Volume And Estimate Pricing

rbsremodeling

Ok here is a thought. We all keep loosing bids to lower pricing. Maybe some hacks, maybe some competitors tightening their belts.

8 Years ago I did a very large volume for a remodeler with a much lower mark up

So lets say using simple math numbers:

400K work with a 40% markup = 160k gross profit

V.S.

800K work with a 20% markup =160K gross profit

For some of you the work or calls may not be there. For me the calls are there but the Prices are decreasing. At what point can you lower markup increase volume and make it work. I have done both and have my opinions just looking for outside views.

The guys that answer what is your average yearly gross??? not looking for specific numbers more to see where your coming from production wise under 500K over 500K?

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Mike Finley

Damn brother, of anybody here you should know that the profit number is related to the companies capacity. 160K on a job that takes 1 week and 160K on a job that takes 12 months isn't the same.

(Work needs to be defined. )

If work means keep profits the same that means that you are lowering mark up and increasing capacity. If not the profits decrease. In this equation capacity increasing means productivity increase or expenses decrease at the same time. Capacity can't mean adding 20 guys to the payroll.

I believe this is exactly what most of us are experiencing

rbsremodeling

Increase the Volume of work and still maintain the same profits.

I think people still want to hire quality companies but the difference in pricing is getting harder for them to justify when the access to money has been restricted.

When the money was easier to come by there was less hesitation to spend it.

So we have the options to increase volume and reduce markup and give the home owner more options that may lower cost.


I just sat on the phone for an hour with a couple wanting to do a basement remodel. I gave them 4 different options. I was the highest bidder but they want to use our company so they are asking for options.

These types of buyers are going to be rare in my opinion

So how to we address the other buyers??

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Mike Finley

I don't know, you've lost me. I either don't understand your point or you are talking about 2 different things at the same time.

That's just business as usual. Good company with scalable systems, that's just business as usual. You increase your sales without dropping your prices and you maintain profit margins as you increase volume and profits increase with the new business volume.

If you mean increase volume, drop your prices and still maintain the same profits, that's different. You'll have to let me know how to do that.

I don't see that increasing volume if volume is defined as gross sales dollar amount.

rbsremodeling

That is exactly what I mean. It is do able some sacrifices will be made but of course it can be done

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Mike Finley

I don't want to be Walmart, and I don't want their customers.

rbsremodeling

Understood but there will always be a Barney's of NY and there will always be a Walmart.

I think by having a discussion like this will give some guys some options.

I agree with your post that not every person/business is meant to succeed and it is times like these that weed out a lot of the hacks or guys with out a plan

But I also know enough guys with fire sale pricing is not going to help us either.

So we either help them leave gracefully or Wise up and do better.

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SLSTech

I think I know what your saying, but there has to be some sort of a trade off. As the saying goes; You can have it quick, you can have it cheap, you can have quality - pick 2 of the 3

Now for instance a drywall sub - starting off they would go broke based off of the Going Rate, as they pick up speed they get more money in their pockets. They will get closer to the perfect triangle but they are specilized in one area only, wheras as for a GC that's alot more difficult.

As a quick side note - if the volume dies off, you will lose your shirt a lot quicker unless you can cut positions as fast

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rbsremodeling

You stay away from the custom bathroom and custom kitchens etc and try to standardize your remodeling more. 3 bathroom packages or 3 kitchen packages and just turn over more volume in less time.

Guys become more proficient and you focus more on the profitable jobs and sub the rest of the work out.

We all know that we should do this but when you do remodeling you kinda go with the flow to a point.

So you focus more on specific types of projects and customers whose expectations aren't through the roof and churn of volume.

Not Bathfitter crap but a medium between that and the custom stuff

Just thinking out loud

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SLSTech

Sorry I was off perusing other threads.

Now you are starting to get into other business trade offs - where you are only known for medium range bath remodels instead of a company that does everything from low range (203k's) to high quality renovations (embassies, high end houses, etc...).

I have looked into the guaranteed 7 day kitchen & bath remodel ideas, packaged deals, etc... & they do have alot of merit. Specializing in a niche is the most profitable business method out there, its just finding the right niche for the area. In Mike's case it is the high end baths, Greg's would be high end decks but what happens in a downturn like were in now. Is your niche in your area still going to be there & if it isn't what else can you jump over to quickly if need be?

Another thing to consider for those package deals & guaranteed 7 day jobs is storage. The guarantee doesn't start until all the components are in & you start working on the place, you have to store those materials until you ready to go. As for the package deals, you need to keep enough of the harder to get items on hand - JIC & rotate stock.

Who knows, I may actually go this route starting in July, or I may stay just the way I am for a bit longer. D@mn buisness plan is stuck on Year 2 at the moment...

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Certified Energy Efficiency Audits, Ratings, Modeling, Verifications, & Consulting
Residential, Commercial, & Industrial Infrared Thermography Scans

HomerJ

This post hits home for me.

Given my customer demographics, the availability of quality subs, and the overall market conditions, my pricing methods will likely fall in the range you've described here.

In addition, I'm working on a means to provide customers with easy to understand pricing. The aim here is to take some of the mystery out of the way jobs are priced and to take some of the haggling out of the equation. Not exactly like the CarMax model, but something similiar.

Realistically, we'll be doing some quality work that we can be proud of. But, we're not going to be building the Taj Mahal every time out.

If we can land more jobs using this model, and control expenses, we should be able to hit our profit goals.

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Northwest Indiana General Contractor
Northwest Indiana Remodeling Contractor
Indiana Bath Remodeling
Indiana Kitchen Remodeling

rbsremodeling

Exactly what I was thinking in my mind. There is bathroom remodeling company advertising a $9,999 bathroom remodel. 3 piece Kohler fixtures, matching faucets and accessories, replacement tiles and paint job. Basically a swap out with nothing moving.

I priced out the material at $2000-2500 Bucks. That's a 5-7 day job for one guy. Standard 5x8 bathroom.

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Brock

Nah that bath guy would go broke in my area. That bath would be bid for 4-7 k by 20 companies if they wanted to get that many bids.

Brock

You know thats the one thing I never understood about this forum. I've been on for a little over a year, and it is shocking to me how wide the variations are on pricing around the country. I'm not talking about what anyone charges. I'm talking about what customers are willing to pay. It's all about cost of living and ect. I get that but the ranges are so extreme.


I need to move.

HomerJ

Yes. I think you're onto something with this. As Brock pointed out, the pricing would need to be adjusted according to what your market will bear.

If you can figure out a package price for a basic facelift that allows you to land more jobs and still make a profit, you're ahead of the game.

I'm looking at doing a good, better, best pricing program for kitchen and bath facelifts. The main difference between the three tiers would be the fixtures and materials involved.

In the good category, we might offer 2-3 colors of basic ceramic tile. Better might include 2-3 colors of natural stone.
Best might be glass, or other specialty materials.

We could do the same with the fixtures, accessories, cabinets, etc.

Demo and haul away need to be accounted for as well. I need to figure out how to incorporate that into the basic price as well.

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Northwest Indiana Remodeling Contractor
Indiana Bath Remodeling
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WarnerConstInc.

Rory-

I have been doing this for several years now.

I have 3 different tiers of bathroom re-do's.

Always give 2 or 3 options for Kitchen Cabinets along with differnt level counters.

It goes on and on for me. I will do the same quality of work wether it is a PT pool deck or a full composite front porch re-do.

People around where I am at know what kind of effort I am going to put in no matter if the cabinets came from China or my buddy built them all and fabbed up a solid surface counter top.

The one thing you need to lay out to customers is that with a lower quality product you con sometimes only make it look so nice.

scuba

We have always specialized in bathrooms. The ones we have always liked best are the 6-7k jobs. A couple thousand for the materials, in and out in 3-4 days. We don't linger long enough for anything to go wrong. We have done literally thousands of these over the last 30 years and have them down to a science. We can be very competitive and make the profit we want.

There was mention of the $9,999.00 bathroom with Kohler fixtures and such. To me, this price is not competitive. A typical swap out should take no more than 40 hours (using all in house labor). That's demo, new tub, shower faucet, walls, shower doors, floor and toilet. A vanity sometimes but more often than not they only put on a new top. So you spend $2.5k on materials and 7.5k on labor. That's $187.00 / hour. That is not competitive. They're probably spending more like 4k on materials and taking longer to do it.

I'm finding that the work out there right now is the stuff that people have to do as opposed to what they would like to do. They are the ones we are focusing our marketing on.

Sorry to ramble.

ottagosoon

That means that ever penny spent for overhead on the 400K must be the same for the 800K.
So if you are doing 400K with 4 mechanics and they all have a phone and you fine that doing the 800K worth of work you need 6 mechanics. Then two of your mechanics can't have a phone because that would increase your overhead.
The mechanics are part of your job cost and your phones are part of your overhead. I like sticking the little faces in.

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Can't Say That Here!!!

Mike Finley

Rory - basically you're talking about changing your business model. That's all you're saying. You're talking about introducing or changing what you do to something else.

Why? Because right now the only people in the market don't fit what you do? What would you do if tomorrow everything turned completly back around 180 degrees? Would you still be caring about adding this or changing what your company does or would you forget it in a hot second?

Why would you change your business model just over temporary economic conditions?

If you want to add this or anyother thing your can come up with to your business then do it, do it because that's what you want to do. But changing what you do just to capture a market that you really want nothing to do with makes no sense to me.

I could start selling gum to customers while on estimates, but wtf would I want to do that? I could start offering umbrellas on my website, but why?

I'm not going to start second guessing my product or services. I say to myself "what worked in the past will work again in the future" and am sticking to it.

There will be a back lash on all the low ball hacks in the market place. They will not be the new market. Maybe I am naive, but I'm not buying into this crap going on just yet. It's too soon to start doubting everything you built your business on.

outlaw

I think you are going in the wrong direction. Last year I RAISED my prices tremendously. I am at least 30% higher than most of my competetion. I dropped from 3 mill to 2 mill. But I made sooo much more money. And my customer service is now second to none!