Can You Charge for an Estimate as a Contractor?

Cost estimation is a vital aspect of closing a client and analyzing the feasibility of the project’s completion. 

But can you charge for an estimate?

You might believe that providing free estimates can help you deliver a quality customer experience and avoid a money-oriented image of your brand. 

But what if it’s a large-scale project that takes days to deliver a proper estimate?

What if the client is merely curious and not serious about your service?

Well, there’s no white and black answer to whether you should charge for estimation or not. It’s a gray area. Let’s understand more to help you make a better decision. 

Should Contractors Charge for Estimates?

Based on the general rule, you can charge for estimates for different complicated projects like a kitchen remodel or home addition. 

But according to Fine Homebuilding, if you want to charge for an estimate, it should be based on the job’s size, the general industry practice, and personal philosophy.

Job scope

You can charge for estimates for large-scale projects with different stakeholders, like subcontractors, designers, and architects. It takes more time to coordinate with every stakeholder while preparing your estimates. Also, estimating the material cost requires time and effort.

Half of the contractors believe that the time spent estimating a large-scale project should be charged, and the other half believe that to make money, you must spend money.

Industry-standard

You can also check whether your competitors are charging for cost estimation. It can assist you in complying with industry standards and avoiding deviation.  

Some contractors consider free estimates part of the overhead cost and a factor in business. Perhaps there are many competitors in the business to consider estimated charges. 

Or it’s unprofessional to ask clients to pay for the estimates, as the companies with great reputations place customer satisfaction and experience above a minimal cost estimation charge.

According to Fine Homebuilding, Midwest engineers, residential architects, or design/build contractors don’t charge for estimates. So, if you operate in the Midwest, you should also offer free estimates and avoid losing a business opportunity.

Personal philosophy

Some contractors believe that a free estimate is a “guess” and that a paid estimate is an accurate estimation of the project costs. While others want to be compensated for the work done by them.

Also, most contractors believe charging for estimates filters clients who aren’t serious about hiring them.

Being a small-scale contractor, you can also provide a free consultation via phone, but you must be present in person for paid consultations. You can ask the right questions to your prospects and filter out the ready-to-hire and merely curious leads. 

Ask prospective clients

• Did anyone provide them with a reference?
• What is their budget?
• Do they want an estimate or a fixed price?
• What other companies have called them?
• Have they been remodeled before? How was it?
• What do they want in a contractor?
• How will they decide if a project’s successful?

Some clients may use an estimate to negotiate lower project costs with your competitors. Asking the questions can help you qualify your leads and understand the motive behind the consultation request. 

In special cases, if clients ask why you charge an estimated fee compared to your competitors, you can channel the opportunity to state the difference between you and your competitors and the value you bring to the table.

Should Contractors Issue Estimates for Free?

Free estimates depend on what’s best for your business, clients, and industry. You can offer free estimates for small, straightforward projects like painting a room or washing a window, as you can create these estimates quickly using professional financial management software like InvoiceOwl.

But for a large project with large teams and detailed designs, you can consider charging for your estimates because of the effort involved in creating a professional estimate. 

That’s not it.

Look at a few factors that can affect whether you charge for estimates:

• Your usual estimate close rate
• The project size and budget
• The likelihood of closing the sale
• Your level of experience and hourly pay
• How accurate your estimates are
• How much detail you include in your estimates
• Whether you’d be working with other companies

If you decide to offer free estimates, you must consider the drawbacks of the process.

Demerits of Issuing Free Estimates

A free estimate does sound appealing, but it has a few downsides that you must consider. 

• The lower the perception of quality. Many businesses don’t offer free estimates because they consider it reduces the value of their experience and service. Having a stronghold in the industry, many contractors want their knowledge to be valuable. If you choose to offer a free estimate, the client might take you lightly or might switch to other competitors without realizing the value you can offer.
• You can waste your effort and time because you won’t be paid for the client’s home visits and the hours spent during the project discussion. You also don’t have a guarantee that you’ll close the client even after the effort you put in. 
• You could affect client satisfaction, as most clients are unaware of the difference between quotes and estimates. They might get upset once they realize you are not offering an exact quote and ask for a more detailed plan.

These factors might make you rethink charging your potential clients, but how much should you charge?

How Much Can Contractors Charge for Estimates?

A quote can cost between $50 and $1,500, depending on the work’s value and size. The estimated fee for painting a house will be on the lower end, while remodeling service work can be priced higher.
You can charge a combination of your overhead, hourly rate, and profit margin. Many contractors charge a fixed amount for estimates and use 50% of that amount as a project deposit.

You should remember that project estimation is a part of your expertise. If the project’s complexity is higher, you have a genuine reason to charge for your time, effort, and industry knowledge. 

You can also include the cost of your estimates in the project price if you don’t charge upfront. The client might think the estimate was free, but once you win the work, they’ll pay for the time and effort you spend estimating. 

But before you charge for the estimates, here are three tips you must consider. 

Tips to Know before Charge for Estimates

Charging your clients for estimates requires a clear understanding of why and how to do it. Multiple tips can be followed:

1. Know your value

You must convince yourself that the estimation task is time-consuming, and you must charge an estimate fee for your valuable time. You have put in years of hard work learning to remodel, and you are an expert, so you should charge for your specialized skills in creating a quote for your potential client.

2. Explain your value

You must explain your value to your prospective client and justify the estimation cost. It can help you remove misconceptions in the client’s mind about the extra estimated charge and establish a strong relationship. 

In large projects, the estimates can take a few days with a feasibility study, pricing analysis, and other factors under consideration. However, you can avoid charging for estimates for simple jobs and provide a rough estimate for your clients. 

3. Use financial management software

Use professional financial management software to ditch the traditional or manual estimate processing to increase the efficiency and productivity of your financial management. 

The software can minimize the time and effort in creating quality estimates and ensure you deliver a quality customer experience for your paid or free estimates. 

Our team has selected the best financial management software for contractors to help you achieve your desired targets.  

InvoiceOwl Is the Best for Creating Professional Estimates

InvoiceOwl is the leading estimation and invoicing software for contractors to assist you in creating professional estimates in no time. 

You can access several professional pre-built templates to make professional estimates to ensure you deliver an excellent customer experience. You can create estimates using your laptops, mobile, or tablets.

The software offers estimate processing, reporting, recording a credit memo journal entry, payment processing, invoicing, and other impactful features. It also enables your employees to streamline financial management and allows you to control your business operations. 

The software is best for industries like electrical, HVAC, construction, carpentry, landscaping, plumbing, roofing, and other leading service-based niches. 

You can access the simple and user-friendly interface of the software to experience the best financial management ecosystem.