Irrational Fiscal Exuberance
I received a call today from a potential new client. We chatted about his project, about the logistics of the project, and we even began to go through numbers, which I would not have brought up. But, it is always welcome to begin the money talk sooner than later. I worked backward from what his all inclusive budget figure was, categorizing each cost, and ending up with one sum for the construction (not a lot), which I felt was fairly close to what a labor estimate might be, given what he told me of his project. Of course, that is all subject to change when I see the home, but nonetheless, it's a good start, and I had just done a similar project.
He told me that another kitchen design firm quoted him 3 times the amount, in terms of labor, that I estimated to be reasonable, with that firm also not having seen his home, and double the all inclusive budget overall. So, reasonable question, why the wide difference? Of course, I have no idea what all was included in the other "estimate".
This is one of the toughest and most tricky areas overall, the estimate. Essentially, we need to estimate something before it is designed. We need to evaluate the client's wants and needs and put a dollar figure to it. It's a little bit art, a little bit science, to get that number. But, with care and thought, it's doable.
Me, I don't want to be too low and build false hope. I also don't want to be too high and lose the job. I'd say I err on the higher side, but not too high, HATING the idea of having to reveal much larger numbers down the road and instead, often revealing a pleasant surprise of a lower cost instead of disappointment when the design work is finished. After we go through the whole process, who on earth wants to be told that the project is now out of their budget! That's a huge fear of mine, HUGE! I'd much rather lose the job than estimate too low.
But, you also don't want to mistakenly estimate too too high either.
Perhaps that more expensive shop feels as I do, that erring on the higher side is better than building false hope. From the information I have thus far, I think they went too far afield into irrational fiscal exuberance territory. I'll update this as I get more information.
Tell me about your estimate story!
Monday, February 12, 2007 at 02:31PM
Reader Comments (3)
Not only is the estimate a little bit art, a little bit science, it is also a little bit of playing poker to get that potential client to open up what budget number they have in mind. When clients tell me they really have no idea what things cost, I can understand this. After all, a kitchen remodel is not a weekly purchase. But once a homeowner decides on a home improvement purchase, a dollar amount of what they can spend is established in their mindset.
For my showroom, I wanted to maintain a friendly, approachable atmosphere. I want people to feel free to walk through the displays with leisure. But to get to the place where I ask, “How may I help you” begins the art of the conversation where budget and design expectations need to be discussed.
Moreover, what I have learned from the many years of estimating and learning from each negotiation is that there is no one precise formula. For some customer’s it’s a slow dance, for other’s a fast pace tennis game where you need to know how to lob one back, a poker game where the client reveals nothing, making that little voice deep down inside me scream ala Jerry McGuire, “help me to help you!” Moreover, what I get from a lot of my clients is that I definitely wasn’t the cheapest, that I displayed confidence, that they felt comfortable because I listened to what they wanted.
Laurie, thanks for expanding on this topic. It is a dance, a dance with difficult steps, oftentimes, when one talks budget with potential clients who are strangers at that point. I think the process works best, for me, when I disclose my estimate first, and then ask my potential clients what they had planned on investing, which then opens up the conversation as it should. I think that is fair to the clients actually, first and foremost. The dimensions for their space and their want/need list determines where the budget will be, so for me, I disclose my numbers first.
But, this first visit is so critical. I do think too many clients latch on to very small issues at these first meetings, or perceived issues, and toss out an otherwise exemplary designer who has strong attributes and will work hard for them. Sometimes a small emotional piece will sway a potential client in one direction, when hard facts should move the client in another direction. The difference can mean how the client lives their lives in their kitchen, a pretty big deal! Which gives me an idea for a future topic: How to Hire a Kitchen Designer!
Interesting stories!
Reading your stories really brings comfort. In the economy we are in people are really trying to cut costs and their number in their head can be unbelievable. My husband and I run a design build company. We are always trying to find that balance that you talk about. Giving people hope that they can afford much of their dreams but not coming in at the end with so many additional costs. It is a tough balance to find. We are currently working on being more proactive with our customers as far as discussing ways they can save money by using remnant countertops in bathrooms ect. I will definately continue to follow your blog to understand what talented designers and builders can do to help educate their potential customers of the benefits of working with qualified people.