Selling against other contractors - Contractor Talk - Professional Construction and Remodeling Forum

duckdown · 01-01-2009, 09:17 AM

We have more business than we can handle. Here are some of the things we do to be successful.

1. We don't hire people with prior convictions. Customers feel more comfortable if they know that criminals aren't working on their homes.

2. We show them proof that we are not criminals. This includes showing them our Government/Military clearances. Copies of our DD214 showing that we were honorably discharged and even references of work we have done with those in corrections/law enforcement.

3. We let the customer choose their own materials and if defective, we will eat the lost time dealing with it. The need for product markup isn't necessary if you calculate a fair hourly rate. Likewise, is there really a difference between us buying and the customer buying from the same suppliers?

4. We don't waste money on lead services. We do however participate in electronic forums where customers hang out. We try to answer questions that homeowners may have on diychatroom, avsforum and other boards.

5. We encourage our staff to dress better than other contractors. For example, I wear Sketcher boots which are fashionable vs military boots or some of the other less appealing (from a looks perspective) that others wear.

6. We show up on time. If I tell a customer that I will be there at 8am, I am usually there at 7:50 and will sit in the driveway until the time we agreed upon.

7. I am respectful of their living space. How many contractors will take the time and take off their shoes vs just walking across a beautiful carpet?

8. I warn them upfront that I am brutally honest if they choose lower quality materials. Since I let customers purchase their own materials, I will tell them that there selection may not be of high quality. NOTE: The side effect of this approach is that customers will usually purchase higher quality materials when they are purchasing themselves.

9. We ensure that our vehicles are washed. For example our Ford trucks have their tires armor-alled and don't look like they are used as work vehicles.

10. We are mindful of our language. Some of the employees do speak languages other than English but they are banned from doing so within earshot of a customer.

**genecarp** · 01-01-2009, 09:55 AM

Sounds like a good common sense approach to doing business, I apply all the same values, with the exeption of material selection.

mahlere · 01-01-2009, 10:22 AM

Quote:

Originally Posted by duckdown

We have more business than we can handle. Here are some of the things we do to be successful.

1. We don't hire people with prior convictions. Customers feel more comfortable if they know that criminals aren't working on their homes.

2. We show them proof that we are not criminals. This includes showing them our Government/Military clearances. Copies of our DD214 showing that we were honorably discharged and even references of work we have done with those in corrections/law enforcement.

Here in NJ, these actions would bring some suspicion...i.e. "why are they trying so hard to prove that they aren't something?"

Quote:

Originally Posted by duckdown

3. We let the customer choose their own materials and if defective, we will eat the lost time dealing with it. The need for product markup isn't necessary if you calculate a fair hourly rate. Likewise, is there really a difference between us buying and the customer buying from the same suppliers?

what about all the misc material needed? do you provide that? or just give them a material list? or just place the order and have them pay directly? Are you able to get the proper hourly rate so that you can actually give up that material markup? Where do you draw the line?

[quote=duckdown;568431]
4. We don't waste money on lead services. We do however participate in electronic forums where customers hang out. We try to answer questions that homeowners may have on diychatroom, avsforum and other boards.
[good idea if you have the time and patience...but definitely a good idea]

Quote:

Originally Posted by duckdown

5. We encourage our staff to dress better than other contractors. For example, I wear Sketcher boots which are fashionable vs military boots or some of the other less appealing (from a looks perspective) that others wear.

why don't you provide company uniforms? it would make things a lot easier and better.

Quote:

Originally Posted by duckdown

6. We show up on time. If I tell a customer that I will be there at 8am, I am usually there at 7:50 and will sit in the driveway until the time we agreed upon.

my experience tells me this works on the 1st call of the day, but if you are running service, or multiple appointments, a window of arrival is better. 2 hr windows make most people happy and give you some wiggle room.

Quote:

Originally Posted by duckdown

7. I am respectful of their living space. How many contractors will take the time and take off their shoes vs just walking across a beautiful carpet?

that's why god invented shoe protectors...OSHA is not to keen on people doing construction work in socks...

Quote:

Originally Posted by duckdown

8. I warn them upfront that I am brutally honest if they choose lower quality materials. Since I let customers purchase their own materials, I will tell them that there selection may not be of high quality. NOTE: The side effect of this approach is that customers will usually purchase higher quality materials when they are purchasing themselves.

this could go either way...if your hourly rate is high enough, people aren't saving any money by buying the material themselves...and if this part is done improperly, it could turn potential customers off completely...

Quote:

Originally Posted by duckdown

9. We ensure that our vehicles are washed. For example our Ford trucks have their tires armor-alled and don't look like they are used as work vehicles.

10. We are mindful of our language. Some of the employees do speak languages other than English but they are banned from doing so within earshot of a customer.

these two are good for everyone to do....

good luck.

duckdown · 01-01-2009, 04:30 PM

Quote:

Originally Posted by mahlere

what about all the misc material needed? do you provide that? or just give them a material list? or just place the order and have them pay directly? Are you able to get the proper hourly rate so that you can actually give up that material markup? Where do you draw the line?

I either do one of two things. I prepare a list of misc materials that can include things such as wirenuts, caulk, glue, etc. Sometimes customers don't bother with the small items and we simply charge a flat fee for this stuff.

I borrowed the idea from my mechanic. Notice how they simply list a shop fee and don't attempt to itemize several drops of oil and some grease...

Quote:

Originally Posted by mahlere

why don't you provide company uniforms? it would make things a lot easier and better.

Sorry, I should have explained deeper. My comment wasn't meant to be limited to shoes, it just that many contractors have been known to wear crappy, dirty shoes and walk across a customer's house.

In the summer, the crew wears logo polo shirts (Think Bestbuy) and in the winter we do button-down oxfords. Uniforms aren't as classy. The only time we don't wear the "uniform" is when doing dirty work such as drywall. If we are doing electrical then it is easy to stay clean.

Quote:

Originally Posted by mahlere

my experience tells me this works on the 1st call of the day, but if you are running service, or multiple appointments, a window of arrival is better. 2 hr windows make most people happy and give you some wiggle room.

We have minimums of four hours and therefore if we have only two jobs max on any one day to account for. On the chance that we are running late, one member of the team will depart the current job to head over to the next job, such that the customer has the perception of ontime starts.

Quote:

Originally Posted by mahlere

that's why god invented shoe protectors...OSHA is not to keen on people doing construction work in socks...

We aren't doing work in socks. What we are doing is removing our shoes when we aren't doing construction work. For example, if I show up at a home to provide an estimate, I will ask the customer whether I should remove my shoes. I will not just "assume" that it is OK to walk across their home with my shoes.

This is especially important if you happen to have customers who were born outside of the United States as cultures other than our own tend to practice this out of habit.

Mike Finley · 01-01-2009, 06:15 PM

I agree with almost everything you said you are doing and think it's great.

However the non-markup of products and materials is not anything to be excited about. And making up for it in your hourly IS NOT POSSIBLE. Show me 2 identical businesses operated identically with the exception of 1 controlling the merchandise being installed and the other not and the latter will not be as profitable as the first, it's simply impossible with everything being equal because there are huge profit potentials that come up just from simple things such as customers doing upgrades and changes in the life of the project manufacturers seasonal incentives, last years models being discounted to the retailer, rebates from the manufacturer to the retailer and on and on. You cannot make up in your hourly wage what you don't even know that you are missing out on.

Vinny · 01-01-2009, 06:42 PM

Quote:

Originally Posted by Mike Finley

However the non-markup of products and materials is not anything to be excited about. And making up for it in your hourly IS NOT POSSIBLE. Show me 2 identical businesses operated identically with the exception of 1 controlling the merchandise being installed and the other not and the latter will not be as profitable as the first,

I agree to some exteny Mike but it really depends on the buisness model and the given industries normal practices.

In the standard home improvement buiness model labor vs material for a given line is generaly consistant. For instance, a roofer can produce x sqft of roof with 3 men and the material is always Y per square. In these model business's the norm is to mark up using "total vloume basis"

But for site work or related business's a 0 to 10% mark up on material is the norm and you are really reselling your labor and equipment at a mark up on a per piece basis. This would commonly be known as "Capacity based Mark up". The times I know of we were able to get a larger mark up on material was when we were able to et the matrial at a score and resell it at the given areas standard price.

But again, generaly speaking site guys are reselling labor mostly because the labor verses material ratio chnages job to job. There may be very high production / very high material volume jobs that while in relation to gross profit margin may be considerably low, the actual dollar amount is rather large. And there is vice versa to that also.

The introduction of a different machine, or 1 more man, or 1 more truck can change the production dynamic by 20 to 50% where normally speaking in a roofer, or sider, or window operation the gain in production by adding another guy may not do anything and you cant use a bull dozer to speed up the changing a sink.

Mike Finley · 01-01-2009, 07:10 PM

I agree with you, it's always dependent on the type of business you are in.

silvertree · 01-01-2009, 07:23 PM

As a remodeler, I couldn't make money without material and sub markups.
I have a competitor who claims he doesn't markup materials, I saw one of his estimates.
$456 to return materials
$4200 for supervision
Ect, ect it was actually funny. But we bid the same job and neither one of us got it, HO said we were both too high. Drove by one day and the HO was out there with a half dozen guys from South of the border.

duckdown · 01-02-2009, 07:59 AM

Quote:

Originally Posted by Mike Finley

However the non-markup of products and materials is not anything to be excited about. And making up for it in your hourly IS NOT POSSIBLE.

If you do some math, how much does it cost you to drive to the supply house, wait in line, etc vs just letting the customers choose?

Now, I am on the clock when I prepare the shopping list for the customer and the desire of a customer to make sure that they get it right translates into more hours. More importantly, I like work where I can get to stay clean and the consulting aspects are the best way to accomplish this goal.

duckdown · 01-02-2009, 08:01 AM

Quote:

Originally Posted by silvertree

Drove by one day and the HO was out there with a half dozen guys from South of the border.

I posted a separate thread on selling against companies who hire illegals...

Vinny · 01-02-2009, 11:16 AM

Quote:

Originally Posted by Mike Finley

I agree with you, it's always dependent on the type of business you are in.

Yea, I suppose. But I will also agree with you Mike.

It is appearent to me that dollar for dollar, if you took a 3 million dollar per year typical (assuming well run) home improvenemnt business and compared it to a 3 million dollar dirt buisiness, the home improvmnet buisness is more profitable and easier to manage.

To make an equitable dollar amount of profit in site work you'd have to do 6 million revenue and because of the iron part of the equation you may net 5% (300k) as opposed to a 3mil per year roofer that can or should be able to net 300k on the lower revenue.

Of course, this is only IMHO, but I also have insight into both of those worlds

MattCoops · 01-02-2009, 12:19 PM

Just the first "clause" of your restrictions would put me out of business. I can see not hiring those with felonies. But misdemenor offenses? Come on, that wipes out 90% of the construction workforce.

You may have not took time to research the word penitent in the term penitentuary.

duckdown · 01-03-2009, 08:14 AM

Quote:

Originally Posted by MattCoops

Just the first "clause" of your restrictions would put me out of business. I can see not hiring those with felonies. But misdemenor offenses? Come on, that wipes out 90% of the construction workforce.

I think it depends on what the crime was. If it was something like drunk driving, then we wouldn't have issue in hiring. However, if it were anything that would be considered in the category of violation of trust: forgery, shoplifting, etc then we would not hire...

Mike Finley · 01-03-2009, 10:42 AM

Quote:

Originally Posted by duckdown

If you do some math, how much does it cost you to drive to the supply house, wait in line, etc vs just letting the customers choose?

Now, I am on the clock when I prepare the shopping list for the customer and the desire of a customer to make sure that they get it right translates into more hours. More importantly, I like work where I can get to stay clean and the consulting aspects are the best way to accomplish this goal.

Well, it shouldn't be costing you anything, you should be making money as a result not losing it.

We can buy a toilet in bulk 20 at a time and have them delivered. #1 we get a discount on bulk, #2 they get delivered, #3 they are always on hand (no drive to the supply house or Home Depot or where ever #4 We know the quality #5 we know the installation

On items you wouldn't stock, they can still be bought online and shipped to you or ordered and shipped or ordered and picked up in bulk trips, picking up 4 different customers orders at the same time.

And lastly it doesn't "cost" anything because you mark it up to retail and make a profit on the items you are selling.

Ask yourself how much does it cost you when you give a fixed price for a job and can do 5 indentical jobs in the time it takes somebody else to do 3? Because you are installing what you know, not some hodge podge of mismatched, bargain basement, on clearance, returned missing parts, wrong sized piece of crap a customer has bought.

Just an little simple example, we make $100-$400 about 3 out of 4 jobs we do for doing nothing more than supplying the customer after the contract has been signed with a nice tear sheet that shows the matching accessories available to them for the faucets (they are buying from us). Each tear sheet shows the matching towel racks, toilet handles, towel rings, robe hooks... etc.. in the matching finish of their faucets and in the matching style. The average retail we charge on this sheet for a towel bar is about $60.00.

3 out of 4 customers will purchase these as an add on. A couple of towel bars, a couple of rob hooks, a this and a that and you have another $300 with $150 of profit built in. The work involved is supplying a customer with a tear sheet and placing an order either online or by phone and waiting for it to arrive by UPS.

We have dozens of opportunities built into our profit pipeline like that, all based on controlling the customers materials that in no way would you make up for in hourly. (We also charge a minimum of $15.00 for each item ordered to install it) So there is your hourly but you aren't getting the mark up on the materials. Nor are you controlling the materials and ensuring a 2 minute installation because you are installing the same things over and over and over again with no suprises.

There are many ways to skin the cat, but trying to say it's more profitable to leave product out of the equation is absolutely wrong. Not when you have customers spending $300 for towel racks with you, when they could have gone to Home Depot and bought an entire set of towel racks for $39.95.

You can stand on the ground of whatever else you like and it's fine but profitability is not one of them, you are giving up profit there is no way around it. You cannot make up for it hourly.

THINKPAINTING · 01-03-2009, 04:49 PM

If you have more work than you can handle..............WOW my hats off to ya.

As for dressing neat, washing trucks, etc etc, I know many contractors who employ the same methods and have been for alot of years, good to hear.

No markup on material, sorry don't buy that. We dont wait in line at HD and then check ourselves out at the cash register, sh.....it we might as well unload the delivery trucks as well...

All our materials our delivered....and marked up as they should be, but if you have more work than you can handle in this economy, and your makin money, what can I say.....except WOW......

THINKPAINTING
www.paintingexperts.com

mahlere · 01-03-2009, 05:42 PM

don't kid yourself...guys who have more work than they can handle, don't charge enough...

charging enough regulates the work to a level you can handle...or allows you to hire the proper help, and pay enough, to properly handle the work...

Mellison · 01-03-2009, 06:04 PM

Never would I initiate a conversation with a customer about whether or not convicted felons will be working in their home. Since I started in 1996 no customer has ever asked so I see absolutely no reason to bring it up.
Not marking up materials in something I do not understand either. As a business owner supplying labor and material, it is certainly within your right. Even while charging an acceptable rate for labor you can be losing several thousands of dollars a year.
Showing up on time is extremely important. Never do you want a customer wondering if you will arrive or not. And after a few minutes pass beyond your discussed time of arrival without your arriving they will be wondering.
Company work shirts are a must. Nothing looks worse than a bunch of guys running around a house or building wearing "street clothes"

duckdown · 01-04-2009, 08:08 AM

Quote:

Originally Posted by Mike Finley

On items you wouldn't stock, they can still be bought online and shipped to you or ordered and shipped or ordered and picked up in bulk trips, picking up 4 different customers orders at the same time.

We have gained efficiency by working on only one or at most two jobs at any one time so multiple pickups doesn't benefit us. Besides, we feel there is much more customer satisfaction when a customer can go to a supply house that has an extensive display and see what they are getting vs just looking at pictures in a brochure.

Awhile back, I remember a customer who thought that a drain assembly for a tub costing $70 was high. They of course went to Home Depot and realized that the stuff they sell was cheaper but otherwise junk and came back from the local supply house with a really fancy one (high quality brass) that cost $150. Do you know how much satisfaction was increased by letting them choose their own?

Quote:

Originally Posted by Mike Finley

Ask yourself how much does it cost you when you give a fixed price for a job and can do 5 indentical jobs in the time it takes somebody else to do 3? Because you are installing what you know, not some hodge podge of mismatched, bargain basement, on clearance, returned missing parts, wrong sized piece of crap a customer has bought.

Our main focus is on home theater which is very custom. I have never ran across any job that was similar to any other. Other than 2x4s, drywall and caulk, pretty much everything else can vary.

Quote:

Originally Posted by Mike Finley

3 out of 4 customers will purchase these as an add on. A couple of towel bars, a couple of rob hooks, a this and a that and you have another $300 with $150 of profit built in. The work involved is supplying a customer with a tear sheet and placing an order either online or by phone and waiting for it to arrive by UPS.

I just put in a towel bar and hooks for a customer that they picked up at a higher-end plumbing house (Modern Supply, Berlin CT) where they sell toilet paper holders for $350! I guess I could have attempted to sell them something of the same quality for around $50 and made a profit, but I could see this going bad in that the customer (or should I say spouse) saw a particular one and demanded that he get that one. Common sense is most certainly uncommon.

Mike Finley · 01-04-2009, 12:01 PM

Dude, I'm not even going to address the nonsense you just replied with, that just says you're in your own little world. Customer satisfaction is having customers driving around town in search of a drain? Uh, huh. There is nothing similar between home theater installations? Uh huh.

And as Mahlere already eloquently stated - anybody who has more work then they can handle isn't charging enough. That's economic contractor law #1.

As I said already there is more than one way to skin the cat, if for you and your business you're more comfortable giving up the profit margins associated with products and materials, so be it. Just don't stand on a soap box and try to say markups can be made up hourly.

Based on silly statements like "we have more work then we can handle" which means you don't understand contractor law #1, it's easy to understand why you don't understand law #2 which has to do with material mark ups.

duckdown · 01-04-2009, 06:03 PM

Quote:

Originally Posted by mahlere

don't kid yourself...guys who have more work than they can handle, don't charge enough...

I assure you that adding transparency to the costs of home improvement helps immensely. In the same way, we desire CEOs of Wall Street to be transparent, we should also do the same...