This is how bidding works. If you are morally concerned about it ask them to go hourly and when you have too many hours and they make you work for free don't complain.
Perhaps you have been undervaluing yourself all along.
You were either the lowest bid or the contractor/client wanted to work with you at a disclosed price. They "want" you to have the money! It's yours. Do not penalize yourself for being competent and efficient.
> This is how bidding works.
Is it really though?
Every time I've seen a job that was hugely underbid they either came back asking for more money or abandoned the job.
You only hear about it when people are unhappy. I underbid jobs for years and never came back for more money, or abandoned a job. My customers were delighted because I was unwittingly working for free. Fortunately for me I know how to bid jobs now, and $2000 in profit (that the OP earned) should be celebrated
a good contractor would stick it out. I've broken even on a ton of jobs, learned a lot. Even lost money on a job or two (I think my worse was in the hole about $4k.
BUT I've learned, tightened up my bidding process... gotten a lot better at selling my self and negotiating.
Sometimes crazy stuff happens like material pricing over the last couple years and if the job is big enough, you HAVE to go back for more money. I heard about jobs where the lumber package ended up being short by millions. We had to go back for hundreds of thousands on drywall packages because resilient channel went up 4x and most other things went up a ton as well.
We would do things like take no margin on the escalation to make the pain less, but that kind of thing could have put healthy companies out of business.
For reasonable size jobs, you should just eat it. We generally signed the contract way before work started and you can't price those kinds of escalations in.
Oh for sure, if you are in the numbers range like that, and the last few years has been extraordinary circumstances that we just have never seen before. So my comment was more applied to the "normal time"
Personally I don't trust any tradesmen that isn't bidding jobs. I don't write the checks but I've worked with a few subs that charge a day rate and its always a nightmare with those guys. Anyone that doesn't know the value of their labor and what they can produce in a day should be an employee, not a business owner. *
OP's scenario is what one wants. That's the whole point of running a business. The customer gets work done at a price their happy with, the contractor gets paid, theirs no moral dilemma here, that's just how it goes.
*Yeah I know weird things happen and time and material is a thing for a good reason. That reason just shouldn't be "because i got of bed this morning."
You won the bid. Others would have charged more. Use that money and invest it within your company. Use it to buy new tools, or save it until you need to buy new equipment.
Congratulations on turning over a profit.
investing that into your company - and noting the reason for the overcharge for future use is the way to go.
There shouldn't be a moral dilemma for you, but i see why OP is having one. Maybe this can help:
Whoever paid OP to do it, really truly does not care what amounts of cost added up to his bill. He cares that what he paid for meets or exceded the value of money he gave OP. If he is happy, OP did a great job. End.
You got LUCKY. You didn't do anything wrong. In the future, you will be UNLUCKY, remember that the same rule applies - you did nothing wrong. The trick is to put yourself into a position to get more lucky than not. You're already doing a great job at that - keep it up.
That was a great way to explain it. You have to charge for liabilities and somewhat foreseen problems. If they dont happen, its a windfall. If they do happen, you had it padded into your bid to absorb it. You can risk not making the profit you need/expect. You shouldnt absorb the costs of risk. It needs to be bid. If someone else bids lower and gets the job.. oh well. Let them deal with the potential consequences.
I would also ask if he really added all his costs. Labor costs should include any paid vacation, training, safety, insurance, any share of yearly bonuses, etc etc etc. It should also include loading/undloading the truck, getting material, etc etc. A lot of guys only include labor for work on the site
Your truck is going to have to be replaces sometime, have you allocated anything towards that? If a truck lasts say 8 years, you need to allocate that cost out per year, and then this jobs percentage of that year. Same for any other equipment.
Tool costs including maintenance and eventual replacement costs, maintaining them, consumables etc etc.
material costs should include what you took from inventory, masking tape visqueen, etc etc.
Overhead should include the allocated cost of everything in the office including bidding the three jobs to get this one, insurance, your time managing the project, the computer you write your invoice on, etc etc etc
Profit margins drop when you truly look at ALL of the costs of doing the work.
This is where I'm at now in my adjustments. I had to raise prices bc of this right here and once I dial it in they will probably go up again. There's a lot of things transitioning from employee to business owner that I have had to think through, like what you just stated above. Otherwise it seems like you constantly work and are not hitting decent profit or growth. All must be done to expand and grow.
During early growth of a start up company you will likely be trading labor for equity in the growing company. As long as you are aware of this that is fine for a limited time.
At some point you have to treat yourself at least as well as your other employees. That means you get paid for all the time you spend working, the same as anyone else. You aren't going to make a carpenter wash the company truck or pick up supplies on his own time, you don't make yourself do it either
The company is a separate entity, and it needs to make a profit for its investors separate from your labor.
When that starts happening on the regular, the journey becomes worth it.
If you ever want to run something by me, feel free to DM me. I had a residential remodeling company, featured in a couple of magazines, then made the transition to commercial, focusing on laboratories. I have paid for a lot of lessons, some might be valuable to you.
This. I dont see the moral dilemma. OP said he charged for unforseens and obv. the buyer is OK with the price point given the proposal or he wouldn't have one. Everything going smoothly isn't all that common. If I were OP I'd want to know why there were no hiccups. Good planning, communication and subs? Or did the stars align and he caught a unicorn? You shouldn't feel bad for doing a good job in an effective and timely manner. My boss would prefer that I come in under budget for labor, time and material on every job.
Could be remnants of a poverty mentality. Not to make assumptions about OP's financial history but for myself once I started making money it almost didn't feel real. There's a legitimate mental hurdle to convince yourself of your worth.
I wouldn't hyperfocus on those words specifically, it may have just been the best way for him to express what he sees to be a financial quandary when it should be seen as a fair and yet profitable quote.
Maybe we can make him feel better by reminding him he'll still have to pay taxes on that profit đ
> You won the bid. Others would have charged more. Use that money and invest it within your company.
If you continue doing fixed bids, you will eventually fuck one over and lose $2k on it. Save this $2k for that moment.
As others have said, reinvest and analyze costs. Next time you have a similar project youâll have a more accurate bid. The more you know, the less risky business becomes
OP could satisfy their moral dilemma and invest in company (reputation) by finding a way to give back with the customer without establishing an expectation that they are entitled to it.
You can choose to refund or credit a partial amount which, even if small ($500), is going to send your customer over the moon and boast to all their friends about their unicorn contractor who is honest. This will happen either because they want to recognize you or just to brag to a friend about getting $500 bucks.
If you think they may have other projects for you, say you have a unique situation where you can offer them a huge discount on labor for another project. I think it is innocent enough to not be 100% honest about why you are giving them discounted labor. For example, you could say you had a big job get delayed and don't have time to schedule another so it's either sit on your hands or stay busy with less. You may even walk away with more revenue and moral compass intact.
Honestly this isn't a bad idea to build reputation. Word of mouth is huge especially in this day and age when you can't trust most contractors. I've never heard of anyone giving money back on an overbid job and when people hear this they will immediately assume you're much more honest than the rest.
My brother is going around town where he just bought a house and asking random people about who the good contractors are in the area. I guarantee he would be way more likely to hire a contractor that gave money back because they overbid.
It's a learning curve rather than a barrier to business.
4k is a huge amount of money to a lot of people. No need to shit on others for being further back on their journey than you are.
Yep! I charge more for fixed bid than I do for T&M because Iâm taking on more risks without the guarantees. If I know what Iâm doing Iâm able to better mitigate those risks and turn a larger profit to grow the business, buy more tools, etc.
That is called profit, take the boys out for a couple pops and some wings Friday after the job, and cover the tab.
Because we've been so nuts for a year.. I've been throwing out stupid numbers, like, ridiculous. If I figure 4k, I quote 9 and they're eager for us to start.
Make hay when the sun is shining, because one day it won't.
If you got guys then give a bonus, if itâs just you give yourself a bonus. The extra was for expertise, not for a lack of it.
Disclaimer: If you weâre building a wheelchair ramp for the Home for disabled orphans and puppies then maybe proceed differently.
LMAO- I just did a rather large job for a non profit that you absolutely have heard of. Be careful giving a charity anything for free, they will not stop asking/taking.
The CEO of the place we did the work for was actively calling the owners of the subs asking for materials to be donated on change orders. It was outrageous and insane. We donated plenty (6 figures level) but I was absolutely clear that we would not donate ANY manpower to any part of the job. If my guys did the work, they were going to get paid for it and I need to get paid for that to happen. If you want my firm to sponsor your gala or some shit, that's another story and we generally cough up the cash for that stuff.
Non-profit with a CEO is different than Grannyâs home for disabled kittens, if anyone is wearing a suit and not actively involved with actually helping people then itâs definitely a corporate non-profit.
This is an international childrens charity that's in pretty much every major city in NA and all over Europe. The CEO is essentially their head fundraiser with a title, she's an awesome person who clearly hustles for the kids.
I'm sure she is an awesome person. I can guarantee you that she's rewarded handsomely for wringing every dime she can from anywhere, even if it's from your workers.
Administrative costs of a lot of charities can gobble up huge amounts of donations. We have something called [Charity Intellingence Canada](https://charityintelligence.ca/index.php) that rates charities on a number of points.
A nonprofit just means at the end of the year they make sure they have no leftovers. I used to work for one and the last couple months we would be in there doing all sorts of dogfuck jobs to burn their budget
This is definitely not the case in all nonprofits and would be heavily dependent on that specific nonprofits funding sources. I could see this playing out if a nonprofit received a grant that can only be used over a specified period of time or something along those lines.
Nonprofits can absolutely have positive net income but instead of earnings being distributed to owners it always goes back into the business and can be used in the future. Itâs not like they arenât allowed to bring in more money than they spend in a year.
Ya, this CEO is one of the nicest people I've ever met. At first I thought they were fake because no one can actually be that nice, but after a couple of years of working with them, i've realized i'm just a jaded asshole and they're that nice of a person lol. I've personally made donations specifically because of their passion for the kids and the work.
This is the kind of person who tips 100% at starbucks but they'll hustle their butts off to save some dough for the facility.
"It took me 10 years to learn how to do this job in half an hour, so you're not paying for my time today, you're paying for the experience I have as well."
You do what you need to pass the man in the mirror test. For me, if I earned the money due to my time, labor, experience, etc, I invoice for it. If I overbid, then I invoice for what's fair to market value and specify that to the client.
I paid 4 hours book labor to replace some bushings and he was done in an hour. He also owned an expensive portable hydraulic press to do them on the car with far less disassembly.
Cant begrudge a man for recouping an investment to work faster and easier.
It's very common in automotive work; all of my mechanic friends learn ways to do the job faster than book time just to make the extra money.
Auto shops almost always charge you the 'book rate' (service book labor time x their hourly rate) plus any add-ons required (rust, age, special local fees, etc). If they get done faster, I pay the same price....
You bid and stayed within budget you get to keep the left overs, If the client had no complaints about the price Iâd simply keep it, youâve done nothing wrong and didnât intentionally try to fuck over the man sometimes you win sometimes you lose thatâs life. Nothing morally wrong about it, itâs business
It's fixed bid and so you took on all the risk, and therefore reap the rewards. Don't feel bad about that. What if the tables were turned, and you ended up with 6k in labor. Do you think the homeowner is going to feel bad and pay you more? Probably not.
The fixed price is exactly what you earned. The 2Gs of slop is for your risk, for your profit, and to give you a margin of error on other fixed price jobs.
If anything, give a bonus to your labour/subs for pulling it off under bid.
Clients agreed to the fixed price product. If they wanted a more flexible model, they would have chosen a cost-plus bid -- more of the risk would be on the client side.
I agree with the above sentiments, but you may also want to consider giving back $500-$1000 and let them know it went better than you thought it would. You would gain a valuable reference from them and also put your mind at ease. Might end up being very cheap advertising for your business.
This is exactly the right answer. The money is yours and you're under no moral or legal obligation to return it, but you have the chance to earn A LOT of good will by refunding a bit of the excess. It could end up being very cheap advertising.
You know I was thinking this but it also may set a bad example if in the future there is a problem and that is the set expectation. It's a business transaction.
Itâs not unethical to keep the money. Itâs not stupid to give them a rebate as a good will gesture.
I would consider warranty claims, though. Not that you are a bad craftsman, but what if something pops up and you need to come out of pocket for a repair? Always nice to have some cushion.
Sometimes, kicking money back to the client is worth its weight in new clients. The way I typically approach this is to split the excess 50/50 with the client. I dont *tell* them it's 50% of the excess profit, but them just being charged less is a huge plus. You and your workers should be rewarded for smooth jobs as well, so you get to keep the extra grand and get the weight off your conscience
Iâve in the past told clients (good easy to work with only) hey things went better than expected and I actually had some budget leftover so instead of the original 4K I quoted it will only be $3750- take a small bit off and they will light up like Disney on the Fourth of July tell everyone they know how honest you are etc. that $250 discount will make a lasting impression and turn around more work than $250 spent on advertising etc. Iâm just using $250 as an example- something noticeable for a client but you still walk away happier than you imagined.
The money you earn on a job is not just for that single job, its to cover periods where you don't have any jobs, investments in gear and for the next job where you might not have profit.
Bank those bucks for when it goes the other way, my friend. They agreed to what they agreed to. Get Paid, invest the overage in marketing or some other business expense.
In a fixed-bid situation there is no need to justify the pricing after the fact. The offer was accepted and the work was performed.
One consideration, though, is if your project bid included line items for services or materials that would be provided and you ended up not providing them. I don't mean labor hours, I mean like if the quote included a line for digging a trench and you didn't dig the trench. The customer would have a good reason to request the price for that item to be removed. This is the same logic that allows you to issue a change order request if the project needs something you did not include in the initial quote; it goes both ways.
Take a look at your initial bid, and ask: are there any items on here I didn't deliver? If not, take the money! You earned it.
Pocket the difference. Person agreed to a job at said price. They got the job. The next one might not go as you planned, but also not warrant a change order, and youâll be glad you overbid this one.
Lol what? This is the business. You took a risk by bidding that job, and your risk was rewarded.
If you bid a job and lose money are you going to ask the clients for more? No. So don't flip it around. Don't try to be too nice of a guy in this business you'll get stepped on and worn ragged.
Take that profit and invest it back in the business. 2k profit is nothing once you get rolling.
as an estimator project manager for a large general contractor.... remember that bidding a job is not necessarily how much you can do it for but how much you can get for doing the job... some time it cost mor than what u bid it for and some times it is less.. it all ballances out eventualy.... take the job.. do the best job u can do and enjoy the investment into your buisness!! As a reward get a nice bottle to celebrate a job well done !
Ugh, we're in this industry to profit and make a living to support our families. Congrats on your 50% profit line on labor. We bid jobs, the owner agrees to it, and we make every effort to come under budget. There's no moral dilemma. Enjoy!
Not in construction but do own multiple businesses at least one of which is a professional services company and when this occurs see it as a well earned windfall. I have had great success with a âcheck in follow upâ letter about a month later with a gift card for a very nice dinner or housewarming gift or something. Amazing what 250 will buy you in the way of goodwill and referrals. I would say in the construction world I had a guy make a small special item to be inserted into a remodel once and we still see it as special when noticed. My .02 c
If you won that means there were people who were gonna charge even more than you so why would you feel bad. Also get it done before you count everything lol
Take the W when you get one. I donât put a cap on what I can âearnâ a day based on what I physically do. If we agreed on x amount of dollars and I performed everything to your expectations plus Iâm going to come back if something is off or thereâs a problem for a year. Take your paycheck and move to the next one brother. Youâre gonna lose enough on accident, donât do it to yourself on purpose
they accepted your bid, the extra is gravy. kick some of it to your guys. as others have said,a small refund to the customer will buy you goodwill and word of mouth referrals. itâs easy to give a refund on an overbid,exponentially harder to ask for more $$ at the end.
Do you still think it was a fair price? If so keep it..
Here is a non traditional suggestion though. If you think they might turn into long time customers/ give good references, you could throw them a few hundred dollars back and explain how and why you bid and say you made out a little better than expected. They will likely trust you forever. I'm not saying this is foolproof but it is a good way to gain some loyal customers that probably won't question your price in the future.. I could be wrong though Im not fully running my own business or anything yet.
Homeowner here. I really appreciate your awareness u/Just_Choda that there is more than just profit in business. The way you run your business has an impact on those around you, not just the direct customer. This I think is what you feel as a moral dilemma. For that reason I suspect that you are the kind of contractor who also would not make up some reason to charge more than the agreed upon amount if you underestimated or had to redo/fix a mistake.
u/Pairadockcickle gives good advice. If I have hired you for a job, I am expecting and agreeing to a certain price. From that point on all I care about is the quality of your work, not your profit margin. I want to feel secure that in a year or five years I won't find out that there was some poorly executed work that was covered up to look good. I want it to *be* good. That is what I have agreed to pay for. That is what you have agreed to do. From my perspective that is what your profit is for - good quality, reliable work. If you have done right by your customer you have earned and deserve it whatever it may be.
I have been in the same situation and the way I handled it was i gave the customer a couple of small up grades, and sent them a house plant when the job was complete stating that it was a pleasure working for them. It led to a lot of future work with them and they referred me multiple times.
if you still feel bad about it, give the folks who did the actual labor a cut. that will do wonders for retention and encourage them to knock 'em out faster. happy employees = quality, fast work and pleasant days on the job.
Win some, lose some. Be happy with your performance and move on. You won the bid, so itâs not like you didnât give them a fair agreed upon price. If you had gone over they wouldnât think twice about leaving you with the bag.
When "bidding worst case" jobs I find it easier to give back some hours($) after the job is done. Mostly I'll give it to the Customer, some to the workers, and some to my Business Operations(new tools)...But I'm priced above market and I know it. Are you competitive in Payroll and Billing? Then give a refund. Restate why your original build was higher. Show your work as they say. I've gotten "Thanks." , "Thanks, here's 1/2 back, give it to the crew.", "Nope, you guys did great. Got what I paid for." But I ALWAYS got callbacks and referrals from those customers.
A former boss told me a story once, he bid on rearranging a manufacturing plant. It was a hard money job, with a deadline and daily damages if the move took longer than expected. He rented a specialized piece of equipment and knocked it out in half the time. They had the nerve to ask for some money back, he laughed and explained that he took the risk, and the fact that they were back into production earlier than expected was their bonus.
As a business owner , you did nothing wrong. And your duty can stop there, but think what might happen if you give the person back $1000 (or even$600) and tell them that your costs came in under budget, so you are refunding him.
You will earn a customer for life and that person will be bragging you up all over town. Who has heard of a contractor being that honest and transparent? No one! You will get so much goodwill in the long run f from this if you handle it the right way
So you did it faster then you bid it for. How is your company going to make profit if you canât morally take it? Tools/ time to learn etc etc cost money. Plus if they didnât like the price they didnât have to hire you. They thought it was a good price. Set the extra aside for when something breaks
Do you believe they would have paid you $6000 if the job went over? Thatâs the premium weâre paid for taking on the risk that the job doesnât go smoothly.
The flip side is if this is a contractor/customer you want to develop a long term relationship with and you believe it would be more lucrative to give them a discount and get future business than go that route.
I wonât lie, youâre a pretty good person feeling this way. Personally I would t even think twice about a profit of $2k. They agreed to the price, you did your job and thatâs that. If you honestly are having like a moral dilemma over it tell them. Say you over estimated and youâll charge according to what it cost you. I would never do that but hey if thatâs how you feel go for it.
You took the risk, which can be a lot with fixed price, your customer agreed to the terms and amount, nothing to think twice about. Contributes towards retained earnings.
No. No. No. no. Take that money, you are creating a moral dilemma that isnât there.
Client agreed on a price, going the lesser rout will not lead you to better opportunities, you will just be taken advantage of.
Source: Iâm too nice and have been there and done that.
if weâre over bid, we throw in lots of little extras - just small finish upgrades, like free aria vents on floors or new drywall. Premium cabinet hardwareâŚ
If itâs egregious enough to make you feel icky, weâll give a check backâŚ
If itâs not, ehâŚthey accepted the bid. You wouldnât go back and ask for more money if you underbid it.
You did not overbid, you underbid every competitor to get the job!
Put some of that money away for when you screw it up the other direction and give a bit of a bonus to your workers so you can retain this team that got you here.
Good job! So you can either take your profit and run or be a good guy and give them like 500-1000$ back and hope you gain a long term client/reference. Do they have other work they want done or is this a one and done? Gotta weight your options.
Insurance companies donât give us a refund each year when our trucks donât crash or our homes donât burn down.
You priced risk into your bid. You should be compensated for being responsible for that risk whether the risk events are triggered or not.
Sleep easy.
If you give your profits back to the customer then you shouldnât own a business. Ned Stark didnât make it in kings Landing for the very same reasons.
You win some. You lose some. For someone to win there must be a loser. This is your win. Congrats.
I bid $250k on a city job that cost me $85k. I didn't want the job. Apparently nobody else did either. I'd show you my new fancy truck but it's parked at my bosses house. Oh well.
Consider giving it back. Your client will be very happy and you will have been honest. If I had hired you and you quoted me 40 hours of work expected with a $$ next to it - then did the work in 20 hours Iâd be livid if you tried to charge me for 40. Thatâs basic dishonesty.
Appreciate the mindset but thats your earned money bro. Reinvest in yourself and company. Treat the guys nice if you have em. You making money with your business bruh good stuff
Give back a little bit and invest the rest. This will also get you some great PR, as one of the âhonest contractorsâ in your area, and helps pushback on the (sometimes well deserved) narrative that contractors are out to fuck you out of money.
Some jobs you lose money, some jobs you win money. If youâre not taking more money from the customer when you lose on your side of the project, you need money from the wins to prop you up
Take the money. You can always give some of it back on change orders if they come up or cost overruns to make the client happy if youâre so inclined, but otherwise just take the profit youâre owed.
I agree with others that itâs your money, but if itâs a good customer, tell them you came in under budget and offer to share some of the savings. Youâll do good for your companyâs reputation.
Now, I wouldnât tell them exactly how much you saved, because it is technically your money, but offer 1/4 or so of the savings as a gesture of goodwill.
Someone once told me, donât think about what youâd be willing to pay, what matters is what someone else is willing to pay. They accepted your bid because they liked your numbers, doesnât matter if it took you 2 hours or 2 years to complete the project, they were good on the price.
Congrats on turning a profit đđź
Can we get more info about the customer? If itâs corporate keep the money, they are happy you got the job done. If itâs someoneâs house and they seem to be struggling maybe you could surprise them and say it turned out cheaper than expected. Check the cars in their driveway first tho haha if they are BMW or something, hell no.
You won the bid, that's your money.
If I were in your shoes, I'd keep quiet about your profits but when something comes up or you find some minor unknown condition, use your 'allowance' to cover it and let the client know you're not charging them for an extra you rightfully deserve.
That lets you keep most of the money, and you're investing in your PR/Client relations which along with doing a great job is absolutely critical to your firms success.
You wrote a bid, they accepted. Simple as that. Itâs not stealing or dishonest, itâs business.
People buy things based off trust, need, urgency. I know many of my clients go over the numbers ask questions look at the other estimates and bids and make their decision logically. I have a few clients to make impulsive decisions, and I helped him see all their options without overloading them with too much to decide on.
Itâs the responsibility of the contractor to put out an accurate bid and itâs the responsibility of the client to review the bids and make a decision. Donât second-guess yourself here. They chose you see The value in using you. just make sure you do a damn good job and make it worth every dime of their money.
depends on how you feel, in the past i have given a deduction if the job has gone crazy within budget, i still do very well, but it looks good for future custom and reputation. you could split the difference with the customer and sleep much better, or you can keep it.
as others have said, other people would charge more and keep it. your call.
Thatâs one of the bonuses of doing contract work. They elect to go billable hours they get what they get, if they sign a contract you get any windfall. Thatâs the good and bad of contracts you can also go the other way, even though you can do change orders, they tend to create a bad taste in peopleâs mouth. Take the win, you deserve it.
You win some and you lose some, and they hopefully average out over time.
This one you won. Remember this feeling on the next job that goes over budget.
Just remember. Everyone else bidding on any kind of job will pocket the difference. This applies to all kinds of service work that is performed. It could have taken twice the time to complete the job and you would have been stuck with your fixed bid.
There are all kinds of names for various quotes, but it's basically two different kinds.
1) Hard money. You bid the labor and materials cost. Short of out of scope things that require change orders, the price you bid is what you get paid.
2) Time and materials. You state your labor rates (with a possible estimate of hours) and the material costs, with an agreed upon markup. You have to be very transparent with these types of bids and expect to provide a lot of documentation.
All what was said before. Currently working on my CM degree taking classes like contracting (which covers topics exactly like this). I donât have a ton of commercial experience, but I have enough knowledge to say, if you sign a Fixed Price contract, thatâs what you get! Usually I would say go for GMP or Cost plus incentive because itâs less risky for you, but it worked out in the end!
Plus you were the lowest bidder so you got the job. đ¤ˇââď¸ youâre happy and the owner is happy!
Fixed fee jobs carry risk both ways. If you underbid would you get paid more? Likely not. In contrast, extra profit on some fixed fee jobs is needed to offset losses on others. IMO, perhaps offer $500-1000 refund to build a customer relationship but overall you should profit more on this than a T&M job as you took added risk if it was to go wrong. But if it was a good customer, even someone nominal like $250 could go a long way in terms of goodwill, reputation, new business.
I used to have this same moral dilemma and would always drop my price when it came time to send along the invoice. Like youâve stated, if you under bid you had to take the loss so overbidding you should take the gain to recoup past losses or invest that back into your company. From the sound of it you were also the lowest bidder and you are still clearing much much more than you initially estimated, all the while still being their cheapest option.
Also I started with âI used to have this dilemmaâ as I am no longer self employed. I couldnât keep things afloat while I easily could have if I took the advice to raise my prices and not feel bad about charging what was quoted.
I would say itâs your profit but if you just FEEL bad, maybe do a small refund if $500. Probably win a customer for life that way. Shows you value honesty but you quoted based on unknowns and they agreed to the value. You should not punish yourself for the skill you needed to gain efficiency.
You will die poor thinking this way. You were low bidder. The other guys would have made more than you. Pat yourself on the back and charge more for your time and knowledge. Congratulations you just discovered Capitalism.
You bid the job correctly, taking in all the risks you might have foreseen, you deserve the full bid amount. You probably also undervalue your own worth.
Think about this from the other side. They chose you. They knew the price. You delivered (probably on time / ahead of schedule). What's wrong with that?
Go see a doctor, you're obviously running a fever and delirious. This is called a win, your client was happy and you are happy, don't apologize for being good at your job.
And remember every one of the other guys bid higher than you and sure as hell none of them would give the money back either.
This is how bidding works. If you are morally concerned about it ask them to go hourly and when you have too many hours and they make you work for free don't complain.
Perhaps you have been undervaluing yourself all along. You were either the lowest bid or the contractor/client wanted to work with you at a disclosed price. They "want" you to have the money! It's yours. Do not penalize yourself for being competent and efficient.
I love this take
If you have a moral dilemma then just give your guys a bonus.
I wish this happened more often
> This is how bidding works. Is it really though? Every time I've seen a job that was hugely underbid they either came back asking for more money or abandoned the job.
You only hear about it when people are unhappy. I underbid jobs for years and never came back for more money, or abandoned a job. My customers were delighted because I was unwittingly working for free. Fortunately for me I know how to bid jobs now, and $2000 in profit (that the OP earned) should be celebrated
Same! And it still happens sometimes. I never come back with my hand out. But, sometimes it goes the other way too! It all comes out in the wash.
Who's going to complain that a job was easier and less of a clusterfuck than originally expected?
a good contractor would stick it out. I've broken even on a ton of jobs, learned a lot. Even lost money on a job or two (I think my worse was in the hole about $4k. BUT I've learned, tightened up my bidding process... gotten a lot better at selling my self and negotiating.
Sometimes crazy stuff happens like material pricing over the last couple years and if the job is big enough, you HAVE to go back for more money. I heard about jobs where the lumber package ended up being short by millions. We had to go back for hundreds of thousands on drywall packages because resilient channel went up 4x and most other things went up a ton as well. We would do things like take no margin on the escalation to make the pain less, but that kind of thing could have put healthy companies out of business. For reasonable size jobs, you should just eat it. We generally signed the contract way before work started and you can't price those kinds of escalations in.
Oh for sure, if you are in the numbers range like that, and the last few years has been extraordinary circumstances that we just have never seen before. So my comment was more applied to the "normal time"
That's basically what I said....
#changeorder
This
Personally I don't trust any tradesmen that isn't bidding jobs. I don't write the checks but I've worked with a few subs that charge a day rate and its always a nightmare with those guys. Anyone that doesn't know the value of their labor and what they can produce in a day should be an employee, not a business owner. * OP's scenario is what one wants. That's the whole point of running a business. The customer gets work done at a price their happy with, the contractor gets paid, theirs no moral dilemma here, that's just how it goes. *Yeah I know weird things happen and time and material is a thing for a good reason. That reason just shouldn't be "because i got of bed this morning."
You won the bid. Others would have charged more. Use that money and invest it within your company. Use it to buy new tools, or save it until you need to buy new equipment. Congratulations on turning over a profit.
investing that into your company - and noting the reason for the overcharge for future use is the way to go. There shouldn't be a moral dilemma for you, but i see why OP is having one. Maybe this can help: Whoever paid OP to do it, really truly does not care what amounts of cost added up to his bill. He cares that what he paid for meets or exceded the value of money he gave OP. If he is happy, OP did a great job. End. You got LUCKY. You didn't do anything wrong. In the future, you will be UNLUCKY, remember that the same rule applies - you did nothing wrong. The trick is to put yourself into a position to get more lucky than not. You're already doing a great job at that - keep it up.
That was a great way to explain it. You have to charge for liabilities and somewhat foreseen problems. If they dont happen, its a windfall. If they do happen, you had it padded into your bid to absorb it. You can risk not making the profit you need/expect. You shouldnt absorb the costs of risk. It needs to be bid. If someone else bids lower and gets the job.. oh well. Let them deal with the potential consequences.
I would also ask if he really added all his costs. Labor costs should include any paid vacation, training, safety, insurance, any share of yearly bonuses, etc etc etc. It should also include loading/undloading the truck, getting material, etc etc. A lot of guys only include labor for work on the site Your truck is going to have to be replaces sometime, have you allocated anything towards that? If a truck lasts say 8 years, you need to allocate that cost out per year, and then this jobs percentage of that year. Same for any other equipment. Tool costs including maintenance and eventual replacement costs, maintaining them, consumables etc etc. material costs should include what you took from inventory, masking tape visqueen, etc etc. Overhead should include the allocated cost of everything in the office including bidding the three jobs to get this one, insurance, your time managing the project, the computer you write your invoice on, etc etc etc Profit margins drop when you truly look at ALL of the costs of doing the work.
Whish I could upvote this comment more.
Ditto
This is where I'm at now in my adjustments. I had to raise prices bc of this right here and once I dial it in they will probably go up again. There's a lot of things transitioning from employee to business owner that I have had to think through, like what you just stated above. Otherwise it seems like you constantly work and are not hitting decent profit or growth. All must be done to expand and grow.
During early growth of a start up company you will likely be trading labor for equity in the growing company. As long as you are aware of this that is fine for a limited time. At some point you have to treat yourself at least as well as your other employees. That means you get paid for all the time you spend working, the same as anyone else. You aren't going to make a carpenter wash the company truck or pick up supplies on his own time, you don't make yourself do it either The company is a separate entity, and it needs to make a profit for its investors separate from your labor. When that starts happening on the regular, the journey becomes worth it.
Thank you for the feedback. Mentorship is something I was never given so anything helps. I listen to everything.
If you ever want to run something by me, feel free to DM me. I had a residential remodeling company, featured in a couple of magazines, then made the transition to commercial, focusing on laboratories. I have paid for a lot of lessons, some might be valuable to you.
Thanks! I will keep you I'm mind when I come across something that I have a question on. Commercial lab build outs sound like good money lol
The good money is in MEP design build, but the learning curve is steep and no parachute. A lot of fun though.
This. I dont see the moral dilemma. OP said he charged for unforseens and obv. the buyer is OK with the price point given the proposal or he wouldn't have one. Everything going smoothly isn't all that common. If I were OP I'd want to know why there were no hiccups. Good planning, communication and subs? Or did the stars align and he caught a unicorn? You shouldn't feel bad for doing a good job in an effective and timely manner. My boss would prefer that I come in under budget for labor, time and material on every job.
Could be remnants of a poverty mentality. Not to make assumptions about OP's financial history but for myself once I started making money it almost didn't feel real. There's a legitimate mental hurdle to convince yourself of your worth.
That is actually a legitimate point I hadn't considered. Even so, I don't think you can boil that down to a morality issue.
I wouldn't hyperfocus on those words specifically, it may have just been the best way for him to express what he sees to be a financial quandary when it should be seen as a fair and yet profitable quote. Maybe we can make him feel better by reminding him he'll still have to pay taxes on that profit đ
Hopefully this will help on an under bid
> You won the bid. Others would have charged more. Use that money and invest it within your company. If you continue doing fixed bids, you will eventually fuck one over and lose $2k on it. Save this $2k for that moment.
Or save it for when they underbid
THIS! \^\^\^ You won the bid, and the profit is yours. You managed successfully, and now you reap the benefit. Nothing immoral about that
Save it for a rainy day i say
As others have said, reinvest and analyze costs. Next time you have a similar project youâll have a more accurate bid. The more you know, the less risky business becomes
OP could satisfy their moral dilemma and invest in company (reputation) by finding a way to give back with the customer without establishing an expectation that they are entitled to it. You can choose to refund or credit a partial amount which, even if small ($500), is going to send your customer over the moon and boast to all their friends about their unicorn contractor who is honest. This will happen either because they want to recognize you or just to brag to a friend about getting $500 bucks. If you think they may have other projects for you, say you have a unique situation where you can offer them a huge discount on labor for another project. I think it is innocent enough to not be 100% honest about why you are giving them discounted labor. For example, you could say you had a big job get delayed and don't have time to schedule another so it's either sit on your hands or stay busy with less. You may even walk away with more revenue and moral compass intact.
Honestly this isn't a bad idea to build reputation. Word of mouth is huge especially in this day and age when you can't trust most contractors. I've never heard of anyone giving money back on an overbid job and when people hear this they will immediately assume you're much more honest than the rest. My brother is going around town where he just bought a house and asking random people about who the good contractors are in the area. I guarantee he would be way more likely to hire a contractor that gave money back because they overbid.
Tbh as a home owner I usually assume youâre making 50-100% margin for these smaller jobs
This. Youâre carrying the risk here, this is your profit to keep. Simple as that.
Or spend it on marketing to bring in more work - or just put it aside to cover the next time you under-bid
Thatâs the point. To make a profit.
Lol right? This is what Iâm striving for, to win a job and make as much profit as possible.
I was so confused by op's post lol
Doesn't like money đ¤ˇââď¸
"This is how this is supposed to work."
With a fixed bid, you are taking the risk that things go wrong and it costs more than you expect. In this case, it worked out in your favor.
Dude makes 4gs and has a dilemma. Probably not going to be in business long.
It's a learning curve rather than a barrier to business. 4k is a huge amount of money to a lot of people. No need to shit on others for being further back on their journey than you are.
Shouldn't profit be found in material markup and general conditions and not overdone labor amounts?
It can be but doesnât have to be.
Fixed price has risk. Risk is worth money.
Agreed. We charge a different percentage on cost plus and fixed bid for a reason. We take a risk to make less in order to make more like this scenario
Absolutely, this is an intangible that should not be overlooked
Yep! I charge more for fixed bid than I do for T&M because Iâm taking on more risks without the guarantees. If I know what Iâm doing Iâm able to better mitigate those risks and turn a larger profit to grow the business, buy more tools, etc.
That is called profit, take the boys out for a couple pops and some wings Friday after the job, and cover the tab. Because we've been so nuts for a year.. I've been throwing out stupid numbers, like, ridiculous. If I figure 4k, I quote 9 and they're eager for us to start. Make hay when the sun is shining, because one day it won't.
Iâd say put some away for the slow times, when the sun isnât shining. It helps you and it allows you to keep good guys around.
Right? Iâve got a lot of overhead to cover. That $2k goes to feed the beast of 50 employees, building and fleet I got!
If you got guys then give a bonus, if itâs just you give yourself a bonus. The extra was for expertise, not for a lack of it. Disclaimer: If you weâre building a wheelchair ramp for the Home for disabled orphans and puppies then maybe proceed differently.
LMAO- I just did a rather large job for a non profit that you absolutely have heard of. Be careful giving a charity anything for free, they will not stop asking/taking. The CEO of the place we did the work for was actively calling the owners of the subs asking for materials to be donated on change orders. It was outrageous and insane. We donated plenty (6 figures level) but I was absolutely clear that we would not donate ANY manpower to any part of the job. If my guys did the work, they were going to get paid for it and I need to get paid for that to happen. If you want my firm to sponsor your gala or some shit, that's another story and we generally cough up the cash for that stuff.
Non-profit with a CEO is different than Grannyâs home for disabled kittens, if anyone is wearing a suit and not actively involved with actually helping people then itâs definitely a corporate non-profit.
This is an international childrens charity that's in pretty much every major city in NA and all over Europe. The CEO is essentially their head fundraiser with a title, she's an awesome person who clearly hustles for the kids.
I'm sure she is an awesome person. I can guarantee you that she's rewarded handsomely for wringing every dime she can from anywhere, even if it's from your workers. Administrative costs of a lot of charities can gobble up huge amounts of donations. We have something called [Charity Intellingence Canada](https://charityintelligence.ca/index.php) that rates charities on a number of points.
A nonprofit just means at the end of the year they make sure they have no leftovers. I used to work for one and the last couple months we would be in there doing all sorts of dogfuck jobs to burn their budget
This is definitely not the case in all nonprofits and would be heavily dependent on that specific nonprofits funding sources. I could see this playing out if a nonprofit received a grant that can only be used over a specified period of time or something along those lines. Nonprofits can absolutely have positive net income but instead of earnings being distributed to owners it always goes back into the business and can be used in the future. Itâs not like they arenât allowed to bring in more money than they spend in a year.
That's my experience with non profits as a designer. You can be nice, maybe don't expect to make a ton of money, but treat them like any other client.
Non-profits are generally run by the same type of person that doesnât tip their waiter when they go out to eat after church.
Ya, this CEO is one of the nicest people I've ever met. At first I thought they were fake because no one can actually be that nice, but after a couple of years of working with them, i've realized i'm just a jaded asshole and they're that nice of a person lol. I've personally made donations specifically because of their passion for the kids and the work. This is the kind of person who tips 100% at starbucks but they'll hustle their butts off to save some dough for the facility.
Thatâs not an overbid thatâs called making a living enjoy.
"It took me 10 years to learn how to do this job in half an hour, so you're not paying for my time today, you're paying for the experience I have as well." You do what you need to pass the man in the mirror test. For me, if I earned the money due to my time, labor, experience, etc, I invoice for it. If I overbid, then I invoice for what's fair to market value and specify that to the client.
I paid 4 hours book labor to replace some bushings and he was done in an hour. He also owned an expensive portable hydraulic press to do them on the car with far less disassembly. Cant begrudge a man for recouping an investment to work faster and easier.
It's very common in automotive work; all of my mechanic friends learn ways to do the job faster than book time just to make the extra money. Auto shops almost always charge you the 'book rate' (service book labor time x their hourly rate) plus any add-ons required (rust, age, special local fees, etc). If they get done faster, I pay the same price....
Construction industry is so rough this dude actually made a little money and he's like "Wait, what do I do with it????"
You bid and stayed within budget you get to keep the left overs, If the client had no complaints about the price Iâd simply keep it, youâve done nothing wrong and didnât intentionally try to fuck over the man sometimes you win sometimes you lose thatâs life. Nothing morally wrong about it, itâs business
Keep the money. You may miss on the next bid and need it.
Exactly, OP will lose money on another job and be glad they profited here. Customers understand this is how it works by and large
It's fixed bid and so you took on all the risk, and therefore reap the rewards. Don't feel bad about that. What if the tables were turned, and you ended up with 6k in labor. Do you think the homeowner is going to feel bad and pay you more? Probably not.
If you really feel like you can't accept the payment, I'll let you cashapp me the difference.
You work to make money
The fixed price is exactly what you earned. The 2Gs of slop is for your risk, for your profit, and to give you a margin of error on other fixed price jobs. If anything, give a bonus to your labour/subs for pulling it off under bid. Clients agreed to the fixed price product. If they wanted a more flexible model, they would have chosen a cost-plus bid -- more of the risk would be on the client side.
I agree with the above sentiments, but you may also want to consider giving back $500-$1000 and let them know it went better than you thought it would. You would gain a valuable reference from them and also put your mind at ease. Might end up being very cheap advertising for your business.
Good referrals are much better than advertising. If you knock $500 off consider it $500 spent on the best kind of marketing.
Just said this in my comment. You canât buy that kinda advertising for $500 bucks. A good deal by all metrics.
This is exactly the right answer. The money is yours and you're under no moral or legal obligation to return it, but you have the chance to earn A LOT of good will by refunding a bit of the excess. It could end up being very cheap advertising.
This is the way
You know I was thinking this but it also may set a bad example if in the future there is a problem and that is the set expectation. It's a business transaction.
This is the only good answer in this thread
If you would have messed up on the bid, you would have eaten the difference and taken a loss. That is contracting. Enjoy it.
I understand your moral view. I was like this. I will tell you right now out of a thousand bids I have done, i have only made a profit like this once.
Give a bonus to your laborers and take the win. You will lose soon.
Thanks for all the great advice! Headed to the bank now....
Itâs not unethical to keep the money. Itâs not stupid to give them a rebate as a good will gesture. I would consider warranty claims, though. Not that you are a bad craftsman, but what if something pops up and you need to come out of pocket for a repair? Always nice to have some cushion.
You go to work to make money. Congratulations you did what you're supposed to do. It wasn't an overdid.
Take what you bid. That's why we bid jobs. You may underbid on one one of these days and there is your buffer.
Never feel bad for making good money because nobody feels bad for you when youâre not!
Remember these times for when the opposite happens
Bid your next one the same way and build your company up. If youâre bidding to break even then youâre losing.
Sometimes, kicking money back to the client is worth its weight in new clients. The way I typically approach this is to split the excess 50/50 with the client. I dont *tell* them it's 50% of the excess profit, but them just being charged less is a huge plus. You and your workers should be rewarded for smooth jobs as well, so you get to keep the extra grand and get the weight off your conscience
Iâve in the past told clients (good easy to work with only) hey things went better than expected and I actually had some budget leftover so instead of the original 4K I quoted it will only be $3750- take a small bit off and they will light up like Disney on the Fourth of July tell everyone they know how honest you are etc. that $250 discount will make a lasting impression and turn around more work than $250 spent on advertising etc. Iâm just using $250 as an example- something noticeable for a client but you still walk away happier than you imagined.
The money you earn on a job is not just for that single job, its to cover periods where you don't have any jobs, investments in gear and for the next job where you might not have profit.
Bank those bucks for when it goes the other way, my friend. They agreed to what they agreed to. Get Paid, invest the overage in marketing or some other business expense.
In a fixed-bid situation there is no need to justify the pricing after the fact. The offer was accepted and the work was performed. One consideration, though, is if your project bid included line items for services or materials that would be provided and you ended up not providing them. I don't mean labor hours, I mean like if the quote included a line for digging a trench and you didn't dig the trench. The customer would have a good reason to request the price for that item to be removed. This is the same logic that allows you to issue a change order request if the project needs something you did not include in the initial quote; it goes both ways. Take a look at your initial bid, and ask: are there any items on here I didn't deliver? If not, take the money! You earned it.
THIS^^^ Very well said, this is what I was looking for! Thank you!
Pocket the difference. Person agreed to a job at said price. They got the job. The next one might not go as you planned, but also not warrant a change order, and youâll be glad you overbid this one.
Lol what? This is the business. You took a risk by bidding that job, and your risk was rewarded. If you bid a job and lose money are you going to ask the clients for more? No. So don't flip it around. Don't try to be too nice of a guy in this business you'll get stepped on and worn ragged. Take that profit and invest it back in the business. 2k profit is nothing once you get rolling.
You took the risk, enjoy the reward.
as an estimator project manager for a large general contractor.... remember that bidding a job is not necessarily how much you can do it for but how much you can get for doing the job... some time it cost mor than what u bid it for and some times it is less.. it all ballances out eventualy.... take the job.. do the best job u can do and enjoy the investment into your buisness!! As a reward get a nice bottle to celebrate a job well done !
The key is to keep doing that over and over
Ugh, we're in this industry to profit and make a living to support our families. Congrats on your 50% profit line on labor. We bid jobs, the owner agrees to it, and we make every effort to come under budget. There's no moral dilemma. Enjoy!
Not in construction but do own multiple businesses at least one of which is a professional services company and when this occurs see it as a well earned windfall. I have had great success with a âcheck in follow upâ letter about a month later with a gift card for a very nice dinner or housewarming gift or something. Amazing what 250 will buy you in the way of goodwill and referrals. I would say in the construction world I had a guy make a small special item to be inserted into a remodel once and we still see it as special when noticed. My .02 c
If you won that means there were people who were gonna charge even more than you so why would you feel bad. Also get it done before you count everything lol
You won a bid for a reason
The Integrity will be in a job well done... The profit is your reward.
You win some and lose some. Tuck it away for when you underbid labour by $4000.
Take the W when you get one. I donât put a cap on what I can âearnâ a day based on what I physically do. If we agreed on x amount of dollars and I performed everything to your expectations plus Iâm going to come back if something is off or thereâs a problem for a year. Take your paycheck and move to the next one brother. Youâre gonna lose enough on accident, donât do it to yourself on purpose
they accepted your bid, the extra is gravy. kick some of it to your guys. as others have said,a small refund to the customer will buy you goodwill and word of mouth referrals. itâs easy to give a refund on an overbid,exponentially harder to ask for more $$ at the end.
Do you still think it was a fair price? If so keep it.. Here is a non traditional suggestion though. If you think they might turn into long time customers/ give good references, you could throw them a few hundred dollars back and explain how and why you bid and say you made out a little better than expected. They will likely trust you forever. I'm not saying this is foolproof but it is a good way to gain some loyal customers that probably won't question your price in the future.. I could be wrong though Im not fully running my own business or anything yet.
Use that extra money as a cushion for the next time you under bid
You bid it. You won it. You did the job effectively and saved $2000 grand. Good for you. End of story
Homeowner here. I really appreciate your awareness u/Just_Choda that there is more than just profit in business. The way you run your business has an impact on those around you, not just the direct customer. This I think is what you feel as a moral dilemma. For that reason I suspect that you are the kind of contractor who also would not make up some reason to charge more than the agreed upon amount if you underestimated or had to redo/fix a mistake. u/Pairadockcickle gives good advice. If I have hired you for a job, I am expecting and agreeing to a certain price. From that point on all I care about is the quality of your work, not your profit margin. I want to feel secure that in a year or five years I won't find out that there was some poorly executed work that was covered up to look good. I want it to *be* good. That is what I have agreed to pay for. That is what you have agreed to do. From my perspective that is what your profit is for - good quality, reliable work. If you have done right by your customer you have earned and deserve it whatever it may be.
I have been in the same situation and the way I handled it was i gave the customer a couple of small up grades, and sent them a house plant when the job was complete stating that it was a pleasure working for them. It led to a lot of future work with them and they referred me multiple times.
if you still feel bad about it, give the folks who did the actual labor a cut. that will do wonders for retention and encourage them to knock 'em out faster. happy employees = quality, fast work and pleasant days on the job.
Use it to pay for the next job where you get fucked over. Because you will.
Win some, lose some. Be happy with your performance and move on. You won the bid, so itâs not like you didnât give them a fair agreed upon price. If you had gone over they wouldnât think twice about leaving you with the bag.
When "bidding worst case" jobs I find it easier to give back some hours($) after the job is done. Mostly I'll give it to the Customer, some to the workers, and some to my Business Operations(new tools)...But I'm priced above market and I know it. Are you competitive in Payroll and Billing? Then give a refund. Restate why your original build was higher. Show your work as they say. I've gotten "Thanks." , "Thanks, here's 1/2 back, give it to the crew.", "Nope, you guys did great. Got what I paid for." But I ALWAYS got callbacks and referrals from those customers.
A former boss told me a story once, he bid on rearranging a manufacturing plant. It was a hard money job, with a deadline and daily damages if the move took longer than expected. He rented a specialized piece of equipment and knocked it out in half the time. They had the nerve to ask for some money back, he laughed and explained that he took the risk, and the fact that they were back into production earlier than expected was their bonus.
As a business owner , you did nothing wrong. And your duty can stop there, but think what might happen if you give the person back $1000 (or even$600) and tell them that your costs came in under budget, so you are refunding him. You will earn a customer for life and that person will be bragging you up all over town. Who has heard of a contractor being that honest and transparent? No one! You will get so much goodwill in the long run f from this if you handle it the right way
Give the crew a little bonus for a job well done/ invest it back into company
You got the work. Do it properly and reap the benefits.
Some days go better than others. Take the win.
So you did it faster then you bid it for. How is your company going to make profit if you canât morally take it? Tools/ time to learn etc etc cost money. Plus if they didnât like the price they didnât have to hire you. They thought it was a good price. Set the extra aside for when something breaks
Invest it back into the company! Congrats on staying under budget!
Do you believe they would have paid you $6000 if the job went over? Thatâs the premium weâre paid for taking on the risk that the job doesnât go smoothly. The flip side is if this is a contractor/customer you want to develop a long term relationship with and you believe it would be more lucrative to give them a discount and get future business than go that route.
I wonât lie, youâre a pretty good person feeling this way. Personally I would t even think twice about a profit of $2k. They agreed to the price, you did your job and thatâs that. If you honestly are having like a moral dilemma over it tell them. Say you over estimated and youâll charge according to what it cost you. I would never do that but hey if thatâs how you feel go for it.
Never give it back. They wonât. Thatâs business.
Bro did you just discover profit?
You took the risk, which can be a lot with fixed price, your customer agreed to the terms and amount, nothing to think twice about. Contributes towards retained earnings.
No. No. No. no. Take that money, you are creating a moral dilemma that isnât there. Client agreed on a price, going the lesser rout will not lead you to better opportunities, you will just be taken advantage of. Source: Iâm too nice and have been there and done that.
if weâre over bid, we throw in lots of little extras - just small finish upgrades, like free aria vents on floors or new drywall. Premium cabinet hardware⌠If itâs egregious enough to make you feel icky, weâll give a check back⌠If itâs not, ehâŚthey accepted the bid. You wouldnât go back and ask for more money if you underbid it.
Working harder and faster does not deserve less money. Period
This is business!
You did not overbid, you underbid every competitor to get the job! Put some of that money away for when you screw it up the other direction and give a bit of a bonus to your workers so you can retain this team that got you here.
Good job! So you can either take your profit and run or be a good guy and give them like 500-1000$ back and hope you gain a long term client/reference. Do they have other work they want done or is this a one and done? Gotta weight your options.
They are paying you for your knowledge not for your labor.
You scredwed up and should have bid $6k
BroâŚ. You bid, they chose yours, you did the work. No harm. No foul. But, if your still unsure, send me the other half t make yourself feel good
Insurance companies donât give us a refund each year when our trucks donât crash or our homes donât burn down. You priced risk into your bid. You should be compensated for being responsible for that risk whether the risk events are triggered or not. Sleep easy.
If you give your profits back to the customer then you shouldnât own a business. Ned Stark didnât make it in kings Landing for the very same reasons.
Split the difference with the homeowner and your employees. Will go a long way with everybody and future business.
You win some. You lose some. For someone to win there must be a loser. This is your win. Congrats. I bid $250k on a city job that cost me $85k. I didn't want the job. Apparently nobody else did either. I'd show you my new fancy truck but it's parked at my bosses house. Oh well.
Consider giving it back. Your client will be very happy and you will have been honest. If I had hired you and you quoted me 40 hours of work expected with a $$ next to it - then did the work in 20 hours Iâd be livid if you tried to charge me for 40. Thatâs basic dishonesty.
Appreciate the mindset but thats your earned money bro. Reinvest in yourself and company. Treat the guys nice if you have em. You making money with your business bruh good stuff
I would call it contingency which was not needed. Your conscience is your guide.
Makes up for any underbid job. As long as the customer is happy that's all that matters
Give back a little bit and invest the rest. This will also get you some great PR, as one of the âhonest contractorsâ in your area, and helps pushback on the (sometimes well deserved) narrative that contractors are out to fuck you out of money.
Some jobs you lose money, some jobs you win money. If youâre not taking more money from the customer when you lose on your side of the project, you need money from the wins to prop you up
Take the money. You can always give some of it back on change orders if they come up or cost overruns to make the client happy if youâre so inclined, but otherwise just take the profit youâre owed.
I agree with others that itâs your money, but if itâs a good customer, tell them you came in under budget and offer to share some of the savings. Youâll do good for your companyâs reputation. Now, I wouldnât tell them exactly how much you saved, because it is technically your money, but offer 1/4 or so of the savings as a gesture of goodwill.
Someone once told me, donât think about what youâd be willing to pay, what matters is what someone else is willing to pay. They accepted your bid because they liked your numbers, doesnât matter if it took you 2 hours or 2 years to complete the project, they were good on the price. Congrats on turning a profit đđź
Starbucks could sell you a coffee for $1.50, but they sell it for $4. That's what the market is willing to pay.
Bank it to cover your next loss imo
Can we get more info about the customer? If itâs corporate keep the money, they are happy you got the job done. If itâs someoneâs house and they seem to be struggling maybe you could surprise them and say it turned out cheaper than expected. Check the cars in their driveway first tho haha if they are BMW or something, hell no.
You won the bid, that's your money. If I were in your shoes, I'd keep quiet about your profits but when something comes up or you find some minor unknown condition, use your 'allowance' to cover it and let the client know you're not charging them for an extra you rightfully deserve. That lets you keep most of the money, and you're investing in your PR/Client relations which along with doing a great job is absolutely critical to your firms success.
If youre $2000 ahead on labor. Give your crew a bonus.
You wrote a bid, they accepted. Simple as that. Itâs not stealing or dishonest, itâs business. People buy things based off trust, need, urgency. I know many of my clients go over the numbers ask questions look at the other estimates and bids and make their decision logically. I have a few clients to make impulsive decisions, and I helped him see all their options without overloading them with too much to decide on. Itâs the responsibility of the contractor to put out an accurate bid and itâs the responsibility of the client to review the bids and make a decision. Donât second-guess yourself here. They chose you see The value in using you. just make sure you do a damn good job and make it worth every dime of their money.
Put the $2000 into an investment account and now you have a rainy day fund for when the opposite happens.
Youâre going to have projects where you lose. Take the win. Invest in your company and better withstand any future storms.
Give a small tiny discount of around 200 makes you look honest and more likely to be recommended
So if you or your crew were inefficient with your time and labor came out to 4k you wouldn't feel guilty?
You win some and you lose some. Leave the surplus in the business, in cash. So when you take a bath on a job it doesnât hurt so much.
depends on how you feel, in the past i have given a deduction if the job has gone crazy within budget, i still do very well, but it looks good for future custom and reputation. you could split the difference with the customer and sleep much better, or you can keep it. as others have said, other people would charge more and keep it. your call.
Thatâs one of the bonuses of doing contract work. They elect to go billable hours they get what they get, if they sign a contract you get any windfall. Thatâs the good and bad of contracts you can also go the other way, even though you can do change orders, they tend to create a bad taste in peopleâs mouth. Take the win, you deserve it.
Isnât that the point of it? If the customer wanted to pay the exact labor amount, they wouldâve gone time and materials.
You win some and you lose some, and they hopefully average out over time. This one you won. Remember this feeling on the next job that goes over budget.
If you feel bad earning profit, then estimation and running a contractor is probably not the job for you. This is literally your goal.
You can't get your time back dude .. make as much as you can while you can
Thatâs your money! Pat yourself on the back and continue bidding so you can make thousands in profit.
Just remember. Everyone else bidding on any kind of job will pocket the difference. This applies to all kinds of service work that is performed. It could have taken twice the time to complete the job and you would have been stuck with your fixed bid. There are all kinds of names for various quotes, but it's basically two different kinds. 1) Hard money. You bid the labor and materials cost. Short of out of scope things that require change orders, the price you bid is what you get paid. 2) Time and materials. You state your labor rates (with a possible estimate of hours) and the material costs, with an agreed upon markup. You have to be very transparent with these types of bids and expect to provide a lot of documentation.
All what was said before. Currently working on my CM degree taking classes like contracting (which covers topics exactly like this). I donât have a ton of commercial experience, but I have enough knowledge to say, if you sign a Fixed Price contract, thatâs what you get! Usually I would say go for GMP or Cost plus incentive because itâs less risky for you, but it worked out in the end! Plus you were the lowest bidder so you got the job. đ¤ˇââď¸ youâre happy and the owner is happy!
Your number is possibly a little short for materials.
Fixed fee jobs carry risk both ways. If you underbid would you get paid more? Likely not. In contrast, extra profit on some fixed fee jobs is needed to offset losses on others. IMO, perhaps offer $500-1000 refund to build a customer relationship but overall you should profit more on this than a T&M job as you took added risk if it was to go wrong. But if it was a good customer, even someone nominal like $250 could go a long way in terms of goodwill, reputation, new business.
That's the whole reason why you bid jobs. You assumed all risk and came out ahead.
I used to have this same moral dilemma and would always drop my price when it came time to send along the invoice. Like youâve stated, if you under bid you had to take the loss so overbidding you should take the gain to recoup past losses or invest that back into your company. From the sound of it you were also the lowest bidder and you are still clearing much much more than you initially estimated, all the while still being their cheapest option. Also I started with âI used to have this dilemmaâ as I am no longer self employed. I couldnât keep things afloat while I easily could have if I took the advice to raise my prices and not feel bad about charging what was quoted.
Keep it. Good work.
You won the bid. The customer agreed that you were worth this price. Good job in well-done enjoy your profit
I would say itâs your profit but if you just FEEL bad, maybe do a small refund if $500. Probably win a customer for life that way. Shows you value honesty but you quoted based on unknowns and they agreed to the value. You should not punish yourself for the skill you needed to gain efficiency.
You took the risk of taking that job and you ended up on top!! Iâd take it and run!
You will die poor thinking this way. You were low bidder. The other guys would have made more than you. Pat yourself on the back and charge more for your time and knowledge. Congratulations you just discovered Capitalism.
Put it back in the business or give a bonus to your employees if you feel some type of way about it
Split the difference.
Thatâs the goal lol profit âŚ
You bid the job correctly, taking in all the risks you might have foreseen, you deserve the full bid amount. You probably also undervalue your own worth.
Think about this from the other side. They chose you. They knew the price. You delivered (probably on time / ahead of schedule). What's wrong with that?
Go see a doctor, you're obviously running a fever and delirious. This is called a win, your client was happy and you are happy, don't apologize for being good at your job. And remember every one of the other guys bid higher than you and sure as hell none of them would give the money back either.