Mentoring An Underpriced Competitor

Vinny · 02-24-2008, 10:04 PM

Quote:

Originally Posted by Wood_slinger

I’m really grateful that I stumbled upon this thread. I just recently found this website and have been reading everything for the past several days. I find this forum to be a wealth of knowledge.

I am a newly licensed contractor, focusing mainly on smaller jobs like decks and basements, etc. I take pride in the quality of my work, but have been very disappointed in my returns thus far. My biggest problem is that I was “away” from the industry for almost 6 years and just had no idea how much costs have actually gone up in that time. I find that while pricing a job I am always second guessing myself, thinking that my prices are going to be too high, only to find out that I undercut myself. A good example is recently I priced a job that I did not really want in the first place because it was a little further than I wanted to go. I thought that I really padded the price to where if I did get it, it would be worth my while. The HO had two other quotes from local contractors and mine was the cheapest by about 30%. This was when I realized that I was not doing something right on the business end, and hence led me to start searching online for help such as this forum.

I’m a small contractor right now, no employees, work out of my home, etc. Since I do not have previous year sales data it is very difficult to project my overhead, taxes, business expenses, etc in order to add all of these important factors to my prices. I would love some advice on common practices for other companies when they were starting up. I normally price my jobs by figuring out my materials, then estimating the time in which it will take me to get it done. This is just not working for me. I want to be inline with the industry, and definitely do not want to be considered a “hack”, as I feel I offer high quality craftsmanship.

Thanks again for this thread and your willingness to help the new guys.

Wood slinger, I will hopefully give you good but quick advice that maybe someone else in your industry may be able to elaberate on.

Yes, your right, its very difficult if not impossible to know what your overhead is with no previuos years data to look at, so what i would suggest is take your material add it to your burdened labor (that is what you either pay your self or what you would pay an emplyee, which ever is greater plus tax obligations and W/C + G/L) then double that number.

This will give you a 50% Gross Margin.

Then job cost it. I mean job cost every job you complete and catorgorize them on a spread sheet. Then review that info at the end of each month, then at the end of the year and make adjustments accordingly. BTW, I cant stress this part enough. YOU NEED TO DOCUMENT EVERYTHING. This way you will have documented info on what to expect when you hire someone to do the work for you from a production capability and a material use standpoint.

Look at that info next to your prevously completed years P&L and you'll probably start to see how to continue pricing and you can adjust from that if you decide to add employees. You may find you can ratchet down the price a little, still be profitable and sell more work or you may be able to squeeze more money out of your selling if you can raise a price.

Good luck

Vinny · 02-24-2008, 10:11 PM

Ed, I have done this exact thing twice and it can be good or it may be bad.

I had one guy I helped use it against me and one guy I helped did very good with the help i gave away so I would sugest going slow and make sure it dont turn around and bite you in the a$$

Wood_slinger · 02-24-2008, 11:21 PM

Vinny,
Thank you for the advice. I will try this formula on my next bid. I normally do materials + estimated time plus a small % for insurance, but that is about it. I think your formula will have me actually putting a little something into the company instead of just paying the bills. The job costing will take me a little while to get the hang of, but I see where it would be very helpful in the long run.

Thanks again

**AtlanticWBConst** · 02-25-2008, 05:57 AM

If someone is a legitimate business, providing good service, quality work, but undercharging...I'd pull them aside and say something in a heartbeat.
You can't but want to help someone like that, because you respect what they are trying to accomplish.

We have a network of contractors. Personal friends and professional friends. Some of us are competitors, but we all repsect eachother's work and businesses.
We all help each other out from time to time (sending some workers to help catch up on a job, subbing some work, or whatever). We often do lunch (Fridays especially), we talk "shop", and in the process, we mentor each other.

We all need help in this business. We all need friends in this business. Friends will help you, with a simple phone call.

send_it_all · 02-25-2008, 06:59 AM

This thread, while heart-warming and fuzzy, seems very contradictory to the exremely common smart-ass responses on this site to the endless "how much should I charge" posts by the very same legit, yet under experienced, contractors you are all talking about helping now.

I have always been a proponent of open dialogue about this very subject on this site, but I was part of a very small minority here. All the "how much?" question threads here get slapped down rather quickly any more. Of course when someone asks that question, what they really mean is "what am I doing wrong?"

Now suddenly everyone wants to help? I'm all for it.

Thanks Ed.

**AtlanticWBConst** · 02-25-2008, 07:30 AM

Quote:

Originally Posted by send_it_all

This thread, while heart-warming and fuzzy, seems very contradictory to the exremely common smart-ass responses on this site to the endless "how much should I charge" posts by the very same legit, yet under experienced, contractors you are all talking about helping now.

I have always been a proponent of open dialogue about this very subject on this site, but I was part of a very small minority here. All the "how much?" question threads here get slapped down rather quickly any more. Of course when someone asks that question, what they really mean is "what am I doing wrong?"

Now suddenly everyone wants to help? I'm all for it.

Thanks Ed.

The problem with the questions posted on pricing, I've noticed, that illicit sarcastic backlash seem to be these 3 points;

PRIMARY REASON # 1: You can't guess someone's weight acurately over the internet. The same can be said about pricing a job on the internet. There are too many variables, regardless of general sf ranges. A contractor with some kind of experience (even after 1 year) knows this. This leads into point # 3.

2.) The person does not generally start off with: Hi, I'm new to the field, or, I am just starting out, can someone help me ....
If people were a little more humble and sincere in their asking for help, they would get more answers.
Instead, they generally say: ...I have a 1600 sf house, and blah, blah, blah,...how much to do this, or that.
It is usually their first post. Like they come on only to "use" the site (and member's experience) for one thing. That raises some ire.

3.) They list in their title that they are a GC, or remodeling Contractor, or Builder. Then they ask some ridiculous question that totally blows their cover.
If they are such, then they would know the answers to some of the basic pricing questions that they ask.
If they would be honest about who they are, and what they do. They are rookies. There is nothing to be ashamed about that. We all were at one time, and we all still are, dependant on the exact trade we are compared against.

Getting back to point # 1: It can be quite difficult to price anything for anyone on here, because there are other factors involved. No one prices anything over the phone. One job may be such and such price for a 1000 sf addition. The same size addition can be another price, based on the issues that are inherent with that particular addition.

**AtlanticWBConst** · 02-25-2008, 07:40 AM

Possibly the recent points made by Send It All, pose a suggestion.

Maybe the site could use a forum, just for helping out newbi contractors, or contractors who are pricing something that they have never priced before?

A Price Suggestion Forum, or a Need Help Pricing Forum or a Mentoring Forum? Then people wouldn't get all the sarcastic backlash that comes around with the standard "how much", or other basic questions....

send_it_all · 02-25-2008, 08:04 AM

I agree that we can't know someone's overhead costs and such. In my post above, I vaguely addressed this by saying when they ask how much, what they really mean is what am I doing wrong? What I meant by that is that they need help with the estimating process...not the numbers. I think your suggestion (Atlantic) about a pricing/estimating forum is an outstanding idea, and one that would be a HUGE step toward accomplishing Ed the Roofer's goal of mentoring the lesser experienced estimators.

The only problem I forsee with this forum is that it would get repetitive pretty quickly, but I would abslolutely love to get everyone's take on the entire estimating process from figuring overhead numbers to applying them to the price of a job.

A forum like that on this site would be good for this industry on several levels. It would educate less experienced estimators who now undercharge due to not figuring enough o&p into their pricing. (These are the ones Ed is setting out to help). It would be a start toward a semi- standardized estimating procedure which would put more of us into a smaller price ballpark, reducing the chances of being ridiculously underbid by Ed's unwitting hacks...lol.
Even if some of our potential clients stumbled onto the forum it would open their eyes to the reason our prices make it seem like we make $200 per hour.

If this seems like a mindless rant keep in mind that I'm up late...not early...lol.

tnt specialty · 02-25-2008, 08:45 AM

Send it all; While I tend to agree with your comments; There are some of us that are perplxed/amazed....whatever the case may be....That a contractor would "price" his job based on what others charge....

From day one I knew my costs, and that's how I arrived at the prices I would charge.....If fact, when a customer offers another contractor's bid/price for me to look at, I typically refuse until I've presented mine. If there is a considerable differencew, then, and only then would I agree to review the others and dertermine the possible reasons for the wide price difference. Whereby, I may be required to justify my higher price......On a couple of occaisons I've had to justify a lower price! (I can only think of one, but surely thwere must have been more over the past 25 odd years).

When I educate a competitor it's typically to enlighten the newcomer/naive as to particular business dynamics that will affect his/her ultimate operating costs.....He/her ought to have enough sense to figure their individual overhewad costs.

**AtlanticWBConst** · 02-25-2008, 09:01 AM

Bottom line, it is still always good to know what the average rates are around the country and by region...
They may not be the same as others, but it's a feeler guage, that can allow us to see where we are at. We may be able to get more, we may feel we have to charge less, etc..

I know that when I do certain proposals, especially in commercial bidding work, it's more so based on a rate, or SF. Then it is adjusted for the little, or the big, incidentals....

Railman · 02-25-2008, 09:31 AM

It's not too hard to start out using someone else's prices, if you know for sure that it's a for real proven price. Many builders give out their existing subs and suppliers pricing, to help generate more competition, even though it's not ethical. These numbers will usually get you started, even if you don't have the most efficient operation to start with, because your simply don't have the established business's overheads. Also, a started business don't need to have the same expectations for profit. This will only work for a while though. Eventually, YOU HAVE TO KNOW WHAT IT COSTS TO DO YOUR WORK!

Tough love:
Back in the early 80's, my oldest brother (of 7) had good size residential framing company, with over 100 employees. It was common for him to have to compete with guys he trained. One guy in particular kept beating him out on condo projects. So he finally figured out what was going on. The builder was giving out my brothers bid to the new guy, & hence he stole the work. What my brother ended up doing was low balling the next job by about 50%, & sure enough the other guy got the job. He didn't realize what was going on until he had the job framed half way, at which point he just pulled off... lesson learned!

BTW, he remained friends with the guy he mentored.

Moral is : Eventually, YOU HAVE TO KNOW WHAT IT COSTS TO DO YOUR WORK!
Joe

Wood_slinger · 02-25-2008, 11:03 AM

I thought maybe a “newbie” could put his two cents in on this topic. Being new to the business-end of this is sometimes difficult. Especially with the current market as it is, it seems that competition is a little more heightened than normal. I completely understand and appreciate the frustration with some people asking questions such as how much per square ft to price this job and so on, but I don’t really see anything wrong with asking other people if $20 a sheet is too much to pay a sub for hanging/finishing drywall in my area or if there is a better formula to price out jobs and not leave so much on the table.

I have yet to find a good forum in my area to network with others in the business as it seems like there are either very large home builders or the guy who advertises as a handyman to dodge the licensing requirements. I don’t fit either one of those categories. I’m not ready to start building houses yet, in fact, I try to keep my jobs fairly small right now just because I know that I do not yet have the business skill set to handle the larger jobs.

I agree with Atlantic, one has to come to this board a little bit humble to begin with. I’m in my mid 30s and I have spent a lot of my life learning and growing a passion for my trade, but I admittedly have a lot to learn about the business side of it. For me at least, the business end is like learning a new language and I didn’t fair that well at French in school. Worker’s Comp laws and rules, filing deadlines, sales tax on labor (never did understand that), G/L and who is listed on the policy, and a host of other things that tradesmen don’t normally think about. I know, this is all part of doing business, but sometimes one just has to ask some questions. I feel more comfortable asking other people in the business than I do some suit in an office that has never dealt with running a business.

I appreciate the willingness of those to help out “newbies” like me.

SelfContract · 02-25-2008, 11:26 AM

Together we stand, divided we fall.

Double-A · 02-25-2008, 12:03 PM

I might be one of the ones you're complaining about, being hard on folks, but I'm not one to beat around the bush.

Asking for prices over the internet on something that is really not a product, but more of a custom, one off service, such as working in someones home, is just not good business.

Now, asking how to go about pricing that job is something entirely different.

"What items should I include in a proposal, what items should I leave out? What goes into a scope of work? Should I take my workers labor rate and use a multiplier to figure labor burden or can I just add up the numbers and use that?"

verses "My plumber says he'll plumb my second floor bathroom for $2000.00. I think that is too high. What would you guys charge?"

Now honestly, which of those questions can you really answer?

silvertree · 02-25-2008, 08:30 PM

I think we should mentor the guys coming up but I don't see where actually pricing anything helps. Some of us posters say "Guess how long it will take you, add materials and figure what you need to grow a good business". Most of that advice goes unheeded. I have been sarcastic to some of these postings, and remember the good and bad advice I got when starting out. From now on I will only be sarcastic to the idiot postings which are easy to spot. Sometimes it will be hard not to tease the new guys, after all my generation looked for left handed screwdrivers, skyhooks and brass magnets.

Wood_slinger · 02-25-2008, 08:44 PM

Quote:

Originally Posted by silvertree

I think we should mentor the guys coming up but I don't see where actually pricing anything helps. Some of us posters say "Guess how long it will take you, add materials and figure what you need to grow a good business". Most of that advice goes unheeded. I have been sarcastic to some of these postings, and remember the good and bad advice I got when starting out. From now on I will only be sarcastic to the idiot postings which are easy to spot. Sometimes it will be hard not to tease the new guys, after all my generation looked for left handed screwdrivers, skyhooks and brass magnets.

I went after a skyhook my 1st year as an apprentice; I was 18. I must have asked a dozen people before I figured I had been played with. Luckily I never fell for the "metric crecent wrench". Thanks for reminding me of FNG games...

I don't mind taking my lumps in this business. I'm glad to still have all my fingers and toes at this point, so a few bumps and bruises are not going to kill me. Just want to make sure I don't make too many business mistakes if I can help it. My father has always told me, "if your going to be dumb, you got to be tough." I spent a good part of my life being tough, so I'm trying to help grease the rails a little.

woodmagman · 02-25-2008, 09:02 PM

Quote:

Originally Posted by Vinny

Ed, I have done this exact thing twice and it can be good or it may be bad.

I had one guy I helped use it against me and one guy I helped did very good with the help i gave away so I would sugest going slow and make sure it dont turn around and bite you in the a$$

Quote:

Originally Posted by woodmagman

Ed,
I am a firm believer of this mentality, and the comment that Slick made about the thought that work will dry up rings true to alot of guys starting out as tradesman becoming businessmen.
My experience is that if you are pricing fair, based on your costs, you will be maintain growth and as time goes on will begin to either charge more or less based again on costs. The small guy does charge too little, 99 percent of the time. Talking to them today about it will help in the future.
This can be a good reason for belonging to an association or inviting them as a guest to join the association. It shows that professional business do come together for a common goal.
Keeping your enemy closer then your friends is a good way of looking at it aswell. That fact is that he may teach you something.

That fact is that he may teach you something....and if not then why worry.

Publisher1 · 02-27-2008, 03:08 AM

I'm not a lawyer, but think you should be careful when you are discussing pricing with a competitor. In Canada we have the Competition Act; in the U.S. there is anti-trust legislation, and counseling competitors to raise their prices might overstep the rules. (It is okay for me, as a publisher, to give advice to contractors that they are underpricing -- in fact I've done it a few times -- but it would definitely be against the law here for me to approach a competing publisher and urge his business to raise rates!)

**Ed the Roofer** · 02-27-2008, 12:12 PM

Just for clarifications sake, this premise is not and should not in any way at all be perceived as a collusion between contractors and price fixing.

I did make an earlier reference about a competitor of mine, who many years ago, showed me what their bid prices were on similar projects that I was bidding on. He did not show me his price on a job that we both had quoted.

Even with the knowledge of how much more his company was properly charging, I still could not immediately justify to myself the upgrading of my prices to their level.

Rationally, I did not have the same company overhead and other costs of running that a more established firm had.

Irrationally, and self manipulatively, I convinced myself that I would not get enough work if I increased my prices to their level. That would have been true years ago, but as I have built up my company and gotten a firmer grip on true buisness operation costs, I slowly have rode the tide upwards.

Just by having the necessary information alone, does not allow a person to put their faith and full belief in the justification of doing things that they are told. But, it gave me the opportunity to open my eyes and begin to learn from that experience.

Today, I wish to share that learning experience with others, especially those that offer potential as being good high quality craftsmen and have enough savvy to learn the business and accounting portion well enough to flourish.

Ed

Footfall · 02-27-2008, 12:26 PM

I'm glad I found this thread. I am in the planning stages of branching out on my own into flooring, and I was going to do exactly some of those things you mentioned. I had found out the "going rate" here in town for laminate, and I was going to undercut it by a few cents. I never even thought of sitting down and thinking about WCB, CPP (canada pension), etc etc... so I'd thought I'd share what I've done.

I started with "duuuh, I wanna make $50 an hour 'take home' ", and ended up with:

Deductions
WCB - 5.33%
CPP - 9.9% (optional)
Prov Tax - 11%
Fed Tax - 15%
Liability insurance (1 mill) approx $400 / year
Disability - unknown as of yet, covered under WCB to an extent.

Total deductions with cpp is 41.23% plus any insurance, not including vehicle or other costs.

Reaction: "Holy crap, I lost 50% of my earnings!!"

Talk about being schooled.

02-24-2008, 10:11 PM	#22
Vinny View Profile Vinny Captain of the Titanic Send Message Follow Blogs (0) Threads (692) Photos (4) Reviews (0) Projects (0) Toolbox (0) View All Activity Captain of the Titanic Trade: Asphalt Paving,Excavating, Masonry Join Date: Jul 2007 Location: Westport, Connecticut Posts: 692	Re: Mentoring An Underpriced Competitor Ed, I have done this exact thing twice and it can be good or it may be bad. I had one guy I helped use it against me and one guy I helped did very good with the help i gave away so I would sugest going slow and make sure it dont turn around and bite you in the a$$ __________________ Roccies Asphalt Paving The Right Way Driveway Company If you say you cant, your a loser. If you say you wont, your a quiter. Which one do you want to be?

02-24-2008, 11:21 PM	#23
Wood_slinger View Profile Wood_slinger Registered User Send Message Follow Blogs (0) Threads (12) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Registered User Trade: Residential Remodeling Join Date: Feb 2008 Location: Martinsburg, WV Posts: 12	Re: Mentoring An Underpriced Competitor Vinny, Thank you for the advice. I will try this formula on my next bid. I normally do materials + estimated time plus a small % for insurance, but that is about it. I think your formula will have me actually putting a little something into the company instead of just paying the bills. The job costing will take me a little while to get the hang of, but I see where it would be very helpful in the long run. Thanks again __________________ Bryan ************************************************** * Man's actions are the picture book of his creeds. ~ Ralph Waldo Emerson

02-25-2008, 05:57 AM	#24
AtlanticWBConst View Profile AtlanticWBConst Pro Send Message Follow Blogs (0) Threads (2,702) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Lic. GC/Remodr - Commercial/Residential/Industrial Join Date: Mar 2006 Location: New England Posts: 2,702	Re: Mentoring An Underpriced Competitor If someone is a legitimate business, providing good service, quality work, but undercharging...I'd pull them aside and say something in a heartbeat. You can't but want to help someone like that, because you respect what they are trying to accomplish. We have a network of contractors. Personal friends and professional friends. Some of us are competitors, but we all repsect eachother's work and businesses. We all help each other out from time to time (sending some workers to help catch up on a job, subbing some work, or whatever). We often do lunch (Fridays especially), we talk "shop", and in the process, we mentor each other. We all need help in this business. We all need friends in this business. Friends will help you, with a simple phone call. __________________ - Build Well - Last edited by AtlanticWBConst; 02-25-2008 at 05:59 AM.

02-25-2008, 06:59 AM	#25
send_it_all View Profile send_it_all Pro Send Message Follow Blogs (0) Threads (1,989) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: general contractor/ remodeling Join Date: Apr 2007 Location: Orange County, Ca. Posts: 1,989	Re: Mentoring An Underpriced Competitor This thread, while heart-warming and fuzzy, seems very contradictory to the exremely common smart-ass responses on this site to the endless "how much should I charge" posts by the very same legit, yet under experienced, contractors you are all talking about helping now. I have always been a proponent of open dialogue about this very subject on this site, but I was part of a very small minority here. All the "how much?" question threads here get slapped down rather quickly any more. Of course when someone asks that question, what they really mean is "what am I doing wrong?" Now suddenly everyone wants to help? I'm all for it. Thanks Ed.

02-25-2008, 07:40 AM	#27
AtlanticWBConst View Profile AtlanticWBConst Pro Send Message Follow Blogs (0) Threads (2,702) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Lic. GC/Remodr - Commercial/Residential/Industrial Join Date: Mar 2006 Location: New England Posts: 2,702	Re: Mentoring An Underpriced Competitor Possibly the recent points made by Send It All, pose a suggestion. Maybe the site could use a forum, just for helping out newbi contractors, or contractors who are pricing something that they have never priced before? A Price Suggestion Forum, or a Need Help Pricing Forum or a Mentoring Forum? Then people wouldn't get all the sarcastic backlash that comes around with the standard "how much", or other basic questions.... __________________ - Build Well - Last edited by AtlanticWBConst; 02-25-2008 at 07:52 AM.

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02-25-2008, 08:04 AM	#28
send_it_all View Profile send_it_all Pro Send Message Follow Blogs (0) Threads (1,989) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: general contractor/ remodeling Join Date: Apr 2007 Location: Orange County, Ca. Posts: 1,989	Re: Mentoring An Underpriced Competitor I agree that we can't know someone's overhead costs and such. In my post above, I vaguely addressed this by saying when they ask how much, what they really mean is what am I doing wrong? What I meant by that is that they need help with the estimating process...not the numbers. I think your suggestion (Atlantic) about a pricing/estimating forum is an outstanding idea, and one that would be a HUGE step toward accomplishing Ed the Roofer's goal of mentoring the lesser experienced estimators. The only problem I forsee with this forum is that it would get repetitive pretty quickly, but I would abslolutely love to get everyone's take on the entire estimating process from figuring overhead numbers to applying them to the price of a job. A forum like that on this site would be good for this industry on several levels. It would educate less experienced estimators who now undercharge due to not figuring enough o&p into their pricing. (These are the ones Ed is setting out to help). It would be a start toward a semi- standardized estimating procedure which would put more of us into a smaller price ballpark, reducing the chances of being ridiculously underbid by Ed's unwitting hacks...lol. Even if some of our potential clients stumbled onto the forum it would open their eyes to the reason our prices make it seem like we make $200 per hour. If this seems like a mindless rant keep in mind that I'm up late...not early...lol.

02-25-2008, 08:45 AM	#29
tnt specialty View Profile tnt specialty Pro Send Message Follow Blogs (0) Threads (421) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: General, roofing and insulation contractor Join Date: Apr 2007 Posts: 421	Re: Mentoring An Underpriced Competitor Send it all; While I tend to agree with your comments; There are some of us that are perplxed/amazed....whatever the case may be....That a contractor would "price" his job based on what others charge.... From day one I knew my costs, and that's how I arrived at the prices I would charge.....If fact, when a customer offers another contractor's bid/price for me to look at, I typically refuse until I've presented mine. If there is a considerable differencew, then, and only then would I agree to review the others and dertermine the possible reasons for the wide price difference. Whereby, I may be required to justify my higher price......On a couple of occaisons I've had to justify a lower price! (I can only think of one, but surely thwere must have been more over the past 25 odd years). When I educate a competitor it's typically to enlighten the newcomer/naive as to particular business dynamics that will affect his/her ultimate operating costs.....He/her ought to have enough sense to figure their individual overhewad costs.

02-25-2008, 09:01 AM	#30
AtlanticWBConst View Profile AtlanticWBConst Pro Send Message Follow Blogs (0) Threads (2,702) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Lic. GC/Remodr - Commercial/Residential/Industrial Join Date: Mar 2006 Location: New England Posts: 2,702	Re: Mentoring An Underpriced Competitor Bottom line, it is still always good to know what the average rates are around the country and by region... They may not be the same as others, but it's a feeler guage, that can allow us to see where we are at. We may be able to get more, we may feel we have to charge less, etc.. I know that when I do certain proposals, especially in commercial bidding work, it's more so based on a rate, or SF. Then it is adjusted for the little, or the big, incidentals.... __________________ - Build Well -

02-25-2008, 09:31 AM	#31
Railman View Profile Railman Pro Send Message Follow Blogs (0) Threads (700) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Railing Join Date: Jan 2008 Location: Cincinnati Posts: 700	Re: Mentoring An Underpriced Competitor It's not too hard to start out using someone else's prices, if you know for sure that it's a for real proven price. Many builders give out their existing subs and suppliers pricing, to help generate more competition, even though it's not ethical. These numbers will usually get you started, even if you don't have the most efficient operation to start with, because your simply don't have the established business's overheads. Also, a started business don't need to have the same expectations for profit. This will only work for a while though. Eventually, YOU HAVE TO KNOW WHAT IT COSTS TO DO YOUR WORK! Tough love: Back in the early 80's, my oldest brother (of 7) had good size residential framing company, with over 100 employees. It was common for him to have to compete with guys he trained. One guy in particular kept beating him out on condo projects. So he finally figured out what was going on. The builder was giving out my brothers bid to the new guy, & hence he stole the work. What my brother ended up doing was low balling the next job by about 50%, & sure enough the other guy got the job. He didn't realize what was going on until he had the job framed half way, at which point he just pulled off... lesson learned! BTW, he remained friends with the guy he mentored. Moral is : Eventually, YOU HAVE TO KNOW WHAT IT COSTS TO DO YOUR WORK! Joe

02-25-2008, 11:03 AM	#32
Wood_slinger View Profile Wood_slinger Registered User Send Message Follow Blogs (0) Threads (12) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Registered User Trade: Residential Remodeling Join Date: Feb 2008 Location: Martinsburg, WV Posts: 12	Re: Mentoring An Underpriced Competitor I thought maybe a “newbie” could put his two cents in on this topic. Being new to the business-end of this is sometimes difficult. Especially with the current market as it is, it seems that competition is a little more heightened than normal. I completely understand and appreciate the frustration with some people asking questions such as how much per square ft to price this job and so on, but I don’t really see anything wrong with asking other people if $20 a sheet is too much to pay a sub for hanging/finishing drywall in my area or if there is a better formula to price out jobs and not leave so much on the table. I have yet to find a good forum in my area to network with others in the business as it seems like there are either very large home builders or the guy who advertises as a handyman to dodge the licensing requirements. I don’t fit either one of those categories. I’m not ready to start building houses yet, in fact, I try to keep my jobs fairly small right now just because I know that I do not yet have the business skill set to handle the larger jobs. I agree with Atlantic, one has to come to this board a little bit humble to begin with. I’m in my mid 30s and I have spent a lot of my life learning and growing a passion for my trade, but I admittedly have a lot to learn about the business side of it. For me at least, the business end is like learning a new language and I didn’t fair that well at French in school. Worker’s Comp laws and rules, filing deadlines, sales tax on labor (never did understand that), G/L and who is listed on the policy, and a host of other things that tradesmen don’t normally think about. I know, this is all part of doing business, but sometimes one just has to ask some questions. I feel more comfortable asking other people in the business than I do some suit in an office that has never dealt with running a business. I appreciate the willingness of those to help out “newbies” like me. __________________ Bryan ************************************************** * Man's actions are the picture book of his creeds. ~ Ralph Waldo Emerson

02-25-2008, 11:26 AM	#33
SelfContract View Profile SelfContract Pro Send Message Follow Blogs (0) Threads (1,362) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Home Remodeling Join Date: Dec 2007 Posts: 1,362	Re: Mentoring An Underpriced Competitor Together we stand, divided we fall.

02-25-2008, 12:03 PM	#34
Double-A View Profile Double-A Moderator Send Message Follow Blogs (0) Threads (4,618) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Moderator Trade: GC - Remodeling Specialists Join Date: Jul 2006 Location: Arkansas Posts: 4,618	Re: Mentoring An Underpriced Competitor I might be one of the ones you're complaining about, being hard on folks, but I'm not one to beat around the bush. Asking for prices over the internet on something that is really not a product, but more of a custom, one off service, such as working in someones home, is just not good business. Now, asking how to go about pricing that job is something entirely different. "What items should I include in a proposal, what items should I leave out? What goes into a scope of work? Should I take my workers labor rate and use a multiplier to figure labor burden or can I just add up the numbers and use that?" verses "My plumber says he'll plumb my second floor bathroom for $2000.00. I think that is too high. What would you guys charge?" Now honestly, which of those questions can you really answer? __________________ "My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y. New York Times, July 20, 2006

02-25-2008, 08:30 PM	#35
silvertree View Profile silvertree Certified Remodeler Send Message Follow Blogs (0) Threads (3,207) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Certified Remodeler Trade: Kitchen bath remodeler Join Date: Jul 2007 Location: North Oaks,MN Posts: 3,207	Re: Mentoring An Underpriced Competitor I think we should mentor the guys coming up but I don't see where actually pricing anything helps. Some of us posters say "Guess how long it will take you, add materials and figure what you need to grow a good business". Most of that advice goes unheeded. I have been sarcastic to some of these postings, and remember the good and bad advice I got when starting out. From now on I will only be sarcastic to the idiot postings which are easy to spot. Sometimes it will be hard not to tease the new guys, after all my generation looked for left handed screwdrivers, skyhooks and brass magnets. __________________ Vote for Pedro Kitchen, bath, St Paul remodeling Minneapolis Remodel Blog 203K Loan Consultant Minnesota

02-27-2008, 03:08 AM	#38
Publisher1 View Profile Publisher1 Pro Send Message Follow Blogs (0) Threads (283) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Construction News Service Join Date: May 2006 Location: Ottawa, Ontario Posts: 283	Re: Mentoring An Underpriced Competitor I'm not a lawyer, but think you should be careful when you are discussing pricing with a competitor. In Canada we have the Competition Act; in the U.S. there is anti-trust legislation, and counseling competitors to raise their prices might overstep the rules. (It is okay for me, as a publisher, to give advice to contractors that they are underpricing -- in fact I've done it a few times -- but it would definitely be against the law here for me to approach a competing publisher and urge his business to raise rates!)

02-27-2008, 12:12 PM	#39
Ed the Roofer View Profile Ed the Roofer Pro Send Message Follow Blogs (0) Threads (7,135) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Roofing Contractor Join Date: Dec 2006 Location: NW Suburbs of Chicago Posts: 7,135	Re: Mentoring An Underpriced Competitor Just for clarifications sake, this premise is not and should not in any way at all be perceived as a collusion between contractors and price fixing. I did make an earlier reference about a competitor of mine, who many years ago, showed me what their bid prices were on similar projects that I was bidding on. He did not show me his price on a job that we both had quoted. Even with the knowledge of how much more his company was properly charging, I still could not immediately justify to myself the upgrading of my prices to their level. Rationally, I did not have the same company overhead and other costs of running that a more established firm had. Irrationally, and self manipulatively, I convinced myself that I would not get enough work if I increased my prices to their level. That would have been true years ago, but as I have built up my company and gotten a firmer grip on true buisness operation costs, I slowly have rode the tide upwards. Just by having the necessary information alone, does not allow a person to put their faith and full belief in the justification of doing things that they are told. But, it gave me the opportunity to open my eyes and begin to learn from that experience. Today, I wish to share that learning experience with others, especially those that offer potential as being good high quality craftsmen and have enough savvy to learn the business and accounting portion well enough to flourish. Ed

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02-27-2008, 12:26 PM	#40
Footfall View Profile Footfall Tim Horton's is my hero Send Message Follow Blogs (0) Threads (16) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Tim Horton's is my hero Trade: Flooring Join Date: Feb 2008 Location: Saskatoon, SK Posts: 16	Re: Mentoring An Underpriced Competitor I'm glad I found this thread. I am in the planning stages of branching out on my own into flooring, and I was going to do exactly some of those things you mentioned. I had found out the "going rate" here in town for laminate, and I was going to undercut it by a few cents. I never even thought of sitting down and thinking about WCB, CPP (canada pension), etc etc... so I'd thought I'd share what I've done. I started with "duuuh, I wanna make $50 an hour 'take home' ", and ended up with: Deductions WCB - 5.33% CPP - 9.9% (optional) Prov Tax - 11% Fed Tax - 15% Liability insurance (1 mill) approx $400 / year Disability - unknown as of yet, covered under WCB to an extent. Total deductions with cpp is 41.23% plus any insurance, not including vehicle or other costs. Reaction: "Holy crap, I lost 50% of my earnings!!" Talk about being schooled.