The Integrity of Estimates – What is Fair?
October 13, 2020
Every contractor knows how difficult it is to find the right formula for calculating estimates. In fact, many will say it’s the single most difficult part of being a glass shop owner. In my early interactions with potential customers, I was often asked to lower my estimate. I’m sure that the obvious lack of confidence seemed an open invitation to “low-ball” me. My inexperience with making deals didn’t help… It was a dead give-away that my estimate was open to negotiation.
As I gained experience in bidding projects, I came to realize that I was looking at it all wrong. When a prospect would offer a counter to my estimate, I would feel an obligation to be more “fair,” and lower the estimate. A big mistake I was making was that my numbers were too rounded. I was giving the impression they were arbitrary. I learned along the way that presenting a more exact number (even including dollars-and-cents) made my estimate seem more deliberate. For example; an estimate of $1,000.00 seems much less firm than an estimate of $1,006.97. This method discourages people from asking to reconsider, since the exact number implies a lot of consideration to begin with.
More than anything else, I have come to understand what integrity of estimating is all about. You may notice that, up to now, I have referred to these as “prospects” or “potential customers.” Until they actually buy, they are not yet actual customers. I believe that I owe my loyalty to the people who are already buying. If I offer an estimate to a prospect that is lower than the one I charge to my existing customers, it undermines my loyalty to those that buy. When considering what is “fair” in terms of giving an estimate, my first responsibility is to my customers.
When someone asks you how you have arrived at your estimate, you can explain that the number is based on what is fair. If people are paying what you charge, and you are selling enough of those products to satisfy your needs (or wants), that is fair. What would be the point of selling it for less? In truth, you are doing your prospects a disservice by adjusting your estimate to convert them to customers. How would that be fair to the customer who has paid you full cost? Now, this doesn’t mean you can’t have a sale or a discount from time-to-time, but that’s different. That is on your terms. Personally, I prefer to give something away for free as a bonus rather than discounting an estimate, but I’ll save that for another day.
Do you disagree? I would love to hear from you!