One of the biggest challenges between a homeowner and a contractor is agreeing on the price of a project, and one that both feel is fair.

To the contractors, it tends to feel like the homeowner is coming to the table with a 'low-end' number. Equally, the homeowner's probably see your number as a "cover all contingencies" price.

So where do you find the middle ground?

Scott Wootton of Peterborough & The Kawarthas Home Builders Association has one answer.

"We use what we call a 'Pre-Service Agreement' to help people quickly come to grips with what is a required budget for the scope of work they're intending to take on," says Scott.

"It's just an Excel spreadsheet with twenty-six main cost categories, and we simply give people a quick understanding of the twenty-six costs that will go into their project."

And the benefits to doing this?

"This gives them a clear opportunity to see where the costs come from," says Scott. "Rather than it being one 'take it or leave it' price, it educates the prospect to the fact that there are [many prices that make up a project]."

By educating his prospects on the different costs of a project, Scott can get them to 'see' what goes into a project, rather than just tell them.

They can see how their decisions, and budget, affects the different costs of the project and, therefore, puts the 'value-decisions' back in the homeowner's hands.

As Scott explains, "It really depends on your priority list.

"Do you want quality? Do you want quantity? Do you want service, and what level of service?" says Scott.

"What is it you're looking for? You can't have all those things and still be just concerned about price."

And how long does it take?

"I've got it down to about an hour's meeting," says Scott.

One hour. Most contractors spend an hour defending their price -- Scott is using that time to fully explain his price. And there's more ...

"At that point I introduce them to what I call our Pre-Service Agreement," adds Scott, "which puts them on the hook for the cost of doing the other things that are required to get through the initial process -- that is, looking at the logistics of the project.

"How easy is it going to be to get a permit to do the job? Are you too close to the septic system? Are you in contravention of a square footage of lot size coverage issue? Do you have setbacks from your lot lines from your other buildings?

"So these are all issues that need to be answered to be able to say, yeah, well we can go ahead with the project ," says Scott.

"And when people see that there is a process [behind all this] and not just a simple straight answer either they won't buy into the pre-service agreement and you're done with them in the first hour, but more importantly, you educate people to the fact that this is not an easy solution."

So how does this help to negotiate a fair price for both you and the homeowner?

As Scott mentioned, it educates the homeowner to the costs of their project, and the value-decisions they need to make, which makes for better negotiation than simply defending a single, unsupported (in the eyes of your prospects) price.

It also helps in getting the homeowner to see the 'true' cost of the project.

"If you get through that process, you may have gone from a $50,000 job to a $100,000 job," says Scott.

"The client has been educated to the fact that what they really want - what they really hold dear in their heart is not a $50,000 job - it's a $100,000 job.

"And they're okay with that because, at the end of the day, they now see that what they're going to get is what they really want," Scott continues.

"And they've adjusted their budget to accommodate that, because they've decided, 'You know what? Price doesn't matter .

I thought it was price. It's not price. I really need the functionality to be what I want it to be. I want to be comfortable, and this is what it costs.' "

Scott offers his cost centers to anyone wanting to start using this approach:

"It starts with plans and permits, site work: Is there demolition involved? Is there disposal? Rental and safety equipment is included that line item as well.

"Then excavation, pouring the concrete floor, foundation, framing, roofing, decking, siding, doors and windows, soffits, facia, plumbing, HVAC mechanicals, electrical, insulation, drywall, millwork and trim, kitchens.

"Then specialty items like fire-places, stairs and railings, floor coverings, paint, clean-up, landscape, paving, and septic.

"I've also got a line for client administration. We charge 4% to 6% of the total value of the project for that, and that is a big saver. It's the overhead that often gets missed on a project."

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