How Do You Handle Volume Discounts?

dougchips

I copy and paste...do you really think that I would redo the whole thing? I quote short post HOWEVER, I do not know how to quote just part of a post....

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Gordo

Nicely said!

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Looks like some pros were here.

mahlere

i'm just like a broken clock

maj

That's fine, but like I said....... Why not use the quote box?




Like this

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The views expressed in this post are merely opinions of named poster and in no way shall be deemed meaningful by members of the herd. By no means does anything posted by named poster mean a damn thing for anyone else partaking in this thread.

Gordo

How can anybody bid a CUSTOM tile job by the square foot, especially showers? Unless you are building the same thing a hundred times, you are going to get an extreme variation in prices. I think you said something like this yourself concerning tile backsplashes.

You may want to put everything out to bid at first, then when the cream rises to the top.......use them exclusively. You will have a grasp on their prices after a while...if they get out if line you can talk about it.

Are you bidding these jobs before the sub sees them? Or gathering prices from subs then tacking on your M/U?

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Looks like some pros were here.

Stone Mountain

ALL of my carpenters are independent sub contractors. It is pretty much standard in my industry. Guys like Terry of Decks ETC (on of our members here) has his own company, but really only runs one or two crews ,including himself. I run as many as 12 crews, but because we are so highly seasonal, I use only subcontractors. They supply tools, their trucks, and labour, while I pay for everything else.
Anyway, this year I think I've had the best installers as a group in probablt a decade. I have had virtually no trouble with my decks, and generally only great appreciation from customers. (Fences can be a different story, no matter how good you are or how good a job you do, but that's a ....different story)
Anyway, I was so pleased with the overall work this year, that around July, I raised my basic labour rate by 16%. This is what I pay everybody.
If my customers continue to be so happy, I feel my business will grow exponentially. The more happy customers, the more solid my reputation. The better my reputation, the higher my prices. The higher my prices, the more I will pay for labour. The more I pay for labour, the better that labour will be. The better my labour, the happier my customers. And so on.

A bit of background, for those who wonder about this little diatribe and it's relation to the length of time I've been in the business.
I started selling decks in 1981. In 1990, I bought out my partner (my brother), and went on my own until 1998, when I took another partner.
That partner, (from 98 to Feb 05) cared NOTHING for reputation, and did no prepairs, no followup, treated the men lke sh*t, to the point that I walked out. Since then I have been trying to rebuild my reputation, and it's working. I'm up at least 30% this year over last.

The only time I ask my guys for a lower rate would be on a very large very simple job.

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Bob Kovacs

One thing that no one has mentioned here is that "volume discounts" are more relevant based on the size of a particular job- not the number of jobs.

Whether Mike Finley gives me one 70 SF tub/shower job a month, or 50 tub/shower jobs a month, for each job I still need to do the following:

- Drive to the site
- Set up my wet saw
- Protect the area
- Install and grout the tile
- Clean up, knock down, and drive home
- Invoice Mike
- Collect payment

How does Mike giving me 50 of these jobs a month decrease the amount of time on each individual job, which is the only reason he should get a "discount", since as has already been stated, all I have to sell is my time???

Now, if Mike comes to me with the contract to tile 20 multi-person toilet rooms in a new office building, I'll likely be able to do that at a lower cost per SF, since I save on set-up time (I only set up once for possibly 100 times the square footage), I'M working in larger areas, so the number of cuts relative to the SF is lower, and I've only got to prepare one bill for the 7,000 SF of tile, vs 100 bills for the smaller jobs.

THAT is what gets one a "volume discount"- not more individual jobs.

Bob

Mike Finley

The same way they are doing it day in and day out. The same way somebody bids a custom home, they can do it by doing a take off. My requests of an estimate for tile are not just a "3x4 foot shower with a pretty shelf in the corner". They run on average 4 pages and include drawings and layouts usually down to actual placement of individual types of tile. They include measurements, what materials to use, what wil be supplied, on and on. I haven't had a tile setter yet have a problem figuring out his costs.

Now just to clarify, any tile setter I have used seems to use 3 combined methods for coming up with his costs for job, they use sq footage for areas of tile, they use linear footage for lengths of tile, such as chairrail, or lines, and they use piece rates for things such as a factory made corner shelf. Their prices are very consistant so far. The low guys comes in low the middle guys will come in at the middle and the high guys come in high, consistantly on every estimate.

Mike Finley

I appreciate everyone answers, but as usual there always seems to be a disconnect to some degree between reality and what you should answer on a forum. It's wonderful to hear all the tales about how you run your companies and how paying more for everything will get you more business and make you an angel, and we all know about you get what you pay for and how you have to take care of those who take care of you... and how anyone that even sniffs around at lower prices is the devil.

blah, blah, blah, now let's all step away from the computers and walk outside and have to deal with the real world again where the politically correct answers we post on a forum are just about on the verge of meaningless.
So far out of some 40 odd replys only one person has actually even answered the very straight and direct question in post #25 - the answer to that question is the answer to this entire 50 some odd long thread, yet only 1 person chooses to actually address it.

Very odd.

Gordo

I guess they have an adder in there for when it is an upstairs bath and they have to set the wet saw up on the other side of the house. Now I know why we do all our own tile work.

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Looks like some pros were here.

Mike Finley

More like a beer commercial than reality...

Tastes great less filling... translates to "sounds good, but not based in reality", Bob.

It's going on everyday, in every city of the country. I'm just starting to roll my eyes at the rationalizations going on. Answer the question in post 25 and lots stop all the pretending and posturing.

Mike Finley

Gordo, you give your fellow tradesman waaaaaaaaaaaaay too much credit.

mahlere

Mike's question in post #25


My direct answer in post #38

So again Mike:

I believe that directly answered your question in a quite non-pc way.

Bob Kovacs

OK, I'll answer your question, and I'll even restate it first so everyone doesn't have to go looking for it:

Do you believe that today putting the work out for new bids as a volume of work such as $5000, $10,000 or $15,000 worth of tile setting month in month out, would or would not result in lower bids as opposed to getting the bids based on an individual tile job here, an individual tile job there... (which was how the current rates we have evolved)

Sure the bids will come in lower, provided that you can guarantee that I'm going to get that much work from you every month, and were willing to pay me the difference between what you promised and what you actually give me. I say this because one of two things is going to have to happen if I'm going to lower my price to you and continue to make the money I need to make (because I'm sure as hell not going to work for less than that just so you can get better pricing...):

1. I've got to give up some of my other clients, possibly burning relationships that I've spent substantial time nurturing, just so I can service you- remember, I've only got so many hours in a month to lay tile. I'll also stop advertising, since I don't want to take on too much work outside of the volume you committed to me, since I then wouldn't be able to properly service you. Now, when you don't pull through with all this work you promised me at this great reduced rate, I'm screwed and have to scramble to get back on my feet.

2. I've got to hire additional staff to handle this work, which brings with it all of the headaches (poor quality, hiring/firing, babysitting, etc) that you know exists- otherwise you'd just continue to do the tilework in house (and hire additional staff yourself if need be). Now gone thru all this headache just to give you the great reduced pricing on all of your volume, and again I've got no guarantee that I'll continue to see that work- if you falter, I'm screwed again, and have to lay off my new guys, which isn't good for my reputation.

Now, of course there will always be the subs who are stupid enough to fall for what you're proposing, and that must be your"reality" you're accusing me of not being in touch with. My reality, on the other hand, seeing how the company I work for gives out over $100 million of subcontracted work a year (kinda makes that $5k/month in tile look a little small, no? so maybe I've got a pretty good handle on "reality"), is that the subs who lower their prices just because a contractor is going to give them "so much work" end up getting screwed in the end- I've seen it work out better for the GC than the sub 99 times out of 100, trust me. I've seen some great companies go out of business over this, and never once have I had a sub come up to me and tell me that the key to their success was giving us "volume discounts".

Bob

mahlere

So Bob, if I give you a great price, will I get some of that $100mil?

Bob Kovacs

Sure. We've got a nice little project that's coming up in Jersey City- the electrical package should be in the realm of around $18-19 million- you interested?

Bob

mahlere

uh, i'll get back to you. if it was $17.9mil, no problem. $18mil, a little much

Mike Finley

Once again, not reality. I appreciate the response, but it isn't the answer to the question. I didn't ask what you would do or how you would approach it or how you would deal with it, I asked putting it out to bid to the market place, not to you. Everything you responded with looks to me like it is based on your circumstances.

A little more back ground...
No tile setters I have talked to are fully booked, always feast and famine, feast and famine.

Not a single tile setter I have ever talked to advertises.

Could be a scenario that happens, but I doubt it, haven't seen a single tile setter that resourceful.
Once again, never asked what you would do, talking about the market place. If you don't have a handle on the market place it is okay to pass on answering the question, instead of answering it based on what you would do.

So then now that we are finally talking about the market place and not yourself - yes, you've seen it happen, you've watched it happen... does that mean that in your opinion the answer to the questions in post #25 is it would or wouldn't? Thank you in advance.

Bob Kovacs

Mike-

You already know the answer based on your marketplace- 99% likely, the bids will come in lower, because most subs haven't got a clue what they're doing business-wise.

My point in my responses is to illustrate to the subs who come here, who I'm assuming are coming here to learn what not to do as much as what to do, is that just because "the marketplace" responds a certain way doesn't make it right. I'm sure you'll find that your subs will lower their prices. I'm also sure that as mahlere said, the prices will soon start to rise back up as soon as the subs realize what's happening to their profits. Given that, what's the point of this whole exercise anyway? To get a short term improvement in your pricing?

Bob

mahlere

Good luck Mike.