Is This Right?

shed-n-deck

I see all sorts of questions about "How much should I charge" on this forum. My question is this: Would it be wrong if I were to mislead somebody into believing that they should charge $0.50 per hour to do their job? It's always tempting to give some of these questions such a wrong answer that it might hurt, not that I want to hurt anyone, but I just don't get how somebody would ask for pricing advice unless they really just don't know....And if that's the case, then they are trying to take advantage of our mistakes.....Mistakes which may or may not have cost us (me) lots of money.....Mistakes that everyone needs to make in order to effectively come up with their own pricing.

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Shed

wackman

Lots of guys started out as tradesmen then turned business owner and consequently are weak in that area.

I know I am and that's exactly how I did it. I learn new things everyday. I buy books, call people and ask questions, come to forums like this, estimating software....

Whatever it takes to learn.

It's normal in our profession that they're not going to be sure about bidding and pricing at first. Can you really blame them for asking the questions? They have to learn somehow and I doubt anyone wants to learn everything from the school of hard knocks. Plus every profession I know of checks and price shops their competition to use as a yard stick. Apartment communities check each others rent pricing, tv salesmen check the prices at their competitors. You do need an idea where you place to truly be successful.

I think it's smart to try to find answers in any way you can and that includes asking questions from those that know the answers on these forums.

Remember all they're doing is what we did too. I know my old bosses and friends who were already contractors didn't like it when I started up shop because I also became a competitor to them (with inside knowledge of their operations) but they all still helped me when I had questions and I respect them for that. They're honorable people because of that.

If you feel like they're trying to take food out of your mouth and you don't want to help them, then simply don't answer them.

Besides, most of these guys aren't even in my area so they won't be competing with me regardless. Why wouldn't I help if I can?

My 2 cents.

Wack

Celtic

You get what you pay for....if a person is willing to limit their choices to a free forum on the internet .... caveat emptor.

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RizzoMaryland

I don't understand how people in this business, whether they were originally tradesmen or not, do not have a clue what to charge. Is it that they dont want to rip someone off (including themselves)? Or do they not know what the market value of something is? Trial and error is the best way to learn going rates for different types of work.

You see a lot of "price for crown" posts that really makes you wonder. This is about as simple an estimate can be. One element of material to consider and only one phase of installation. Maybe they are new to the business. If that is the case they need to learn quick or get out of the way because its bad for the rest of our businesses.

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"An idea is salvation by imagination"
Frank LLoyd Wright

thom

Unfortunately, there are a number of guys who really don't know what things cost. As the construction economy continues its descent there will be an increasing number of unemployed tradesmen looking to make a buck to pay the rent. They won't even consider things like licensing, permits, fees, workmens compensation, liability, withholding taxes, cost of vehicles, cost of tools, time to make bids, time to pick up materials, this list could go on forever. If you are a professional remodeler you will be competing against these guys, more and more. Your customer will ask, maybe just to himself without talking to you, "Why is Bill Constructor $$35,000 when Joe Carpenter is $15,000 for the same job?"

Now, Joe Carpenter may not be around long but, there are thousands of replacements for Joe just standing in line.

The customer likely will find they didn't get what they wanted, though they did get what they paid for (crap and headaches probably incomplete work). Joe will find he didn't get what he expected, he worked for a couple months for nothing. AND, the real contractor who knew what he was doing didn't get the job. Bill Constructor sat home and watched TV. Everyone lost.

And this scenario will play out Thousands of times nationwide.

orson

Firstly, it's not that I don't have a clue what to charge. I am in the process of writing up a business plan and figuring out how I am going to structure my business. To do this I need to write a business plan and secure financing. To do this I need to project margins. I have no problem projecting margins based on what I would like to make and how much I would like to reinvest in my business.I also have no problem projecting my cost overheads and doing estimates based on materials and man hours, however, if I just sit here and invent profit margins I run the risk of having banks reject my request for credit based on unrealistic projections. I can't determine whether my projections are realistic or not because I cannot find information on construction pricing that gives me a clear idea of what types of gross and/or net margins remodelers are getting. If I was in most other types of businesses I could just look up the pricing of my future competitors and decide where I wanted my business to fall in that range based on whether I was going for a cost leadership, differentiation or niche strategy. It's not that I haven't looked either, or looked in a variety of sources including in books, online in various locations. I'm sure I will eventually find the information I need, but I am curious as to why you guys are so afraid to post information about your pricing. As you mentioned, it is not good for anyone's business when people are lowballing construction bids. As a matter of fact, it is probably the single biggest problem in the industry that I have seen, particularly for employees of construction companies whose opportunities for good wages are continually getting squeezed as bidding gets increasingly competitive. Given this logic, why are you guys so resistant to making a simple statement about what is a common industry profit strategy? i.e. "I go for an average job cost of 50%(hard costs) and I usually net about 10%" How would making such a statement adversley affect you? How is that type of information so super secret that it's going to give someone else a huge starting advantage? In most businesses this type of info is pretty common fare, I'm just having trouble locating it for the remodel business.

Double-A

Markup and Profit, A Contractor's Guide by Michael Stone

He goes into good detail about several of the questions you have.

As for real numbers, what are they? For me they are one thing, for you, another, and for Tom R, they might be entirely different.

That's the beauty of this type of business. You can be big, small, a big fish in a little pond, or a small fish in a big pond. It doesn't matter.

You just need to find what will work for your intended type of business.

Saying I shoot for a 50% gross margin is meaningless if all the more remodeling I do is to install door knobs.

One other thing is competition. Proprietary information is just that, proprietary. Sharing that with some competitors is fine, and healthy, but sharing that with the guy next door can invite unwelcome pests to the party.

Contact your local SCORE chapter and find a mentor from within their ranks. They are a gold mine.

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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

Mike Finley

This is the God's Honest truth.

orson

Now that sounds like good advice, thank you.

RizzoMaryland

That information is irrelevant to you. It makes no difference what I charge. I may charge $350 for installing 40 linear foot of 3 1/4" crown paint grade on an 8' ceiling with 4 inside corners. Tell me how this helps you running your business or writing your business plan. Or, probably the most interesting, how you will secure financing because of this information. If you don't have any idea of these costs then you shouldn't be thinking of securing any financing or even be in this business.

It is not that we are withholding information from you as much as it is the fact that we are protecting you from falling off track of what is important to YOU. It doesn't matter what I do. What do YOU need to do to be successful in your business?

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"An idea is salvation by imagination"
Frank LLoyd Wright

Kingfisher

I first came to this site after 17 years in construction, 11 as a GC, 8 of owning my own company, but only 1 of running a construction company on my own getting jobs and being the prime contractor. Its nice to get opinions and thats what they are, you still need to judge them yourself. I find most are good if the question is good and if it's bad the answers are too. If you're doing work over your head it's good to look for help but are you asking the guy you just under cut for it And the HO just need to blow off

MY 2cents

Tiger

orson,

The most important thing about securing a loan is your collateral and good credit history. IMHO, the business plan is a distant concern. Don't expect anyone to loan an amount greater than your existing assets.

Dave

MattCoops

My dad would always tell me: It's better to learn from someone else's mistakes than your own.

But I see where you're coming from.
I think if you don't know how to bid a job, then learn how or pay someone else to do it.
I answer the "how much should I charge" question the same as a "what should I name the company" question. It's your business; do with it as you see fit.

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Matt with Cupan Custom Tile & Paint of Lowell, Massachusetts
Design and installation of ceramic tile and natural stone for floor, wall, and countertops
(978) 601-8774 | cupantile@gmail.com | view tile pictures and more

Aaron111

I say go with your best gut feeling

LNG24

Dave,

Have you ever applied for a new business loan? Yes, your past credit and collateral will play a part, but not a big part! A proper business plan when submitted to the right banks will net you all the capital you need to not only start up the business, but also to get you through the first few UNPROFITABLE years.

Most businesses do not realize a Net Profit for the first 3-5 years as you pay down large capital purchases.

Many peopel just choose to mortgage their homes to finance their new and unplanned business venturn only to end up loosing just about everything.

And remember; If you don't plan, you plan to fail. But, you should also have a Plan B to address the unknown such as sudden economy shifts, major competitors moving in next door, product or business not getting received as you planned on, or in my past; A major Highway realignment causing huge traffice delays keeping 90% your customers away.

CaliDesigns

What I find interesting in this forum is that most people don't want to give up there pricing. I'll give up my pricing all the time. You know why? Because I am not scared of someone taking all my work. If you are a true tradesman, you can back your **** up! If not, your just another joe shmoe trying to make a buck.

shed-n-deck

I'm not scared of giving up my pricing, just take a look at my site. What I'm scared of is giving up my pricing to somebody that can't come up with their own pricing structure. If 7-11 asked Safeway what to charge for a pound of Bologna, 7-11 would have gone out of business a long time ago. I'm also not so sure if I would feel comfortable going to an optometrist who had to call another office to find out how much he should charge to give me an eye exam. My point is that only you know what your time(skill) is worth, so why in the world would you be asking me...or anyone else?

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Shed

LNG24

I think that is the main thing. MOST DO NOT! Most guys in a trade that go out on their own are typically good at the Skill, but haven't a clue as to the back end. Why? Well, simple put, they have not been there to learn it. A good accountant can help you set up pricing structures. They typically have access to isdustry standards for things such as What should my advertising budget be from cost of goods to insurance.

How many people just tack on the cost of material and forget about carrying the expence until you get paid? Same thing for labor and taxes. and just about everything else.

So What they are really asking is not WHAT should I charge, but HOW do I figure it out.

Taking on a new venture is scary. Not knowing is even scarier.

I think most of us come on here for one of two reasons. One to just talk shop with others and the others to find answers. I know I have asked my fair share, but I do not believe I can ask without answering a few as well. Like Bartering, its a give and take.

I get HOT when someone is getting in over their heads. I don't want them to make the mistakes I made, but sometimes you just have to let people do it. I was in over my head when looking to demo a fireplace without doing the chimney first. I was fortunate enough to have some very knowledgable guys educate me on its construction so I now know how it goes up and therefore I can figure out how it should come down.

So my best advice can only be: If you are going to ask a pricing question, you have to lay it all out there. Size of your operation, Past Experience, Labor Rate for your area. Materials Costs, How much will be in house and how much are you subbing out, Plans, Specs. etc. Don't simply say, How much for this job?

Grumpy

You find most of the time the people asking a price or the going rate, don't know how to properly price a job. You also find sometimes it's a buyer making sure the bidder is being honest. You also find guys like me who, when bidding something odd ball or for the first time, want to make sure not to be shooting myself in the foot.

I first factor in my own costs, as I think they are, and then I want a reality check. I ask colleagues who have done similiar work what they think they'd charge. Sometimes I ask those colleagues online and sometimes in person. If I am lower I certainly raise my price. If I am higher, maybe that's a good thing. Don't get me wrong I don't ask often, but rest assured I'll ask again.

The only stupid question is the one un-asked.


Would you be out of line to purposely lie to someone? That's an ethical decision that is up to you and your set of moral values. Would you purposely give someone the wrong directions when they ask for main street, knowing it's south but telling them north? I don't see a difference betwen the two scenarios. If you don't want to help someone isn't it just better to shut up instead of purposely misleading someone?

E plurubus unum(sp?), let the buyer beware. The same rule applies here. Let the reader beware. If it sounds too good to be true, it probably is. What is the perspective of the person answering?

If it's Joe Schmo who has been in business less than a year and does a little of everything, you might want to rethink trusting his answer... he might not purposely be misleading you but possibly just doesn't know any better. Then again if it is John Specialty contractor who does every day what you are asking and has a proven track record of giving sound logical advice... you might be in good hands.

Ed the Roofer

It is "Caveat Emptor"

Ed