How to Present Construction Estimates
Presenting an estimate to clients is one of the most stressful tasks for both construction companies and homeowners because everyone at that table is full of expectations.
On one side, as a residential contractor, you're concerned about how the clients will react to your cost estimation. On the other, the client is nervous about the total cost they're going to face and whether or not that fits within their plans.
Add in the complexities of figuring out how and when to present it, and you've got yourself a truly nerve-wracking proposition.
But it doesn't have to be that way. The trick is implementing a solid strategy to ensure that you're using the estimate review meeting as an opportunity to foster a good client/builder relationship at the onset of a project, as well as help your clients understand why their remodel or custom home, costs what you say it will.
Why You Need an Estimate Review Meeting
One of your main goals in presenting a construction cost estimate is to walk the project owners through it so that they understand where the project costs are coming from. Putting it into context keeps the clients from judging you purely on price without all of the facts.
It also prevents clients from ghosting you. Ghosting is the practice of ending a relationship with someone by suddenly and without explanation, withdrawing from all communication.
If you simply give clients a cost estimate without taking the time to present the details, there's a good chance they will just use that information to pass judgment on your price and never follow up to meet with you.
During that meeting, you can address any questions or objections regarding the project costs and detailed scope of work to help clients connect one to the other.
Setting up the Estimate Review Meeting
The best way to present an estimate to clients is face-to-face because it allows you to gauge their reactions and anticipate where they may have doubts or concerns.
If you can't meet in person, a virtual face-to-face is also a viable option. You want to ensure that however you present that estimate, the clients are seeing it for the first time with you present to explain it.
In the initial meetings that lead up to creating an estimate, homeowners reveal details about their needs and wants and what's important to them. We call these "breadcrumbs" because they are usually shared as little bits of information dropped here and there. The estimate review meeting is a good time to show your clients how well you were listening to them by reflecting those breadcrumbs back to them.
Never Send the Estimate to the Client in Advance
Remodeling or custom building a home is a stressful and expensive process for a homeowner, and it's a situation where they often feel like they have little to control. So they need you, as the expert, to guide them.
But homeowners can be impatient and, in an attempt to gain some control, will often ask you to send them the estimate ahead of time so "they can review it and formulate their questions."
The problem with this approach is that you won't be able to judge their reaction, nor will you be able to properly connect the scope of work to the numbers on the page. Further, you are raising the chances they'll cancel the meeting and ghost you.
Sending the Estimate in Advance Leads to Anchoring Bias
Anchoring bias is people's tendency to rely too heavily on the first piece of information they receive on a topic. Regardless of the accuracy of that information, it will be used as the reference point to judge all further knowledge gained on the subject.
In the case of a residential construction estimate, giving it to the client without context means one of three things will happen:
They will see the number and cancel your meeting because they think the price is "too high"
They will see the number and continue with the meeting but immediately jump into negotiation mode with you
They will see the number and feel that you are close enough that they approach the meeting with the right mindset.
For the majority of clients, sending them the estimate in advance only gives them permission to shop that detailed estimate around for a better price - or show it to family and friends to "confirm" their opinions on your pricing. Or, it allows them to ghost you because they have what they need and no longer need you.
Preparing for the Estimate Review Meeting
First impressions are everything when it comes to presenting your detailed estimate to your prospective client. You can use the best construction estimating software, use a construction estimate template, follow a thorough trade bidding process, and maybe even enlist a professional estimator to craft an accurate preliminary estimate, but if the presentation falls flat, it dilutes the quality of the process and impact on the clients.
One of the best things you can do is organize all of your work by compiling it into a tabbed project binder. You'll stack all of the construction documents in there and be able to show the depth of the process you've gone through to tabulate unit costs and arrive at the total cost for their particular project.
Check out one of our client's presentation binders he brings to every estimate review meeting. It sets him apart from other builders in his area and makes a great first impression.
Photo courtesy of Jesse J Contracting Ltd.
How to Present Your Estimate
When I started presenting preliminary estimates, I would walk clients through the entire detailed estimate for the construction job. All 15-18 pages of it. And at some point, usually around page 5, I'd see their eyes glaze over and know I was losing their attention.
So I figured I needed a different approach to achieve the intended outcomes of the meeting without droning on in unit price and square footage discussions. Or without losing them to the sticker shock of seeing the bottom line without proper context.
Here are Six Key Strategies to Implement
When walking project owners through the construction documents, remember that they're anxious to understand the total price you're proposing and that we need to keep their attention and focus.
Here's how you hold their focus while keeping their emotions in check.
1. Mirror The "Must Haves"
During initial meetings, clients drop clues about things that are important to them. Highlight those items in the conversation. Something like: "I recall from our initial meetings that X and Y were very important to you and a must-have."
This is one of the core ways you keep attention because it shows you were listening to them and helps build confidence in you and your team as the right partners to work with.
This allows you to get confirmation from the clients about needs vs. wants, helping you show clients how they can lower their overall investment through value engineering.
Top Tip: Have clients fill out a "Needs Matrix" before you meet with them, which helps them organize and prioritize their needs and wants for the project.
2. Dig Into Feasibility And The Cost Drivers, aka Value Engineering
It's not uncommon for a remodel or custom home design to be completed before a general contractor becomes involved. In these situations, the design often pushes the construction estimate over the client's intended investment level or budget.
By shortlisting a few of the key components of the design that are driving labor and material costs, you can help clients understand these impacts and the possible adjustments that would help reduce the total cost.
For example: "As you can see, the large cantilever is a fantastic design element but does create a significant cost in the Structural Steel category. If the total cost is an issue and we want to reduce the investment level, this might be an area we could focus on. By bringing the exterior walls in alignment - or reducing the length of the cantilever - we could move to traditional framing methods with wood, thereby reducing the direct costs in those categories."
Also, reference historical data from similar projects to help project owners feel confident in the estimated cost you're presenting to them for their construction project.
Top Tip: Prepare a short list of the top three cost drivers and outline cost-reducing solutions to present in this meeting.
3. Highlight The Known Unknowns
Risk is a component of every construction project, and far too often, the feedback clients will hear from your competitors angling to sell the job is that "everything is included" and there will be "no surprises." I wish this were true, but life is full of surprises.
In the design phase of the project, while you're engaged in construction cost estimating, shortlist the risk areas of the project and where you need more information on the project requirements.
Top Tip: In conjunction with the cost drivers, come to this meeting prepared with a short list of the elements of design, finishes & specifications, and anything else you need more information on in order to minimize cost overruns to the project from a cost and time perspective.
4. Share Feedback From Trade Partners
One of the key outcomes of going through a proper pre-construction process in your construction business is to elicit feedback from 30 other sets of eyes - your trade partners. This is known as the bidding process, and it goes a long way in providing "confirmation bias" to the numbers you are sharing with prospective clients and ensuring you are presenting the most accurate estimates possible.
Including feedback from trade partner site visits and bids can help back up the reasoning behind certain line items and potentially present other ways of achieving the end goal.
I always used to say that the cost of your project has been determined by 30 sets of eyes on the plans.
Top Tip: Prepare 3-5 areas of the build where critical trade partner feedback needs to be discussed with the clients. This takes us away from a commodity discussion and into a forward-looking alignment on scope and cost estimates.
5. Review The Project Schedule And Workback
Most people assume that cost is the number one focus for a prospective client. And while this might play a heavy part in their decision-making about working with you, in the end, time becomes the more important factor.
Taking the time to flesh out a clear and realistic project schedule that includes actions connected to the client you're presenting to is key to deepening your relationship with them. It illustrates a level of thoroughness in your work and presents a refreshingly professional approach that will help differentiate you in the meeting.
Top Tip: It's a good idea to build a project schedule and plot your internal team labor hours across it to double-check you have the right amount for labor costs. Then compare it with what you have in your estimate and see if the numbers match. And if you have a project manager in your company, get their eyes on it as well.
6. Prepare Options
After you've gone through all the steps above, the client might still feel like the overall construction costs are more than they can invest. While we can't magically lower our price because that would come out of our overhead costs and profit margin, we can go one step further by coming prepared with alternate price versions.
Be sure to keep the "scope and budget" conversation at the forefront of the discussion so the client understands that is what's pushing it over their investment level, and avoid getting into a square footage negotiation.
Top Tip: It's a good idea to always prepare the "full monty" estimate, but also prepare a second version with the reduced or changed scope based on your value engineering recommendations.
The Bottom Line on Presenting Estimates
Construction estimating takes a tremendous amount of time and effort, and there's nothing worse than going through that estimating process only to hand it off to a client and have them tell you that it's too expensive. Or worse, ghost you because they've made a snap judgment and don't need you anymore.
Situations like this occur across the residential construction industry because the clients don't understand where the price you gave them is coming from. That's why it's critical to review construction estimates with clients in person to help build their trust in you as a professional general contractor and assure them that you're job is to deliver the best outcome based on their investment.
Coming prepared for that meeting to discuss the project scope and estimated cost, outline the significant price drivers, and explore potential alternatives to bring better alignment between the project scope and its total cost, are key strategies to ensure you're laying the groundwork for a successful working relationship with your clients.
I created the BUILD AND PROFIT SYSTEM to help remodelers and custom home builders implement rock-solid sales processes that ensure they build stronger client relationships and get paid for all their work.
Click below to learn how the BUILD AND PROFIT SYSTEM can help you master the art of presenting estimates to clients.
