Vinny

Clearly, I'm with IHI on this. And as stated, its not price fixing if the meeting were informal, or formal for that matter, if the focus was education about costs of running a business and why you shouldnt lower your price.

No one is strong arming anyone into setting a particular price (heaven for bid be associated with organized old italian men) but a open disscution of why a price should be justified isnt wrong, imoral or against the law.

Its done by all sorts of industies, all sorts of organized labor, and all sorts of sanctioned brokerage type businesses all the time. Why should our be different??

Point: call a local realestate brokerage and ask what the commision is to sell a house. Now call 10 other brokarages and ask the same question. I can tell you from first hand knowledge (I use to hold an agents license) the standard rate is the standard rate (usually 6%) with little or no varience accross the board. Theres no law that says they must charge that. They can charge less if they wanted. But they dont because they would be ostrisized (sp?) for doing so.

I have pointed out at a previuos time to Denick that the biggest problem in our industry is there is no one way of learning the busines. No one way of understanding costs, pricing, running a business, and regulation. Its not like going to a business school that you recieve an MBA at Yale, and get the same way of teaching at Harvard.

This industry is unbeileivably splintered into every level of bozo doing it his way.

I mentioned the typical home improvement industry business (roofer, sider, window, doors, gutters). They have a standard way of pricing. Most everyone prices to sell between 45 and 55% gross profit margin of cost of goods sold. For instance, if a window costs $100.00 for the window, and $100.00 in labor to install it the COGS is $200.00. The selling price will be $400.00 +/- among the better educated contractors in that industry. Its because there is a huge host of material distributers, networks, gurus, and experts teaching what it costs to do business and if you expect to do well, this is what the price is. No one is saying you cant sell it for less, but you wont be successfull selling cheap and you cant grow.

Conversly: Its no secret now I'm buying an excavating business. I'm in the process of doing my costs basis. I'm building an excel spread sheat for each piece of iron I will be buying calculating the hourly cost of operation. I am basing all figures off a 5 year ownership. I may own it longer, but if your gonna get ahead of the hourly rate vs the monthly payment when you first do the finance, you cant do it over 10 years. It just doesnt make sense math wise. But I'll bet any money anyone reading this has thier own way of doing this. I know for fact after talking to several friendly competitors most will figure 10 years worth of hours against the dollar cost. OK, do it that way and try to grow a business. The negitive cash flow will over take the monthly average revenue and soon when sales drop off, your done.

Materials: I have heard anything from no mark up to as much as 20% mark up, to "I try to get what ever i can by shorting the loads and charging a little more than the ticket". LOL, theres a business plan.

So here again, no one way of doing things, so my price for a 40,000 lb excavator is going to be totaly different than my competitor with the exact same machine because he may have owned it for 9 years and has no note and runs it himself and keeps it behind his dads house and steals fuel from the service station down the road.

The one thing we need is what has been described as a "business owners union" to help with standard education of a standard method of doing business accross the board.

One more thing. Theres an even bigger problem here. I just came back from a 3 day marketing boot
camp where a guest speaker gave the key note speach at a meeting of marketing mad men The guru, Dan Kennedy, said some pretty profound things we need to understand. He told the story of "circut city" going out of business and why they did go bust. It was explained thier ultimate undoing wasnt that they didnt do things right. Its ultimatly because we (as consummers) have enough stuff. We have enough TVs, computers, oven, cars, machines, houses, office buildings and credit card debt. We have enough, period.

So circut city went out of business not because they didnt know what they were doing it was because they couldnt compete in an enviroment where there were more than enough places to get the exact same crap they were selling with the exact same service, benifits, warentee, color options, whatever!!!!

The same goes for us. There are too many swinging richards that own iron, run trucks, sell dirt, dig ditchs, drive dirty piece of sh!t pick ups and have no teeth.

The point: Be better, be different, be unique wherever possible

__________________
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?

dirt diggler

You know that "infamous" statistic of how the majority of businesses will fail in 2, 3, 5 years (whatever it is) --- you know the one I'm talking about, Vinny??


That statistic isn't there because there's just so many unlucky people in the world. It's there because very few contractors who are able to grasp how to run a f**kin business.


My hat goes off to anyone that steps up and takes a swing. Really. I swear, it takes some damn balls and it takes a helluva man to go out and do something on his own. But that sentiment is worth about as much as a $4.99 Sympathy Card. Because that's all it is ...




So many guys worry so much about paying the bills and how much this is gonna cost, etc. Their focus is on the very opposite of what it should be.



Being in business is not about "putting food on the table" - as the saying goes. That's what a job is for. They are two distinct "things" - and the mentality to do either is completely different. Of course - bills must be paid --- but if the first thing on your mind, upon waking up in the morning, is wondering how you are going to put food on the table ... then you need to reconsider having a business in the first place.




Vinny, what I'm telling you here (or anyone else reading) is about as close to that "Golden Magic Bullet of Success" as anyone can get.

Go back to that statistic ... 80% businesses failing within 2-5 years. Very few fail because their work sucks. And it's not a lack of desire, determination or balls --- hell, you need that stuff just to step up to the plate. Those are all more or less "emotionally-tinged" traits anyways.


Businesses fail because most contractors do not understand how to be profitable. Some do not even really understand what "profit" is. Besides, who wants to be concerned with profit ... not when there's more important things to worry about ---- like "putting food on the table."





Businesses do not fail, Vinny, due to a lack of education "out there." --- they fail because few are able to actually become "profitable." It's as simple as that.





I hope that you can see how this ties into your post.

DD

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Thanks in advance!!!

Vinny

I suppose to that end DD, your point is valid and your right. But being profitable can start with understanding one business, or business in general. So an education in basic business is of the utmost importance. And of course I dont necassarily mean getting an MBA at Harvard.

Lord knows if I had an MBA from Harvard I wouldnt be in this business. I would have had a job on wall street bilking billions of dollars out of the american public. Hey wait..... Thats already been done

I guess were both on the same page Dirt.

BTW, my posts are longer with content. Hitting the "enter key" is no substitute

__________________
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?

Poolman

Great Discussion!

Not to mirror what's already been said, but this is important stuff for anyone thinking about going out on their own(as well as those of us who've been at it for years).

Anyone can step up and blindly start "a company".

It takes someone with a split personality.
Willing to take risks, but conservative enough to keep money in the bank.

You have to be good at what you do. But it's more important to be able to generate work at a profitable level. So you must be part salesman, part craftsman/tradesman, part accountant, part manager(if you employ people), part deal maker(with vendors), and last but not least (on this partial list) JUGGLER. Don't let those balls hit the ground or game over.

It's not hard....but anyone who's currently an employee and thinks it's easy is free to give it a go.

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Scott

Is this going to be expensive?
It's all relative.

JDavis21835

Im game, as long as I can use your dime