To Us Pros

Grumpy

to us pros
I think you might like this: http://www.startupjournal.com/column...030728-qa.html

It's called:
Gaining an Edge Over Low-Price Competition

Floorwizard

Very nice,

Sometimes you have to try and weed out the low ball clients, you do not want to earn their business, cause lots of em have beer budgets, but expect top quality wine.
I deal alot with products, but I do sell labor along with it, and most all my clients understand you get what you pay for with labor. It's easy to price shop for materials, apples for apples, But it is usually the wealthier clients want nothing to do with cheap labor.

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"in 20 years you will regret more what you did not do than what you did"

pgriz

Thanks Grumpy, good link. I strongly believe each contractor has to decide what profile of customers they want, and focus on these. If the homework was properly done, you will have few competitors, the profit margins should be very good, and there are few after-sale problems. We are very specialized in our business, and we attract customers who want that speciality. As for the rest, they can't afford us, and they wouldn't call us in the first place.

Grumpy

In another forum someone gave me the best sales approach I ever saw. Customer says: "Your price is too high." your response, "Let's analyze my pricing then. I can break my pricing down into 3 categories. First we have material, then Labor then Profit. Now my material cost has to stay the same unless we use this cheaper material. My labor cost has to stay the same unless I pick up a few unskilled guys and pay them less. If I decrease my profit I will go out of business and won;t be able to honor your warranty."

Chances are good they will accept your price. If they don't you don't want them as a customer anyways!

Floorwizard

That's a good quote, and will work, as long as you have the best price on the product.
If your profit margin is low, and selling it less to beat a competitor will not work. Then the competitor must be getting a better cost and selling at a better margin.


I do think you should stick to your guns though....It just makes you look better.
Discounting at the drop of a hat due to client response will only gain distrust.

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"in 20 years you will regret more what you did not do than what you did"

Grumpy

Why does your price have anything to do with it? Even though you spelled out your logic I fail to comprehend.

If people ask me to drop my price here is another response: "Why?" always ask why then I explain "Some companies will add 5% to their price for what they call negotiation room. This means if you ask for a discount they give it to you, but the discount was never really there. We on the other hand bid our estimates so tight that unless we make changes to the spec, our price can't possible change. The price I present to you is the best price I can offer because we don't compete on price we compete on quality."

hatchet

Cost vs. Quality is probably the hardest concept for clients to comprehend. They look at everything as if it was coming from a banker or a car salesman - therefore think that the price is always over what it should be. They're gun shy of honesty.. haha.

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Rich
WIT Construction Co.
Superior MT Contractor

Grumpy

That's why it's our job to show them. "Mr. prospect can I see your other estimate? If it makes you feel any better, cover over their name and price. I only want to show you the differences between my proposal and theirs. It is important we compare apples to apples."

Floorwizard

I can understand what Grumpy is saying, but I am sure he deals alot with just labor portion of it.
I deal alot with material, and some other stores in town have the same products. If a client comes in and says they found the same product cheaper, I will try to match or beat the price. But I would like to see an estimate first like Grump said.Our labor tends to be a bit higher than around town, but that doesnt mean we lose alot of clients, we just lose the ones we don't care to get.
Products mean nothing if not backed by superior labor. Thats how it is in the flooring industry.
Grump: If your selling mostly labor, than I can see why you stick to your guns quite often. I stick to my guns on the labor portion too, but I cannot on the material portion, unless I am selling a product that is exclusive to us (luckily there is lots).

Who would want to buy from a store that has the cheapest material and labor in town? How would they expect to get the finest quality of goods or labor?
Somewhere I saw a quote--- "Quality, Service, Price, pick any 2"

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"in 20 years you will regret more what you did not do than what you did"

Floorwizard

By the way Grump, how much is the material portion in roofing?

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"in 20 years you will regret more what you did not do than what you did"

hatchet

I'll put what I would say to see if it's close to the actual. I'm assuming some type of asphalt dimensional shingle. 30 year warranty
Material - 92.40 / sq
Labor - 54.39 / sq
I'm probably way off.. hah.

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Rich
WIT Construction Co.
Superior MT Contractor

Grumpy

Flor depends alot upon the type of roof and type of material. If we hire a sub we pay them $60 per square for an easy job. Cheapo shingles cost about $35 a square. Wow hatchet not too bad on labor way off on material. Shingles that cost $90 a square are really high end. Typical architectural are about $40. This is all off the top oif my head. I don't look at pricing more than a few times a year when I input them into my spread sheet.

If someone says they can get the same material cheaper tell them "Quality, Service & Price. You can only pick two. Which ones do you want?" If they say price tell them you will call them right back and then never do. If they call you back, tell them "Well you asked for price and I can't give good service if I give good price" I can be such an ass... but HEY you don't want this customer anyways.

hatchet

That is a shingle made by Celotex called Dimensional 4 (355lb) - I think they call it Shadowband or something like that now.

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Rich
WIT Construction Co.
Superior MT Contractor

hatchet

It was listed in my estimating program but is from 2000 so I added 5% to it.

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Rich
WIT Construction Co.
Superior MT Contractor

Grumpy

Yeah a shingle that is 355 lbs can easily cost you that much. Typical 30 year architectural shingles weigh about 255.

NutAndBoltKing

I value every customer that comes to my fastener business. To best serve contractors I have found through experience that I must track, evaluate, and anticipate their purchases, maintain an adequate bottom dollar inventory, and to help with estimates I give sufficent written notice whenever there is going to be a price bump. I know efforts like this work, as does my 24/7 service and free delivery. I firmly believe that PQS - price, quality, service - is doable for building material suppliers; even with the high expenses for maintaining a fleet of delivery vehicles, soaring employee health care expenses, propertry taxes, insurance, charities and energy costs. PQS for the material supplier is simply up to the owner.

Grumpy

Nut, the problem lies when a compeitor takes your low cost products and puts them to equal an inferior roof. No the roof is not inferior because the products cost less, the roof is inferior because they use les products.

DIsect one of my steep slope asphalt shingle roofs. I always want to tear off and fix bad wood. Some guys lay over existing. This is a cost difference. I always always install Ice shield. Some guys skip this. This is a cost difference. I always use metal flashing. Some guys use roof cement. This is a cost difference.

You see these are things that effect the cost, but also effect the quality. If I take away these things I bet my costs will be right in line with theirs, but I will be installing a junk roof system and I refuse to do that.

Floorwizard

Good point Grump,

In the flooring business especially with carpet, it can all look the same to the customer. It takes a pro to show the client WHY the product or installation is better than another quote from a competitor.
If the customer still wants the low price from your competition, then I say "o.k. thank you for the opportunity, I hope all goes well"
Sometimes it's just not worth the time to convince someone to pay more for your work, and it sure isn't smart to drop your shorts and still try to give great quality material or installation.

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"in 20 years you will regret more what you did not do than what you did"

NutAndBoltKing

Excellent points, and well stated. That's why I believe a supplier like myself has to really know his contractors needs and let them know about future price bumps and all available discounts. Every little bit helps. FYI: energy costs will be rising this winter; manufacturers have to pass along the increases, so get ready to dig deeper and adjust your estimates. Happy Holidays!