One constant thorn in the side of truss fabricators is the cost of preparing quotes, often multiple times for the same job through the life of a project. I find that this is especially true for custom homes, as they often go through numerous revisions for aesthetic, budget, zoning, and other reasons.
Often, as readers know all too well, the builder will visit his local truss plant – or often several truss plants – with early-stage house plans wanting the truss supplier to provide several key pieces of information for the project.
Of course, one key piece is to establish a base price for the roof and or floor trusses. While I don’t intend to take anything away from those in the flooring, painting, insulation, or countless other trades that are involved in building a custom house, I would suggest that few if any other trades estimate pricing of their products and services in as demanding a fashion as we commonly do in the truss world. Paint, sheetrock, flooring, roofing, etc. can all be costed with reasonable accuracy using relatively simple area calculations. Plumbing and electrical rough-in costs are largely driven by number of fixtures, so they can also be determined with reasonable effort.
But what is the common approach that we take in the truss industry? In my experience, and years of interaction with truss plant owners and managers across North America confirms I am not alone, we almost universally follow the same approach. We start by creating a truss layout from the information on the plans, which in truth is better described as a 3D model created from 2D drawings rather than just a layout. Since the project drawings are often incomplete at this stage, a great deal of questions and guess-work is required. This model is then used to inform our very sophisticated engineering software, which in turn provides us with information by which we calculate our estimated material, labor, and overhead costs, at which time we can add our target profit margin. Often, the truss supplier provides key feedback and problem solving on engineering issues during this time.
The time required to follow this process can vary depending on the complexity of the building, but it would not be news to anyone reading this to say that multiple days can be spent on this preliminary work to provide a confident estimate of costs on a large complex house. And, of course, as I mentioned at the start, the project is still at the preliminary drawing stage. It is not unusual for the plans to undergo two, three, or more substantial revisions as the project evolves. Making those revisions may require less time than the first time through, but too many times it can be almost as difficult to make several small changes as it was to do the initial layout.
So, what does that process cost our operation? Well, let’s think about a complex job that takes a skilled designer two working days to get from plan to initial proposal, then goes through two more revisions that take another 9 hours. Using some fairly simple and very conservative math, we can arrive at the following:
- 25 hours total * $40/hr. = $1000
Your hourly rate for a good designer may differ, but with wage and benefit overheads it’s likely not much lower than $40/hr and is quite likely higher. And there are also the fixed overheads to consider, including the office equipment being used, software licensing costs, office space costs, and so on.
If this complex job is sold at a price of $30,000, then the $960 we spent to obtain the order is ~3%, and we could well consider that a reasonable cost of our sales process. But let’s remember that, in most cases, we are operating in a competitive environment trying to win this job while competing against other truss suppliers doing exactly the same thing. If a total of even three truss plants are involved in this process, then the total cost is $3000 – or 10% of the project value, and the two losing companies are each out $1000 that must be made up on future work because they have no revenue from this job. You may be happy that you were successful at landing this job, but keep in mind that statistically you are going to be one of the other two 67% of the time.
Personally, I believe that through this process our industry has given away our estimating and engineering services for far too long. For almost as long as I have been in the business, I have heard industry people say that we need to charge for these services – but I’ve yet to see that done on a meaningful and consistent scale. Perhaps your company, or your region, is an exception. I certainly hope so, and I hope that your success in being compensated for your expertise spreads. If you’ve had success in charging for estimating, or in some other way being compensated for your expertise outside of selling the physical product, I’d love to hear about how you did it. Please share your thoughts with me.