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Think Twice Before Giving A Price

Case study

I had a visit from a builder once up to the office. He carried with him a scroll of plans and he looked a bit flustered.

He had just come from a meeting with a dear old lady, a friend of a friend’s grandmother. This lady was in her 90’s and needed a new home built after the earthquakes. She didn’t need anything large; she was only looking at a design that would be around 60-70m2 with two bedrooms, bathroom, kitchen dining and lounge. The footprint was straightforward, no funny angles and a straight rectangular shaped floor plan.

Time was not on her side, and she only had a limited budget. My builder friend knew that he needed to get the pricing sorted for it quite quickly so he could get on with the job as winter was approaching.

He gave me the plans and asked me to sort out a price – no problem. THEN he said, ‘I’ve already told her it will probably only be about $1000/m2……’ as he rushed out the door.

My heart sank.

Anticipate Hidden Costs

Sure, you look at a simple set of plans with a simple layout and think, this won’t be an expensive build! But given it was a small footprint but had all the same requirements as any larger home, ie, plumbing, electrical, drainage, kitchen, etc etc…… I knew that it was likely my builder was going to end up in a tight spot.

Nevertheless, we steamed ahead and pulled the pricing together, measuring every stick of timber and nut and bolt and applying labour constants to each item. Quotes were supplied for the subtrades, and P&G and margin were added. The final price came in at around $120k.

I KNEW that if I just told the builder the final price, he would freak out…. He had already promised his elderly client ‘about $1000/m2’. The true cost was double that.

We called him into the office and sat him down…. and instead of showing him the trade summary first, we walked through the trade details document with him that didn’t show the total $$.

Line by line, we went through the pricing. Every line we showed him the measure and the labour content, and every line he said ‘yip! That looks great! Perfect!’ and so on and so on……

We got to the bottom of the trade details and he was stoked. Pleased as punch that we had taken a job off him and that he agreed with every single line item that was discussed. The sub-contractor quotes had been supplied by him from his own contacts, there was no issue whatsoever.

Until we showed him the trade summary with the total dollar value listed at the bottom inclusive of margin and GST.

I have never seen anyone change colour that quickly. He knew he was up sh&t creek.

He grabbed the trade detail again and skimmed over it, trying to work out what we might have done wrong. Blustering, he asked questions about our numbers, we showed him the measures on the plans so he could see where everything came from…. In the end he gave up. There were no mistakes in our measure or pricing. Everything was correct.

He packed everything up and walked out of the office – on his way to have a very tough conversation with a little old lady who had already been through hundreds of earthquakes and lost her home…. Who was now going to need to apply for a mortgage to pay for her house.

This story comes to mind every single time I hear a builder offer a square metre rate to a client. Think twice before you give any advice about costings… even as a guess.

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