I heard an ad for a remodeling contractor today that, at least to me, gave the oposite impression then I think that they wanted.
To give you some background, this was on a 4 hr “home and garden” radio show.
It consist of a host with a long history in lawn and garden business and 2-4 guest each hour.
The host is a “natural salesman type”. That is it appears that he can be sold most anything and anything that he has them becomes a “salesman” for.
He does a lot of the ads for the show and it appers that they are often ad lib.
While I will take much of his lawn and garden advice to heart he does say a lot of things, specialy when he touts of the advertiser’s products, with a grain of salt (or even a 25 lb bag).
Today I heard him do an ad for a remodeling contractor. One that he has advertised for for years and years.
Unfortunately I was not paying attention and did not catch what the job was, so I don’t know if this was a $100k or $200k or $500k job.
The host says that the contractor finished a job and the client really like it and the client want to settle up and said that he was expecting to pay anyother $25-27k becaue of all of the extra’s in the job.
The contractor said that the client did not have to pay him any more. That the contractor know that there where lots of variables in the job and he bid it high enough and he already made enough money on it.
The host says that shows how “honest” the contractor was.
I certainly did not see that as a show of honesty.
Replies
Should have taken out honest and inserted. DUMB
Spheramid Enterprises Architectural Woodworks
Restoring, Remodeling, Reclaiming The Quality..
An HONEST to god victim of his own poor business skills.
I had a contractor email to brag that he sold 2 jobs yesterday. He admitted selling the one on price, and the other he was of the opinion that it was good value that sold the deck. In the same breath he said that the industry standard (his competition as he saw it), bid half the price he sold it for.
Poor guy just didn't understand that he left 8-12,000$ on the table on the job he didn't sell on price.
I guess this poor kid won't be working with us-though he needs us badly.
Sad watching someone sail off down the river towards a waterfall-he just doesn't understand the concept "working for free=slavery".
L
GardenStructure.com~Build for the Art of it!
Bill,
I understand your point, but does that mean that if I value my work, and price it "a certain percentage" higher than other peoples bid, that Im not an honest contractor?
I bend over backward for clients, and soak up many of them that others wont deal with, but Im expecting to get paid for it. If I loose bids because I bid high, isnt that my choice? If they choose to use me, my price was upfront.
I can easily defend why I bid higher than others, but its not based on the cost of the materials. I still see myself as one of the most honest people in the business.
-zen
sail off down the river towards a waterfall
I lke that expression, leaves little to the imagination, except that the salior usually has a "don't tell me" attitude and a quirky "aren't you jealous" smile.
Display of his own STUPIDITY
Welcome to the
Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!
Sounds like a salesman lie to me .
I heard a sales man yelling at his kid which is kin folk. The kid had lied . That was the biggest offense, but he had also lied to his daddy! The dad said the boy, "you dont ever lie , unless you have to from now on. "
Often I wondered if his own lies were on his mind and formulated that special sentence between a sales man and his own son . Classic.
Tim
"you dont ever lie , unless you have to from now on. "
I can relate to that. Way, way back in my misspent youth, I fell into the wrong crowd and spent some time as a professional burgler.
During the seven years that followed I got married and divorced, and recieved a top secret security clearance in the Navy. To this day, neither my wife nor the FBI knows about that.
Now it's true that my "lie" to the wife was merely an act of ommision, but believe me, the FBI specificaly asked if I had a history of misdeeds.
So once I lied, "I had to from then on."
SamT
bill ... i find your read of the situation as curious ...
the contractor was given an opportunity to add to the price at the customer's behest..
no one was going to object...
yet , the contractor replied that he hhad already figured in the variables and he was fully compensated..
now .. if this is not the hallmark of an honest contractor.. what is ?
are you implying that he had "gouged " in the original price ?
where are you going with this ?
The problem with this was that I don't know any of the details of what actually happend. I don't know if the extra costs where because of "unknow conditions", changes in finishes. changes in scope of project?But I see different people reacted similar to me. That little snippet did not necsarily mean tht he was honest.I can see the following.A) he was a bad businessman and left the money on the table that was rightfully his.B) He was a bad estimator that grossly over estimated the job. Then the question becomes if he did not have all of the extra cost would he have refunded the extra?C) he was a bad business man & contractor that let the job get away from him and was afraid to charge what it was really worth.Now those the impressions that I PRECEIVED from the ad.And I suspect that the host emblished and something like this might have been what happened.Contractor - The replacement kitchen will be $100k, but I am including an aditional $25k as contingnecy because I suspect that there might be problems of undersized framing in the walls, rot, and mold, but can't be sure of the extent of the problems until we open the walls.End of project - Client says how much extra is for all of the work on repairing the damage in the walls and joists.Contractor - That was including in the continguencies.Which in the order of what Mike suggested.But, if it was, and but instead the contractor went ahead and asked for the extra $25k then I would not say that would have been not only dishonest, but stupid.Way too easy for the client at sometime to go through there papers and see that those expense had been initially included.
Edited 3/13/2005 3:51 pm ET by Bill Hartmann
Bill, I agree with you that a person who was used to approach business problems might raise an eyebrow when hearing this contractor talk.The problem is most don't really understand the business of contractors. How many respond to a fair billing rate with "I wish I was making $xx.xx an hour!"? Most people don't really understand risk, probability, profit, overhead, etc. What they do understand is most contractor's are scum and are out to get them. When this guy can say with a smile "no charge" most clients are elated.I remember reading a case study about Nordstroms (I think that was the store) return policy. They had a faithful customer who tried to return a suit from a competing retailer. The manager of the returns dept. finally was made aware of the situation and told the customer he would gladly give him his money back. The point of the story is that they have excellent customer service which surpasses all reasonable expectations.Customers love this. They don't care that they paid way too much for the suit in the first place, they care that the big company still treats them as a special customer. That is why I would be proud to be the contractor the radio broadcast was referring to.
Jon Blakemore
When this guy can say with a smile "no charge" most clients are elated.
You got it Jon.
Saturday I was going over complex house plans with an acquaintance here. Construction to commence soon. He proudly told me that the contractor often comes in under the bid price. It's a local co. that I'm not very familiar with, but that sales pitch, confirmed with several past clients, is clearly working. This house is about $250/sq ft. Didn't in the least concern the clients that the initial price was apparently high.
This all came out when I cautioned them about change orders. Unfortunately neither the archy, the GC, nor the HVAC guy seem to know how to do heat loss calcs. So nobody knows if the proposed heating system will be adequate. Yikes!
PAHS Designer/Builder- Bury it!
I'm with Mike on this one.
The guy bid the job, and built in contingencies that he expected to hit.
If he didn't run into the contingencies, wouldn't that have been a plus for BOTH the customer AND the contractor (less hassle for the homeowner, more profit for the contractor).
Example... I had a job that ran into LOTS of contingencies. Some I anticipated... and unfortunately, some I didn't. I WAY underbid the project, in the final analysis.
Did I charge for the contingencies that I SHOULD have anticipated? Nope. My fault.
Did I charge for the contingencies that were TOTALLY off the wall? Yep... discussed it with the homeowner when they came up and we came to an agreement (this was only two items, BTW).
Did I refund the amount for certain things I had planned for.. but didn't run into do to a little extra effort to avoid the issues? Nope. The extra effort to avoid the contingencies saved a lot of inconvenience for the customer AND me. It was with a bit of skill, and a LOT of luck that we didn't have to deal with the issues. Should I not be rewarded for making life easier on the customer? If not... explain performance bonuses on time sensitive jobs.
They did a couple of change orders. Obviously, I charge for changes in scope.
In the end, my customer was happy... I was happy... and that is evidenced by doing 3 additional jobs for that customer and receiving two referrals. In converse... I have given them a bit of advice (no charge) for a few of the projects that they was doing on their own (not something I would do for a customer that I felt "slighted" by).
$25k is a hell lot of money to build into the bid and not include in an as needed case.
Not to be contentious... but $25k is not really all that much when you are talking remodeling. Most people aren't aware of what is contingency and what is, what is thought of as, "actual work". Unless it's broken out... it would be difficult to even guesstimate on an average quotation.
Doesn't mean that anyone is trying to rip anyone off... just means that the contractor knows what is entailed in the job, and what is most likely to happen.
Of course it depends on the entire scope... but I could come up with MANY a scenario that would entail that kind of contingency $$.
I'm with Mike here ...
I read the first post and had no idea where you drew your conclusions.
if the story stands as stated in the ad .... why does the contractor have to be an idiot or a potential thief?
"A) he was a bad businessman and left the money on the table that was rightfully his.
B) He was a bad estimator that grossly over estimated the job. Then the question becomes if he did not have all of the extra cost would he have refunded the extra?
C) he was a bad business man & contractor that let the job get away from him and was afraid to charge what it was really worth."
A) maybe he went in, saw the whole scope of the job and bid it accordingly. Told that customer that a tough job would be fairly easy ... since to him ... it was. Why does the customer have to have a better idea of the price of the work than the guy doing said work?
B) maybe he went in ... and saw the problems ... being a good contractor he just knew they'd pop up .... and was simply prepared for the inevitable.
C) see reply to A, again. Why we thinking the customer knows what a "fair" price is? Maybe they're used to being ripped off? And maybe this guy has one price .... his. And knows full well that he'll get more referals giving fair prices and sticking to them than by trying to whack one customer and live of that one job for the rest of his life?
by all accounts ... this contractor could have been the very top bidder ... and you're all still saying he's got no clue.
Jeff Buck Construction
Artistry In Carpentry
Pittsburgh Pa
Since that time I have heard the host uses that same story several times. But each time it is different. He does a lot of stuff off the cuff.I have no idea of what the complexity of the job was or how the contractor handled it.What my point was the way that host descibed it did not make SOUND like the contractor was being honest to me. .
.
A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
"the client want to settle up and said that he was expecting to pay anyother $25-27k becaue of all of the extra's in the job"
I think alot depends on what the "extras" are. If they are the type of items that may be covered by what someone labeled as "contingency"- which is something that should be in every remodeling project- there should have been no charge. If they were scope increased initiated by the owner, like "let's add 2' to the addition", then the contractor should have billed for them (unless he wanted to be a nice guy and use some of the unused contingency money).
I don't think it's a matter or "honest" or "dishonest"- more a matter of "properly estimated" or not.
Bob
I agree with all points.My comment was not about the actual dealings of the contractor, but rather the immediate impression that I got from the ad.And that was not one indicating the honesting fo the contractor.
Bill,I love to have clients like you. I can be frank about business matters and not worry they will be misinterpreted.Most clients are much different, and we have to anticipate the different personalities when bidding a job.I would bet a dollar to a dime that most listeners would be impressed by that ad.
Jon Blakemore
"I would bet a dollar to a dime that most listeners would be impressed by that ad."JonBlakemore hit the nail on the head. The radio show (as described by OP) sells advertising, boys. Contractor finds (creates) some customer who gushes praise and who probably has some reciprocal business "arrangement" with contractor. Or, could be the talk show host needs some work done- who knows and who cares enough to find out?I can't say that I've worked with a dishonest contractor. Dishonest developers, inspectors, suppliers, and labor, yes. Now I have had some contractors who's work quality was so bad they should have paid me for giving them the opportunity to "express their inner 4 year old". I mean ...really....really ...inconceivably bad work. So in that sense, maybe they were being dishonest with themselves and others about knowing anything about construction, excepting the big pickup and cell phone, of course.
Billhartman,
I worked for a "contractor" for about 1 yr. when I found out what dishonsety is about. His mark up on labor was 105%, and on materials was 110%. Would complain about not having money to pay us, but would always have somebody cleaning up for us. What I found out was he was paying this guy $10 an hour and charging the client $35 an hour.
When inquire about promised raises he always complained about not having the money to do that. So after 6 months of talks about honesty he laid me off 4 days after christmans and hired his grandson.
So yes that is what I call dishonsety!
Nailer
there a big problem right now in Hurricane land of contractors taking 50% deposits for work to be done, and never coming back.oh, I saw an Hvac truck the other day, had professional, honest, on his truck but he misspelled "refridgeration"
Nailerman,Other than the part about the boss supposedly not having enough money to make payroll, I cannot see where the dishonesty is.Maybe his markup was very high, but how do you know that's not what is needed to stay profitable in his market and his line of work?As a small business owner, I can tell you that the cost of doing business (legitimately) is incredibly high. If you have never been out on your own than I can assure it's probably more than you think.
Jon Blakemore RappahannockINC.com Fredericksburg, VA
JonBlakemore,
My wife and I run two businesses out of our home. Mine is Remodeling & Trim Carpentry, hers is Music Instruction. So yes I know what it is to run a profitable business.
Normal mark up for this area is 20 to 30 %. His dishonesty is legendary in this area. The client that I was working for hired him as the gc. Once in charge he got rid of most of th carps and hired his kids and gran kids. Kept me on untill I finished the oak paneled study.
I have been in business for myself for 12 yrs.
Nailer,
Did your former boss tell his clients upfront that he was going to mark up materials 110%, etc.? And just so we're clear on the math, you're telling me he'd buy $100 of materials and then bill the client $210? Is it possible that his contract wording was that he'd charge "110% of costs" (which is 10% over)?
Anyway, if he was, in fact charging $210 per $100, I'd say he was certainly ripping them off. But if he told them ahead of time that that was his policy, he wasn't lying to them.
Anyway, if he was, in fact charging $210 per $100, I'd say he was certainly ripping them off.
I wouldn't jump to that conclusion. The mere fact that someone marks up something by 100% is irrelevant. There are many, many merchants who routinely do this every day. Carpenters for some reason, think that marking up something to make a healthy income is somehow reprehensible. Thus, most carpenters are poor.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
this thread is yet another example of why we, asa group or so called professionals, constantly shoot our collective selves in the foot.
everyone all at once now ... again .... with feeling.
Step 1) bitch about the fact we don't make no money ...
Step 2) bitch and the guy who does then call him a thief!
like I really had to direct that ... it'd happen no matter what ....
Jeff Buck Construction
Artistry In Carpentry
Pittsburgh Pa
Step 1) bitch about the fact we don't make no money ...
Step 2) bitch and the guy who does then call him a thief!
Jeff,
I know you're just joking about this, but clearly there's a difference between making money honestly and making money dishonestly.
"I know you're just joking about this, "
I joke about alot of things ... but money isn't one of them.
I couldn't have been more serious.
Frankly, I haven't seen anything that says the GC in question did anything dishonest.
Jeff Buck Construction
Artistry In Carpentry
Pittsburgh Pa
Frankly, I haven't seen anything that says the GC in question did anything dishonest.
Jeff,
It appears (and the OP hasn't explicitly confirmed this yet) that the GC undertook a T&M contract and doubled the cost of the materials without mentioning that in his contract.
For the sake of argument, let's assume the above is true (for the time being, at least). I would call that dishonest. Wouldn't you?
"It appears (and the OP hasn't explicitly confirmed this yet) that the GC undertook a T&M contract and doubled the cost of the materials without mentioning that in his contract."
You read that in the very first post to this thread?
Wow ...
XRay vision between the lines!
more like my original theory ... finding what yer looking for.
I read it more like the guy bid a job correctly and stood by his original bid.
and 40 or so posts later he's a crook.
Jeff Buck Construction
Artistry In Carpentry
Pittsburgh Pa
Jeff,
By "OP" I'm referring to the "original post" in the story line I'm commenting on; numerically, that would be post number 20.
Sorry for any confusion.
my fault ...
but I'm sticking to the first post.
conjecture on conjecture ... then cunjecture on a more hearsay ...
makes me dizzy!
Jeff Buck Construction
Artistry In Carpentry
Pittsburgh Pa
Anyway, if he was, in fact charging $210 per $100, I'd say he was certainly ripping them off.
I wouldn't jump to that conclusion.
Well, perhaps I shouldn't say "certainly". But I will say that in my experience a 15% markup is average. Over 100% is unheard of in contracting -- that's why I thought the OP must have been misquoting.
As to your other point, I have to admit that I am uncomfortable marking things up, even though I know it happens all the time in retail and sales work. Maybe it's because -- in my mind, at least-- retail is different than contracting.
I do what what makes me comfortable -- I don't mark up materials at ALL. But I DO charge for my time when I set up orders and pick up materials, etc. And I tell my clients this when I do work for them, or present proposals to new clients.
Ragnar,
No, they had no idea. He called it hidden cost. But enough crumps about that. We could as jeffbeck says continue to "bitch" about it or we can as my dad says, " learn from it and do better. "
In my world honesty, integrity, and loyalty means a lot. And guess what? I make great money at what I do. And I don't use mark up. My reputation is far better then that.
Nailer
If you can't do it right, then learn to do it better.
No, they had no idea. He called it hidden cost...
Nailer,
So you're saying this guy would set up a time and materials contract and NOT specify his markup on materials? If there was an implication to the homeowners that he was merely recovering material costs (withOUT a markup), then I'll agree with you and call this guy a thief and a liar.
There's nothing wrong with marking up materials, of course, PROVIDED that a contractor discloses this fact to his clients.
Like you, I value honesty and integrity. Like you, I also do just fine financially, and enjoy a great reputation. It's too bad that some people seem to think that only the guys who cheat and lie end up making money.
Keep up the good work!
Regards,
Ragnar
Don't take this the wrong way but I think you have a fundamental misunderstanding of what markup and profit is. There is nothing crooked or dirty about it and they are necessary to the health of a business. In a nutshell MU should cover the business expenses, including the owners salary, AND profit for the BUSINESS. A decent profit is necessary for the business to continue to operate and grow. It's not just a bonus that the owner gets to throw in his pocket. Every other form of business that sells something that I can think of does this, why should residential construction be any different.
You say that 15% is the norm for MU in the construction business. Maybe that's so for most (I don't really know if it is or not), but I cannot see how a construction business can survive let alone thrive on 15%. Using the example of nailer's ex-boss, if he can charge a 110% MU, I see nothing wrong with that as long as his market can bear it and as long as he continues to get jobs then I would say that it does. In fact, good for him. BTW I didn't see where this guy was using a T&M contract, perhaps I missed it. If he's using a lump sum contract why should he disclose his MU in it? If the HO has done his/her homework, then they should know that they are getting a service/product at a price that they value that service/product, otherwise why did they accept the bid? The contractors MU is really none of their business. If he is using a T&M contract then yes the MU needs to be disclosed but only so that there is an agreement as to how the bill will be calculated.
Many guys do not understand this and either go out of business or never fully realize the fruits of their labors. Ask yourself this question:
Are you a carpenter (or whatever trade you are in) first or a business man first?
Or to put it another way:
Do you own a business or do you own a job?
Is there ever, in your honest opinion, under any circumstances an ethical or moral limit to profit made?
Strikes me that every faith based belief system has myriad warnings against greed.
Equating building construction mark up with retail mark up is apples and oranges IMHO.
"Is there ever, in your honest opinion, under any circumstances an ethical or moral limit to profit made?Strikes me that every faith based belief system has myriad warnings against greed."
Of course. Charging an appropriate MU and gouging someone are two different things. Like I said if you're charging a 110% MU and you're still getting jobs then you must still be in line with what your market will bear. The market (your client base) has decided that your services are worth what you are charging. If you're at the high end of the contractors in your area then I believe that is a sign that you are doing things right. You are probably providing the best product with the best service and your clients know that and want that and are willing to pay for it.
Now intentionally charging someone for a service or product that you know the market values less than you are charging is wrong when you know that your client is not aware of this fact. For example selling a kitchen remodel that you would ordinarily price at $50,000 to a little old lady who doesn't know any better for $100,000 just because you know you can get away with pulling one over on her is wrong and greedy. As would going into a place hit by a natural disater and then charging more than you ordinarily would because the people there are in desperate need of help. That's scamming but is not the same as marking up on materials, labor, and subs to cover your expenses and make a profit.
"Equating building construction mark up with retail mark up is apples and oranges IMHO."
I'm not sure I agree. By retail I'm assuming you mean a store which sells goods. Of course the actual numbers and percentages are not going to be the same but the principle will. WalMart might have a 1% MU on a T-shirt but you can bet that they cover their costs and have a healthy profit for growth and for the shareholders dividens in that 1%. They can make it up in their volume and sheer size leveraging their economies of scale. A mom & pop store might have to charge a 100% MU on the same shirt to stay in business and make a profit.
Speaking of retail, are we not all selling something? GC's and people doing business with the general public are in fact doing a retail type of business selling services. Material suppliers and subs are wholesaling to the retail level (and they mark up as well).
I simply do not see why people believe that my construction business would be wrong for charging what its services are worth and earning a profit while for every other business it's OK.
Ampres,
There is nothing crooked or dirty about it [markup and profit] and they are necessary to the health of a business.
You don't have to argue with me there! I fully believe in the morality of a free market system.
If he is using a T&M contract then yes the MU needs to be disclosed but only so that there is an agreement as to how the bill will be calculated.
It's true that the OP did not explicitly state the GC was undertaking a T&M project -- but I only ever hear of materials markups in the context of a T&M project, so that's why I assumed it was such. But thank you for pointing out that assumption -- I jumped the gun a little bit there. Hopefully the OP can shed some more light on that.
It sounds as if we're in agreement as long as my assumption about the T&M part is correct.
Actually, if the GC undertook the project as a lump sum, we'd also be in agreement -- in that case, the homeowners would have known the cost upfront, so any labor rates or material markups would be irrelevant. There's no problem with an agreement by mutual consent.
Regards,
Ragnar