and then they I've seen customers actually try and track how many hours you on the job well you were only on my job for 20 hours they didn't see the time that you spend at the shop loading up or pulling materials to get ready for their job or if you did have to go pick stuff up from the lumber yard they didn't see all that time they're only going to track the stuff that's actually on their job and then try and ask you for a credit at the end of it I would definitely say that's never a good idea to do lastly one of the things that we've found is if we break down labor and we tell them it's uh you know let's say arbitrarily our labor rate is $50 an hour and we tell them it's 40 hours at $50 an hour we've actually had a lot of push back people don't think we're worth it and I don't I don't know what trade you might be coming to us from but people seem to think that we aren't worth our money I can give bids out all day long and tell people that it'll be $10,000 for their fence and they're like okay that's great I love it and some people think that's too expensive and that's no big deal but you know how many people would freak out and have freaked out when they see how much we think we're worth and it's because we don't think we're worth that we know we're worth that we get that every day all day for some reason though people just don't want to pay contractors like us what we're worth they don't understand the costs that go into it they'll go pay the auto mechanic down the road where you actually have to bring all your stuff to them they'll pay them a good rate you know they're worth 125 bucks an hour but a fence Builder that has to train for this stuff has to work out in the elements not in a nice shop and that we actually come to you with our you know sometimes $100,000 worth of equipment for your job for some reason we're not worth the same as a mechanic we're not worth the same as an electrician in our field what we found is we found a lot of push back because people just think we're not worth it and so we've eliminated that all together we don't tell them how much our labor rate is um it doesn't matter cuz it's a bid and you can either take it or leave it so today if somebody asked me to break out material and labor and give them an itemized breakdown of their project my answer is it's $5,000 to do the job it's $0 not to that's your breakdown we have in certain circumstances with Federal projects needed to disclose some cost and after the contract signed and everything if they want to see some of that stuff that's fine but this is a bid they need to understand again I think a lot of customers don't understand the difference between a bid and an estimate the other thing I've done in a case where somebody says hey could you break this out for me I so okay so do you want to work time and material in this job and that means that every single nut bolt piece of material that I bring into this job I build them for and maybe I only charge them 10% markup whatever it is we have that agreement up front but every single hour I put into the project I also build them and that's how we do all of our repair work for gate operators and stuff so our gate operator people understand that but our fence people probably don't when I tell them like that you know if this thing takes 50 hours and we only bid 40 in our estimate cuz at that point in time it's an estimate then you'll be responsible for that additional money and then they're like okay no I I want to work on a bid I I just want to know homeowners really appreciate that firm fixed price so I feel like a lot of times they're trying to get the best of both worlds they're trying to hold you to a firm fixed price because no customer is ever going to come to you if they go out and they count up all the material and all of a sudden now there's 25 post and you only bid 22 they're never be like oh I owe you some extra money it's always the other way so they only ever it only ever hurts you never ever benefits you I can assure you of that that's just the way it works so that's my take whether or not you should be breaking down your materials and labor I'll say one last thing though there might be that crowd out there that says you know what that's just not dishonest you're just you're you're screwing people over you're just too expensive or whatever the objections may be understand again this is a firm fixed price I provided them with a proposal they looked at it and said for the work you're getting ready to do I feel like that's fair and they accepted it we entered into a contract and both parties agree I had didn't CSE them into accepting that contract I haven't told them that they had to use me or I'm going to bust our kneecap there was no part of that that was forceful had I done any of that stuff it would have been it would have been uh what's the word unethical that's the word I'm looking for that would have been unethical but everything we're doing is above board we both agreed on what we were doing so with that I say to all those people that say you're you're just being dishonest you're trying to hide stuff that's not true I'm just trying to eliminate problems because I've Seen It All Before I know exactly where they are and all these objections are things that have come up from my 30 years in Contracting so take it for what it's worth I hope you got something out of this till next time I'm Mark a successful contractor and I hope you have a good dang day and make tons of money