The biggest difference between these two methods may be in how your client reacts psychologically to seeing his project portrayed in your proposal. If you can present the proposal to mirror the client’s priorities, you will have a better chance of success. There are also very practical arguments for and against each method.
So what do you do when you write up a proposal for a project? Do you itemize all parts and labor,? You may have always itemized, or you may have never itemized, and because your method seems to work, you may not even question whether another method could be better.
This article isn’t intended to convert you, but hopefully, it will make you think about the way you write proposals and help you land a few more projects. We will take a look at the pros and cons of itemizing and see if you should consider a change.
Your choice is to:
- Breakdown the costs of all materials, labor, and services Or
- List line items by description and outcome as a lump sum, with no breakdown of material or labor
- Breakdown Everything
Going this way means you list every material that will be used. You use exact names for each item including brand name and part number. You show every screw, nut, and bolt and the quantity of each. You list how many hours of labor and at what rate.
Advantages of Itemizing:
- Transparency: The client can see that the big number at the bottom of the page is not made up or doesn’t happen to be the exact amount of money you need to buy your teenage son a new car. The lump sum that the client is responsible for is broken down like ingredients in a recipe.
- There are hard costs that are justified by the individual ingredients going into the finished project.
- Showing each item can make it easier to upsell a client when they ask about an add-on or an upgrade in finish etc.
- If the customer asks for a discount, you can point to the list and ask them what they want to leave out.
Disadvantages of Itemizing:
- A customer can look online and find one of the items at a cheaper price by another manufacturer and wants you to use a product you know is inferior.|
- The customer can become overloaded with information and get overwhelmed, deciding to bail or put off the project.
- If some items aren’t used fully, or the project finishes in less time, the customer might haggle for a discount or at least become upset.
2. Non-Itemized Proposals
This method focuses more on the outcome of the project. What is the customer hoping to achieve? Is it an extra bedroom and more space for the family? Is your “parts list” tied in at all to a family’s need for more space? This approach allows you to be the “expert” without sharing details of the recipe… which won’t be more delicious by showing the ingredients.
Advantages of Not Itemizing:
- Keeps the customer focused on the benefit of the project. (-and frankly, that’s what he’s focused on…)
- Maintains your authority as the expert. Prevents the customer from being overwhelmed with numbers and details and prevents them from questioning a particular choice of materials etc. when they have no expert knowledge of those choices.
- Simplifies and speeds up the process for both you and the customer.
You keep your line item description(s) focused on the goal the customer shared and how you are addressing that goal, but you don’t give him a list of widgets. You want to list the color and finishes and mention how they will match or set off the color of the main building for instance. You may list that a particular trim will make the ceiling look higher… connect the choice of material to the overall goal, don’t list the name and quantity.
A big advantage of this method is that customers often look down at a list of materials and think, ok, ok, and then see your labor rate of $90/hr and suddenly cringe. They can sometimes think, maybe I can do this project myself, or find someone with a cheaper labor rate. They may never consider that if a cheaper labor rate exceeds the estimated hours because it wasn’t as efficient, the higher rate was the better deal!
Disadvantages of Not Itemizing:
- The big number at the bottom of the page is made up of several smaller numbers, so it’s easier to justify the high price tag.
- There maybe be particular clients including the government, that simply require itemization.
- If they don’t trust your expertise, they may think you just made the number up.
It’s important to know that for a big project, you wouldn’t just have a long description and then a number at the bottom.
You can create line items for each phase of the project, with a description of what that phase would accomplish and how it would relate to the end result with the estimate of its cost. If you lay out the project broken down the way you want the customer to think about it, you can then offer options for upgrades and add-ons as separate line items.
To Itemize or Not?
Ultimately you have to judge what works best for your business. The truth is that the kind of projects you do demand that you only do it one way. The reason for exploring the differences between these two methods is simply to push you to consider whether a different method might work to your advantage. Itemizing is tried and true. Not Itemizing offers you a chance to be more focused on the customer’s goal and might make you a better salesperson. Proving to a client that you and he are on the same page with the benefits and goals he has in mind could make the difference between winning and losing. Think about it…