What’s your pricing strategy?

Q: The downward trend in new builds over recent years has seen many builders rely on renovations to fill the gaps. When you’re costing up a renovation job, what’s your strategy for pricing labour?

Firm: D C Homes Limited
Principal: Derek Craig
Location: Cromwell
Staff: 2 employees

Pricing renovations is always difficult, as you never know what you might find. While some clients prefer to have a fixed price, I always advise against this – builders need to leave so much room for the unexpected that it often ends up being more expensive.

I prefer to opt for an open book policy. I will give the clients an approximate ‘per sq/m’ rate, which includes my hourly labour rate, true material cost and my margin. Using this method, the final cost is generally not too far off and, if it is, it’s clear why.

I believe it’s important, especially when carrying out renovations, that my clients trust my judgment. They need to be confident that if I discover something during the job that needs to be repaired, I won’t just carry on because it’s not in the fixed price. I will let them know what the problem is and what the repercussions of leaving it could be, then they can decide whether they want me to complete the work.

Overall, I find that having an open and honest relationship with your clients works best. That’s especially true in a small town such as Cromwell, where you often make friends with your clients and, even if not, you’re pretty much guaranteed to bump into them again!

Firm: Eves Construction
Principal: Rowan Eves
Location: Ohakune
Staff: 2 carpenters, 1 apprentice

About 30% of my work is renovations and, on most, I strongly recommend using a charg-up rate – give an hourly rate and the jobs takes as long as it takes.

It removes the surprise of unknowns that normally occur in renovations. You never know what you’ll find, especially given that the majority of the homes in Ohakune are older houses. Most people understand that.

While some clients aren’t that keen up front, Ohakune is a small town and I’ve had my building business here for 32 years, so they know I’m not going to take longer than required. If potential customers insist on getting a quote, I decline the work.

However, I’m quite happy quoting on small renovations, additions or alterations for more modern houses; basically anything built in the last 30 years. This is because 90% of difficulties in renovations are because of rotten timber, which we don’t see in newer homes around here.

Firm: Deane Fluit Builder Limited
Principal: Deane Fluit
Location: Wanaka
Staff: 9 employees

When doing renovations, I almost always give my clients my hourly rate and then estimate how many hours I believe it will take (if there are no nasty surprises).

However, I make sure they are aware that there are often a number of unknowns when it comes to renovations – there could be issues with the plumbing, the wiring, the framing or anything else hidden in the walls – and if this is the case, the number of hours required to carry out the renovation will adjust accordingly.

The most you can do is make sure the client understands the risks of uncovering a problem and estimating to the best of your ability.

I do have the odd customer who wants a fixed price and if they are set on that method, that’s fine. But they’re being naive, as any builder (myself included) would be mad not to add a hefty contingency amount onto his real estimate in case of any problems.

Overall, it’s best to work with clients who are realistic – there are too many out there who want to make gold out of pig’s muck, but don’t want to pay for it!