Customer Desires

ABLE1

Hello all,

Trying to get a general consensus on the following. Gave a proposal for a project to a customer. Priced it as a total install price of equipment and labor. After presenting it to the customer, now 4 days later got a request to break out labor separate from equipment.

The statement is that they need to show labor as a separate item.

My question is why?? Any idea why this would be necessary or is it just a ploy to see if I am charging to much for labor and or equipment??

Any thoughts??

Thanks,

Les

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ABLE1

Tscarborough

Just tell them that it is all labor and you are donating the materials.

Peladu

My initial guess is that another company gave them a bid and outlined it
like that, and they want to compare it one for one.
My second guess is that they are price checking either you, or the other guy.
My third guess is not even worth typing...

Mike Finley

The easy answer would have been found by asking them why instead of us, but since you didn't...

It all comes down to do you do business your way or their way? There seems to be a common misconception I see that sometimes people think providing good customer service means you do every your customer asks of you no matter what. I don't believe in that at all and my customers seem to think we provide excellent customer service. The precedents you set with your customer through the estimating process will follow you right through to the last day of the job.

cssconstruct

Able,
Do you have all your insurance? If I use a sub that does not have insurance (landscaping or such) I have him itemize his bill for audit time. Just a thought. Or they are getting ready to shop your bid around.

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www.cssconstructionllc.com

ABLE1

Thanks for the input. I was looking for some different or similar opinions as mine. I have had prospective customers do this before and each time I become accommodating I never hear from them again.

It may be the same here.

Concerning asking them................. It is my feeling that if I ask: why?? I will get a lot of double talk and they will still want me to break it down. Not that I am trying to hide anything but it is a total install price which includes labor. Done Deal!!

Again thanks for the input and if there is more to come it would be appreciated.

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ABLE1

Gordo

That a boy! Stick to your guns. The price is the price.

I have found if you are blunt about your stance that they will respect your price....thus getting the job.

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Looks like some pros were here.

ABLE1

Yes I have all the insurance and I am incorporated. If I have to walk on this one I will.

I have also been asked to extend my price guarantee from my normal 15 day to 45 days. With today's wire prices and other items changing daily this would get very difficult.

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ABLE1

cssconstruct

Definately,
They are just trying to price shop you then. They get the "Thank You for your time" speech.

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www.cssconstructionllc.com

Mike Finley

I must be a glutton for punishment or just an A-hole, but I love that part of it. I like nothing better than asking these types the same question over and over again. It's a ball as they keep coming up with 5 different answers to the same question and you just act like you're a complete moron and ask them again because you know they are BSing you.

Me - So why do you want to see a break out between labor and materials?

Them - "because I need to see the break out to see labor as a separate item."

Me - Right, that's what you said, but now, why do you need to see a break out between labor and materials?

Them - "So I can see how much the labor is and how much the materials are."

Me - Right, I see, but now why do you need to see them broken out separately?

Them - "So I can see how much of the job is labor and how much is materials in the bill.

Me - I see, okay, now why is that important, I'm just not sure why you would want or need to see that?

Them -"That way I can see how much the labor is."

Me - Oh, okay. Now why would it matter what the labor is?

Them - BECAUSE I GOT ANOTHER BID FROM SOMEBODY ELSE AND I CAN"T TELL IF YOU ARE RIPPING ME OFF!

Me- Oh, I see. Actually we don't break labor and materials out on our estimates. (smile, remain quiet)....

Them - "f#ck, where do I sign?"

joasis

I usually always write the bid with labor and materials as stand alone numbers...this is what is expected in my market, and it does not cost me any jobs...the problem customers are the ones that after the job is completed, and they are writing the check, they want to know the hours we spent on the job site so they can "compare" to the bid labor quote. I actually had one HO say my labor bid, which he agreed to, was way to high and he wouldn't pay it...he thought we made $200 an hour or so on his job. I pointed out to him that he accepted and signed my proposal, he agreed to the price by doing so, and the amount will not change...plus, my bid was the least expensive of 3 he got before the job started.....what a jerk...he paid up.

The guys we erect steel buildings for can be the worst though....we charge $4 a sq/ft for erection...and on a 4800 sq/ft building completed in a week and a half by 3 guys, they think we are getting rich. Of course, they are paying for the equipment on the job site or the little things like insurance...and most of all...the experience we bring to the job.

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realpurty2

I may envoke war with this statement (Hiding from Mike already ) but...

Unless you have something to hide or lack confidence that your bid is in range, why would you mind breaking it down when asked? It's a natural part of the sales process to provide answers to the customer's questions. It really doesn't matter what their reason is if you get right down to it. Do we assume that ours will be the only bid, or that they wouldn't speak to anyone but us about their project, it's normal cost, what they are getting for their money?

There is no need to volunteer it on every bid, but when it's a specific question from a potential customer it deserves a direct answer. Know your customer, know your competition, know your market and then use that to answer the customer appropriately.

Rather than drill them about why they want it, or put a wall between you and the customer by flatly refusing ( which automatically raises suspicion in my opinion) why not show them the numbers and explain the value behind them.

Do you feel your employees are adequately trained and as good or better than your competition? Good help cost more to get and retain. If so, tell the customer those strengths are reflected in your labor cost.

Does your bid include extra time alloted for "those special touches" that other companies do not even provide? Surely there is something that differentiates you from your competition in a good way.

Are your material prices fixed or variable? Explain that because materials vary so drastically, changing daily, any remaining labor portion, while rarely unused, is typically retained by the company to cover material price increases that occur after their contract is signed.
This allows you the ability to offer a turn-key bid price even though the material prices are so volatile.

I could go on and on, but you get the point. We all choose to run our business in different ways. This is just one way, and my preferred choice rather than the "You take it or leave it stance".

Fire away Mike, I know your going to eat me a new one. hahaha

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Woman in a Man's World.

Mike Finley

No need to fire anything. There are only two points of my ridiculous reply, one being to never walk away from a meeting with a customer without getting to the real objection, and the second point is to follow your companies systems and procedures instead of not having any. Why do people know you would be wasting your time asking a sales clerk walking down the aisle of Kmart if she would take $15.00 instead of the marked price of $25.00 for an item? Customers respect a company that has an actual system in place for doing business instead of some guy and a truck where everything is open to negotiation.

What? You didn't get that from my earlier reply?

ABLE1

I do appreciate the input for all of you. It is really helpful.

Let me apply a little extra back ground. I was asked by another contractor who is installing the phone, data wiring and equipment, if I would provide a number for CCTV for the project. He would pull the cable for CCTV and I would install equipment. As this evolves a little more each day. The person that I was to give the proposal to was not the end customer but it turned out to be a person that is in a sense acting as a GC for a portion of this larger project.

I do understand that everyone does there business there way. Unlike some here I do not have employees to train or muck up the job. I quit that stuff some time ago. Too much stress. I would rather pass on this job because I can see the extra potential stress to the brain not to mention the body. So therefore I have taken the position of one job one price.

Besides if your going to buy a car do you ask the salesman to split out the cost of the labor vs. the materials??? I think not. You look at the number, like it or not and negotiate or walk from there.

Thanks again.

Y'all have a good day.

Les

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ABLE1

Double-A

Les, my feelings about this are shown here in this post.

A client that buys with price as their first priority is not a client I care to work wtih. You're not selling material or labor. You're neither Wal-Mart or the local Rent-a-Labor company.

You're selling a prototype installation of a that piece of equipement. Its never been installed there before.

Time and material applies to a manufacturing process. It doesn't sound like you're a manufacturer to me. It sounds like you're in the service business.

Even a job as simple as driving a screw in one particular spot on the wall can not be broken down to T&M without running a risk. What do you do if you damage the wall and your screw because you hit a nail or a steel nail protector? Should you have charged for using a metal detector? Who pays to repair the wall? Do you forfet all your fees because you can't install that screw in the specified spot?

T&M assumes that you can control these risks. You can't. So why would you allow your client to ask you to?

Granted, I'm making this more complicated that it probably has to be, but, my point is still valid. As soon as you start playing the T&M game, you pass control of your company and the power to set your prices to your client. You now depend on his experience and expertise in the business you're in to govern the success of your company on this project.

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"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

Grumpy

I wouldn't break out my bid and I have everythign to hide. Customers usually don't understand profit. Explaining that is a waste of my time. Giving my proprietary pricing structure away to competitors is not part of my business model.

Does the customer want to buy a finished product or do they want to be the GC and hire me as a sub? Well if they want to provide my materials and equipment then I really don't want to work with them because they just want someone to work for wages. Working for wages may be great if you are a small owner operator type model but I am not.

If they are buying a finished product they don't need to know the cost of the parts. If they want to work with me on the project I don't want to work with them. If they are price shopping I won't get hired so why waste the time.

Double-A

Good for you Les.

Mike, why didn't you just say that in the first place?

Nice reply and I couldn't agree more. You clients will respect you only if you first respect yourself.

While I respect Purty's motives, I'm not willing to discuss the finer points of running a highly complex business with someone that doesn't have the background to understand the conversation. In my experience, that is exactly where this type of conversation with a client leads.

We do try to always respect our clients, and to answer any questions or fulfill any request they might have as best we can. We also try not to solicit their advice on how to run the finances of the company.

If your way of doing things is working well for you Purty, then you have no need to do what we do. You are dealing with it in a effective manner for your situation. Maybe I need to come visit and take some notes.

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"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

realpurty2

(Bear with me, I'm still under the influence of potent painkillers here so my reality is well.. fun as heck temporarily but things don't always click at first either)

I may have misunderstood his original post. At no point did I mean to break it down as far as showing profit margins, markups, or anything of the business internals. And definately not negotiate or change the price unless the scope of work changes too. I thought he meant something like:

Regular Bid- $******x dollars

vs

Materials- $****** dollars
Labor- $***xx dollars
equals Total Bid price $******x dollars

We will break it down that far ONLY not into actual percentages that show all the contingency, overhead % etc. So far, we've been lucky and never been asked to go any farther with it. If we were asked, I would very likely take the same position of all the other opinions above.

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Woman in a Man's World.

Double-A

I was wondering why you were beginning all your posts with "Honeybuns, ..." or "Cabana boi"....
A journey of a thousand miles begins with a single step. Lao-tzu (604 BC - 531 BC), The Way of Lao-tzu

This is where the silppery slope begins. I prefer not to take that first step.

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"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

Grumpy

The problem is this Purty,

When you break out your prices, then the customer works up his own material list and prices that out... which does and has happened to me... then you have to explain the whole markup on materials thing. They don't wanna hear it.

Customer: "Why do you charge $55 for a sheet of plywood when home depot sells it for $15?"

Me: "Well the answer is simple really, home depot sells you the plywood. They don't sell you delivery, removal of existing, disposal of existing, and installation of new. And Home Depot doesn't give you a warranty. These things cost money."

Customer: "Well your workers are here and the dumpster is here, so why do I have to pay extra?"

Me: "My workers are paid by the hour, my dumpster by the ton. Besides who will deliver the plywood?"

Ok so you bury the material markup in your labor, but then your labor is 20% higher than everyone else and you cost yourself the job to a price shopper who thinks he can take who ever had the lowest labor cost and combine that with who ever had the lowest material cost and get a good job done. We all know how these end and I wouldn't want to be a part of it.

I said in a few posts where I would give allowances for custom work. To a degree this is breaking out a price, however it actually isn't. When I said "I would give allowances for fixtures." I mean just that and nothing more. A bulk of the materials would still be lump sum, it would only be stuff like faucets, counter tops, and tiles that are based on allowances... Everything else, at least all the commidity items, would be part of the base package.