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Lowering Prices

 
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Old 05-03-2009, 06:10 AM   #1
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Lowering Prices


Some of you may have seen my post about losing work to low ballers. The saga continues. I lost a reside this week: 38 square, strip aluminum, tyvek, install Carvedwood vinyl, 21 Harvey tribute replacement windows, New thermatru front door(going from a double to a single with side lites), New overhead garage doors.Wrap all window casings, soffits, and rakes. My price $28,000.00. Lost it to a lower bidder. She wouldn't tell me the number, just that is was significantly lower.
So I decide to take a look at my pricng. Looked hard at my fixed costs. From what I figure, based on my fixed costs, and the number of days per week I'm geting work I need to raise prices . Its not rocket science, my fixed costs are just that, fixed. To cover my nut, and make a profit I need to raise prices.
I know my shortcomings. Sales, and marketing. I suck at both. I did a sales letter mailing of 2500 (studied on how to write it), and got 8 calls. Sold one. A basement closet. My mailing list is good. Thinking of getting a postcard designed, but I'm scared that i'm throwing good money after bad. I know you need to do 3 plus mailings, so fear be damned, I'm going to do it.
As far as sales goes, I have been listening to Zig Zigglers cds. Informative, but I don't have the "sales personality". I am doing my best to over come this.
There is so much information out there, and here, that i find myself losing focus, and getting confused on which way to turn next.
I am sitting on some cash, but I'm also sitting on an equal amount of debt. If i don't get something going soon, this winter will be tough, very tough.
I decided to look around and try and find a job, yes a job working for someone else. this post is getting long so i will post my findings on that front in another post. Sorry for the long crying post, but it helps to write about it.
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Old 05-03-2009, 06:48 AM   #2
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Re: Lowering Prices


mike,

don't take this with offense, as it's not completely directed at you, but at everyone in your position....

now may be the time to get a job working for someone who can sell and run a company...you don't have the capital to hire a salesman and a marketer....

but you have the skills to do the work....negotiate a good contract for yourself with a contractor who can sell the work....

we all want to be 'self-employed', but now that the easy money is gone, it's gonna shake out a lot of self-employed contractors....

as an aside, i have 2 of our guys going to a job on monday...simple work, I quoted $1900...landlord came back with a quote of $600 from someone...i didn't sell the job, I just explained what had to be done...and we are going to do it...

guarantee, the guy who quoted $600 firmly feels that I underbid him, and next time he'll bid $500 for the work...

it's a sad situation..

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Old 05-03-2009, 06:52 AM   #3
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Re: Lowering Prices


No offense taken, as I said I know my short comings. But see my thread looking for a J.O.B.
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Old 05-03-2009, 06:55 AM   #4
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Re: Lowering Prices


just did...but don't settle for a job...target companies that will give you a career...and companies that are looking for guys who want a career...
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Old 05-03-2009, 09:04 AM   #5
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Re: Lowering Prices


Quote:
Originally Posted by mikec View Post
I know my shortcomings. Sales, and marketing. I suck at both. I did a sales letter mailing of 2500 (studied on how to write it), and got 8 calls. Sold one.
Maybe you should write sales letters for a living, that's a fantastic return on direct mail, even with a qualified list. Sounds like you have the right idea in seeking some further help in sales technique if you decide to stay self employed. It's not so much that you have to have a "sales personality". Selling simply requires that you discover what the prospects true needs are and then gear your specifications to that goal. Find out what they want to accomplish and show & tell them how you and your solution meet those needs. No tricky closing required.

Good luck on whichever fork you decide to take.
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Old 05-04-2009, 01:04 PM   #6
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Re: Lowering Prices


I Been in construction all my life and Got my B lic. about 1 1/2 ago.
Guess i'm not the salesman i need too be for success.
Everything i've studied on bidding work says give a fair and honest bid, and do not lower it to get the job. Well if i did not lower bid i did not get any work.
I'm not even taking about substantial jobs to cover my nut. Just to Get by.
Posted add on graigslist last week as it is the only ads i can afford. the next day i looked for my add and there were 375 postings the next day for skilled trades. 1/2 not licienced. Applied for many jobs to get no response. Whats next. Can't even pay the bills. I wish you the best of luck and hope somthing good comes your way sooner than it has for me.:con fused1:
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Old 05-04-2009, 07:16 PM   #7
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Re: Lowering Prices


Mike C,

Don't know where in Ct. you are, but I have experienced the same thing here in Fairfield County, as I am sure everyone else has all over. What kills me is that I know I have lost some jobs to uninsured, unlicensed idiots who do not operate business as you or I do with insurance/taxes etc. I now explain to potential customers that I will not waste my bidding against a "competitor" who is unlicensed and operating illegally, but I can be competitive with another professional. I explain the pitfalls and potential hazards, as well as, fines associated with doing business illegally. I would not hesitate to report any work that is being done illegally. If you are being underbid by someone who does not operate legally, and they get the job, REPORT THEM and the HO! Legitimate competition is one thing...Best of luck
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Old 05-04-2009, 07:28 PM   #8
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Re: Lowering Prices


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Mike C,

..... I now explain to potential customers that I will not waste my bidding against a "competitor" who is unlicensed and operating illegally, but I can be competitive with another professional. I explain the pitfalls and potential hazards, as well as, fines associated with doing business illegally. I would not hesitate to report any work that is being done illegally.....
Just curious. How is that received by the prospective customer?
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Old 05-04-2009, 08:20 PM   #9
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Re: Lowering Prices


I don't tell potential customers I will report them if that's what you're asking, but I do ask that they not waste my time bidding against illegal competitors. I explain that I am a legitimate company with legitimate costs associated with that. And if they want a professional job where we are both protected in all ways (ins. etc.) by law, there are legitimate costs. I have no idea how it is received, but at least I have given myself the opportunity to counter these ridiculous low ball prices up front, and have made the HO's aware of the risks they would be taking . And yes, I have reported illegal work in the past, and will likely do so again. I wish more contractors would do it. These are the a$$holes that give us a bad name, and take potential work from us.
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Old 05-04-2009, 09:17 PM   #10
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Re: Lowering Prices


i'm in a different field but i've cut costs probably up to 25% if not more. i cut contracting fees and basically do every bid at cost. my labor, material and subs cost thats it. no mark ups..

frankly it sucks but if figure if your getting work and your able to at least sustain your bills your lucky. i can barely do that.
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Old 05-05-2009, 02:14 AM   #11
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Re: Lowering Prices


I stopped doing material mark ups and its KILLING me
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Old 05-06-2009, 07:31 AM   #12
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Re: Lowering Prices


In the big picture the low ball price may soon become the actual cost of a job . If a guy lives in a cardboard box, walks to work , doesn't have insurance or licence his over head is lower and can work cheeeeeper .

It depends how desperate they get. I have not lowered my price but have not increased it yet either . I have been looking at jobs that i would have passed on even last year . My over head is low and i am a small company now ,and will stay small until the money starts to fly.
The good news is the low ballers will die off ,on the down side some of us could be in the same boat .
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Old 05-09-2009, 07:52 PM   #13
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Re: Lowering Prices


Sorry to hear you guys are having a rough go of it. This year early spring was really quiet but things have picked up real fast and I have actuallr raised my prices and for the most part have been getting the work without homeowners even batting an eye. My problem is that work is keeping me from writting estimates at a normal hour, so I may fall off a cliff here soon with nothing scheduled
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Old 05-10-2009, 09:29 AM   #14
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Re: Lowering Prices


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Old 05-10-2009, 09:43 AM   #15
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Re: Lowering Prices


Where are your referrals from past clients? People I do work for refer me to others. Keeps me busy and price is not always the issue from a referal.

How about your network? Architects, engineers, subs you have used? Are they not referring you? If not, why not?
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Old 05-10-2009, 09:48 AM   #16
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Re: Lowering Prices


Most of the subs I've used are in the same boat. My referrals shop for price just like everyone else. I have had some referrals who actually shop for a lower price just to be one up on their buddy who referred me. I have some steady clients who call no one else but me, and they do refer me, but the referral is not an instant sale.
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Old 05-10-2009, 10:17 AM   #17
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Re: Lowering Prices


Quote:
New overhead garage doors.Wrap all window casings, soffits, and rakes. My price $28,000.00. Lost it to a lower bidder. She wouldn't tell me the number, just that is was significantly lower.
If she won't sy how much the other bid was it is probably because you did not ask in the correct way!

I always get some math from the prospects, I have been getting very good about that. Not to lower my price but so I know why I lost it or if I need to change the scope to lower the price in with their budget or to someone else's scope of work.

I will say now Sir Mamm let me ask you this since I am a engineer at writing estimate's I could do this job at least 10 different ways, now If I pick one way out for you I would only be able to write you one price so I need to know (pause) how much you are hoping to be spending so that I can give you a scope of work to meet that price.
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Old 05-10-2009, 10:24 AM   #18
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Re: Lowering Prices


Not everyone that calls is a prospect, some are suspects. I went on a bid the other day and I know a painter told the lady to call me after he talked to her about painting her house. I went and she was very quick to answer questions really to quick. When I sat her down and asked her if everyone quoted her for Aura exterior she said I was interested in hearing what you had to offer me not talk about the other painters, well at the end of the bid she said she needed a few hours to think about it, I called the painter that I though put the fix up 10 minutes later and he said he was power washing the job the next day. Kind of odd being she needed a few hours and he was already awarded the job, they must of did the old call my old boss and I will beat his price...The painter even said he charged her more than the price I left so that confirms it he double estimated me to get a job and I would bet a million that he is lower than my price.
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Old 05-10-2009, 11:25 AM   #19
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Re: Lowering Prices


Being in construction industry a long time, I learned one important thing... Never chase someone's else's price or try to beat anybody's quote.
By doing so regardless what the reason is, you place yourself in an inadequate position to complete planned work and provide quality material and service. This will lead to shortened schedules slips, pressure to complete the project faster, it will effect the quality of work and throughout the job you will be looking to recover the lost moneys that you lost because you underbid the job, which will put you in an aquard position with the HO and your reputation on the line.

In this economy you can not compete with low-bidders no matter what you do. There are guys working out of the trunk of a car with no insurance, no overhead, no permits and most have no clue what they are doing. I can see already the flow of such hacks has began, because HO get ripped off, the jobs are being hacked-up, not finished,etc. So no matter what you do, you will not get a contract unless you are willing to lose your shirt and take a chance to screw up your reputation.

Better days are on the way, this economy hit the rock bottom, people out there have money, and many still have plans to do theirs renovation projects they originally planned, only when everything came to a crash, they are holding back to see what happens.

There is another category of HO, who think since the economy hit rock bottom, now is the time to try and get a contractor to do everything for nothing, so they will create a contractor bidding war and get the lowest price, at the same time looking for a best result, and we all know what the outcome of that will be, and don't get surprised if the HO calls you to repair theirs nightmare.

Try to hang out and do the best you can to overcome this period, don't lower your standards for anybody, because there is people still out there who do appreciate quality and they do not mind paying your prices, they just waiting like everyone else.

Good luck and hang tight, it will roll again
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Old 05-10-2009, 11:38 AM   #20
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Re: Lowering Prices


Here's something that took me awhile to learn. It's a gem.


You will continue to compete with low bids until you stop competing with low bids.


Leave the economy aside - that is what it is right now. Good times or bad - you will always have someone low-bidding you. Don't believe me? There was a guy on here about half a year ago that offered to do work for free - and the client still didn't use him.





Do not blame the problems with lowballers on the economy. They will be there no matter what climate you're working in.



YOU have to decide whether or not you wnat to compete with them or not. If you're repeatedly getting shot down - maybe look at yourself. There is more to selling a job than price. In fact, believe it or not, price is not the first thing on a prospect's mind. If it is, they most likely can't afford the project anyways.



But, the point is, you have to conciously decide whether or not (I keep saying this to you all) --- you have to decide whether or not you want to have a business, or earn wages as a self-employed person (which, btw, will end up costing you more money in the long run).




The problem with placing blame on something, is that it prevents you from actually seeing the true, root problem. Maybe it's sales ... maybe it's marketing. Maybe it's the way your employees act on the job. Maybe you smell bad. Who knows - could be a 100 things. But take a brutal and honest look at things.





As for you guys not marking up, or just doing work on an "at-cost" basis ... once again, decide whether or not you want to own a business - or be a self-employed laborer for the rest of your life.





There's plenty other things in the world to do besides construction. The sooner you can take control of your "world" - the sooner/better off you'll be. Unless you simply want to go job-to-job paying for someone else's home improvement. Which makes no sense at all.

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