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How To Build A Better Proposal

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One of The Foundational Building Blocks of a Successful Company

 

Small and medium size construction companies struggle with preparing detailed and accurate proposals. This problem isn’t restricted only to small companies. It begins there, but only gets worse until they either get big enough to absorb the costs of guessing at project costs or give up trying and quit.


When I started doing construction forty plus years ago, I had no clue how to prepare proposals and like every other small construction company…I guessed. I used a common method called, trial and error. Doing proposals this way is a real crap shoot and doesn’t leave much room for mistakes.


Preparing accurate proposals that communicate clearly doesn’t have to be a roll of the dice.


Early on I began working on a proposal system that worked for me. It has gone through years of experimenting and tweaking to become what it is now. Over the last fifteen or twenty years I’ve been asked multiple times by other contractors who saw my proposals how I did them. I just assumed that everybody else was doing something similar.


Several years ago, it hit me that this wasn’t the case after being hired by other contractors to do proposals for them. This is when it became apparent that there was a real need for a proposal system. I kept pushing this down the road until God hit me upside the head with a board and pointed out that my system could help other contractors.


I’ve been busy with construction projects and life in general and continued to procrastinate developing a system that other companies could use. Earlier this year I decided I better get to work on this before I get hit in the head again.


I’m happy to announce that we are currently in the final stages of preparing a proposal system that will be made available for other contractors to use. It’s currently being tested by independent contractors. We are rebuilding the Solution Building website to allow for downloading the proposal documents. It’s not just for general contractors either, it will work for any of the construction trades.


This proposal system will include templates for:

 

  • Bid sheet – A Word document with all the construction sections and individual items already listed out with space for filling out the scope of the work to be done, dimensions, materials, locations, etc., as needed for communication.

 

  • Worksheet – An Excel spreadsheet with all the construction sections and individual items already listed out with optional overhead and profit markups inserted in the appropriate cells.

 

  • Estimate – A word document with spaces to fill in the pertinent information, i.e. customer’s information, what will or will not be supplied by the contractor, the scope of work, the estimated price for each specific element and a total estimated price.

 

  • Proposal – A word document with spaces to fill in the pertinent information, i.e. customer’s information, what will or will not be supplied by the contractor, the scope of work, the proposed price for each specific element, a total project price, payment arrangements and project duration.

 

  • Contract – A word document with spaces to fill in the pertinent information, i.e. customer’s information, list of referenced documents, construction funding information, property specifics, project start date and legal terms and conditions.

 

  • Proposal-Contract – A word document that is a combination of a proposal / contract in one.

 

It also will include a data base for material and labor costs:

 

  • Data Base – An Excel spreadsheet with prices for material and labor for a wide variety of specific construction tasks. This information will be copied and pasted to a blank worksheet.

Clear communication between contactor and customer is difficult, especially when there isn’t any. Last week I wrote about the importance of communicating clearly through proposals and reasons contractors avoid doing them. 


Next week I will break down the proposal process even more.

 

 

The Bulk of The Communication Responsibility Lies on The Contractor

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How To Build A Better Proposal

 

 

Every contractor, at some time, has had an unhappy customer. This is almost always due to poor communication and/or a lack of understanding. It may have been some small misunderstanding or might have been major enough to result in being fired or going to court.


Several years ago, a partner and I were meeting with a customer early in the process of building a new home. The customer pointed out that the distance from the electric meter to the house was more than the 50’ allowance, as per the written proposal.

He asked if this was a problem. My partner told him no, it wasn’t a problem. Guess what…


It was a problem.


The problem didn’t surface until later when the customer was billed for the additional 100’. After some digging, the communication breakdown was uncovered.


The customer asked, “if it was a problem”. What he really was asking was…”is it going to cost more?”.


My partner’s response in reality was, “we can dig the additional 100’, but it will cost you three times as much as the allowance in the proposal”. This isn’t what was said.


Neither individual intended nor expected this to be a problem. It was a simple matter of misunderstanding…a lack of communication.


Communication is, …the exchange of information and the expression of feelings that result in understanding.

 

 

Understanding is the tricky part.

Why is it that contractors don’t communicate clearly through concise written proposals to customers? Here are the four main reasons for this:


First is time – It takes more time to prepare a detailed written proposal. We’re already so busy that we can’t keep up and with the limited time we have, we aren’t going to spend it on preparing a proposal.


Second is comfort – I started this company because I loved to build, plumb, wire, pour concrete, roof, etc., etc. The trade is what I know, and I don’t like doing paperwork, I want to go swing a hammer.


Third is knowledge – It’s hard to know how long something is going to take or how much material is going to cost. If I give the customer an approximate price or even better if I can just get paid for time and material, I know I won’t lose any money.


Fourth is no system – When we started the company, no one ever explained the importance of having a business system in place. A business system is the blueprint for building your business. Detailed proposals are one of the foundational pieces needed to keep it from collapsing.


These are four valid reasons for avoiding doing proposals, but…


The cost of not preparing detailed proposals, is far more expensive.


The customer also has some responsibility in preventing construction projects from falling apart and the high cost of poor communication. This whole construction process is overwhelming to most customers and they need to know what should be included in the communication. 


But the customer isn’t an experienced contractor that does this for a living.


If only there was a process for doing proposals that:

  • Saved time.
  • Could be done by office staff.
  • Didn’t require a four-year degree or twenty years of on the job training.
  • Included all the necessary parts and pieces


What if I told you that there is such a system and you could have it? There is and it’s going to become available in the next few months. Over the next several weeks we are going to breakdown the system, go through the different documents and processes in detail and explain how it works.


Remember that we are the professionals and the bulk of the communication responsibility lies on us.

Getting an Estimate for a Construction Project Can Be a Big Mistake

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It’s Like Guessing What a Bag of Groceries Costs Without Being Able to See in The Bag

 

 

One of the most frequent questions that I get asked by customers considering a construction project is…what’s it going to cost. Don’t get me wrong this is one of the most important pieces of information needed before moving forward with a project.

The problem with answering this question comes from the lack of information available in the early part of the process. Sure, there are some basic square footage prices that can be incorporated into giving a quick price, but I learned a long time ago that giving an ESTIMATE without having enough information is a recipe for disaster.

When my customers ask me this question, I tell them it is like looking across the room at a brown paper bag full of groceries and telling someone what it cost. Before I can answer that question, I need to know what’s in the bag. It makes a difference if it is paper towels or steaks, how many and how well they were packed.

The same is true for a construction project – what materials are going to be used, how much is going to be used and how well do you want it built? There is a wide variety of products out there and it is important that your contractor asks enough of the right questions to know what and how many ‘groceries are going in the bag’.

Rarely will I give an estimate. Sometimes, depending on the project, I will for a preliminary ballpark figure. It might save both parties the time and trouble of going forward if there isn’t enough of a budget. The level of accuracy with an estimate is minimal at best.

I encourage my customers to let me give them a proposal. Even if they pay for the proposal, it is much less than the cost of the project and a sound investment. When pricing a construction project, the dollars are significant enough that you should know what to expect before you get started and run out of money.

“But don’t begin until you count the cost. For who would begin construction of a building without first calculating the cost to see if there is enough money to finish it? Otherwise, you might complete only the foundation before running out of money, and then everyone would laugh at you. They would say, ‘There’s the person who started that building and couldn’t afford to finish it!’

Luke 14:28-30, NLT

Doing an accurate and detailed proposal takes time and effort. Most contractors are more focused on getting to the money generating construction and neglect the proposal process. I’m convinced that the proposal is as important of an investment for the contractor as it is for the customer.

You can see an example of our proposals here – http://www.timbercreekconstruction.us/Proposal-Estimate_Sample.php.

The number of stories that I have heard of unhappy customers or contractors not getting paid for all the work they did is unnecessary. This problem can be enormously reduced by giving an accurate, agreed upon price in the beginning. That way when the project is finished everyone can be happy.

What We’ve Got Here, Is A Failure to Communicate

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And What Can Happen When We Don’t

 

The above title is a famous line out of the 1967 movie, “Cool Hand Luke”. In the movie Lucas Jackson, played by Paul Newman, is a guy with more guts than brains, a man who refuses to conform to the rules. After being sent to a prison camp for committing a misdemeanor he is constantly giving the camp bosses trouble. After his mother dies the bosses put him in the box afraid he might want to attend the funeral. When he gets out he runs and gets caught and runs and gets caught, the bosses try to break him but he just won’t break. They try to force their ideas and rules on Lucas, but he is having none of that. In this case neither side is listening to the other.

The point is that effective communication requires listening, not trying to force your ideas on someone else. We all have our own thoughts and ideas how something should be done. In a business relationship we need to remember who has the check book, whose project it is. Our job as the business should be listening to the customer and helping them accomplish their goals. Not telling them what we think they want. Most of the time communication is thought of as what we say or write to someone. We need to remember that communication is a two-way street and we need to be listening twice as much as talking. We need to listen before we write.

I was involved in a situation this week that is a good example of what can happen when there is little or no communication. I was in small claims court as a witness in a double law suit between a building contractor and their customer. The contractor sued for an unpaid balance for work performed. The customer counter-sued for inadequate and poor-quality workmanship. Both parties had legitimate claims and neither party won. When everything was over they both dropped their suits. What could have, no should have, been an enjoyable and rewarding experience for both, ended as a losing situation for everyone involved. This whole mess could have been avoided had they started communicating in the beginning. There was no written agreement of any kind, just a verbal agreement with an hourly rate. This left too many unanswered questions and assumptions.

When I prepare a proposal for a construction project I am thorough and write the description of things to be done in detail with prices for each separate item. Yes, it takes longer than just giving an hourly rate. Some people, maybe most, would say I spend too much time working on proposals. Maybe I do, but I would rather waste some time on the front end than waste it in court on the back end.

I have been asked several times over the years by other contractors about my proposals. They want to know how I do them and if there is a software or a program that I use. Actually, I have been designing and building and tweaking this system over the last 30 plus years. I have even been hired by other contractors to do proposals for them. This got me started thinking that I need to share this system with others. So, we are just beginning the process of designing and developing a system that will include blank templates, a customizable data base and instructions on how to use it. We plan to have this ready and available by the end of June.

If you or someone you know would be interested in using a program like this then please forward this blog to them.