In the Floor Academy podcast: Estimates and Communication, Kyle Hedin, host, and Ken Ballin, flooring expert and owner of Skyro Floors in southern New Jersey, discussed why the success of a flooring installation business depends heavily on knowing your numbers and establishing fair pricing. They also talked about how to leverage the estimate process as an opportunity to communicate your expertise and build rapport with prospects, which can help you win projects. This article provides a few key takeaways from that episode.
Know Your Numbers
Ballin says, “Regions play a big part in [knowing your numbers] because numbers that you might get in my market you might not get somewhere else.” There are many reasons why flooring installers may charge more for installations in one region than another, even for the same type of flooring. For example, in an area where the cost of living is high or there are no local suppliers, contractors may raise prices to cover greater overhead costs.
Ken Ballin Suggests: Keep a Journal
Contractors often struggle with accurately pricing projects. Ballin shares a story about how he tackled this challenge:
“One of the best pieces of advice that I was given when trying to figure out pricing was by my friend who was setting tile before she became a rep for Schluter. She said, ‘Keep a journal. Every day you go to work, and you write down […] what you did […] so you can see what you accomplish for each day of the project. And then you count the hours. So, at the end of the project, you have a document. You can say, well, this job cost this much divided by this many hours.’ This is how much I need per hour.”
Ballin took the advice of his friend and practiced writing in his journal every workday. In time, he discovered which processes were wasting time. “So, it really helped me focus on […] making adjustments where I needed to,” Ballin says, “There’s nothing that opens your eyes like seeing right in front of you, you’re screwing up.” The journaling process helped Ballin realize he had been undercharging for demo-and-install projects for a very long time.
Don't Waste Time
Hedin shares his own story about wasting time. “I used to rush out to every estimate,” Hedin says. “Like, you’ve got to hustle, right? You’re trying to build something.” He chased every single lead and put a lot of miles on his vehicle. Eventually, he became familiar with his numbers and started prequalifying prospects on the phone.
Prospects appreciate clear and timely communication of estimates, even if estimates are well beyond their price range. The problem is estimates take time.
Hedin suggests using the initial phone call as an opportunity to weed out tire kickers. With a short conversation, contractors should be able to gather enough information to make an informed decision about whether to invest their time in providing an estimate.
Contractors who know their numbers and prequalify leads on the phone may get some pushback about the pricing. Hedin responds something like this: “I’m happy to talk to you about the project. That’s where I’m going to be at. I can explain where the numbers came from; how I got there. I’m happy to come out if that’s in your range.” If the prospect is not receptive, Hedin wishes them the best with their project – end of story.
If a prospect’s expectations regarding pricing are unrealistic, there is no need to waste time and effort providing an estimate. On the other hand, if a prospect continues to engage, knowing your prices are higher than other contractors, you can use the conversation as a springboard to cultivate the lead.
Hedin says, “I’ve been able to give people ballparks, and they’ll kind of balk at the price, but you know it’s within their budget.” Hedin might soften the blow by saying something like, “Look, I know it’s high. Let me come out, and we’ll measure it up. We’ll see what we can do.” Hedin says that on bigger projects, he is often able to bring the price down because prospects don’t always provide accurate details about the project.
Establish Fair Pricing
There are many ways to establish fair pricing. Square foot, day rate, base price plus extras, and so on. The operative word “fair” applies to both the contractor and the client. Home and property owners do not want to get ripped off any more than contractors want to struggle to keep their businesses afloat.
Ballin points out that when someone accuses a contractor of “price gouging,” “ripping people off,” or “taking advantage,” no one is forcing them to pay. “There are thirty handymen watching the local Facebook group,” ready to respond, Ballin says. A seasoned contractor brings more knowledge and experience to the table than any handyman.
Include Future Expenses
Contractors need to take everything into account because just being able to pay today’s bills is not enough, Hedin says. “You’ve got to think ahead, folks. […] You’re damaging your body. That has a cost. We don’t get a 401K; we don’t get any sort of retirement plan. We pay our own Social Security. […] You don’t get paid vacation. You don’t get anything as an owner-operator.”
For help with pricing, Hedin recommends that readers listen to the podcast called, How much should I charge for…, with Anthony Moses, owner of Simply Intricate Designs. “But the simple, summed-up way [to find your day rate]” Hedin says, “is you need to know how much you can produce in a day, and you need to know what it costs to pay your bills, pay your taxes, run your business – all of that. And then you have to put some profit on it. And now you have your day rate.”
The Floor Academy also provides free, downloadable resources, including one called “Business Budgeting” that can help you determine your day rate.
In the video, How Much Do I Charge?, Hedin goes over how it works and some of the finer details of how to use all of this information.
Day Rate vs Square Foot Pricing
Both Hedin and Ballin prefer using a day rate over square foot pricing. Ballin says that using a day rate “takes away that ability for that customer to call and say, ‘Hey, how much do you charge?'” Ballin uses square footage as his starting point, although this is not information that he gives to prospects. Ballin explains, “These are just numbers that I’m using during my estimation process.”
If Ballin adjusts his day rate, he does so according to the scope of the project, not the service performed. “I’m charging my minimum for the day,” Ballin says. “Doesn’t matter what I’m doing; I’m getting my day rate. I can use that day rate as part of a bigger job. So, if I’m doing a bathroom renovation thing and I’m going to take a day to demo the bathroom, well, the demo portion of that job is my day rate.” If Ballin is doing something less time-consuming, like a repair that can be completed on the way to another project, he will not charge the full-day price.
Communication is Critical
When a contractor understands the needs of prospects and adapts their communication styles accordingly, it helps build rapport and establish the credibility of the business. Ballin stresses that improper communication results in headaches and wasted time. “Communication is big with your customers,” Ballin says.
Attitude goes a long way when it comes to delivering estimates that convert prospects into paying customers. Hedin says, “Honestly, if you don’t have a good mindset going into your estimate, you’ve already lost.” Contractors possess information, expertise, and resources that the prospect does not have. Hedin feels confident going into an estimate because his potential clients don’t know how to do the work themselves. “They called you because they need you,” Hedin points out.
Ken Ballin Warns: Pay Attention
Ballin emphasizes the importance of being aware of your surroundings and your audience when delivering an estimate. For example, he might explain the details of a project differently to an engineer than to someone who is not an engineer.
Hedin agrees, saying, “I need to find out what you do and be able to relate to you.” Hedin suggests incorporating your technical knowledge into the discussion, because it will set you, the “consummate professional,” apart from a contractor who “just comes in, looks at a couple of things, and says, ‘Yeah. Fifteen.'” You can talk about specific details pertaining to the project, like the flatness of the substrate, moisture testing, pitched shower curbs, and the like. However, Hedin cautions against condescension: “Don’t talk down to them. Don’t confuse them. Don’t make them feel dumb.”
Clearly State What Is Not Included
When you deliver an estimate, make sure your prospect understands what is not included. Hedin says that contractors need to explain that there may be unforeseen costs, such as major repairs, flowable hydraulic cement underlayment (self-level), etc. Ballin agrees, saying, “If I can’t see it, then I can’t include a price for it, so there will be an additional cost for prep. […] We’re not fortune tellers. […] Don’t go buy the stuff for free. That’s insane.”
The bottom line in estimates and communication is bringing value and clearly communicating that value. Ballin says, “Nobody’s holding a gun to anybody’s head, saying, ‘Sign this contract.’ You know, if they see value in what you’re offering, they’re going to cut you the check. They’re going to have you do the work.”