New Contractor Advice: Time Estimation

I got a time estimate from a friend who’s a brand new contractor in the area of home renovation (my wife made me promise to start renovations on our new place immediately as a condition of purchase). He’d already bid me an hourly rate, but I asked for a rough estimate of time spent. He hasn’t yet seen the place (we can’t talk the owner into letting us come over again), but he answered my question anyway, giving me an estimate 5x lower than I suspected it would be (Danger! Danger, Will Robinson!). I replied with the following advise on how a contractor should estimate time for maximum customer happiness (and therefore maximum revenue):

There are two schools of thought on time estimates. One school of thought, which I’ll call “bait & switch,” says to knowingly under-estimate so that by the time the customer notices a slip, they’re committed and they continue with their contractor by sheer momentum, hoping it’ll all be over soon. This technique produces customers that either pay more than they thought or that force the contractor to cut corners to meet their initial estimate, lowering the quality. In either case, the customer tends to get unhappy, which hurts repeat business and word of mouth.

The other estimation technique I’ll call “under-promise & over-deliver.” In this scenario, the contractor estimates their time very conservatively, then doubles or triples it to take into account the unforeseen. This estimate may scare the customer away, but a good contractor will say things like “I hope it’ll be less, but I want to make sure that we spend enough time to make sure that you’re happy,” to smooth the way. Plus, when the contractor delivers early, the customer is happy, calls again for future work and says things like “and he came in under the initial estimate!” to all his friends.

Obviously, very few people that read this site are contractors in the area of home renovation, but I think the advice applies to most forms of contracting. Take it as you will.