Black Lab Remodeling

How accurate are third party sources for construction prices?

We all want to make informed decisions before we decide to make a choice.  We also all want a good deal.  The bigger the price tag associated with the decision, the more information we look for.  So it is only natural these days to jump on our computer, tablet, or phone and go to the world’s largest know it all: Google.  We search sites like Home Advisor, Angie’s, and ThumbTack to name a few.  But how do you know that their information is accurate?

Sure they get their materials information from sources like Home Depot, Lowe’s, Meeks Lumber, Ace Hardware, and the like, but that information is often times two or more years old, when things like inflation take off this makes those numbers outdated very fast.  What about the cost of labor?

Well, there are official labor statistics reported by the State and Federal labor departments, and those records are from payroll reports so that is a pretty solid source of information for an average.  What else goes into the price of services and projects?  Well, there is overhead for both project or job costs (materials, labor, supplies and equipment, utilities, specialty tools specific to the job/project, project bonds if required, etc.) as well as business overhead (advertising, insurance, bonds, vehicle cost, fuel, utilities, phones, internet, health insurance, retirement plans, non-job specific employee payroll, office staff, website, maintenance of tools, vehicles, training for employees, etc.).  Where do these numbers come from?

These numbers come from contractors.  Usually from their tax filings.  The problem with these numbers is most aren’t good at keeping accurate recordings of their costs.  How can this be?  If contractors can’t keep good records wouldn’t they be going out of business all the time?  The answer is, yes. And they do.  Roughly 95% of all construction companies/businesses fail in the first 10 years of business.  Usually, they are not charging enough to cover all their costs.  So when they are reporting their taxes they are usually underreporting their costs, and this causes the reported information to be underreported.

So if one of the largest components of the cost of a project is being underreported, wouldn’t that then mean that if they are used for the information by the third party resources, they would not be giving an accurate picture of the actual costs for a project?  No.  These sources can only report what the information they can gather says.

Unfortunately, they are getting bad information from the construction industry as a whole and this leads to bad information being provided to the public looking for real information.  So when someone who is looking to remodel a kitchen, and finds one or more of these sites that a Kitchen remodel costs around $30,000 (for a minor remodel) or $165,000 (for a major upscale remodel)? That is the number they hold on to.  So what happens when they start talking to a contractor that does know their numbers, one that tracks their numbers and makes business decisions based on those numbers?

Often times it is sticker shock!  Sometimes the number ends up being twice as much as the other contractors they have been talking to.  Is this contractor greedy? No, they just have accurate information based on past experiences and records for their business.  Each business will have its own overhead and overall costs.  But not each business (not just construction business) will keep accurate records and make business decisions based on those records.

So who would you rather do business with?  Who would you bet would make it past the 10-year anniversary?  Who would you trust to price the job accurately enough to know that they could finish your job without having to leave it to cover the costs they forgot about or didn’t know about with another job?

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