Episode•August 24, 2026•43 min

EP285: How to Stop Costly Estimating Mistakes for Contractors

What if your contracting business is losing money before your crew ever steps onto the job site? A job doesn’t always become unprofitable during production. Sometimes, the profit was already gone the moment you sold it. In this episode, Brad talks about: The importance of accurate job costing Common estimating mistakes: guessing labor and material costs Understanding true labor burden rates The impact of non-productive time on project timelines The dangers of pricing based on competition The necessity of a clear scope of work Strategies to avoid discounting correct estimates Links to resources Grab my free job costing worksheet and start job costing every job right away. https://go.hammercrm.com/widget/form/4Bws6E9GGX0RZPoED1bn Want to go deeper? Check out the Contractor Profit Blueprint: https://www.thecontractorprofitblueprint.com/ Book a strategy call with Brad: https://hammerandgrind.com/qualification-website Enjoying the podcast? Visit our website at https://www.hammerandgrindpodcast.com for the latest episodes, resources, and more. Have a question, story, or topic you'd like us to cover? Leave us a message here: https://www.hammerandgrindpodcast.com/voicemail. We'd love to hear from you, and your message could be featured on a future episode! Help us get the word out to other contractors by leaving us a review or sharing our podcast! Hosted on Acast. See acast.com/privacy for more information.

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Transcript

0:01

Sometimes a job doesn't become unprofitable during production. Sometimes it's unprofitable the moment you sell it. Today, we're going to be unpacking mistakes that contractors make during the estimate process and cause you tons of profit before anyone ever sets foot on the job site. Hey, welcome back to the show. I'm your host, Brad Hebner, licensed general contractor, author of the Contractor Profit Blueprint, and business coach to overwhelmed contractors who are trying to gain more profits, and regain their freedom. Now, in this episode, we're talking about mistakes that are made during the estimating process that cost us a ton of our profit, if not most of our profits, before anyone ever sets foot on the job site. And here's the thing. Whenever the job's finished and we're like, where's the money? We can't just initially blame production. We can't just initially blame our employees. And one of the reasons why I speak so much about job costing is because job costing is the tool that shows you where all of these profit leaks are. We'll get into that here a little bit more later. So first off, stop blaming production. I mean, just right off the bat, stop blaming production. Just because a job finishes and there's no profit doesn't mean it was the production's fault. It doesn't mean that the guys took too long, or maybe they did take too long, but that wasn't actually the problem even to begin with. They took too long, plus you didn't have enough money factored into the hours to begin with. So you have a shortage of hours, and they took even longer than they were supposed to. You have a double whammy there, right? So going back to the original estimate and doing an actual job cost on it is going to help reveal a lot of these problems, all right? So if your crew executed this job exactly according to the estimate, would you have made profit you wanted? Would you have made the profit that you wanted? So if everything went perfect on production, would you have made the kind of money that you wanted whenever you sold the job? If the answer is no, then it's not a production problem. It's just not. So we're going to go through these, all right? A lot of times you sold a bad job. Let's just throw it out there and get it on the table. You just sold a bad job. And when I say you, if you're doing the sales as an owner, that's definitely you. But if you have a sales team who are selling jobs at a lower price point, again, it's still your fault because you're still ultimately in charge of what price points they're selling them at, what gross profit margins they're allowed to sell jobs in. You have control over that, right? So it's still your fault even if you're not doing the sales. So here's mistake number one when it comes to estimating. You just simply guess. You guess on labor, right? You're guessing on... how long something's going to take. You're guessing on the efficiency rating of your team, their production rate, all that stuff you're guessing instead of using actual hard numbers that you have either from past jobs or from other reference points that you can potentially get information from. You can literally YouTube stuff, AI stuff, and just be like, how long does it take a normal one person to install a door, an exterior door? it's going to come back and give you a range. It's going to give you some ideas. You can check three or four sources. If you've never done it before and you have no idea how long it's going to take, you can get some ideas on this and then you can use that as a baseline. I'm not saying it's going to be perfect, but I'm just saying you can't just guessing. No, I think it's going to take, I think it takes somebody four hours to. you know, install that door, or I think they can do it in two hours, right? So that's one mistake. Another mistake with labor is pricing time based on what you can do it in, right? Oh, I can install a door in two hours. I'm super efficient and I can do a door in two hours. So that's what I put in there. Guys, that's your team is not going to be as productive as you are. It's just not going to happen. At best, they're going to be 80% of your rate, right? So if it's two hours, you know,80% of that is what they're going to be at. Right. So it needs to be three or four hours to do the same job that you can do. They're just not going to be as good as you. Yes, you may have a unicorn and that's great, but it's just it's not going to be the standard. All right. So gut feel estimating. You just have a gut. I think I think we could do this job in two weeks. I feel like we can do it in a week. I feel like we could take we could take it do it in a month. No, that's not bid stuff like that. Right. That's just silly. But I know people that do this, right? Contractors are often based on perfect world production. In a perfect world, we can do this job in five days. In a perfect world, we'll get this done in two weeks. I'm guilty of this. I know a lot of people are guilty of this. There's no such thing as a perfect world. Like if you do, you know, you probably have less than a 5% chance on any project of it going perfect. It's funny because we have problems on every single project. If you go back and look at your projects, you can say like, yeah, we had that problem. We had that problem. Some of them are big, some of them are tiny, but there's still problems that cost you money. But we still go and we estimate jobs based on perfect world, right? The perfect production rate. It's not true. You need to bid jobs based on like normal. Or worst case, I don't mean like if a job normally takes five days, you know, you bid it for 30 days. Let's be realistic. But if a job normally takes five days, maybe you bid it for six. Right. You're giving yourself a little bit of a buffer there. Other things, nonproductive time. This is huge, huge nonproductive time. You know, you bid a job for a week,40 man hours, right? Five days. But what you don't take into consideration is drive time. you know, set up and tear down time, talking to customer time, material handling time, going to the store four or five times, like all this nonproductive time. It may, you may have figured eight hours swinging a hammer, right? But a five day work week, eight hours a day of swinging a hammer translates into six days of production, six days. So if you think you're going to do a job in one week, mean five days. you know, working eight hours a day, swinging a hammer, it's not going to happen. It's unrealistic. So again, we can use the 80% rule here as well. Like our, the time we think it's going to take, add 20% onto it. If we think it's going to take, you know, five days, we add 20%. If we think it's a hundred man hours, we add 20%, right? 120. Like that is a good starting point for taking into consideration non-productive time. Client comes home at lunch, has a bunch of questions for your lead guy. Hey, Brad, how's it going? Oh, it's going pretty good. Hey, I got some questions about some stuff, blah, blah, blah, blah. An hour later, your lead guy is still talking to the homeowner, right? He just lost one hour of production. So he can't, I mean, he's either got to work overtime or he's got to work additional days. And that can happen every day. So nonproductive time is a huge factor in your labor rates being way off. You know, things like cleanup, punch list. difficult access, right? Hey, we're going to install this deck, right? No problem. Normally we can, you know, we get to park our trucks in the driveway and we get to, you know, a truck can drive in the grass and drop all the materials right next to the job site. Except this time you can't because it's in a condo complex or it's in some kind of tight restriction and you guys have to hand carry the materials from, you know, half a block down the street. Like that's if you're if you didn't catch that during the estimating process, shame on you. You just you know, you're screwed your guys there. And I've done this. I mean, this isn't lost on me. This is I've done all of these things. So difficult access complexity, we overestimate how easy we can do something, even if it's very complex. If there's a lot of math that has to happen, if there's a lot of thinking that has to happen, that can really slow down your production time. And then again, trips for missing materials. I've talked about this before. And then, you know, using actual labor burden rates that you should be, which is number two. So number two is using wage instead of your true labor cost. So number two is, you know, my carpenter makes 30 bucks an hour plus FICA that, you know, $34 an hour is what he costs me. No, it's not. That's not what he's costing you. You have to factor in. benefits, PTO, holidays, other additional burdens like vehicles or uniforms or cell phone stipends or, you know, training or additional, you know, taking them out to lunch once a month. Like all of these things cost you money. And in order to run a business, the money has to be factored into the cost of the employee so that the customer is paying for it. Like we have, you know, we have to make money. It's not like we have, you know, we think our labor cost is $1,000. And so we charge the customer $1,000. And that's great. If our labor cost, if our true labor burden is $1,500, and we charge the customer $1,000, you get to pay the extra 500. Right? So we need to make sure the customer is paying that extra 500, not us. Understanding your true labor burden costs. Yeah. And then understand how the number needs to translate into your estimate. So again, if you have a carpenter and you factor 40 bucks an hour, you know, for a carpenter, and it actually costs you $43 an hour, you're losing $3 per hour that you estimate. So you're underestimating before you even start, right? If your labor cost assumption is wrong, every labor heavy job you estimate starts with bad math. If you got a job, it's like almost no materials in a super heavy 300 man hours, right? And you underestimate by two or $3 an hour. Oopsies, right? You're eating that. So that's number two is using wage instead of a true labor burden cost. And if you haven't grabbed my labor burden worksheet, you can go grab that on the website and go to hammerandgrind. com. It's on the website. It is $39. It's worth every single penny. If you don't think it is, let me know. I'll give your money back and you can keep the worksheet. So, you know, I don't have no problem doing that. Mistake number four. I'm sorry. Mistake number three, getting ahead of myself, screwing up material costs. We've all done this. You know, we're doing we're doing work and it's super tedious to go out and get every new pricing. You know, how much is a two by four today? versus how much was it last week? How much is a sheet of drywall today versus last week? How much is this and this and this and this and this? You know, how much are treated deck boards now? Like prices change, right? But using outdated prices, forgetting about waste. Again, this is being optimistic. You think your guys can like, you know, do a herringbone tile pattern on a 45 on a diagonal and you think 10% waste is plenty. Newsflash, it's not. Ask me how I know. Forgetting things about delivery and freight costs, right? They want to order, you know, you're going to order some aluminum handrail package from the supplier. You forgot that the supplier charges the freight charge on that. They have to order it in. They don't stock it. And it's going to be an extra $200 for freight. You know, oopsies, who's going to eat that? You're going to go back to the customer. Hey, customer, I suck at my job. Can I get an extra $200? No, usually you just eat it. Right. Assuming that every price, you know, every I'm sorry, every piece will be used perfectly. No mistakes. Can't tell you how many jobs, you know, we had just enough pieces of casing. One bad cut. Guess what? Another trip to the store for one piece of casing. It got so bad. I just had a rule. It's like, look, if you have to go to the store to get extra trim, don't just buy one piece. Buy two or three or four or however many you're needing. Buy extras. We can always take them back because there's nothing worse than going to the store, buying one piece of trim, coming back and screwing that piece up as well. And then you get to make another trip to the store. Ask me how I know about that. Right. So assuming every piece is perfect and you're not going to make any mistakes for getting price volatility. You know, like I said, things change. They can change overnight. You bid a job today with a lumber package that's, you know, five thousand dollars. And then next week, that same lumber package is sixty five hundred dollars. because of price creases, right? So you got to make sure even in your estimates, especially if you're scheduling jobs like six months out, you need to have clauses in there that the price of some of this material may change. Like you're not guaranteeing the price today unless we buy the materials today. Like if I'm going to do a job six months from now, I may buy the price, buy those materials today and stock them, warehouse them until the job to ensure the price. But if I'm going to wait six months before I order the materials, The price can definitely change and you need to have clauses in your estimate to accommodate that. Not accounting for, like I said, material handling, which is the same as shipping freight and not accounting for restocks. A lot of companies will charge you a restock fee,10%. You know, you special order something, you special order those aluminum handrails that cost you $200 in freight, right? And you order an extra two handrails because maybe that's smart. Maybe you just did it on accident. Who knows? You get done and you want to send those back because they're $300 a piece. Guess what? 10% restocking fee, right? So you can get to pay $60 to send it back. So there's things to take into consideration. I did a job one time for my in-laws and they wanted tile that was literally imported from Italy. They had to get it from Italy and ship it here on a container ship. So you have to order extra. Like you're going, you know, you don't want to get to one piece of tile left and then have to wait four weeks for another, you know, another case. So like you're going to order extra tile when you have to deal with things like that. And then forgetting small materials because individually it doesn't seem important, right? A $40 mistake, that's not the end of the world, but 40, $40 mistakes add up, right? And those things can add up quick. So are you estimating what the materials should cost? or what they actually cost when you put it in the job because you're too busy. I don't have time to go get all this information. I'll use the pricing sheet from two months ago because I don't really want to go out and reprice it. Guys, most of the time, if you have actual pricing sheets, you just send that over to your salesperson and make them do all the work. Make them come back with an updated price sheet. You don't have to go in there and actually do it yourself. You don't have to log in and... You know, go to Lowe's and check what the two by four cost is. Go to the sales desk, email it, whatever, call them and say, hey, I'm going to send over a price list. Can you update it for me? Make them do the work. That's what they're for. Mistake number four, missing cogs. So a lot of profit quietly disappears in your cogs. What do I mean by that? You might remember the material, the lumber. You remember the cabinets. You remember the electrician, the subs and all that. But what about everything else that's required? Here's a list. dumpster fees, plans, permits, engineering, job supervision, equipment rentals, specialty equipment rental, special tools you have to purchase for that job, delivery charges, temporary protection, cleanup and disposal, inspections, testing, portable toilets, consumables. It took me a long time to realize like if you just have a dozen tubes of caulking on your truck. Right. And those tubes are six dollars a piece. No big deal. You can get one or two or three uses out of them, you know, before you have to get a new tube. It's still a consumable that the client is using. So, you know, one thing that I did and you should do this is even if you know, like you just got to do a couple of little touch ups with a tube of caulking, the customer buys the entire tube. Even if you know you're going to get four or five uses out of that tube, which. Honestly, you're probably not because it's going to dry up before you even use it. And it's a waste. It's a different story. But if you only need to use two little dabs, two tiny little dabs of silicone, the customer pays for the entire tube of caulking or silicone. You're not just provisioning it based on how much you use. The reality of it is that even if you don't use that tube again for six months, it's going to go bad. And I don't care about how I get people like, well, if you knew how to store it. You get more use out of it. I'm not going to go and like, you know, rack my brain and go and do extra special work to save a $6 tube of silicone when I can just charge the customer for it and make sure that it's being used. Right. So like, even if you know, you're going to use just a tiny bit and you're going to use it on the next five jobs, the customer gets charged for that one tube, a full tube every time that's a consumable blades. You go through blades. If I was doing a deck, I would buy a skill saw blade for that deck. I knew I was going to burn through it. Treated lumber is bad for blades. So like I knew I had to buy a blade dedicated for that job. It's going to be bad by the time it's over. $30, $40, $50, $60 blade, whatever it is, you know, the customer's paying for that. That stuff adds up. That's the $40 times 40 that we're talking about. So you have to take all that in consideration. Sometimes you have to buy tools that you know are going to get destroyed on the job. I remember early in my career when I was a construction manager for a local developer. And one day I was talking to the concrete guys, the concrete subs. And I don't remember how he came up, but he was talking about saws, you know, like circular saws. And he said, well, if I'm going to, you know, if I have to go and cut a bunch of cuts and I'm going to use a circular saw. I know that saw is going to get ruined with all the saw dust or the, you know, the concrete dust. So I just, you know, I just put in my estimates for a $120 circuit saw, whatever the cost of it is. And I was at that time, I, again, early in my career, I was just baffled by that. Like, well, you mean you're going to, you charge the GC or the customer for the tools that you're going to use? He's like, yeah, if it's going to destroy the saw, you know, and we can argue about, you know, what you're supposed to do. I'm just telling you. If you're going to have to buy a specialty tool, you know, someone wants you to do a bunch of laminate or a bunch of vinyl and you've never done it and you're going to go buy a vinyl cutter to install that floor, that's a specialty tool that you're buying. That's the cost of that tool and needs to be put into the job or at least at the minimum, a percentage of the cost of that tool.

19:18

Hey, just a quick time out from the show. If you're a frustrated contractor who's dealing with low profit margins, stuck working on the tools every day, or doing free estimates for people who are never going to hire you in the first place, I invite you to my private contractor community, The Profit Club, where contractors just like you are adding two to three times more profit each year without producing any more jobs and finally getting completely off the tools to never do another free estimate again. So if you're ready to increase your profits, stop doing free estimates and get off the tools, then all you have to do is click the link in the show notes to learn more about the Profit Club and see how it can easily two to three times the cash in your pocket, give you a proven sales process that will convert more jobs with ease and get you off the tools once and for all. And the best part is you can do all of this without having to produce more jobs than you currently are. Click the link to learn more. Now let's get back to the show.

20:12

Then on top of that, you have wear and tear of that tool. That tool is not going to last forever. So if I buy a $2,000, $2,500 tile saw, that saw doesn't last forever. So if it's got a five-year life, divide that $2,500 by five years. That's how long it's going to last. And then you can come up with a percentage. You can come up with a percentage or you can do it as a dollar amount. I don't care how you do it, but a certain percentage or a certain amount of every job. that's using that tile saw on is going to wear it down and you're going to have to replace it at some point. The customer has to pay for that. That's not an overhead cost, guys. That's a cost to produce the job. That's a cog. All your cogs, the customers pay for. So those are the lists, you know, delivery charges, temporary protection tools, all that stuff. Consumables, like I was talking about caulking, you have caulk adhesives, blades, bits, fasteners, sandpaper, tape. plastic, PPE, miscellaneous hardware. You know, you go buy a box of PPE, right? Mask, dust mask. Say the box of 10 is 10 bucks. You know, no big deal. Well, you use four of them, six of them on one job because the guys throw them away every day instead of reusing them. They don't care. It's not their money. And then you end up using half a box on one job or, you know, whatever. Just examples. It's costing you money. You either have to have a better, you know, better training and make sure you guys are not just, you know, using a multi-blade one time and throwing it away. I know people that would do that. Like, yeah, just because you can order a hundred pack Chinese blades for 60 bucks doesn't mean that you, you know, use a new blade for five minutes. And then when it starts to dull, throw it away and put a new one on. I mean, come on guys, this is part of the training side of it, but still all of those blades cost money, right? You have to think about that stuff. Tape. All of it costs money. Now, do you have to get so granular of like, if you use blue tape, you measure off how many inches of it you use and so that you can charge the customer? No, I mean, let's be reasonable. But if you, if you're, if you know, tape's expensive, blue tape's expensive, painter tape, you know, if it's $15 for a row and you can get 10 jobs out of it, break it up. No, two or $3. Assign a percentage and assign a dollar amount to all these consumables and just throw it in your jobs. Or at the very least, You know, you can just take an overall average and just say $200 for every job for consumables. You know, we average as many blades. We average as much caulk. We average as much tape, blah, blah, blah, blah, blah. That stuff adds up, you know, it costs so much money and we use this percentage of it. So $200 for consumables. Throw some money at it, at least. I mean, it's better to make up a number than not charge at all. Those are cogs. Those are not overhead. I want to make sure you understand that that's not an overhead cost. That's a cost to produce the job. Therefore, it gets billed to the job. The customer pays for it. All right. Here's a question for you. What are you routinely paying for after the contract is signed that should have been included before you priced it? Again, that's the, oh, crap. I totally forgot to put dumpster fees in there. Guys, real quick. This is why having a niche is super easy. Or it makes your life so much easier. Because if you're only doing one thing, then you template your estimates. And every single job is the same with a few variances. But when you're doing a deck today, in a kitchen tomorrow, in a roof the next week, in a bathroom after that, and then you're doing a fence, and you're doing all these jobs, every one of those has a different template, a different estimate, a different sales process. Everything's different. Different price sheet, different everything. That's why a lot of you are overwhelmed. Because you're doing too much crap. Focus on one thing and stick to it. Your life becomes so much easier. So much easier. All right, we're already into this deep. So let me speed up here. Mistake number five is pricing based on competition. You know, nobody around here charges that much. How do you know how much the stuff costs? More importantly, do you know their numbers? Like, do you, you know, you don't know their labor costs. You don't know what their cogs are. You don't know what their margins are. You don't know what their overhead is. You don't even know if they're profitable. You don't know if they're using this job as a loss leader. You don't know if it's one of 15 jobs and they make money on bulk. You don't know any of that information. So basing your price on competition or to be competitive, worst thing you could possibly do. I'll tell you this, take it to the bank. You do not have competition. You do not have competition. I don't care what it is you do. I don't care if there's 100 people in the city of 10,000 people that do the same thing you do. You do not have competition. You have to realize is that you provide a certain experience, a certain level of quality, and people are buying that. They're not buying a price point. They're buying your reputation, what you can deliver. This is why sales is so much more important because you need to be able to have a sale of value. You're not in competition with anyone else. All right. Don't worry about what everyone else sells. You be the one that everyone else is trying to beat. You be the one that everyone's trying to emulate. You set the standard. Don't worry about the competition. And honestly, there's way more work out there than there are contractors that can do the work. I don't care what market you're in. There's way more work than there are contractors. So that another reason why competition doesn't matter. You cannot build your pricing model around someone else's business. You can't. So the price has to work with your numbers and your numbers only. That's why this is why the one question that is the dumbest question you can ask in a forum, how much should I charge for this? That is by far the stupidest question you can ask because nobody knows anything about your business. You can ask. How long will this take? How many hours might this take to do that? That's a different question. But how much should I charge is the stupidest question you can ask anyone because nobody else knows your business like you do. Well, there's industry standards, Brett. No, there's not. There's no such thing as industry average, industry standard, marketplace. No, that's bull crap. If you believe that stuff, that's why you're stuck. Mistake number six, discounting a correct... estimate. So you've estimated the job correctly and now you discount it to get the job. That's a no-no, right? And it's really painful because you actually did the work correctly and then you screwed it up at the end because you discounted, Brad, they're never going to pay this much money. I know them and they said that their budget was $30,000. There's no way they're going to pay $35,000. I get a lot of my clients, especially when they're new and they're charging more for the first time. They'll send me a message. Hey, Brad, I got this job. You know, the estimate came out at $60,000 and I don't think they're going to pay that much. And I'm like, well, what did you, what did you ballpark them? Well, I ballparked them like $50,000, you know, but there were a couple of additional things and it raised the price. I'm like, okay, you know, why don't you think they're not going to pay that? Well, because they said they didn't really want to spend more than 50,000 and more times than not, when I say, well, send it, like send it, send the estimate. Like you can always discount after. Don't ever discount anything before anyone ever says anything. If you're negotiating with yourself, shame on you. Stop bidding with your wallet. Just because you wouldn't spend $50,000 or $60,000 doesn't mean someone else won't spend that much money. Their value of money or value of a task is different than yours. So never bid with your wallet ever. But more times than not, I say send it. And they're like shaking. I don't know, man. I don't know. I really need this work. I don't know. I'd like send it, dude. Send the estimate. Just send it. Stop being a sissy and send it. They'll send it next day. They're like, hey, I got that job. I'm like, awesome. What did they say? They said everything sounds good and they signed it. I'm like, yeah, that's exactly right. Most of the time you're just scared and you're discounting because you have a problem, not because the client has a problem because you don't want to be rejected. That's a problem you need to deal with. So send it. Right. I've told a story many times. One time my wife and I were going to go buy a new car. This was many years ago and we were going to buy a used car. Our budget was like $14,000. We quickly realized that we weren't going to get a decent car for $14,000 and we're like 10 year car people. So it had been like 10 years prior to that before we bought a vehicle. Right. So we're not like looking at vehicle prices. We quickly realized. We weren't going to get a nice enough car for her for $14,000. Our budget initially was $14,000. That's what we wanted to pay. What we ended up paying for the car we got her was $32,000, double what our budget was. And this happens all the time. Just because someone tells you they have a budget doesn't mean that's how much money they have. Doesn't mean that that's what they're willing to pay. It's just a number they came up with. Now, some people, that's true. That's all the money they have. Other people, it's not true. So don't be scared to send stuff and discount it prior to sending it. Don't ever do that. Please, please, please, if you hear me, don't ever discount your estimates before you send it because you think it's going to be too expensive. If you have a problem with that and you're not going to change, you need to get out of owning a business or pick a different industry because that's just a problem you're going to have to overcome. It's not, it's, that is 100% a you problem and you need to address it. So discounting is terrible. I saw a video this morning. It was a guy who does pressure washing, self-wash and roofs. And he's, he's kind of like documenting his journey. He's like, Hey guys, I'm three months into my business. I had this situation happen where I'd give a client an estimate for $690 to do a roof. And I know one of the competitors that was bidding on it. I know him personally. And, you know, she came back and said, I want you to do the job because I like you. Can you do it for 600? Because he bidded at 600. This guy was at 690. The other bid was $600. And he said, yeah, yeah, I can do that. He just caved. Now, he's a new business owner. He doesn't know any better. You don't discount it, guys. Just because you're new doesn't mean you discount. Now, there are some strategic things that you can do for discounting. If I was in that shoes and I really wanted that job, here's what I would have told that customer. Oh, and by the way, when the job was over, she tipped him $80. So he bid it for $690, discounted it to $600, and then got an $80 tip. So he's at $680. If people are tipping you that much money, it's because you're underpricing to begin with. Just straight up. If you're getting super big tips, you are underpricing. And the people know that you are. And they want to reward you and make sure you stay in business. Right. That's just a very simple thing. If you're getting, you know, $500 tips, $100 tips, whatever you are under pricing. All right. So anyways, he, uh, here's what you say in this situation. That's why this is what I put in the comments. I said, don't ever discount your price. Uh, you just simply say, if I was able to lower my price, wouldn't that mean I was overcharging you to begin with? That's all you're going to say, John, I would love to discount my price. I would love to get this job and do this work for you. But if I was able to discount my price, any. wouldn't that mean that I was overcharging you to begin with and I had room to lower it? That's all you got to do, right? I mean, that's it. That's all you got to say. You don't say anything else. You don't have to justify. You don't do anything else. But if I was going to discount it, I want something in return. So in that situation, if I discounted from 690 to 600, I would say, listen, Mary, I normally don't discount pricing because this is what I need to get to run my business. However, I do spend money on marketing. And if you would be willing to do a video testimonial when the job's over, assuming that you're happy, I don't want you to make up anything. All I want you to do is let me record you on camera giving us a video testimonial, then I will give you that discount because that $90 savings, that discount is worth way more. The video of you, the video testimony was worth way more than the $90 discount. So if you're going to discount, get something in return. Okay. I'm not saying it has to be like the same dollar amount. If you're going to discount a job, $2,500, I'm not saying you got to get $2,500 worth of, you know, marketing or exchange. Maybe you only get $500 exchange. I'm just saying at the very least, get something in return, a written testimonial, a guaranteed review, a video testimonial, let them put the sign in your yard for two months, whatever, like get something in return. So that's discounting the estimate, discounting a correct estimate. All right, we're coming to the end here. Mistake number seven, missing or vague scope. Now I had this problem before and I went out and did a on-site consultation for a contractor. By the way, if you guys didn't know this, I will come to your location for three days and tear your entire business apart. Look at every single aspect of it. And that is by far the best investment you can ever make. Having eyes on. Being able to see your business from the inside out is like, there's so much benefit to that. If that's something you're interested in, you can always hit me up and we can discuss what that looks like. But I was doing an onsite for a client and I went out on a sales call with him. And this is what I'm talking about. Went on a sales call. This is the owner that I went on a sales call with. He's measuring some stuff for some cabinets. It's like some built-in cabinets or whatever. He talks to the customer. I'm just a fly on the wall. And then the customer leaves like, I got to get some measurements. And the customer's like, okay, cool. So we go down in the basement and there's, you know, there's nobody there. And he takes like two main measurements. Like it's an L-shaped wall with a little kick out. He takes like two main measurements, width and length. And that's all he was going to do. He's like doing a rough estimate, right? Like rough measurements. And I'm like, what are you doing? He's like, well, I just use this to do the estimate. I'm like, well, then how do you get your, the actual measurements? Well, then I'll have to come back and, you know, and then get the real measurements. I'm like, why don't you just get the real measurements while you're here? It's going to take you like maybe five minutes longer. We're not talking like 500 different measurements. We're talking like five extra measurements. And so he did, and he got those measurements, right? But if you have rough measurements, and then you go and try and do the estimate, and you're like, oh, crap, I forgot to measure that one wall. or I forgot to measure the angle of that wall. I don't know what it is. I'm going to have to guess. So you guess on some of that scope of what it's going to take. So like poorly defined scope, missing exclusions. I'll tell you another one here in a second. assumptions that aren't documented. Customer thinks something is included. Salesperson thinks production will figure it out. Production assumes sales priced it. I thought that was included. Didn't we talk about that? Can we just take care of it? Or can you just take care of it? These are things of missing and vague scope that cost you money. So one of the things that I learned, this is a mistake I learned, is that when we do a door replacement, an exterior door replacement, we would always caulk the outside of the door, make it watertight. silicone, all that stuff, right? We would fill the nail holes if we use them or screws. Like everything was on the outside. It was watertight, ready for paint. On the inside, however, we would just nail on the trim and that's it. We didn't do any caulking, right? Because that's always the painter's job. And a lot of times the homeowner would say, we're going to paint the door. I'm like, perfect. The painter is the one that does the caulking and the nail hole filling, right? That's industry standard. There's that term again. Many times, dozen times, saw a door, customer wasn't home. Next day, I get a call back. Hey, everything looks great, Brad. I mean, the door looks amazing. However, they didn't caulk the inside of the door. And I'm like, what do you mean around the inside? They go, well, you know, the trim that wasn't caulked. I'm like, oh, yeah, that's not included. Like, what do you mean it's not included? Yeah, that's not part of it. Like the painter does that. Oh, we just thought it was part of it. You did the outside. How come you didn't do the inside? then I would have this conversation. And so you know what I just did? I just included it and added it to the cost. Instead of saying, we don't do that, I just say, we'll do it. And I just added on to the cost. Or if I wasn't going to do it, I would put it specifically in the estimate. Does not include caulking interior trim. Does not include... filling nail holes. And people are like, well, that's stupid that you have to go and say does not include all of this. I agree with you. However, if people think, if your customers think one way and you don't have the clarity and the estimate to decipher that, who wins and who loses? Even if you say customer that wasn't included and they go, oh, okay, well, yeah, I guess we missed it. And you're like, cool, I didn't get, I don't have to do extra work. What do you think the customer thinks now? Wow, that's disappointing. I thought it was included. I wish they would have disclosed that in the estimate. Now you're the bad guy, even though you won. So when you win, you lose. And then when you lose, you lose. So just fix it so you don't lose. Make sure you have those inclusions or exclusions in there, right? So just making sure that you don't have missing or vague scope or that you have missing and vague, you know, measurements and stuff like that where you have to go back out or you just guess because you think that wall is six foot when in reality it was eight foot. or 11 foot, you know, so you bought eight footers, eight foot treated for the, you know, for the bottom plate. And it turns out it wasn't an eight foot wall. It was a nine foot wall. Oops, extra trip to Lowe's, right? That's what I'm talking about. I was like, you're missing scope, not taking good notes, not taking good measurements, not, you know, including the exclusions. Like those are all things that come back and bite you later on. All right. So here is the pre-job. Profit test. So before you sign the contract, you should be able to identify these. You should know exactly the selling price, the material cost, the labor hours, the true labor costs, the subcontractor costs, all your dumpster permits, supervision, equipment, rentals, consumables, other job specific cogs, your gross profit dollars and your gross profit percentage. When you sell a job. You should know exactly how much money you're going to make, how much profit and what it's going to cost. It should not be a guess and it should not be a wild difference. If you're bidding jobs and coming in 15,20% low every single time, I guarantee you it's because you're missing some of these things. You shouldn't be coming in low every single time. And if you do act accordingly, that's what job costing does. Guys, you can get my job costing worksheet that does all this for you. You can get the labor burden worksheet that does this for you. It's all on the website. You can just go to the hammer and grind. com, scroll down or click on resources. And there's a few different resources in there you can get to help you with these things. All right. So here's what I want you to do is pull your last three completed jobs, job cost them. I want you to look specifically at like what was your estimated versus actual hours. I bid a job one time, I had 100 man hours, and the job took 190 man hours. Talk about a miss, right? So make sure you're estimated versus actual. You're estimated versus actual materials. I bid $25,000 in materials. It came back at $32,000. What happened, right? Look for any missing cogs. Oh, I forgot about the dumpster fee. I forgot about shipping. I forgot to add in, you know, a case of caulking. Whatever it is, unplanned rentals. You know, initially I was going to do this, dig these holes by hand, but I ended up going and getting a, renting an auger, you know, for $300. It's unplanned rental. So look at all of these supervision, consumables, missing scope, discounts, an original expected gross profit versus your actual gross profit. Don't just ask, did we make money on this job? Ask, where was my estimate wrong? Every job you do is a... is a piece of information to help you get better. If you started with zero knowledge in construction and you did one job and you were way off, you're off by 50%. The next job you do, if you have that information, you course correct. The next job, you're only off by 30%. You take that information, course correct. The next job, you're off by 15%. You course correct. Next job, you're off by 2%. Within six jobs, You can take someone who has no clue how to do something and within six jobs know that they have to include all this information. It's not hard, but if you don't do it, you're going to keep screwing yourself. So do it. Do your job cost. It's the most important thing in your business. Job cost your jobs. Every single one. Every one. I don't care if it's the same thing. Every job. Job cost. Every one. You also see patterns, you'll see production rates, it'll be very easy for you to run a profitable business and know exactly what's going on. All right. Next episode, we're going to dive into more of the labor burden rate. Like what are we what should I pay my guy? Like what does it actually cost? We're going to dive deeper into the labor burden side of it. So make sure you come back next week for that episode. And yeah, appreciate you guys hanging out with me. You know where to find me, you can just search for the hammer and grind. podcasts on some of them. I will tell you that on TikTok specifically, I did change my handle. It's now Brad Hebner. So I'm moving more towards a personal brand. So you may see some of those shifts. You can still find the links in the show notes or anywhere else you can get to them. But yeah, search for the Hammer and Grind podcast. Search for Brad Hebner. You'll find me. And remember, until next time, profit is not a dirty word.