Pulling out your price proposal can be a nerve-wracking moment for both you and the customer. You want to be open about the costs, without scaring them off.
But before you show them the proposal, you need to decide how you’re going to present it to them. You can organize the costs with line item or lump sum pricing – or a combination of the two.
Ultimately, how you present your proposal comes down to customer expectations and the project at hand.
Here are pros and cons of each pricing method to help you figure out which method works best for you and your clients.
When To Use Line Item Pricing
You can show clients exactly where their money is going with line item pricing.
For this method, you’ll need to break down each item and tell its quantity, description, size, cost of each, extended cost and the overall price for everything (including labor and equipment, if they aren’t factored into each item).
Here’s an example of what one item would look like:
Pros: Using line item pricing is more transparent, which can be a big selling point for clients. They’ll be able to see exactly what materials and phases are included, reducing questions and disputes as the project progresses.
The line item approach is also a clear road map for what and where things are being added, so this pricing method makes it easier to hand things off to the production team.
For a nursery, line item pricing helps you track what is going out the door, making sure details aren’t overlooked.
Cons: By giving the exact amount of each item, you open the door for customers to negotiate the charges.
They may offer to complete some of the items – such as pulling a plant or remove the current walkway – to cut that cost from the list. However, what they don’t realize is that charge might also include labor and equipment costs that were spread out over all of the items.
Listing each item can also be a bit cumbersome when you’re doing an extensive project and possibly overwhelm the client.
Plus, you run the risk of the client taking the bid sheet to your competitor to compare prices. Incorporating the labor and other costs like equipment rental fees – instead of as separate line items – can help minimize this issue.
NOTE: You might be required to provide clients with line item pricing, depending on where you live. Check to see what your state’s regulations are for pricing.
When Lump Sum Pricing Makes Sense
Another option is to group the items together using lump sum pricing.
You can either offer a single amount for the entire project or break the charges down by individual components, such as the cost for a fire feature, deck and pergola.
With lump sum pricing, you want to be as detailed as possible without including every aspect of the project. Be as clear as you would be if you were doing line item pricing, detailing the materials used and how it will be constructed. Here’s one example:
- New masonry columns around backyard patio: Install four columns (as shown in drawing on April 8) with brick-base tapering and precast stone caps built on a frost footer. $4,000
Include a section like that for each component of the project, and list the total cost for everything at the bottom.
Pros: Lump sum pricing gives clients a detailed description of what you’re going to do and how much each feature costs.
If they want more information, you can create an addendum to the proposal and include specs and plantings.
For clients who are just looking at the bottom line, this method clearly shows them the total price without bogging them down with each item.
Cons: This pricing approach can appear less transparent than line item, so it’s important to know what approach customers prefer when creating a proposal.
They may be unsure about what is and isn’t included, which can lead to misunderstandings.
Since you aren’t listing out each item, you can sometimes miss things – especially if you hand it off to the production team and your description wasn’t detailed enough.
Combine the Two
Taking your sales to the next level, Describeit allows you to create either type of proposal in an online presentation. Depending on the requirements of the client – a municipal bid requiring line item versus a residential client who prefers lump sum – you can easily change how your proposal is presented with a simple change in the settings menu. Once you’ve settled on a layout, clients can then view – and accept – their proposals online.
While Describeit is set up to allow you to build a proposal component by component, you don’t need to show all of the line items to the client. For example, if you offer a standard masonry fireplace, you can simply create a description item called “masonry fireplace, __L x___W,” write a paragraph of description and assign a lump sum price.
Or, you can list a separate description item for every component — from CMUs to fire brick to flue pipe. You can either show every line item price or a lump sum at the end of that list. We’ve worked hard to make Describeit as flexible as you need
The other great thing about Describeit is, unlike the silence after emailing a PDF proposal to a client or leaving a printed proposal at the end of your meeting, you can track your client’s progress through the proposal and get a peek into what they might be thinking. Describeit tracks when the proposal is delivered, when your client opens it, how long they read it and even how much time they spend on each page.
If you’re ready to see how much more powerful your proposals can be than your competition, schedule a free demo today, and we’ll show you what you’re missing with traditional proposals.
What’s Really Important
No matter which method you go with – line item, lump sum or a combination of the two – remember the most important thing is selling yourself.
Your proposals are just a part of landing a project, so don’t rely on the pricing method to do the work for you.
With years of technical expertise and business acumen, Describeit’s team has what it takes to bring the new way of selling goods and services to the green industry. Schedule a free demo today!
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