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huggytree
02-16-2009, 06:42 PM
I have always kept my prices the same during slow/busy times...im constant.

i noticed again this year (jan/feb) that i cant win a bid if my life depended on it.....i may be 1 out of 20 right now....im losing all my referral jobs..the latest one said i was 20% high and i did lower the price for him slightly....i wanted that job...he e-mailed me saying how impressed they were with me but 20% less is the winner.

i am assuming that my competition is bidding lower to keep going, while i bid the same and sit around the house....

do you lower your prices during the slow season? how common is this?

i dont believe in it...Walmart and Pick N Save dont lower their prices in the winter months...is it just a small business thing?

billbenson
02-16-2009, 06:56 PM
Well, Walmart has different pricing structures store to store. I have one 5 minutes from me and one 30 minutes from me. They have very different clienteles and market accordingly.

I read somewhere recently that it is very common in recessions to fire workers, only to rehire them at a lower salary later. This includes college educated professionals.

I would think if you did lower prices, you need to make it very clear that if things pick up you will go back to your regular rate. People know things are slow so I would think they can accept that they are getting a deal by doing the work now while rates are low.

thx4yrtym
02-16-2009, 08:02 PM
It is clear that either you start competing or you sit on the sidelines or go work for someone else.
You might refigure a couple of quotes and see how much markup on materials you need to take out of the quotes without cutting your hourly labor. Maybe it's a bit easier to swallow that way. At least you get paid for your time. We are all being very careful how we spend our money right now. That means devoting more time to getting competitive bids on many things that we may not have in the past.

I wish you the very best of luck and hang in there, as things improve so can your margins.

Regards,

huggytree
02-16-2009, 09:07 PM
if i lower my prices for my builders im afraid they will say 'whats happening' when i raise them in spring....they know what i charge for particular projects...also they are not getting the jobs either...so lowering my prices for them may help alittle, but they are all being outbid too...

i thought of doing it for my homeowner projects.....i really dont want to, but im just wasting soooo much time bidding.....

this problem isnt as much a recession problem as it is just how construction is in Feb.

im actually 22% ahead of last year right now.

Spider
02-16-2009, 09:27 PM
Planning your bidding is essential if you want to make the most profit - not just in plumbing, but any business that calls for competitive bids. In a nutshell, that means reducing your margins - to zero if necessary - to get work to achieve a predetermined minimum workload. Then raise margins on other bids depending on when the work will be carried out.

Some work, like plumbing, calls for a bid now for work that must be carried out in several stages into the future. By scheduling each stage, you know which time periods have work. Other bids that fill the gaps between those stages will also be at low margin. Bids for work that will be done during the same time period as already allocated can be priced at higher margins. As your workload schedule fills, you keep raising your margins at each bid.

Obviously, you will win fewer of the high margin bids, but that's okay because you have work for those periods. If you win any of these high margin bids, that's extra profit.

If you pursue this plan rigourously, bidding for everything available but priced according to this plan you will eventually find that all your bids are at high margins because you keep filling your work shedule further and further into the future.

This will maximise your profit.

Steve B
02-17-2009, 06:26 AM
If you lower your prices for the builders - I would do it in a way that they know up front that it is temporary. That's really the idea behind a coupon - you are temporarily lowering the price with the option to raise it back. You don't have to call it a coupon since that doesn't fit in your industry, just call special winter pricing.

Or, if you are happy with being 20% over last year, but just don't like wasting your time on all the bidding. I would ask them up front how important price is to their decision. If they say it's important, tell them you don't wish to bid because chances are you will be a bit higher because of your adherence to quality. This may have a positive result as it gives you a chance to tell them how important quality is to you and it makes you seem more desirable to them since you don't seem so eager to bid on the job. Kind of like playing hard to get in the dating world.

huggytree
02-17-2009, 06:56 AM
Steve, do you agree with lowing your prices during the typical slow months?

thanks for the advice with the builders..i just think its bad business for any movement on prices...they want things stable, so they can plan...im worried about any up/down movement which would affect my being a 'stable' sub.....if you give them a price reduction they will say 'if you can make money at that level, why not stay there'....the whole nature of home builders is about cheapness....i think ill keep my prices on their work the same....i dont raise it in good times or lower it in the bad times....stable prices..

i am considering lowering it on homeowner work though...i always get the jobs done early and lowing my prices 20% would still make me some profit....im really not getting much homeowner work right now...when i hire employees someday ill have no choice...ill have to give them 40 hours somehow during the slow months.

CraigFLA
02-17-2009, 08:02 AM
The market sets the prices and it changes drastically especially during these hard times. We are in a economic time of significant deflation. If you don't find ways to lower your prices and keep up with this, it just means you will have a smaller share of the market. Many competitors are in a survival mode that marks down to a very minimal profit margin just allowing them keep the lights on. These are unusal times and businesses know that pricing now will change as soon as demand pushes higher again.

Steve B
02-17-2009, 08:07 AM
If you're only getting 1 in 20 jobs per quote given, and the only reason you are hearing is that it is about price, then, yes I would think lowing your prices makes sense.

I think your strict adherence to that book that tells you how long a job should take has put you in a mindset to make some ill-advised decisions. You own your own business, you are allowed to price jobs based on your actual time. I personally think you're ready for an employee and should be bidding more aggresively so you get maybe 1 in 4 jobs.

I trust your judgement on the way you price for contractors - my comments probably apply more to homeowners.

We all beat you up pretty good in the beginning (on the old forum) about being too worried about being the lowest price. Now, I sense you may have swung too far the other way. Of course, these are just my opinions. It sounds like your business is growing just fine and it's a very valid decision to effectively turn down work by bidding fairly high if you would rather use the time for other things (family, hobbies, etc.).

thx4yrtym
02-17-2009, 08:23 AM
If you had gotten 10 of those 20 jobs you quoted because you cut the price sufficiently and had completed them, what would the profit have been and how much would that have increased the balance on your checking account? How many referrals might you have gotten from those jobs? What's the value of that work?

If someone called you today and said I've I've got a project for you that should take three days and I'll pay you $45 / hr plus materials(wholesale cost ), would you take it or stay home?

Just curious.

regards,

greenwater
02-17-2009, 08:24 PM
I feel your pain Huggy. Being in the same biz but still working for the man, I am dealing with the same issues. But let me put some light on the situation, its not that every job that we bid goes to the low man, its that 60% or better just cant get the financing for the job or the don't want to let go of the money.

Look up the physical address on your permitting system if you can and see if they have went on forward with the job, I find alot has to do with the financial system right now.

huggytree
02-17-2009, 08:41 PM
if someone called me and said he had work for $45 per hour for 3 days...i may laugh at him....

no way i will ever work for T&M for less than my normal $97 per hour....im a bargain at that price because im a very fast worker...

Im losing jobs to lower bidders and losing the referrals...yes.....but my business plan doesnt want low price referrals....i want to be in the circles who pay my real price for my work...not the cheap customers...

im just worried about getting into a low price cycle and having trouble getting out of it.

that last job which was 20% less than me.....could i have matched that price and still gotten it done under the hours...yes.....i often get jobs done in 1/2 the time i bid...i have room to lower my prices...definately because its me who's doing the work....if i hired a worker...no - id probably be right on as far as hours and i may lose money if i dropped my price 20%..im glad in in a position where i have room to lower my prices and still make a decent profit if things get worse and i have to.

my prices are competitive during 9 months of the year....its just the end of winter that i am not competitive....im never the high bid unless its Feb.

I will break even this month(pay myself my normal wage-no profit)....so if thats as bad as it gets im lucky!

as far as hiring a worker - i worked a 160 hour month once...for 1 month i thought about it out of 2 years...when i work 160 on a steady basis ill consider it....while my average is still 100 hours a month id lose if i hired someone...hoping to hire an apprentice in 2010.

thx4yrtym
02-18-2009, 07:46 AM
Huggytree,

thanks for responding.

greenoak
02-18-2009, 09:38 AM
if its work for less or go bankrupt i would work for less.... and try like crazy not to.....
sometimes the market trumps my desires.....

and im also trying to buy things to hit a little lower on the price scale....but still keep my margin good....
ann

cocoy
02-19-2009, 12:28 PM
I see nothing wrong being the cheapest.

Shoot, Wal-mart and Mcdonald's are the cheapest in their business and they seem to be the only companies thriving right now. (Yeah I know...big examples, but I think people get the idea)

I know many people who are going the "I'm the expensive/ exclusive store/provider" It works sometimes, and sometimes the owner's ego is getting in the way of any profits and customers.

Your mileage may vary.

greenoak
02-22-2009, 08:18 PM
i hear you.. .my goal is to be verging into high end and veeeeery reasonable at the same time.... its a good niche, imho...and

SteveC
02-22-2009, 09:44 PM
i often get jobs done in 1/2 the time i bid...i have room to lower my prices...definately because its me who's doing the work....if i hired a worker...no -

As you are on your own, I would price all jobs at your normal rate... however base them on the timeframe it takes you... and get the work... if you then need to expand... hire someone that works as fast as you.

huggytree
02-23-2009, 08:03 AM
no one will work as fast as me.

why would they? its my business, not theirs...

when you take your car in to be fixed they look up the hours for that particular job in a book and assign hours to the job....if they get it done sooner or later the price is the same.....i assign the hours to a job which i believe an average plumber would take to do the job....sometimes i do go overboard on those hours though....on new homes i can use a bidding sheet which gives a value to each fixture...no guess work at all...on remodels there are bidding 'rules' , but alot of it is by feel...

the good news is i have room to lower my hours on a bid and still not lose money...

to find a fast worker i may have to hire/fire 100 employees
50% of them will be average speed, 30% will be very slow, and 20% will be above average speed. so 1 out of 5 should be good right? wrong....that 20% are working for someone else and will not be available to be hired...

ive worked with many plumbers over the years...most want to do a good job, but its rare to find a real hard worker.

greenoak
02-23-2009, 10:03 AM
everybody has a different path...but the main plumber i know turned into a millionaire.and that was in his 30s......by being the best and cheapest and delegating very well....he made it by bidding and winning tons of big jobs...like for schools....and had lots of capable employees..
..he did tell me to get as few employees as possible....
just saying there are many ways to make it....
ann

SteveC
02-23-2009, 05:07 PM
If you start out saying you will not find anyone as fast s you... that is exactly what you will find... start out thinking you will find one, and have systems and procedures in place to ensure it and you will find one... and here is a thought, when they first start with you on a train, tell them how long it would take you to complete the job... tell them that you will pay them for this time and not a minute longer... if they can do it quicker... they win... slower they lose.

Steve B
02-23-2009, 06:53 PM
I agree with you Steve C - this attitude that "noone is as fast as me" is a sure fire way to fail at finding anyone. Besides, he doesn't need to find anyone as fast as him, he just needs to find somebody that works at a speed that will be profitable. Maybe someone slightly better than average (assuming they have good quality and don't steal from you) will help make him a millionaire.

But, as a former Human Resources guy, I can tell you he can't get away with paying him for a set amount of time regardless of how long it takes. That would be a violation of the U.S. FLSA (Fail Labor Standards Act). However, he could have a bonus system for completing a job within certain time frames.

I've never found an employee that was as good or as fast as me, but I plan to keep the ones I have because they help me make a greater profit than if I did everything myself.

SteveC
02-23-2009, 07:48 PM
But, as a former Human Resources guy, I can tell you he can't get away with paying him for a set amount of time regardless of how long it takes. That would be a violation of the U.S. FLSA (Fail Labor Standards Act). However, he could have a bonus system for completing a job within certain time frames.

Could you not employ them as independant sub-contractors on the basis of a fixed price per job... and you could always employee then and pay them a lower rate and give them a bonus if they do it in an acceptable timeframe as per Steve B...

And the main question here, is a lack of work so the question of expanding and employing people really doesn't matter... and when such a time comes, simply increase your hours if you need to... but not your hourly rate.

Steve B
02-23-2009, 08:08 PM
Yes, you can do that if they are truly independent contractors. But, it's unlikely they would truly be independent in this scenario. I was assuming they were going to be his regular employees.

The definition of who is an independent contractor versus an employee is fairly complex, and has a lot of gray area to do it.

huggytree
02-23-2009, 09:36 PM
i wouldnt ever be able to pay a fixed dollar amount for a certain task....sometimes things go well, sometimes they dont...too many variables in my job...its always got to be hourly. Im a Union contractor and have to play by the rules of the union....or lose my health insurance.

i have met 1 person who was as fast as me once...he was just about to start his own company and was a real go-getter...his quality was alittle poorer though...

id always be happy with just being above average

but like you said...no employees any time soon....im hoping for 2010 to get an apprentice.

still havent lowered any prices yet....may finally have a few projects sold...

somehow i am 50% ahead gross sales from where i was last year....i worked 1.5 hours today and will work a full day on Thursday...thats it...9.5 hours for the whole week....i finally saw some other plumbing vans out there today...i counted 4 this morning.....last week i counted 2 the whole week. i hardly see any construction vehicles anywhere...im making call backs to jobs i bid for follow up.....im getting positive response and some possibilities.

I am going to lower my price for the next homeowner job and see if i get it...try to get my % back to 50/50.....i may still be 50/50 with contractor jobs at my full price....looks like most of them are looking more positive than negative.