NARI: Charge for Your Time in the ‘Incubation Room’
authors Doug King | October 14, 2020
Most small remodeling company business owners will agree that one of our largest overhead labor costs is the amount of time we as owners spend developing a client.
I’m not talking about marketing and advertising costs. I am talking about the time we spend because our marketing and advertising worked, the time we invest as we nurture leads into clients.
There is the time spent responding to an online request or a phone call as we attempt to qualify the prospect. We want to know if their project and their personality are good fits for our company.
Once we determine they are a good fit, then there’s time meeting face-to-face (or via Zoom). Then we take pictures. We take measurements. We show off photos of previous projects. We ask questions and answer theirs. From there, we spend hours—often at night and on weekends—designing, drawing, writing scopes-of-work, calculating quantities and estimating costs to determine prices for these jobs.
As noted above, this is a huge overhead expense unless you charge for your time spent in what I call the “incubation room.” The incubation room is where you could (and should) spend hours converting a prospect into a viable client.
I’m always amazed at the number of companies who work in this “room” for free. But truth be told, this is a common mistake. I did the same thing. I started out working for free and soon realized that everyone on the street would let me work for free all that I wanted!
Heck, in one of those early years, I had a stack of papers about 18 inches high from notes, drawings and calculations on jobs where I didn’t receive a dime for my expertise and knowledge. That was very valuable information that I was spreading around like I was competing for some citizen-of-the-year award.
Many of you own full service and design-build firms. If so, you have a process for entering into an agreement where you are being paid for the time spent developing plans, scopes-of-work and budgets for your clients. This is a design agreement or a design retainer.
This column is for those remodelers—NARI members or not—who, even though they are design-build firms, are frequently involved with such tasks as creating floor-plan layouts, scope writing and generating take-offs in order to come up with prices for your prospects. You should not be doing this for free.
You have a ton of experience. You’ve been around the block. You have a lot of great ideas to offer your prospects. You are a professional in this industry. And, you deserve to be paid for your time and your expertise. After all, our business is identifying, presenting and managing the plethora of details that even a small bathroom project requires.
Tools for the Incubation Room
I use two types of documents while I am in the incubation room. One is a Client Development Agreement and the other is an Estimation Retainer Agreement. The Client Development Agreement is used when plans have yet to be developed, and the client is basically starting from scratch. I will use these for projects ranging from basic bathrooms to kitchens with load-bearing walls being removed to room additions.
Our agreement, which is very straightforward and fits on one page, includes language that clearly indicates what the client will receive for the fees paid. We also have a document that outlines our process. It’s one we share with prospects early on, and I am happy to share a condensed version of it with you now.
- Visit the site to review conditions, discuss goals and offer ideas. This is a free 30-minute consultation.
- Enter into a Development Agreement. This stage includes onsite measurements, photos and a possible site visit with an architect and/or engineer. From the clients’ ideas and requests, we create a schematic plan for their approval. Based on that approved design, as well as notes taken from our prior discussions about finishes and other details, we write a scope of work.
- Present drawings to the client. These include 3-D renderings of the job and floor plans drawn with all electrical and plumbing. These are presented along with the written scope and pricing.
- Client Adjustments: The client is allowed to make changes, and we adjust the price if needed.
- Contract Phase: We sign a contract, finalize plans and apply for permits.
- Selections: Client makes selections and approves them in writing.
- Schedule production timeline.
- Hold pre-construction meeting.
- Start the job.
Again, this is not our agreement, just the process. I do not know how anyone can quote a custom remodeling project without going through this process. You should be paid to take all these steps.
The Estimation Retainer Agreement is a tool to allow a scope of work to be created and the calculation of a project price for the prospective client when the client has a set of plans created by a third party. Because finish details and product information are rarely included on architect plans, and because they comprise approximately 40 percent of the project costs, the fee paid for this document offsets the time to assemble all the information and create the scope of work.
If you have not been charging for your professional—and precious—time to quote jobs, I hope this little tidbit might serve as a guide for you to create a process that works for you. QR