Billing the value
I went to the MSPS (MO) conference recently and a presentation mentioned the importance of billing the value of the survey. As a survey tech/survey project manager I am fortunate in that I “get” to talk with clients, perform pre-estimate research and provide estimates. To provide estimates to the value of the survey would require deciding what the value to the client would be. Seems like an impossible task. I feel like I can get a reasonably close estimate together by my minimal initial research and looking at the site to what this survey will be worth for us to perform it (billable), but I have no idea what it would be worth to the client. It is apparent that if they don’t call back it wasn’t worth what I thought it was, to them. Do you consider yourself billing what the value of the survey is to the client, or are you basically estimating billable time for the job?
edit: I should add that I am not interested in billing what the client’s value of the survey happens to be if that value is less than our billable investment.
- 22 Replies
a presentation mentioned the importance of billing the value of the survey.
If you are in business for yourself I couldn’t think of a faster way to bankruptcy. Over the years I have found that this type information is broadcast by those that have never been in business for themselves, do not know the reality of it, and are therefore clueless. Book learning is theory, business is business. I have always billed lump sum with profit included. Worked well for 32 years. ????
@flga-2-2 Thank you for that. OP has been edited accordingly. That was an oversight on my part.
The speaker was probably suggesting that the average surveyor underestimates what the survey is truly worth to the client.
I buy a lot of gasoline at the pump. Today that is $4. Next week it could be $6. By August it could be $8. I will still be buying the same amount of gasoline because I can pass that expense along to my clients by adding 15 minutes here and there at my hourly rates.
In the mind of most clients, the value of the survey is less than zero, as it is a necessary evil imposed on them by some lender or County policy such that they can’t avoid it. It is really less than zero if the results disagree with their prior presumption of location.
The speaker may also have been suggesting that estimates should go up based on the assessed value of the land involved. That goes back to the dangers of unit pricing that was discussed several days ago in a thread here. Thus, surveying an entire section boundary (640 acres) should cost 640 times of surveying one acre. Those of us in PLSSia recognize that thought as a load of hog manure.
Make your takeaway from that session focus on finding ways to raise your prices based on some metric that works for your firm.
a presentation mentioned the importance of billing the value of the survey.
If you are in business for yourself I couldn’t think of a faster way to bankruptcy. Over the years I have found that this type information is broadcast by those that have never been in business for themselves, do not know the reality of it, and are therefore clueless. Book learning is theory, business is business. I have always billed lump sum with profit included. Worked well for 32 years. ????
We have a contract with our clients that states the estimated cost of the survey. I tend to explain that this is a ballpark number, so it’s not what I would call a lump sum, but it’s also not a time/material either, depending. Our billable time includes a small percentage profit and those are the numbers I use in calculating the estimate for the contract amount. If I am a little unsure of the area then I will add some padding to compensate for the unknowns, or at least attempt to cover them if they appear. I’ve had to go back for more money once due to defective deed, and didn’t like it, so I have developed this process. Once the job is complete and we have a final cost, if it’s below what I estimated, we bill the split or less. That is not well received from company executives, they wish for us to bill the estimate in full. The argument is that the client agreed to that number, so bill that number. My view is the client agreed to my self-protection pad, it was unnecessary, so send the relief back to them. Everybody wins.
I may be airing out too much of our business here, not sure.
Most of my work is done lump-sum, and that’s the way I prefer to go. I estimate the time it’ll take, multiply by my standard hourly rates plus expenses (the latter are usually too minimal to break out), and propose accordingly. Then I do the job, whatever it takes, which removes most of the stress about costs. If I get within 15% of my proposal I’m pretty happy; if the contract number is under the final total I suck it up, if it’s over it balances out the ones that came in low.
I have a contract with a public agency that’s T&M against a not-to-exceed figure. It’s okay because it generates sort-of-regular work, and they pay reliably. But there’s no counterbalance because of the NTE cap. I have to be careful with the NTE number going in or I risk losing money.
I have a few clients that are pure T&M. Some want an estimate going in, others don’t care. Those are kind of a middle ground between the ones above: there’s no cap to worry about, but on the other hand I don’t want to run up the bill by spending too much time on anything not directly germane to the job.
There are lots of ways of skinning this cat, but despite all the variations, it’s the year-end profit figure that counts. Keep an eye on that and things will be fine.
Most of my work is done lump-sum, and that’s the way I prefer to go. I estimate the time it’ll take, multiply by my standard hourly rates plus expenses (the latter are usually too minimal to break out), and propose accordingly. Then I do the job, whatever it takes, which removes most of the stress about costs. If I get within 15% of my proposal I’m pretty happy; if the contract number is under the final total I suck it up, if it’s over it balances out the ones that came in low.
I have a contract with a public agency that’s T&M against a not-to-exceed figure. It’s okay because it generates sort-of-regular work, and they pay reliably. But there’s no counterbalance because of the NTE cap. I have to be careful with the NTE number going in or I risk losing money.
I have a few clients that are pure T&M. Some want an estimate going in, others don’t care. Those are kind of a middle ground between the ones above: there’s no cap to worry about, but on the other hand I don’t want to run up the bill by spending too much time on anything not directly germane to the job.
There are lots of ways of skinning this cat, but despite all the variations, it’s the year-end profit figure that counts. Keep an eye on that and things will be fine.
Take your lumps and learn from them. Train your clients with reasonable fee increases in the good times and stick to those numbers in the bad times. One reason I got into construction staking was because there are fewer low ballers. At least it seemed that way to me.
It depends on your client. Certain municipalities will not accept Lump Sum, some do. But, they pay regularly and are consistent. We push for lump sum on 90% of our projects as that is one of the quickest ways to increase profit when done correctly. Yes, the profit can come as a result of the value to the project. Certain clients and people will not understand that and that’s fine, they typically are not repeat clients.
I like to know the final price of any service, professional or otherwise. I had my septic tank drained and a new sewer line ran a few weeks ago and the company said it would cost $5,000. That was clear and concise and I knew I wasn’t going to pay more. They made money, I was happy for their expertise and things got done!
a presentation mentioned the importance of billing the value of the survey.
If you are in business for yourself I couldn’t think of a faster way to bankruptcy. Over the years I have found that this type information is broadcast by those that have never been in business for themselves, do not know the reality of it, and are therefore clueless. Book learning is theory, business is business. I have always billed lump sum with profit included. Worked well for 32 years. ????
Don’t you have to know what the value of your work is in order to calculate your lump sum amount?
@jim-in-az
My lump sum fees are estimated using our billing rates which includes the cost to employ an individual including insurances, taxes, benefits, etc.. and a profit multiplier. Each position in the company has their own billing rate. Estimate your time per specialist, apply the appropriate billing rate, add the line items and you have your lump sum fee. If you have a high liability project, add time for QA/QC at your highest billing rate.
Not all projects are as cut & dry as this example leads you to believe, but it works as a general rule of thumb.
My $0.02 for the day.
Don’t you have to know what the value of your work is in order to calculate your lump sum amount?
My value of work was based on time plus a minium 25% profit. I worked for 30+ years with production builders and nothing else, so my method may not be applicable to other types of surveying. ????
I’ve recently gone to a hybrid, where I do as Kevin Hines mentions, a lump sum based on labor rates with profit built-in, then I add a note that I make sure the client acknowledges, stating in essence that if I have to survey the neighborhood to reestablish their boundary, they will owe me more money. I don’t often use it, but it comes in handy with a bad parcel that’s too far away for recon.
It seems odd to me that surveyors are supposed to just eat it every time an underlying problem is discovered during a project.
I also take a good deal of time to be clear about the scope and potential issues that could result in a higher fee.
So, lump sum unless it’s a quagmire.
Larry Phipps wrote about value pricing but I found Dan Beardslee’s opinion that our real product is liability insurance to be more persuasive.
Financial institutes are aware that a PLS sells liability insurance but most surveyors are oblivious to it and never consider charging for it.
Dan Beardslee’s opinion that our real product is liability insurance
I don’t see this as a realistic perspective. In CA, at least, a surveyor’s finding is an opinion that can be challenged. The only way for a client to recover damages if a challenge is successful is to file suit, which is a tremendously expensive undertaking with no guarantee of success. That doesn’t look much like insurance to me.
@jim-frame True, but that’s only in regards to boundary surveying. We do a lot of surveying, and boundary surveying is a very small percentage.
Which raises the question for me, ??what actual liability expenses and how many dollars have you experienced/lost or heard about (excluding errors and omission which are presumable covered by insurance)??
If you have the requisite experience in construction surveying what is the unknown that causes the liability? The plans I have worked with are in black and white.
what is the unknown that causes the liability?
For me it was plain old stupidity which cost me 600lf of Miami curb and gutter. ???
For me it was trusting an owner representative??s word. I got it back. It cost them $800 more on the next job. I broke even. Another reason to like lump sum.
(excluding errors and omission which are presumable covered by insurance)?
Unless you have first-dollar coverage, you’ll have to pay the lesser of the deductible or the defense cost even if the claim doesn’t succeed. A first-dollar policy is more expensive than a standard policy.
I honestly don??t care what value a client puts on a survey. They either sign the contract or they don??t.
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