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Discussion Forum

Downward pressure on pricing

john | Posted in Business on March 27, 2008 11:34am

I am certainly experiencing this, not only are my competitiors virtually giving stuff away, but I’m losing jobs that I know I would have got just a coule of years ago.

I’ve had to look very carefully at my pricing, and have had to find ways of getting the work out faster (and therefore less expensively). I’ve had to be ruthless about cutting out anything which doesn’t add value to the customer. Hopefully this is going to work, and if things do turn around then what I’ve done is good anyway.

I reckon I’ve got too close to what I do, and I’m seeing stuff that my customers don’t see, basically I’ve been making my stuff too good for what the new market requires. Let’s hope I have realised in time, I missed two jobs recently that I should have got and probably would have if I’d made some changes sooner

Comments appreciated

John

If my baby don’t love me no more, I know her sister will.
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  1. CAGIV | Mar 27, 2008 11:56pm | #1

    If you feel the need to you can cut the base proposal down to "bare bones" and provide a list of options.

    Team Logo

    1. john | Mar 28, 2008 12:35am | #2

      Absolutlely. I used to quote a price to cover everything and to a good standard, but now I quote the basic and let that stick in their minds and then mention the various upgrades

       

      JohnIf my baby don't love me no more, I know her sister will.

  2. frenchy | Mar 28, 2008 02:57am | #3

    john,

      One thing you probably should consider is a time out..  If your work cannot yield you a profit and you cannot lower your costs, step out of line..

       I realize that is hard to do, I mean what about bills and etc.. well often you can work that out.. If I'd known that I could have not spent what I did in an endless run around looking for business  the last six months I was employed I could have gotten to this point with more of my resources intact..

      I was spending more than $50 a day for gasolene and it yielded me zero in sales.. that's something like $6500 I wasted in gasolene chasing what wasn't there.. Not to mention nearly 36,000 more miles on my vehicles..

      Chase what is willing to be caught, accept the inevitable cut backs that will result and wait for the economy to strengthen..

     it's about using your resources..  

     

     

       

    1. john | Mar 28, 2008 10:55am | #5

      If your work cannot yield you a profit and you cannot lower your costs, step out of line..

      I didn't mean to imply that I could no longer make a profit. It's just a change in emphasis. Whereas I use to focus my customers' attention on the nice features of what I do, and the benefits whereof, now I draw their attention to the ways in which choosing me is going to save them money.

      John If my baby don't love me no more, I know her sister will.

      1. frenchy | Mar 28, 2008 04:49pm | #6

        john

         Excellant choice! However, watch out for the potential down side.. That is you start to be known for doing things cheaply and you wind up needing to do cheap work.. The Problem is  when you do have an oppertunity to do great work few will select you because you are no longer known for doing top quality work worth the added premium..

         Be very selective and do all that you can to attract those who want excellant work and are willing to pay the price..

         

        1. john | Mar 28, 2008 08:55pm | #7

          How I wish I was in a line of work where I could become 'known'. In the last five years I have ony ever had one referral. Every other enquiry has been generated by my advertising.

          In any case, the only people who know my work and its prices are the people who buy it from me, and they can't know whether it is 'cheap' or 'expensive'. They only know how it compares with other quotes they may have had and those would have been for different products anyway.

          So although I take your point about becoming 'known' it doesn't really apply in my case. Which is a shame. Being known for being able to provide a nice kitchen at a low cost wouldn't hurt me at all at the moment. In fact I wish I could buy a reputation like that

          JohnIf my baby don't love me no more, I know her sister will.

          1. calvin | Mar 29, 2008 12:55am | #8

            John,

            Reputation sometimes takes years.  I've been at it for over 35 yrs and for the past 20, referral only.   Some can come from suppliers, but the best are those from previous clients as they do the prescreening.  The supplier recommendations aren't usually qualified, and that my friend can be a problem in both time and money.

            You need to present your current customers with something that will keep you one their mind and / or will bring up the question by their friends of "who did that?".

            In the past when doing kitchens for instance-I've given the owners something at completion.  As simple as a bud vase you hang on the wall (with a silk flower so it might stay up all seasons).  They were very nice looking from an art shop-one of a kind (sort of).  They in themselves would beg the question-where'd you get that.  And they'd immediately say-the guy that did our kitchen.

            There's other things that will come to mind that maybe go with the work you've done, something that compliments it-something they'll put up and keep up.

            Write it off for an advertising expense.

            I take pictures now and sometimes get lucky with a good shot.  I have framed some of them and given it to a customer.  Real personal and it does get remembered.

            Of course, doing a bang up job that works so well the client is dying to show it off and of course give your name don't hurt either.

            This idea has been mentioned here b/4 and it is a good one.  Make sure your customers know "you know".  You know who to call for ?.  When they're confronted with a question-they'll call you for referral.  And to keep your name in front of them-send a Christmas card with a reminder you're still around and ready to work-for them or their friends.

            Best of luck.

             A Great Place for Information, Comraderie, and a Sucker Punch.

            Remodeling Contractor just outside the Glass City.

            http://www.quittintime.com/

             

          2. roger g | Mar 29, 2008 03:37am | #9

            I have found that sometimes you have to be "in their face" with big logos on your lorry or shirts and jackets with your name and business.
            At first it may seem embarrassing but I guarantee it will pass. Why should all the commercial vehicles have signs all over them and you don't.
            Later on when you do get well known you can tone down abit.
            I always remember seeing Colonel Sanders of Kentucky FRied Chicken being interviewed in the 60's and when someone mentioned about all the garbage blowing around with his name on it he said it was his biggest advertisement. ( I actually met the old bugger in 1970)roger

          3. frenchy | Mar 29, 2008 05:05pm | #12

            John

              The guy who seems the busiest with the really high dollar clients drives an Old Ford Woodie. He bought a old pickup converted it to a Woodie himself and drives around with a descreet sign on the glass with his company name and phone number.. He paid $3000 for the pickup spent another small pile  fixing it up and it's such an attention getter that he could do lousy work and still stay busier than his crew can manage. That way he gets to select which jobs and which clients he works for..

             All that for a $3000 investment and  some part time work..

            Edited 3/29/2008 10:06 am ET by frenchy

          4. roger g | Mar 29, 2008 05:35pm | #14

            I don't believe John would know what Woodie looks like. Then again he might think it was one of those little mini wagons that had wood trim on the outside. My sister owned one and I used to steal it..............I mean borrow it.roger

          5. frenchy | Mar 29, 2008 05:57pm | #16

            roger G

              Are you speaking about the little mini woodie? or the Minor traveler?  I've owned a few of the later and while you might carry some estimating tools and maybe a little touche up kit or something I don't think you could carry enough tools in one to be a serious builder.. a early 30's or 40's Ford woodie though and you could have a lot of tools and equipment. 

              There is a HVAC guy around with a 32 Ford sedan delivery he used for a while as well. 

          6. roger g | Mar 29, 2008 06:12pm | #18

            The little Austin/mini 850 woody wagon. I think they are collector items now. The Morris 1000 have been collector pieces for years. Not sure what a Traveller looks like. My first car was a 1960 Morris Oxford wagon (no wood) and it still had a crank in the front if needed. It did.
            Beautiful red leather bench seats. Built like a tank and had about the same fuel consumption. In the summer of 1965 some friends and I took off to Miami for a look see. Stayed on Biscayne Blvd near the Playboy Bunny Club. Well, not near but on the same road. At 16 yrs old, that was good enough.
            P.S. As far as carrying enough tools. It just has to carry the person and advertise.roger

            Edited 3/29/2008 11:14 am ET by roger g

          7. frenchy | Mar 29, 2008 07:47pm | #19

            Roger,

               The little mini based woodie was a real fun piece.. just whimsical enough to offset the really serious side it had..

             The Morris Minor 1000 Traveler is the correct name for the woodie wagon, You're right it was built like a tank..  I had a lot of fun miles in them when they were dirt cheap..  Since I knew how to tune them I could get nearly 30MPG with it and that on the cheapest grade of gasolene available.. I used to go to a gas station and sort thru their scrap battery pile and find one for a dollar. I'd take it home pour the acid into a glass  bowl then take the garden hose and rinse out the lead settiment that settles in the bottom of a battery and shorts out the plates.  I'd carefull use a turkey baster to fill the cells back up leaving the white lead residue in the bottom of the bowl, top up each cell with water and 9 times out of 10 get another couple of years out of that battery.

                 I had one engine throw a connecting rod 30+ miles from home so I put my foot down..  knocking and hammering insanely loud I drove another 15 miles before the second rod went thru the block.. foot still flat on the floor I was down to about 25MPH  before the third rod decided it too had had enough but you know that last connecting rod got me into my driveway before it shuddered to a stop!

              2 hours later I had a engine from a badly rusted one in place.  Little tid bit, that was the last car Morris built that still hand a hand crank for starting..

             You could take the battery completely out on a bet and start it with the hand crank.. Won more than a few bets that way.  (Positive post had to be grounded in order for the generator to provide the spark for ignition)..

          8. roger g | Mar 29, 2008 08:17pm | #20

            I used to crank it by hand just to show people that I really did have a crank.
            I remember sideswiping the complete side of a Detroit Taxi with my LEFT fender and all it did was make my RIGHT headlight not work. Now that I think of that incident, it was coming back from Miami and was just inside Canada.roger

          9. john | Mar 29, 2008 08:57pm | #21

            Indeed I would know what a Woodie looks like, although only from pictures. There may be some in the UK but they would have to have been specially imported.

            I used to have a Morris Minor Traveller (with the wood) which was a really nice care, and the starting handle was bot quaint and downright essential. In the UK climate the wood always rots at the joints, so tthey are not good long term propositions unless you don't mind changing the wood every few years.

            JohnIf my baby don't love me no more, I know her sister will.

          10. frenchy | Mar 29, 2008 09:26pm | #24

            john,

              Minnesota has far harsher climate than England.. we have well over 10,000 lakes plus Lake superior.   That doesn't count all the ponds of less than 5 acres or swamps of less than 5 foot depth. Nor does it count rivers or streams or puddles and wetlands.. Don't forget too that we are the original source of the Mississippi as well as the Red river which goes up through Canada and empties into the Hudson. Minnesota feeds the Gulf of Mexico, the St. Lawrence seaway, and the Hudson bay..

             (Little trivia, the headwaters of the red river are south of the headwaters of the Mississippi so in effect they pass each other going north and south.   

             Indeed it is rare to find a really dry place in the whole state. (and I'm only slightly exaggerating)   In the summer there is this thing called humidity.. when it's really bad we have to carve a spot out of the fog  just to breathe.  In the winter, well our 40 below temps tend to be the coldest spot in the nation most days..

              Snow so deep  we measure it in feet, Ice, rain, hail the size of grape fruit, and these things called Tornado's?  (wind sometimes in excess of 250 MPH) 

             In order to get anyplace at all we pour tons of salt on our roads.  Whole industries are made because we need so much salt for our roads..

              Yet wood lasts a reasonable three or four decades here if taken care of..   To keep from rotting  wood joints you melt candle wax into the joints on warm days.    You varnish or lacquer your wood on a regular bases and  then wax it well..

               Wood is cheap.. every stick of wood to make a pickup truck into a woodie wouldn't cost $100.00 that's if you are selective! Once you make the pattern making spare parts is a piece of cake.. Heck you could make a side business making wood for vehicles..  Think of all those MG's and Morgans! Not to mention the dash boards of a lot of Jaguars and Rolls Royce's

              Don't have many Morris Minor travelers around anymore ?  Buy a Toyota pickup with a good engine but rusty body and tear off everything from the doors on back.  Make yourself a Toyota woodie or whatever trips your trigger..

                  You pull up in a woodie to bid a job and the wood on that vehicle shows pride?  What sort of impression do you think it will have?  Compared to the average white van..   Be different,, be distinctive,  appoint yourself royal woodworker to the middle class or some such nonsense.  Put your family crest on the windows,, Don't have one?  Adopt one.    Look elegent and nobody needs to know it started out as an old rust bucket. 

                

          11. roger g | Mar 30, 2008 12:52am | #26

            Unless things have changed when I was a kid in London England, people in North America have no concept of what damp can be really like.
            I now live on the west coast of Canada with the Pacific Ocean within a couple of hundred feet and people think it's damp here. NOT EVEN CLOSE!!!!
            I don't really know why it is so different but it sure is. Maybe it's the Atlantic as apposed to the Pacific.More trivia Frenchie: did you know we have a Mississippi River in Canada and is not connected to yours. Or yours isn't connected to ours:)roger

          12. frenchy | Mar 30, 2008 02:31am | #27

            Roger,

              Well now

              Since ours heads north and south it only seems reasonable that yours heads east and west,, tell me more about it so I don't have to go scourin'  a map..

          13. roger g | Mar 30, 2008 02:52am | #28

            Email coming to you.roger

  3. Buttkickski2 | Mar 28, 2008 03:45am | #4

    We visited my aunt and uncle who have a near million $$ house on a beach in NC. They had all "custom" built-ins and a bar. They told me the prices they paid and I just about threw up: 6 simple base cabinets HAND PAINTED flanking the TV were made from MDF, even the doors which were hung with the cheapest euro hinges known to man. They paid $7,000 and I promise you they weren't worth $800.

    The bar was made of knotty pine with some stain half-azzed wiped on. No poly or any other sealer = $5,500. They didn't even sand the planner chatter marks from the mill off the pine before staining it...ridiculous.

    A simple built-in window seat made of painted MDF = $3,000.

    This stuff was pure junk and my aunt and uncle loved them!

    Top that off with the finest MDF trim you can buy and some plastic water piping and you have yourself a happy homeowner and a profitable builder.

    .

    .

    "Thank goodness for the Democrats! If you are terminally unemployable, enjoy living off of govt welfare and feel you owe society nothing you're in luck: there is a donkey waiting for you."

  4. renosteinke | Mar 29, 2008 03:50am | #10

    One simply cannot succeed by selling on price alone. Even the "Wal Marts" have other hooks - convenience, selection, location, hours open, etc.

    You need to sell on what remains ... quality and service.

    The first step is to KNOW your REAL costs ... and never drop your price below that level. You're not doing anyone any favors by going broke.

    Save your sharp pencil for proven, steady repeat customers, who pay promptly. The hagglers and indecisive strangers get charged extra. You're not running a charity, either.
    It's been said that the "80-20 rule" applied. 80% of your business comes from 20% of your customers ... focus on serving them.

    It's no crime to concentrate on a small niche. For example, we have one guy here who is "the guy" to call for a tubular skylight. Sure, there are others who can do the work, and he can do other things as well .... but his success is based upon letting it be known that this is what he does for a living.

    Another successful business stays busy, and expensive, when others are slow ... by listening to the customers. His guys ALWAYS put on little shoe covers, lay down tarps, and meticulously clean up. Customers know to call him, if they like these things, because he makes sure the ads mention it.

    You can patent a lot of ideas, but a method of running a business is not one of them. Make it a point to study successful business around you, and feel free to copy what works.

    1. john | Mar 29, 2008 11:25am | #11

      First of all, thanks to all the guys who have taken the time and trouble to reply and help me out. It wasn't really what I expected though. I was rather more expecting that people would relate their own experiences and tell us whether they were experiencing the same pressures or not.

      As far as referrals are concerned, I maintain good relationships with my previous customers, and they are only too happy to tell their friends and relatives where they got their kitchen, but (in the UK anyway) people don't change their kitchens that often that referrals could make any significant difference.

      One of my customers, one of the really early one's too, has done everything she can to get me referrals, and in 5 years of trying she has only suceeded once. This isn't her, or my, fault, it's just the way the market is. Even is she or any of them had been more sucessful it wouldn't make that much difference, the customers are still looking for an excellent price due to what they know they can buy an adequate kitchen for elsewhere.

      In the UK (where I am) the kitchen market is dominated by large, national companies with big TV advertising budgets. They are constantly advertising big discounts and although these are not really genuine it does get people into thier showrooms and they come out armed with quotes that although I don't have to match them, if my price is significantly higher then the chances of landing those jobs are that much less.

      I have no trouble showing people that my stuff is worth the extra, but the problem at the moment anyway is that they acknowledge the better value but go for the lower price anyway. There is just too many other demands on their cash, too many other things that they need or want to spend their money on. They are willing to put up with a cheaper kitchen if it means thay can have a nicer car, extra vacation, plasma tv, designer clothes for the kids, the list is endless

      JohnIf my baby don't love me no more, I know her sister will.

      1. Dave45 | Mar 29, 2008 06:04pm | #17

        John -

        Maybe you need to back away from the kitchen business.  I know that when I started four years ago, I thought I would focus on kitchens.  I got quite a few calls, but none of them resulted in paying jobs.  I finally realized that kitchens are actually commodities and that the market for heirloom quality cabinets just wasn't big enough for yet another player.

        The market for heirloom quality kitchen cabinets is - in fact - almost nonexistant.  IMO, the life of a kitchen is ~10 years (or less) because:

        Few people plan to stay in a house for more than a few years so they will get their "new" kitchen in the next house.

        Styles, tastes, and amenities change fairly rapidly so that yesterdays "dream" kitchen looks pretty dated today.

        If you really look at it, there are only so many ways to do a set of kitchen cabs and the big production shops have most of those bases covered.  Economy of scale makes it almost impossible for a small time "one-off" cabinet maker to compete. 

        You may be better off looking into what people ARE buying rather than searching for ways sell what they AREN'T.  Whether you're getting your business thru referrals, advertising, or both, it's much easier to sell into a growing market than a shrinking one.

        1. john | Mar 29, 2008 09:02pm | #22

          I think you are right, and my next lot of advertising is going to widen the scope of my offerings to include built-in furniture such as home offices and under-the-stairs cupboards etc.

          Unfortunately I don't know of any actually growing markets, I don't think there really is such a thing out there at the moment.

          JohnIf my baby don't love me no more, I know her sister will.

          1. brownbagg | Mar 29, 2008 09:09pm | #23

            if you have a crew that work 40 hrs a week, do you price so they make 40 or do you speed up the crew so they make 30 and then have nothing to do for two days. so if you speed up the crew and add work so they make the same as before to save the customer 100 dollars, when does the crew burn out

          2. Dave45 | Mar 29, 2008 09:46pm | #25

            Even sinking markets have opportunities.  Even if nothing is actually growing, there's something out there that at least isn't falling as fast.  The trick is to find it and make that your "niche".

            I've had some (small) success suggesting that kitchen customers get the majority of their cabinets from a production shop and letting me build the one or two really custom pieces that the production shop may not want to do.  Threre's a Lyptus Island in my pipeline that will definitely be one of a kind - although the rest of the kitchen will be stock modules from a production outfit.

  5. IdahoDon | Mar 29, 2008 05:07pm | #13

    I'm a strong proponent of getting the client to get excited and start as soon as possible.  More than a few of my jobs have come to fruition because I would get started that day, even if it was only time for planning, ordering, or minor demo.  Getting the client committed to the start, even without a written contract up front, has been my key to a good finish. 

    If you are having to compete with guys who will give away their time, try to find an angle that doesn't compare your prices with theirs on equal terms or you'll lose out.  Maybe you can combine a T&M component to your jobs with a smaller fixed price portion.

    It may be easier to have a bare bones fixed price to get the bid and offer a wider selection of upgrades as the project moves along.  Being flexible and managing (and encouraging to a certain extent) scope creep can turn a $70k kitchen into a $100k whole house spruce up.

    How are you pricing jobs and what kinds of jobs are you most comfortable with?

     

    Beer was created so carpenters wouldn't rule the world.

    1. roger g | Mar 29, 2008 05:40pm | #15

      I'm a strong proponent of getting the client to get excited and start as soon as possible. More than a few of my jobs have come to fruition because I would get started that day, even if it was only time for planning, ordering, or minor demo. Getting the client committed to the start, even without a written contract up front, has been my key to a good finish. Excellent. Something I am very remiss about and yet kick myself every time for not doing just what you say. Probably one of the best and biggest tips. I've know it but just have to do it.roger

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