Would You Lower Your Prices?

Vinny

This may seem more like a rant or diatribe but I think its worth a thread.

I started paving for a very well known very high end landscape company down my way about 3 years ago. These guys are at the top of thier game and the wealthiest clients out there are thier clients. I got thier paving busness because they had problems with every other legitamate paver in our area. The last guy was really cheating the jobs and it eventualy showed up, so they were seaking out a new paver sub and found us.

Anyone that has ever used us around here will tell you I am a no B.S. person when it comes to quality and service. I absolutly refuse to sacrifice either of those atributes even if I feel like I've been beat up on a price, I will do what is right, often to my detrement. But the cost of that level of quality and service cant be delivered on the cheap so consiquentialy my price is high. But thats not to say its outragious. We sold 3 million worth of work last year about 60% of which was to fresh homeowner based leads and about 40% to contractors. Niether of which would have used us if they thought we were too high to even consider.

For the first 2 years all was well with this landscaper. Then last year price suddenly started to become an issue. It seemed like every time i gave a price to this guy it was questioned or grumbled at. I even took a couple of beatings from old priceing on old propsals that his clients accepted after a year being out there and I didnt raise the price(though its in my quote I am due it) because I wanted him to get the jobs. (keep in mind we are talking about a 300k per year account here).

This year he really came at me looking for major price consessions and it eventually ended in an argument.

First, the priceing I have been giving them hasent changed per unit, with the acception of the price of asphalt going up, in 3 years. Second, If anything I should get a better and increasing margin on accounts like this because the trust factor should be ever increasing. Third, I deserve profit on every job. Forth, I'm sure his clients can afford it. Fifth, we have never had a job go bad. We always delivered the job at the best quality on the date he told us we needed to be there(sometimes at the detrement of my other clients)

If this were a one time thing I may say, OK. But its becoming worse with every consession I make and he's making me feel like I'm wrong here. Like I'm the bad guy.

This exact thing is one of the reasons I hate repeat accounts. It breads familiararity that breeds a sense that we owe them something. Well, that may be, but where would it end.

Anyway whats your thought??

__________________
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?

woodchuck2

If you have a solid reputation then stick with your current pricing, why give in? Thats what they are hoping for, less profit for you and more for them. In the end you get what you pay for. If he wants to get cheap then tell him to find someone cheaper with the same quality work, if that person were out there he would already be using them.

mahlere

does the red flag show up yet?

fhdesign

It is a rant...you answered the question very well by saying you're not going compromise the quality of your work to accommodate this one customers request for a less expensive price.
So keep ranting it's a great way to express frustrations about a "tough to deal with" customer so you don't have to argue with them.
It truly sucks losing a good (or at least big) customer, especially in these times, but if you have to part ways...try not to burn any bridges, leave the door open so he can call you back in the future.

denick

Vinny,

The storm is brewing Vinny in many places. People are seeing rough seas ahead and some are changing course others seek an advantage to stay a float.
What do you see Vinny? Your the captain set your course and put into the wind.

If you can keep your head when all about you
Are losing theirs and blaming it on you;
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or, being lied about, don't deal in lies,
Or, being hated, don't give way to hating,
And yet don't look too good, nor talk too wise;

The first part of IF, by Rudyard Kipling

__________________
Nick

"Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

Poolman

Hey Vinny,

I feel your pain. We have had occasion to work for very high end landscape firms and be a multiple-job sub. In the end it depends on the people you interact with at the co. your working for. We had to split off from the landscape co. because of what your rant was about...entitlement feelings on their part, lower pricing on subsequent jobs, etc...
BUT we did pools for a firm that flips high-end houses. So far 3 pools in 3 years, and a large $ renovation of a pool. Last year nothing, but they were renovating a home on shelter island and I gracefully declined going there to build a pool. Still maintain the pools we built for them and they rent out one of the houses, so I am in contact with them regularly. This is a relationship where they don't quibble over the price-we are higher in general-but they get quite a bit of special treatment as well. It works in this case.

I guess my experience tells me some clients work, some don't, and some work for a while then you part ways.

Scott

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Scott

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

rino1494

Right now, the economic crunch is hurting the middle class. You say that this guy works for high end wealthy customers. High end wealthy customers tend not to care about price, but they care about quality. Explain to him that you have bills to pay and a family to feed. Ask him in the past 3 years that I have done work for you, has there ever been a problem. Explain to him that you provide quality work and ensure no problems and with that comes a price. You provide no headaches to the homeowner.

Give him a price, if he is not willing to work with you, then tell him that you are sorry and hope that we can work again the future.

Another thing, you say that this customer gives you $300,000 worth of work, yet you do $3 million worth of work per year. That is only 10% of your total work. I am sure that you can make up the 10% somewhere else.

Only you know the answer to this Vinny.

__________________
Life is hard. It is harder when you are stupid

Uncle Sam wants YOU....to speak ENGLISH

mahlere

i thnk you are on the right track, but make one thing clear....thety don't get special treatment, they pay for it.....if they don't want to pay for it, then they don't get it....and if you charge for it, you better give it....carry on

Vinny

Thanks for the advice and support guys.

I dont want to be unfair in all this but I,ve worked way to hard and struggled way too much to get this buisness where it is now and I dont want to let someone try to lower me and my buisness to a level down.

The only way for me to do better on price would be to turn myself and my super into field workers(not that I cant and not that I think its below me. but been there done that) and I would also need to fire my sales people, office help and 2 foreman. Of course, at that point I would be much like my competitors and while my quality will stand and price can surely drop, I wouldnt be able to service all I have promised to service and would have to consider changing mine and my familys life style( which is far from extravigant).

Now it is possible if the slow economy turns into something like a small depression, I will have to do exactly what I wrote above but its not what my plan is and I inetnd to do all i can to not go in that direction on purpose, thats for sure.

The bad economy will hurt the middle class working stiff like me and my employees in the end because of inflation but it wont hurt this guys clients one bit and they are willing to pay more for great service and qualiity so I dont know why he's doing what he's doing but I cant be a part of it.

This just edited in: It suddenly dawned on me. This one client is the only whiner. I did about 250 jobs last year, 100 contractor and 150 Home owner. The contarctor ones were not soley with that one guy. I did quite a bunch for several other repeat accounts and didnt get this level of B.S. from anyone else. Its sad, they pay great but I gotta wonder if its worth the stress.

__________________
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?

denick

Vinny,

Let me know this clients address and I'll bring down a 10 ton tow behind sheeps foot roller and visit his driveway at 2 am!

__________________
Nick

"Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

Double-A

I think you've already made up your mind on this guy and are just afraid you might be cutting off your nose to spite your face.

A gentle reminder to him that he's getting what he pays for in spades and how you have looked out for both his and your best interests (price increases for materials only, zero call-backs, schedule performance, etc.) should adjust his perspective a bit. Perhaps his profit on your job should drop a little if he feels the final price to the client is too high?

"You guys have been good to us, nice and loyal for 3 years. I repay that loyalty by passing along only material increases and looking out to do an excellent job for you and your client. No call-backs, no complaints, done on-schedule. So, what did I do to deserve the static over my prices? Asphalt didn't go down. Wages didn't go down. Fuel and insurance didn't go down. Where is this magic price drop supposed to come from? If I take it out of profit, then my business suffers and I can't afford to work for you anymore.

Why do you come to me on the day of my daughter's wedding and ask this thing of me...."

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

Tim Doyka

Could this have been the reason that the other paving subs got out or did a half assed job because once this guy roped you in then changed the rules. I would not lower my prices one bit hopefully you can make up the work somewhere else if he decideds not to use you.

rbsremodeling

Lowering your price may seem like a bad thing to most but it could be necessary at times.

Right now with the remodeling market in a down turn I am going to lower my prices 10-15% but I am going to raise my dollar volume 50% to cover the difference. It means longer days, me and my guys being more efficient. Really watching costs and extra's but I will essentially, base on my mark up and volume make more money. If this guys gives you enough volume and you need the work it might be worth it to drop your prices slightly to keep the business in this market and plan and attract business else where before you cut him loose.

Just another way to view this

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Vinny

Now theres an idea I like

__________________
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?

Vinny

Yes, i've thought of this from that angle as well. Its a hard decision to make because first of all, the season hasnt even gotten started. Theres plent of speculation out there along with the nations bad news, but that doesnt mean we'll be hard hit here, or at all. My busness rely's very little on speculative new construction so I may not experience the sam eissues as someone that does.

And if i lower his numbers for this job, or going forward fro the balance of the season, when do I get to raise them? When He says I can? Thats not my vision of my buisness.

It is my plan as well to increase total buisness (thus reducing OH per job) but inevitable I will need to hire more supervisory help that will once again require increaseing OH cost (vicious circle) so I gotta be carefull not to reduce margin too much if i do lower price.

Anyway, I dont want my buisness model based on someone elses vision of how i should be set up.

__________________
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?

Vinny

I was thinking the exact same thing. I'm friendly with one of the guys before me. I'm gonna call and ask.

__________________
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?

tgeb

There is a lot of excellent advice above, I'm not sure I have much to add, but I'll throw this in for the heck of it.

I had a customer that I had done work for for years, he was constantly telling me that the price was too high, I had to cut him 5% or 10% so that "we" (his business & mine) would get the job. Usually, I would find out later he already had the contract locked up and was merely looking for a little "extra" to line his own pockets.

Even when business was brisk and you could pretty much name your own price this guy was telling me how tight the budget was and I had to keep my prices down.

Eventually I decided not to fall for this guys BS and held the line on my pricing and even raised it some. I have not done a project for him in about 4 years. It has been the most prosperous years I have ever had.

I looked at a job for him recently and gave him a quote, He started with the same old line of crap, "Tommy", he says, "Your price on the concrete work is good but your excavation and hauling is more than we have in the budget. What can you do to get your numbers down?" I don't miss not having his work at all, in fact it has been a stress relief, not having to worry if I am going to make enough to cover all the costs.

The customers that I have now are loyal and usually get me to give them a preliminary quote so they can make sure there is enough budget to have my work done properly. I take good care of them and they know it.

I think I would consider going to this customer of yours and ask him why you should do work for him and his clients for less than you are working for others. That to me is a problem waiting to happen when you get torn between 2 jobs, and one has to be first and the other has to be rescheduled. Which one does he want to be?

It is tough to "fire" a customer but sometimes it is worth it.

God luck with it Vinny, I am sure you will do the right thing.

And if not, Nick knows how to handle this guy!

__________________
Tom

www.gebcon.com

dayexco

you know, you need to get what you need to get! pretty simple. typically a good working relationship means that you'll perform as when promised, and do a job where he's not hounding you to come back and fix problems, running up and down the street paying off your subs or suppliers or have the threat of a lien placed on his job. i've gone thru this quite a few times. good customers/gc's leave because i was too high, many come back. i let them "kick the wheels" on the competition once, then i scratch them off my list, refuse to work for them. i've had a few occasions they want you back, only to correct inferior work installed by competitors...that also i refuse to do.

you know...you might want to present it to him this way.....what he's doing, is driving up and down the street looking for a hooker. stops by you, and you want $100. he's used you quite a bit, happy with results...but then he sees a hooker down the street holding up a sign offering her wares for $20...off he goes. problem is, that hooker can't get him off, or gives him a virus in the meantime that he has to chase down and get corrected/cured. most times, the "john" wants results, GOOD results. smart ones return.

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someday, i'll be as patient as Nick.

denick

And you know this because????? day?

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Nick

"Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

tgeb

Hey, the man just got back from Vegas.....

keep it quiet.

__________________
Tom

www.gebcon.com