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Estimating for sales and profits

March 9th, 2010 / By: / Marine, Marketing

The quality of your estimates has an impact on your bottom line.

Estimating job costs is one of the cornerstone skills of running a successful marine fabrication business. The more accurately you can estimate the amount of labor and materials a given job will require, the better the job will go, and the more satisfied the customer will be. And satisfied customers lead to repeat business and great word-of-mouth advertising.

What are the basic steps in making an estimate? What tools and changes can improve your estimating procedure, making your business more efficient and profitable? What are the most common problems and mistakes marine fabricators make when estimating the cost of a project, and how can you avoid or fix them?

Experienced marine fabricators from across the country answer these questions and share their expertise, insights and tips for estimates that lead to profitable jobs and satisfied customers.

Phone estimates

Often, initial contact with a customer happens over the phone. When a potential customer calls you, first ask what they are looking for or what problem they want fixed. Get as many details about the project as you can.

“We identify whether they’re looking for a cover or an enclosure,” says Chris Ritsema, co-owner of The Nautical Needle in Holland, Mich. “If it’s an enclosure, we ask how many panels it has. Basically, we’re just getting a good description. Then I give an estimate.”

About 30-percent of the estimates Ritsema gives are over the phone. “I’m very clear that it’s an estimate only, and I can’t commit to it unless I can see the boat.”

Of course, over the phone is not the best way to come up with a cost estimate. Ideally, once you’ve had phone contact with a potential customer and given a rough estimate, he or she will agree to set up a meeting so you can visit the job site and discuss the job in more detail.

At the job site

At the job site, you can take measurements, upsell products and services, answer questions and gather information that will help you come up with an accurate estimate. Take lots of notes.

“I come to the boat with samples and products, like the type of thread we use,” Ritsema says. “The first thing I’m going to explain is the materials. It’s important that the customer understands that there are different gauges of eisenglass, for example. I like to go into detail, explain how we fabricate a curtain compared to the competition. I try to upsell our products and give options.”

When Justin Jones, owner of Custom Covers in Salt Lake City, Utah, visits potential job sites, he snaps photos of problem areas, which he later includes with his estimate.

The estimate itself

“It’s important to come up with a good, honest, fair price,” Jones advises. “You want to make sure you’re charging a fair market rate for your time and materials, and that you’re not leaving money on the table or shorting yourself.”

How do you come up with a good, honest, fair price? When Ritsema gets back to the office after visiting a job site, he sits down and estimates the materials the job will require. “From that point, we go ahead and estimate labor, sewing and fabrication,” he says. “Instead of just bulking it all in with a price at the bottom, we do itemized quotes so the customer can really see what they’re getting. Sometimes I will give a streamlined quote and then include different options at the bottom.”

Katie Bradford, MFC, of Custom Marine Canvas in Noank, Conn., offers a method that can help experienced fabricators refine their labor estimates.

“For frequently produced items, we add up time and materials for several jobs and divide by a unit of measure to come up with a reasonable estimate,” Bradford says. “For example, we get an average price per linear foot of a sailcover, a square foot of a bimini, an average number of hours per cushion in an interior, a per-panel price for an enclosure.”

An alternate way to standardize the estimating process comes from Chandler Clark, co-owner of Signature CanvasMakers in Hampton, Va.

“Give yourself a baseline to work from on core products,” he advises, “such as a three-bow bimini (of a limited width) setup with your fabric options, then set pricing for add-ons. This helps to take the guesswork out of estimating, takes less time and ensures that you maintain price integrity and consistency.”

On your itemized estimate, remember to include details about products.

“I think it’s important to give the customer a detailed estimate so he knows what he’s getting,” Ritsema says. “If I’m giving a lifetime warranty on our thread, that should be on the estimate.”

Common mistakes and how to avoid them

The mistake: Too low an estimate. “I think what angers people more than anything is if you give them an estimate and secure the job, and at the end you give them a price that’s $300 or $400 higher than you quoted,” Ritsema says.

The fix. With a recession still breathing down our collective necks and everyone keeping a wary eye on their wallets, it may be tempting to be optimistic about how long a given project will take. The lower the price, the more attractive for the customer. But underestimating the cost of a project will only hurt you in the long run.

At the end of the project, you’ll either have to rush to stay within your estimated time (risking lower-quality results), eat the difference between your estimated and actual labor costs, or charge the customer significantly more than you quoted.

Needless to say, that’s not the kind of choice you want to have to make. So resist the urge to low ball your estimates.

The challenge: Upselling. Upselling products and services can significantly increase the value of a project. But it’s hard to persuade people to part with more money.

The fix. Identify areas where you can add value and services. Then show the customer why the quality and extra services they will receive are worth the added expense.

“When I get onto a boat, I look at other areas, besides the one the project involves, because we also do upholstery,” Ritsema says. “If I notice the upholstery is bad, I can say to the customer, ‘We also do upholstery.’

“If we’re dealing with an enclosure, I look at the frame. If the enclosure has a really flimsy frame, I’m going to try to upsell to a better frame.”

Upselling doesn’t necessarily mean adding to the scope of a project. Quality in craftsmanship or products, like zippers or thread that carry lifetime warranties, can be a big upsell when trying to secure a job or justify a premium price.

“We always sell quality,” Jones says. “That’s our niche. We’re not the cheapest in town, but we can justify the cost because we can show them physically why we’re better or why our products are better and will last longer.”

Clark also underscores the importance of added value.

“We’ve aimed toward the higher-end market with a quality product, a little extra customer service and the addition of added-value that adds little cost in production to us, but provides high ‘perceived value’ to the customer,” he says. “This has served us well in the recent slowdown. We have been able maintain a steady business flow this year without reducing prices, profit margin or quality.”

The challenge: Large or new-to-you jobs. “Since everything we do is custom, the hardest part is determining how long an item will take to build,” Bradford says. Other fabricators echo her sentiments.

The fix. “I would say time is the hardest part of estimating, especially if it’s something you’ve never done before,” Jones says. “Or sometimes you’ll get a unique project that’s really tough to determine in advance how much time it will take. Our policy with projects like that is to ‘underpromise and overdeliver.’ I think that goes a long way with finishing the sale and getting the good word of mouth for future customers.”

Ritsema finds complete overhauls particularly challenging to estimate. He and several other fabricators recommend the MFA Time Standards Manual as a useful resource.

Refine your estimates, boost your profits

“The economy has affected us greatly,” Jones says. “We’re doing a lot of different types of estimates, more for repair and replacement of old overs vs. doing a lot of new covers on new boats. The percentage of people who follow through with estimates has also decreased.”

In a time when every penny counts, it might be worth your while to review your estimating tools and procedures. The quality of your estimates can have a big impact on your bottom line.

Shelby Gonzalez is a freelance writer. She welcomes comments and inquiries at shelbygonzalez@gmail.com.

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