Among the nagging problems that I have is making a customer understand the difference between a fixed price estimate and a time & materials estimate.
Recently quoted a job for some repairs on a home as a fixed price job. Customer kept count of employees working time and actually had a neighbor spying on my guys to see how many hours they worked when the customer wasnt around.
Of course customer now howls when presented with a bill. “Your guys werent here very much at all! How much am I paying per hour?”
No matter what I did I could not make her understand that the job was a fixed price job and that meant she was buying a product and not time.
Anyone else have this problem or am I alone?
++++++++
Another job:
Customer asks for a phone quote to hang (replace) three ceiling fans. I quote $50 per fan If it is simply a matter of swapping out fans. If there is more work then it will be more.
We get to the job and all three fans are hung on plastic, non-approved boxes with no attic access. I point it out to the lady and she says “Oh, it is going to be more isnt it?” I say “Yes it is.”
No more is said. When I present the bill, she grumbles but pays it. Now the husband calls me ranting and raving and threatening.
Anyone have some good systems to alleviate the above kinds of problems?
Replies
Pete-
On the client grumbling about the fixed price contract and how many hours the guys worked, I'd explain it like this.
"Mrs. Jones, you contracted for me to do "XX" work for "YY" dollars. Whether my crew spent 8 hours here or 800, your cost is the same. If you think that 40 hours was the "proper" amount of time for us to do the job, would you have been willing to pay us more if it actually took 80 hours?"
On the T&M client, you're bound to get resistance, as it appears that you're playing the old "foot in the door" game- get in, start the work, and then find "something extra". I know it's a PITA, but maybe you need to spell out what you assume to be encountering for the price quoted, and what will be "extra" in writing up front. Something to the effect of:
" Remove and replace three (3) ceiling fans- $150.00. Price assume the existing mounting boxes are code-compliant. If new boxes must be installed to replace deficient boxes, additional charges will apply."
How do you cover all the possible scenarios? It's not easy, especially as projects get bigger and more involved. But trying to get something written down is better than leaving yourself wide open.
Bob
I've seen this elsewhere and must ask: what is "PITA"?
"Pain In The A****"
OooooOOh.
Thanks.
Good point Bob. Here is what I have come up with on my own
For new customers a 5 minute education would be very very helpful
Mr. And Mrs. Customer this is a fixed price estimate. The only way my final bill to you will be changed is IF you add things to the scope of the job OR if there are some unforeseen conditions that we uncover during the course of our work.
Mr. And Mrs. Customer we have agreed that we will do this work based on the time and materials that it takes us to complete the job. I have given a rough estimate of $_____ to you. Your final bill may be higher and it may be lower depending on the difficulties that we run into. Is there an upper limit that you would rather us not go beyond?
Please understand that the time you will be charged for includes the time that it takes to pick up materials or rental equipment and the time that it takes to get to your job.
++++++
Now, here is the question. As a businessman I markup all of my materials MOST of the time at least 50%. There aint no way a homeowner is going for that on a time and material basis. What does everyone else do?
If a homeowner "audits" my bill and discovers a discrepancy in the material price versus the invoiced price all heck is gonna break loose.
Pete-
If you're finding yourself doing a lot of T&M work, or if you're a small one or two-man operation, you may be better off using a markup system where your overhead and profit are covered mostly through your labor rates, which would then allow you to markup your materials less. Using this system, you may end up with a labor rate of $50, $60, or even $80 per hour, but more clients are willing to pay that than to see a 2x4 charged at $6.
Think about it- they'll pay $65/hr for a mechanic who plugs their car into a computer to diagnose it, or $75/hr for a sewer line to get unclogged- why should your labor rate be $30/hr when you're taking on all the risk of working on their most valuable possession?? I'd still markup materials/subs at least 10% for pickup, management, etc- if they have a problem with that, they're probably clients you're better off not working for anyway.
This is a little different than the "industry convention" of applying a straightline markup to all labor, material, and sub costs, but it tends to work better, in my opinion, unless you grow into larger projects (additions, kitchens, etc.).
Bob
Bob as an electrician I charge $67.50 per hour for two men and I still mark up my materials 50%.
I also have a carpentry side of my business and on the job that we are talking about I charged $58 per hour and marked up my matls 50%.
Been operating like this for about 10 years but I still get the ringer customers who say "surely I dont have to pay your guys to pick up materials do I?"
The stress of having to justify stuff like this is prodding me to rethink how I handle this end of my business.
Been operating like this for about 10 years but I still get the ringer customers who say "surely I dont have to pay your guys to pick up materials do I?"
No, you pick up everything for us. We only charge you for picking up all of the things you forget.
carpenter in transition
I like the way you think
I think the basic problem here is-
"There's none so stupid as those that don't want to understand"
With people like that (first and second examples) it doesn't matter how much time you spend with them, whether you write it all down in foot-high letters across the kitchen wall or take them through several worked examples, they are still going to end up grumbling and feeling hard done by. It's not your fault, it's theirs
John
editted for spling
Edited 9/9/2003 8:01:13 AM ET by john
"I think the basic problem here is-
"There's none so stupid as those that don't want to understand""
I am HO and not in the trades, but I am self-employeed.
But most people aren't and they just don't have any concept of the different between pay and cost.
They to work and say get paid $20/hr they don't realize that in addtion to actually salary the cost of the desk that they work at, the cost of the building, etc, etc. Not to mention the direct cost in payroll taxes and insurance of just having a warm body. They clock in a 8 and out at 5 with a 1 hour lunch, so that is 8 hours and $160. That is the only perspective that they know.
So when they see a job that say has 20 manhours and the bill is say $1500 they don't have any way of grasping that.
THAT IS NOT BEING STUPID! And your remark is very condensending to the HO.
What they don't see is that this is really a 30 manhour job, with the time to do the estimate and plans. the time to get the materials, the permits, etc. And then there is the overhead cost.
PETE
HO come in a wide range of personalities. And from the way that see the problems that you present it how you present the situation to the HO. Some of them are bottom feeders but most of them just don't have any concept of the cost of running a business.
A for the fixed price job. I would have in the proposal and go over with the clients a dozen or so builit point about what they are getting.
Pickup of material and return of their is a problem.
Liability and workers comp insurance.
No charges if it takes longer than expected.
all of the tools, etc.
Other wise all they see if what there persective is. The salary the workers get and the time from clock in to clock out on their job.
B I suspect that the problem is the way that you presented the cost. They heard $50 because that is what you said. Now it is true that mentioned potential problems, but $50 was the only number that you gave and it is what they heard.
In an example gave I would start of by asking them if these where fan rated boxes.
"I quote $50 per fan If it is simply a matter of swapping out fans. If there is more work then it will be more. "
Hey the fans where mounted there before, so what's the problem. It appears that you set youself up for this one. The customer does not really know the difference.
A better response would be to asked if they are installed to current codes and use support boxes rated to hold weigth of the fan. Then you can add that you find that a lot of fans are installed properply and they are in danger of falling and hurting people. Then you can say if the current fan was properly installed then it will cost $50 to switch out, but that it will cost more if you have to replace the dangerous box.
First of all by asking them if they know if the current box is rated or not you have put the ball in their court. Now they are warned that the job might be more expense.
If when you get there you need to replace the boxes you are a hero saving their life, not someone that offered to do the job for $50 and now you are trying to rip them off.
That is just human nature. If you give them two possibilities they are only going to hear the cheap one.
"THAT IS NOT BEING STUPID! And your remark is very condensending to the HO. "
Bill, I think you need a reminder of what was in Pete's original post-"
"No matter what I did I could not make her understand that the job was a fixed price job and that meant she was buying a product and not time."
My remark that "there's none so stupid as those that will not understand" was not aimed at homeowners specifically, just at people who refuse to grasp what you are telling them because they don't want to hear it.
You yourself must have come across people like that. They don't want to hear thoings which don't suit them. You might feel it's worth going over it with them a few more times, I tend to give up fairly quickly.
John
In the scenario Pete gave about the fans being installed on non-code and patently unsafe boxs, what if... after the first fan has been pulled and the unsafe condition found, the HO said "No, I don't want to pay the extra, and will not replace the fans after all."
Do we refuse to reinstall that first fan back on the plastic box? Will it open us up to a lawsuit if we do, and, the next day, the fan falls off. It is definately less securely attached than it was before we messed with it just because the screws have been run in and out twice and we have stressed the connections.
Whether or not we replace the thing, do we have a legal responsibility to inform the HO that there is an unsafe condition existing? WE are, after all, the knowledgable professionals.
How do we insure that we can prove that we have told them in terms that are not misunderstanable? Do we write a certified, return reciept requested letter? have a lawyer write the letter? What?
SamT
"My remark that "there's none so stupid as those that will not understand" was not aimed at homeowners specifically, just at people who refuse to grasp what you are telling them because they don't want to hear it.
You yourself must have come across people like that. They don't want to hear thoings which don't suit them. You might feel it's worth going over it with them a few more times, I tend to give up fairly quickly."
Yes, I have and have tried to avoid those kind also.
But one point that made in the 2nd case, but might not have made as clear in the first case is that this needs to be clearly explained UP FRONT.
In all of these examples that he has posted the problem has come up after the job is finished.
Once someone starts questioning something them is much, much harder to convience them otherwise.
I work to explain this stuff up front and when I detect a shadow in their "understandin" at that time, i either figure it is time to write up a specific contract or run for the hills. .
Excellence is its own reward!
Bill Hartmann,
I don't buy your rationale at all.
an employee working for an employer at $20/hour knows full well that his employer bills out his time at MORE than $20/hour. He may not know the specifics---but he know full well it's more.
Any employee that DOESN'T know this IS ,by definition,stupid.
I don't buy your rationale at all.
Actually I will correct that. I do agree with it about 2%.
Few people work in jobs where there there time is directly billed out.
I can think of many people. The clerk at HD, someone on the line at GM, a teacher. Here is a good example, Andy E. How much of his salary comes out the $7.99 cover price.
But if I save by getting a 2 yr subscription unstead of a 1 year subscript does his salary go down?
Bill,
your reply is utter nonsense.
I don't think for ONE MINUTE that Andy doesn't know full well that he must generate (bill) more money than his salary---much more.
Even "non profit "employees like teachers , social workers etc. grasp the economics of this. that's part of why they complain of departments being downsized while the work load increases,case loads increase ,class sizes increase.
Even heavily tatooed, high school drop out, roofing laborers grasp the concept.
they must be brighter than the folks you are hanging with. LOL
good Luck to You
For customer #1 (fixed price job) you could produce a detailed copy of the first bill that includes things like:
insurance costs
vehicle cost and depreciation
fuel
tools costs and depreciation
Expendables (blades and bits, etc)
time for project planning
time for material procurement
time for the "free" estimates you give
advertising costs
accounting costs
time spent on payroll
etc.
Really though, it would just be a waste of time - some people are just "thrifty" to the point where they think that other peoples time and talents are expendable, and won't be repeat customers anyway.
"Anyone have some good systems to alleviate the above kinds of problems?"
Not really. But I do agree with most of the posts above.
Almost without fail, the disgruntled customer has no idea of what is involved concerning the job itself or the costs involved in keeping a business running that provides the service BUT is convinced that it they are being gouged if it costs more than they want it to. (I feel this way myself sometimes and I think most of us do at one time or another. And sometimes that feeling is actually justified.) But frequently, the customer doesn't care what the involved costs are or whether you are making a living at it, they just want it done for a price that agrees with them.
I think you'd best prepare yourself to encounter more of this because there are numerous reasons that this happens. Now I know I'm not about to tell you anything you don't already know, so consider this a simple reminder.
1- The customer is elderly and just hasn't "adjusted" to current pay scales and costs and may well be operating with very limited financial resources. I frequently cut these folks a real deal and sometimes I even do the labor end of it for free. Depends. (But now there's a system that'll eliminate the whining for sure……………………do it for free.)
2- Then there are those who are quite wealthy, but are just plain cheapskates and want you to assist them in holding onto the money that they're so in love with.
3- There are those whose current financial resources simply cannot meet their true needs. They feel because they are financially stressed, that life in general is too expensive; something is grossly unfair in the world and you're just another example of this. And so they unload on you since you're current violator of what they think is right and just.
4- Let's not forget those who will spend money hand-over-fist for toys and fun stuff, but will squeal like a pig about paying for the necessaries in life. These folks are living beyond their means, but won't see or admit it.
And of course, there are those people who just simply get off on chewing you down by whatever means can be used; no holds barred. They "win", you "lose". Makes them feel "accomplished", powerful and superior. They now have braggin' rights…..at least with themselves.
(Yes, I have met or know people who fit in every category above)
None of the above would care to do for free what it is that you do, but that is exactly what they desire from you……..or at the very least, they want to determine themselves what is the appropriate charge for completion of their project.
To totally avoid this type of problem in the future, you'd have to eliminate these types of people and unfortunately the world has an abundance of them and seems to grow more each day. Even a fully explanatory written contract, which they've read and signed, cannot put an end to whining and tantrums from people who have adopted one of the above attitudes. I haven't seen a contract written yet that prohibits whining and complaining.
What you can do is put together a list of people you shouldn't work for again and put these people's names on that list. They've earned it. And then use caller ID or an answering machine to screen calls and avoid picking up or returning calls from them. Maybe you could even sell the list to other local contractors. <g>
And/or you can point out to them that if they'd spent 10% as much energy on learning and doing as they do on whining, they'd have acquired the ability and tools to do these things for themselves and the job would be done without hiring anyone. Warning: This notion doesn't usually appeal to the whiner.
I wouldn't waste my time trying to educate them as to the real costs of running my business. They'd already understand if they wanted to and would appreciate my availability perform the service for them. Just avoid the whiners in the future once you have them ear-tagged.
Great advice. Well thought out and thorough. Can I buy you lunch? :)
You bet. But geography might be a problem in that regard.
However, I promise I wouldn't complain about you putting a limit on the cost of said free luunch. <g>
Knowledge is power, but only if applied in a timely fashion.
Excellent post, Mr Goldhiller, and I agree all of it. Couple of things I would like to add-
"4- Let's not forget those who will spend money hand-over-fist for toys and fun stuff, but will squeal like a pig about paying for the necessaries in life. These folks are living beyond their means, but won't see or admit it. "
I come across this sort of thing a lot, especially from many of the rich people that I've worked for. They love buying things but they hate paying to have thise things maintained. I think this is because when they have their many windows and doors painted to stop them rotting they haven't got anything at the end of it that they didn't have at the start. One of the reasons why I do kitchens and avoid jobs that are basically repair and maintenance work.
"1- The customer is elderly and just hasn't "adjusted" to current pay scales and costs"
That applies a lot, and I also try to be sympathetic, but when it comes to increased income due to inflation, they get used to the new numbers very quickly. My MIL moans at having to pay 7$ an hour to get her garden tidied, but when the house she inherited sold for $250,000 that was totally acceptable, no problem grasping that number at all!
"(But now there's a system that'll eliminate the whining for sure……………………do it for free.) "
That's a very optimistic statement!
John
"My MIL moans at having to pay 7$ an hour to get her garden tidied,
but when the house she inherited sold for $250,000 that was totally acceptable, no problem grasping that
number at all!"
ROFLMAO !
Oh, the stories I could tell in that vein, as well. <g>
Best saved for a different thread in the Tavern maybe. Anybody got the guts to start that one? LOL
Knowledge is power, but only if applied in a timely fashion.
Regarding upcharging for materials:
Whatever works for you - fine.
But personally, I know what a 2x4 costs and I know what overhead is. I would rather see $80/hour and materials at cost that see $40/hr and some bogus inflated price for the materials.
I'm not an idiot and scams tick me off. Inflating the price of materials to pad your bottom line is just a scam too many people have gotten too used to.
If you want to tack on a delivery charge or $40 per trip to the big box, fine, but don't bill me $6 for a 2x4.
2x4 from Lowes $2.85 X 50%=$4.28 looks like we would get along just fine.
Begging your pardon please, but I'm abouit to butt heads again with you over this issue.
It is not possible for you to know what the overhead is. Some contractors have OH of 5-6% and others find it to be more like 22%. There are quite a few who don't know for themselves what it is. how can you pretend to know?
All you can do is imagine what you think it should be without ever knowing from any business experience what might be included in that overhead.
Then you proceed to state unequivocably that any one who charges enough to cover his OH and make any profit is running a scam operation. By thgat definition every successfull business in this country is a scammer. The only way to be honest in your eyes is to lose money, in which case there would be no businesses and no taxes getting paid and an economy in shambles with unemployment lines on every corner.
So let's get real, If I sell you a two bt four and you think it has too many knots in it, who pays for the time to return it?
If I sell you an Andersen window and install it, and there is a minor problem, who covers my time for the callback?
How do I get paid for the time to help you select that Andesen wiondow in the first place? or for billing you for it? or for the cost of money while I wait for you to pay me for the job?
Give me a break! You pizz me off every time you vomit this "I'm not an idiot and scams tick me off. Inflating the price of materials to pad your bottom line is just a scam too many people have gotten too used to. " kind of crap. And it makes you look like an idioit to say it that way without any idea what you are talking about..
Excellence is its own reward!
Well said
Edited 9/10/2003 10:13:54 AM ET by Pete
Thanks.
Nanny has the kind of attitude as cistomers who you first mentioned in your example. Not happy until the contractor is losing money. He starts with this garbage every two or three months about how any contractor who makes any money is a crook.
Nanny plans to build his own home for some ridiculous low price. Reality will teach him to be more humble someday. Until then, he knows more than the pros..
Excellence is its own reward!
Since I don't know you, I won't try to tell other posters here all about you. Heck, this is the internet after all, and you could be 72-year-old widow padding around all day in her jammies and pink slippers. We'll never know.
There is information I don't know (what your overhead is - but I certainly understand the concept, which is all I said) and information I do know (what materials cost).
It strikes me that a young contractor trying to get started out in the business and trying to operate with integrity while needing to net an honest living would be best served to either 1) omit any reference to the cost of materials or 2) cover all overhead with labor costs and leave materials alone (or with just a slight "hassle" charge).
Pu another way, why would any bidder for a job try to heep labor costs artificially lower than a compeditor by making up for it in materials except for lack of integrity?
But as I said before, "whatever works for you".
Anyway, I've already built my own home - twice. And since I did it on my own, I no longer have to work a regular job for a living. Not a bad deal.
Make that a 172 year old widow and I believe you hit the nail on the head.
Who ever invented work didn't know how to fish....
You git your hand off my knee there sonny. I know how you young fellers are..
Excellence is its own reward!
Can you get any pics of Pif with his pink slippers? NO? I bet that story about wax on his feet was just to keep from admitting to the pink slippers! ; )Any jackass can kick down a barn, but it takes a carpenter to build one.
"Anyway, I've already built my own home - twice. And since I did it on my own, I no longer have to work a regular job for a living. Not a bad deal."
Ooiy! You've gained so much experience since the last time you responded in this vein! Pretty soon, you'll have built ten houses for yourself. Maybe I can get a job cleaning toilets for you. Do you mind if I work in my bathrobe as long as I don't leave my cigar ash on your floor?.
Excellence is its own reward!
Side note to you: interesting information (link below)I just found about the actual costs of car production: 23.5% just for marketing and sales!! Neat stuff that teaches a lot about overhead costs on a much higher scale.
http://www.transportation.anl.gov/pdfs/TA/57.pdf
Edited 9/10/2003 4:47:07 PM ET by molten
NannyGee,
I mark my materials up 40%. Why?
Covers the cost of going to get them.
Covers the cost of warranty if they fail. ( I may get a replacement free but I have to remove it and reinstall it)
Covers working with my supplier to order just the right item for just the right job. Some jobs require more than a 2 X 4.
Certainly adds to my bottom line most of the time, and it is not a scam to want to make money, its called business.
Being in business is about making money. Yes, I could have continued to work at a job but decided I like working for me. And part of that is that all my effort is rewarded by making money. Good money. And I for one won't apologize for that.
I am interested in the fact you now have built 2 houses yourself. And now you don't have to work a job. Just decided that effort was enough for one life? Not interested in doing anything else? Just decided it would be more rewarding to sit at the computer all day and second guess other peoples business that you don't know and know nothing about? For all we know you are just a welfare recipient living in goverment housing eating cheetos and staring at the computer. Piffin is right. DanT
Gee, I didn't mean to degrade the Nanny all the way to welfare status. But here's how I remember this from the last time he had to nerve to walk in to this room full of contractors and start insulting every contrator who ever earn a dime;
He is a stay at home Daddy Nanny. His wife is a teacher who brings home the bacon because she can make bettter money than he can and one of them needs to raise the kids. That much is laudable.
But he gets to feeling insecure about his manhood in that position and has to puff his chest out here every now and then, is how it appears.
As for his building experience, my last memory is that he had renovated the bungalow they live in and had helped a friend build a house, thus the TWO he now counts as having built. He had to mention them in a feeble attempt to give himself credibility in his other slams he made against all contractors.
Statements like that reek of jealousy, greed and frustration. If there were an ounce of truth in his assertion, it would simply be an arguement with two sides. As it is, I feel like I'm mopping up Dog piss - and I rarely get this wayb ut I can't stand someone who wants to sling insults and lies in the same statement..
Excellence is its own reward!
I will bow down and kiss the toes of anyone who can prove I've said any builder makes too much money. The fact that so many simply infer it makes it difficult to communicate any points.
If you come to my house to bid on a job, first of all, I'll expect to have to pay you something for the effort. Maybe you would do it for free - maybe not. But that's my expectation. Next, after giving it adequate thought, you determine that the job will cost $25K in total (the amount you need to cover expences and make a nice living) then that's the price I want to be quoted. If, for some reason, you want to break down labor and materials and I know the materials will cost around $5K, then lay it out that way please - 20+5. I would rather you not soften the 20 by making it 15 abd then raise the 5 to 10 to make up the difference. I will say yes or no - that's it. I will not barter or degrade you - just a yes or no.
It's not a matter of overall costs, it's a matter of integrity. The fact that mark ups are common practice doesn't make it right. And the fact that someone dares bring up this point of view doesn't make them a cheapscate.
Now, I am a stay-home parent and I was able to swing that only because we don't have a mortgage. We don't have a mortgage because I built and sold my first house for enough of a profit to buy the second one for cash and then remodel it. I have also built a home at our 40 acres on the lake, also without a mortgage. None of this matters a bit to the issue at hand. I only bring it up because the good people here can only manage to disagree by degrading.
Edited 9/10/2003 9:21:56 PM ET by NannyGee
"It's not a matter of overall costs, it's a matter of integrity"
Those who add a markup have no integrity??
"The fact that mark ups are common practice doesn't make it right."
Name any public or privately held company that does not add a percentage for profit (costs have to be marked up in order to realize a profit). The desire for profit is capitalism. We are in a capitalist society. When was the last time you bought a part from the auto dealership? Do you think that part cost that much to produce? Are pharmaceuticals sold at cost?
"We don't have a mortgage because I built and sold my first house for enough of a profit..."
Profit is OK for you but not OK for contractors?
"None of this matters a bit to the issue at hand"
It does matter. Here is why. You bought your house at COST. You then sold it at more than cost. You made an evil profit. Why didnt you figure up your hours you worked on your house and pay yourself $10 an hour then add up all of your materials receipts and simply add that on to make that the selling price of your house? That would have been the way a person of integrity would have done it.
(listen...)
...
...
...
...
That's the sound of someone banging their head against the wall.
All that really matters in the end is how much you net, right? I have not said a word about how much anyone's net income is, have I? Shoot for $50K a year. Shoot for $100K a year. Shoot for more. I don't care. This is just about how costs are broken down for the client.
I'll stand out on a giant limb and suggest that one way has more integrity than another.
But if you have plenty of work lined up already then why do you care what I think? You are successful already, right.
By the way; 2x4 at Menards $1.89, 2x4 at Home Depot $1.99, 2x4 at local lumber yard $2.24 (orders of $500+ delivered to the job site for free. Let's see, 250 studs, or the equivalent assorted materials, for $560 +40% = $784, delivered to the job site for free....$224 for a phone call)
Edited 9/10/2003 9:08:21 PM ET by NannyGee
"I have not said a word about how much anyone's net income is, have I?"
welllll yeah you have
"I'm not an idiot and scams tick me off. Inflating the price of materials to pad your bottom line is just a scam too many people have gotten too used to. "
"pad your bottom line" in this case means in lieu of charging more for labor - which I suggest everyone do.
I think you knew that.
"I mark my materials up 40%. Why? Covers the cost of going to get them."
That's labor.
"Covers the cost of warranty if they fail. ( I may get a replacement free but I have to remove it and reinstall it)"
That's labor. All jobs have screw ups. All screw ups take time to fix.
"Covers working with my supplier..."
That's labor.
ANYTHING that consumes your time is labor. Your time is money.
Still think I'm a penny pinching jerk?
"Still think I'm a penny pinching jerk?"
Yep.
If you read the other posts on this board dealing with customer perceptions you will find that a lot of customers find it difficult to understand why they have to pay labor for the material to be picked up. Hence markup.
When I go get my material I am using my work truck, an expense, not labor. Fuel, wear and tear are all expense that I am not willing to absorb for free.
I am often shopping for more than one job. Who would I justifiably charge, job 1, 2 or 3? Do I sit and calculate each minute of my shopping experience so each job pays their fair percentage of my labor? I think not.
I am not a builder. I am a remodeler/handyman. So I do a lot of jobs in a given week. I try, in order to be effecient, to limit my shopping to first thing in the morning. And unless I happen to be on a large job (3 weeks is big to me) I pick up material at various locations for all my jobs for that day. Faster to get around town in the AM and easier to get waited on when no one else is around.
Look, just because you don't want to see a mark up on materials does not mean the rest of the public feels the same. I base my pricing policies on what I find the public accepts the easiest. And this is it. As far as my rate it is as high as I can charge and continue to gain business of the type I want.
You are right, I should not stoop to insults to make a point. And I would feel badly about that if I felt you would accept responsibility for your accusitory overall tone when you post. Since I think you enjoy jerking our chain once in awhile I feel no remorse for being insulting.
And you are right on another issue. I am successful. If feel no need to voice how much so but enough that I can tell you that your opinion matters none at all. DanT
" Since I think you enjoy jerking our chain once in awhile I feel no remorse for being insulting."
That's something to be proud of.
It would be easy to lurk around here just waiting for a good opportunity to "jerk" because you guys are really easy in that respect. It must be too much exposure to bad customers. No doubt that's a job hazzard. I never intended to volunteer as punching bag/stress reliever for you folks.
I will tell level with you a little though. At times like these I do have something of an alterior motive. Here is what it is; What I'm doing is waiting to see if another pro member of this web site, previously just lurking, finally can't take it anymore and posts something like this:
"Hey all. Listen I don't want to make any enemies here (especially my good ol' pal piff) but I think you might just be going off the deep end a little here. I understood Nanny's point the first time she said it. You guys might not agree with it entirely (I don't) but it's not entirely without merit. By being deliberately obtuse and imagining accusations where there were none, you are dismissing a valid point, as well as making yourselves sound like the 14-year-old hallway bullies we all remember from Jr. High."
If I have any alterior motive it's waiting for that. I may have to wait a long time. You guys have a tight little club here. But I promise you, I don't check into this web site to see who I can tick off. That would be petty and small.
OK, you've got it. I'm a contractor that builds and installs custom kitchens, and I agree with you. I think providing a customer with a full breakdown of costs ( and adding a fixed percentage to those that are quite easy for the customer to check for themselves) is asking for trouble.
The way I see it, the customer wants some work done, and wants to know how much they are going to have to pay. That's all they care about. As soon the customer is able to question broken down elements of that cost then that is a completely unecessary (unless a legal requirement) source of potential dissatisfaction.
John
John,
I have to totally agree with you. And I also want to mention that we aren't required to give a detailed breakdown of materials, but rather must simply have the total for them on a separate line from the labor on the billing.
And yes, it's pretty easy these days for a client to investigate prices and then complain based upon the result of their knowledge or investigation. Problem is, selling the materials with no mark-up is no guarantee that you're going to avoid trouble, either.
The world is replete with folks who are convinced they're being taken whether it's on the cost of materials or labor. These folks arrive "pre-dispositioned", assuming we're likely wearing a bandana across our true faces. They're lookin' for trouble and they can find it no matter what........ if they want to.
I had a college-educated, middle-aged, church-goin' woman go off on me one time because I charged more per hour than she was making. She wrote articles for the local little newspaper for $1.25 an hour. Do you have any idea how long it can take to explain to a supposedly educated person that my rates shouldn't (and couldn't.....if I cared to stay in business) have any connection to how little someone else is willing to work for? She and her husband had just returned from a three week vacation in Europe. They trusted me enough to toss me the keys to the house while they were gone and the cost of the job was fully accepted before they left. Upon their return she decided to raise hell with me. See my earlier post as to which category/categories these people fit into. (There are, of course, several other categories that I didn't get listed in my haste that morning.)
Fact is John, there is no sure path to a trouble-free relationship with all customers no matter how fair and giving you may be with them. Unless of course, you want to give your labor away for free or let the customer set the final price of their project themselves.
Thankfully all people aren't so difficult. My established clientele today is comprised of people who are willingly to pay for a quality job and don't squawk about me charging a fair price or making a living for the services I offer them. I return that respect and trust by standing behind everything I do. If there's a problem, I'm there pronto and resolve it for free. Mutual respect is where it's at.
Knowledge is power, but only if applied in a timely fashion.
Edited 9/11/2003 10:10:56 AM ET by GOLDHILLER
Thank you john!
(Can I ask, how did you ever register with that name - not that it isn't a perfectly good one? When I tried to register with "NannyG" - my preference - it had already been taken. I would have guessed you would have been prompted to try "john236" or something like that. Anyway, good to see you here.)
I hope I wasn't too off base with my last post re: kitchens, since this is your area. For the record, I'm perfectly fine with being corrected, just not spat at and belittled. I'm in the middle of my own kitchen project, myself. With three kids tooling around requiring and deserving attention, it'll be a long project. The value added to the house vs. the amount of time I'll spend on it will probably work out to about $1.79/hr. But at least we won't have to take out a loan to do it.
Cheers.
Piffin, thanks. However, my post was a mistake since I violated my own tenet of never responding to, shall i say, those with permanently self-installed blinders to both reality and truth. In other words - morons.
Being born and raised in Chicago, and since my Dad dies when I was 10, I was raised by my Mother and 4 older siblings, and never once heard the "n" word from my family about blacks or any of the other derogatory names for other races or nationalities. Good and bad in everyone of them I was told. That philosophy was indeed different living in Chicago.
Yet, you would not believe the ignorance of the masses. Let me repeat - "the ignorance of the masses", and the way they rationalize their prejudices, and the things I heard say about other races and nationalities. They are, like the scientist who swears that ozone is being depleted by C02 gases and freon, and substantiates his/her "contention" by writing about and evoking only stats that substantiate his/her "contention", while burying or omitting any actual real fact that disproves his/her theory. My brother is a scientist and once told me the word for that "process" but I've since forgotten the word.
Ma used to say in these situations: "Why break your teeth." Ma was, and still is, correctomundo! You can take a horse to water, but you cannot make it drink, right?
I read you roof repair story and I can't find a single thing I could possibly object to. What astounds me is that anyone would think anything I've posted here would suggest I would. I've bent over backwards to say that I'm not commenting on the total of the final bill, much less the amount anyone makes per hour or per year. And each time I've done that, a dozen posts follow telling me what a bastard I am for wanting to cut into profit/income.
When someone posts something challenging it might be human nature to look for something sinister hidden behind the words. But it doesn't mean anything sinister is there. Whitewashing anything challenging would make for a pretty meaningless board, to say nothing of dull.
You might notice that almost nothing has been said here to address the thread question in any meaningful way.
It seems to me you could try to "teach" the customer - coming up with a sort of "contractor 101" course. That's one way. Or you could eliminate from the process as many things as possible that would likely ring alarm bells with the customer and/or cause confusion. That is all I was doing. And look what happened....
Situation is this.................you're currently viewing the world of home construction, remodeling and repair from one perpective and only one.........yours.
You are indeed doing what I described earlier; standing on the sidelines shouting instructions and suggestions to the bull rider. Then when he counters your suggestions with "that ain't gonna work" or "easier said than done", you're convinced it's because he's just being obstinate and/or not following your stellar suggestions because he's just too concerned about his own well-being. Fact is, you will only understand what he's talking about AFTER you've spent some time up there.
If you are truly interested in widening and enhancing your perspective concerning the nature of making a living doing what it is that these folks do for a living........pick up your tools and hang out a shingle. There's my challenge to you...... again. By the way, I hope you've got some coin laid aside to get started. You're gonna need tools, insurance, and a good vehicle...........just for starters.
Once you've got at least a couple of years of ridin' time in........come on back and criticize all you want. I'll be all ears. Mind you, you must support yourself and pay all your living expenses from your earnings .....not just hobby at it when you're in the mood.
It'll be interesting to see what you have to say then about $ per hour versus material mark-up and whining HO customers who think you're overpaid for what you provide and do.......or accuse you of being a scam artist who preys on homeowners.
Oh, and for the record...........if during that time you want to come here for advice concerning a job, I personally would be willingly to offer any advice I could that might be helpful to you. Ya see, I don't hold deep-seated grudges nor refuse to bring out a fresh slate and start over anew unless the person has done something REALLY abhorrent and then shows no signs nor makes no statement of remorse and/or no apology has been forthcoming. As far as I'm concerned you don't qualify for that distinction. However, if all they want to do is continue where we left off....that's a different story.
As always, the ball is in your court.
Knowledge is power, but only if applied in a timely fashion.
Edited 9/15/2003 1:51:53 PM ET by GOLDHILLER
Edited 9/15/2003 2:06:44 PM ET by GOLDHILLER
Goldhiller - I couldn't agree more with you. I like the bronc riding analogy.
Nannygee - would you take driving instructions from someone who never drove a car? I wouldn't - so don't expect these guys to take advice on how to run there BUSINESS from someone who never ran there own construction business. They have wives, kids, mortgages, medical ins., car payments, tuition, phones, electric, heat, & on & on & on. All these bills & responsibilities coming at them & they are doing okay - {contrary to popular belief contractors are not rich -only about 10% at most the rest are doing hard labor & if you think this work is easy GO DO IT}
A house is the single greatest financial investment a person can make - no other investment pays off so much - yet we have people who think they can nickel & dime a contractor to death so as to pay out as little as possible and turn around & try to sell at the maximum selling price. Oh the homeowner can try to make a buck but the contractor can't? We do the work and the HO should keep all the profits? That is what you are proposing Nanny and I think that is totally insane.
...sigh...
You expressed it all just as well or maybe better.
Knowledge is power, but only if applied in a timely fashion.
"A house is the single greatest financial investment a person can make - no other investment pays off so much - yet we have people who think they can nickel & dime a contractor to death so as to pay out as little as possible and turn around & try to sell at the maximum selling price. Oh the homeowner can try to make a buck but the contractor can't? We do the work and the HO should keep all the profits?"
Have you realized yet why you only got a "sigh" as a response from the Nanny Gee?
Because you brought up the flip side of this "business relationship"......you know, the one Nanny wants to avoid..........the "integrity" of the homeowner we deal with as contractors. Nanny doesn't care to address this issue and how that interrelates to the contractor.
I personally think that every new homeowner should sit down and make a decision as to how they're going to deal with contractors, you know, which way has the more integrity and allows them to sleep better at night and then stick with that decision, no matter what!
Knowledge is power, but only if applied in a timely fashion.
Let's set aside, for a moment, all the previous posts and focus a bit on something closer to the thread title.
Let's start out by dividing customers into two groups;
1) those that don't need help understanding anything
2) those that do
Now, let's divide group 2 into several areas, just one of those being those who will not understand or put up with upcharging a significant % of materials cost.
This little group - what is it, maybe 5% of all customers, whatever - is the group I was speaking of/for.
As someone trying to make a living providing a service to the general public, it seems to me, you have two choices regarding this group;
1) You can adjust to their needs by either getting your profit margin in labor or by allowing them to take control of all material needs, or
2) You can say thanks, but no thanks. This is how I work.
If you can afford #2 (and many can, I'm sure) then you have my blessing.
If you can't, then a person might want to take my suggestion seriously.
Now, thank you for your kind invitation to join the trades. I already have a job for the forseeable future - my kids & my own house(s). But when I signed up here I didn't see a space for my union ID# or any such thing, so I guess I'm allowed to be here. And if I'm here, I guess I'm allowed to make a suggestion or two. And if I do, it might be adequate for those who disagree to simply say so and leave it at that. We wouldn't be sitting here at post #106 if that had been the case.
I have done a half dozen or so jobs for folks who needed a project done. While in each case, things went fine (hard for the customer to complain when they are being charged only 20-30% of the going rate) I didn't really enjoy it much. I would rather be putting the effort into my own home & my own equity. I admire those who can deal with customers in a positive way all day and not get ulcers. That's a skill. But if you find it difficult - if it does give you ulcers - consider trying a different profession. As the saying goes, "the customer is always right".
Edited 9/15/2003 3:55:45 PM ET by NannyGee
Okay, so let's address your complaint and suggestion concerning the issues you brought up……………………………………………..
Your position concerning the issue of total cost on a construction or repair project has been that you would rather pay just the contractor's cost for the materials, and pay said contractor a higher per hour fee, including the time to pick up the materials. Fair enough.
But other folks would object to seeing those higher per hour fees, but wouldn't complain or feel "cheated" if the contractor marked-up the cost of material, even if they knew they had. Different strokes. Fair enough also.
Any contractor must acquire "X" dollars on a job to cover materials, operating costs, labor, etc and make a living in the end. And so, what is the contractor supposed to do to avoid potential psychological problems with the customer? Question each client concerning which they would have him do?
This seems somewhat comparable to one's roommate or spouse having an earlier than normal appointment in the morning. You perceive their anxiousness and so you ask if they'd like you to set the clock ahead 15 minutes when they aren't looking and then come morning they'll be fooled. Pretty ridiculous, huh? Who's fooled? They'll look at the clock when it goes off and know they have 15 more minutes to snooze.
I would suggest to you that any customer who has a problem with the total cost of a project……….has a problem with the total cost of a project…………period. Nitpicking over the breakdown between $ per hour and mark-up on materials is just a ruse to cover up the real issue……………the total cost.
Knowledge is power, but only if applied in a timely fashion.
That was an excellent post. First rate! God, I wish someone would have done that about 90 posts ago!
"And so, what is the contractor supposed to do to avoid potential psychological problems with the customer?"
My suggestion is that a contractor (preferably at the beginning of his career) sit down and give some thought to how he wants to operate - to which way of making a living (billing) he feels has more integrity - which way helps him most in dealing with customers and which way helps him sleep at night. Then stick with it, no matter what.
I gave my suggestion, but maybe I'm in the minority as potential customers go. I don't know. It was only a suggestion.
"My suggestion is that a contractor (preferably at the beginning of his career) sit down and give some thought to how he wants to operate - to which way of making a living (billing) he feels has more integrity - which way helps him most in dealing with customers and which way helps him sleep at night. Then stick with it, no matter what."
Oh my! And just when I thought perhaps you were beginning to grasp the reality of the situation.
There is ABSOLUTELY NO, I REPEAT.....NO connection between whether or not a neophyte contractor has integrity and the initial business approach he/she makes while still wet behind the ears as it relates to making a living in the construction trades while striving to produce a quality result/product, sleeping with themselves at night (implication of guilt?) and dealing with the psychological make-up of their marketplace/potential customers.
As a matter of fact, if they were to stick with a business decision concerning labor rate or mark-up that insured they weren't making or going to make a living at it.....that would be a better barometer of obstinate stupidity......... not of possession of integrity.
You once again sound like a participant in a late night college rap session who's had far too much Boone's Farm Apple Wine, i.e.,............ you're babbling in circuitous fashion.
Why am I not surprised?
P.S. - It would appear that Piffin was right to some degree many posts ago when he stated that you are simply back here with the same old, same old. I will differ with him on one account regarding that though.........he said your argument was "more refined". I haven't seen any indication of that yet.
Knowledge is power, but only if applied in a timely fashion.
Edited 9/15/2003 11:24:19 PM ET by GOLDHILLER
Edited 9/15/2003 11:25:21 PM ET by GOLDHILLER
Edited 9/16/2003 8:53:04 AM ET by GOLDHILLER
Edited 9/16/2003 9:08:32 AM ET by GOLDHILLER
You once again sound like a participant in a late night college rap session who's had far too much Boone's Farm Apple Wine
You just brought me back to freshman/sophmore year
I give you guys credit, arguing with him must feel like bashing your head against a wall.
Nanny,
Give it up, until you walked a mile in their shoes, sit down, listen and learn, you ain't qualified to be teacher.
Edit: actually you sound like quite a few professors I've had in the recent years with no practical experience to speak of
The Count-Down begins, 94 days left
Edited 9/15/2003 11:45:03 PM ET by CAG
"I give you guys credit, arguing with him must feel like bashing your head against a wall."
No, actually it feels like thumpin' somebody who has their hands tied behind their back.
I don't know if I can sleep with myself tonight. Any room at your place?
Knowledge is power, but only if applied in a timely fashion.
sure, just got my dead beat roommate to move all his crap out.
thing I don't understand is he claims he doesn't mind paying, but he doesn't want to see marked up materials, just mark up labor more...
so if the bottom line is the same, what the @#$% does it matter.
Next thing you know, he's going to have a contractor show up and he's going to try to tell him, he just want's his labor, he'll go pick up all the material at HD himself thanks you very much.
whatta joke.
The Count-Down begins, 94 days left
Great! Just leave the door unlocked. I'll let myself in.
If you hear some unusual noises during the night, that's just me suckin' on a bottle of Boone's Farm as I try to quench the guilt of having no integrity.
Knowledge is power, but only if applied in a timely fashion.
Cag>>>"Next thing you know, he's going to have a contractor show up and he's going to try to tell him, he just want's his labor, he'll go pick up all the material at HD himself thanks you very much."
He already did, a few times. I won't bother finding the quotes, but something to the effect of "if you're going to mark up material, I'll supply it".
Something else I won't bother doing is supplying contract language for Ho's that want to do that very thing. I'm sure he won't be pleased that the material won't be guaranteed, any gaurantee on work or materials affected will be void, he pays for all time wasted when material is not delivered or fails...
He might like the contract I would write for him, it would be a blank piece of paper, crumpled up and tossed at his head, after I wiped my butt with it, lol.
I like that last little bit...
The Count-Down begins, 93 days left
I'm a contractor and I understand what you are saying. I am not legally obliged to seperate material and labour costs on any paperwork that my customers see, so I don't. I simply quote the total price and, if the customers like it, they sign the contract. I really can't see the point of seperate lines on the bill for materials, labour etc unless it is legally required
John
Hi John,
Thanks for chiming in again.
I'm curious. Someone wants you to gut & redo their kitchen. You sit down with them and discuss all the materials to be used & go home to figure out a cost for the whole thing (not broken down). In general terms, how do you come up with the figure?
Do you total up all the cost of the materials, figure the time involved and then nudge the total up or down a bit for quirks of the job?
Do you total up all the costs of the materials, multiply by a set %, figure time involved, etc.?
Do you total up all the costs of the materials, multiply by a variable %, figure time, etc.?
Do you sort of fly by the seat of your pants :-)
As a customer, I don't care to know. As a poster, I'm curious.
Of course, I assume all "overhead" is in there as a given.
-cheers
"I'm curious. Someone wants you to gut & redo their kitchen. You sit down with them and discuss all the materials to be used & go home to figure out a cost for the whole thing (not broken down). In general terms, how do you come up with the figure? "
I am fortunate in that my main competition, national sized companies with showrooms all over the country, produce price lists for their ready-to-assemble kitchens. All I need to do is to look at the price of their top-of-the-range kitchens and multilply that by maybe 1.5. I then tell the customer that I am a bit more expensive than the RTA competition, but that my stuff is better and I don't charge for installation. They then realise that they are getting a good deal and hopefully give me the job. I only make and install the cabinets, I don't do any other stuff such as electrics, tiling etc, but I can reccommend local tradesmen who do. As time goes on and my waiting list gets longer I expect to increase my multiplication factor.
John
I admire the way you have simplified this aspect of your life. It sounds like you have a good thing going and you must be pleasing your customers if you're keeping busy.
Keep life as simple as possible. That's my motto.
Congratulations.
John,
Raise it now if you are doing that well.
But you are establishing a bad habit and breaking one of the primary rules of pricing.
You are letting your competitiors set your prices since that is your basis for pricing. You are not relating them to your own costs. Now it might be working out fine today, but as tiome goes on, you will take this habit and apply it to other scenarios and other types of work. At that time, you will find that you have no basis for pricing at all, with the possible result that you wake up feeling like you screwed yourself.
Pricing should be based on costs, with reasonable markup for overhead costs and profit added on. if you don't track those costs, you really don't know if you are making money or not. .
Excellence is its own reward!
Do you have General & Commercial Liability Ins.for the work you did for other people at 20%-30% below the average cost? Do you have the proper licensing for the work you did? Did you carry workmen's compensation for your help? If not you broke the law & you put not only yourself but the people you were"helping" in harm's way.
Oooooo.
I'm a very very bad bad man (who works alone)!!!!
So you have no insurance? Do you realize that you not only put yourself at risk, but the homeowners as well?
Is paying taxes on your income a problem for you too?
You're always amusing, Nanny, but the thought of you working for only 20% less than me is what is really a scam.
where you been?
The Count-Down begins, 94 days left
Trying to stay outta trouble.
How'm I doin? ;-)
Nanny,
You accused contractors of running a scam, and I addressed your accusation, which I personally considered an insult. It was not something new though, since your attitude typifies many members of the public, an attitude created and maintained out of ignorance of not only our industry, but general business practices as well
“Consultative selling†has been done for many centuries before the term “consultative selling†came into existence. Most contractors, be they specialty contractors, repairmen, appliance service technicians, remodelers or builders, educate their customers using consultative selling as standard practice. But about products and applications or installations. It’s the process that determines price verses value.
However, you cannot really expect me or my peers to initiate a “Contractor Business Finance 101†seminar at every sales call. You must be kidding. Do you really expect us to explain the logistics of markup and margins to each customer? Do you know how many times I’ve had a customer say: “Why do you pay a CPA to check your books. You should do them yourself so I don’t have to pay for an accountant.†Or: “You mean I’m paying to the depreciation on your damn truck, too!â€
Ours is an industry that is unique of any other industry.
1. We create a prototype.
2. We create the above in the customers home
3. We do not enjoy the luxury of the ideal “factory†environment.
4. Our quality inspection procedures are done under the customer’s eye, during, not prior to, our product/service production.
About #3 above: We must content with the kids, the dog, cat, the unscrupulous member of the public (Surprise! They exist), the “Is that how it’s going to look?†questions before were done, and on and on. In no other industry do such pressures exist while trying to satisfy a customer.
And the last time a customer said to me: “Your price seem high.†I suggested to him that he and I sit down with a pad and paper and list the cost of each material item, the line item cost of overhead, and the amount he thought I should pay myself, and compare my “numbers†to the “numbers†he came up with that were the “basis†of his comment: “Your price seems high.â€
“Well, I didn't actually cost everything out. It just seems high.â€
Ignorance and/or stupidity personified.
Finally, instead of having contempt for my peers, you should have the upmost of respect for those who are true professionals. No one else but they, incur such “daily†insults, stress, and unpaid time trying to sastify customers while simultaneously trying to make what amounts to only a decent income.
BTW, I am writing a book entitled: "The Great Remodeling Hoax", which addresses the mistakes remodelers make while tryhing to serve their customers, the mistakes the public makes when hiring remodelers, and how they both bring the aggravation on themselves.
"you cannot really expect me or my peers to initiate a “Contractor Business Finance 101†seminar at every sales call. You must be kidding."
Well, yes actually, I was kidding. My preference, which I thought was implied, was the sentence after that in post 104. Misunderstanding. I guess that can happen both ways.
"“Well, I didn't actually cost everything out. It just seems high.†- Ignorance and/or stupidity personified."
Actually, I think you might be a little harsh there. If that had been me (and if - a big if - I had not already been jaded by the interactions with 100's of other customers) I think I would have said something like this;
"You should get another quote if you feel uncomfortable with this one. I am certain you will find it is quite competitive. I will need to know soon, however, as many other jobs are coming in. You have my number. I'll look forward to hearing from you."
---------
"Finally, instead of having contempt for my peers...."
Do you think it's just possible that might be a bit of a stretch? Who are you refering to? All contractors? Just the one's here? Just the one's who posted to me? If the latter is the case, then I would first point out that I didn't even disagree with all of them. Even with those I did disagree with, I think "contempt" might be more than a little harsh. People can disagree. At least I hope so.
As to the "scam" part; OK, I'll admit that another word might have been less provocative. But many things in life are scams (in the way that I meant it) and many of them have become so commonplace that we just accept them without giving it much thought. The $3 cup of soda at the ballgame or movie theater is a scam, too - and have many of the same justifications as the examples here - but I don't claim that those people responsible go home every night and beat their kids. They are just as likely as anyone else to be good people worthy of respect. But it's still a scam & everyone knows it. The only difference is that, in that case, it's a scam the customer can opt out of.
At this point let me say again - you should net as much profit as you reasonably can regardless of the way billing is done.
Good luck with the book. I mean that sincerely.
Sitting here patiently waiting on said book Sonny!!
Good to see you in the saddle again with the reigns in your teeth and your spurs ajanglin
Sonny,
I don't know if I've ever posted to you since I started hanging around here, but you do certainly have my admiration for many reasons.
Let it suffice to say....if and when your book is finished and published.....I'll gladly put my hard-earned money on the counter to take one home with me. I know that I, as well as many other people, will benefit greatly from your intellectual, provocative and insightful approach to business, self-worth and human relations.
(Just make sure we all get notice that it's available)
Knowledge is power, but only if applied in a timely fashion.
"You might notice that almost nothing has been said here to address the thread question in any meaningful way"
As the originator of the thread I received some great suggestions and felt everyone addressed the issue as thoroughly as they possibly could.
I think perhaps even your post may have had value. Perhaps if you didnt use incendiary words (scam) you wouldnt get knocked around so much.
Pardon me, one and all...........for this lengthy post.
Just gotta ask after reading all the rants.............
When you, for instance, go to Walmart to buy a popcorn popper or a coffee machine or say a can of beans at the grocery store....do you first contact the companies involved to get a breakdown of costs and markups? Or do you just say "yes" or "no" to the bottom line price of the article in question and then either take it to the cashier and make the purchase or leave empty-handed?
If per chance you have called the companies that are involved in the design, manufacture, and marketing of the article in question, how have they responded to your inquistion?
Did they answer all of questions in full enough detail to satisfy you?
Did you suggest to any of them that they didn't meet your criteria for integrity?
Can you tell us which companies got high ratings in your book for integrity and which ones didn't? Curious minds want to know.
Did you suggest to any of the companies that you had a better way to market their product?
Or did you perhaps just pick up the product and head for the checkout knowing that you'd look like a jackass if you started berating store mangagement about its' markup policies?
Point being...... isn't it basically just the bottomline that really matters to any average consumer?
Seems to me you're just standing on the sidelines shouting critiques to someone who's riding the bull, but ain't ever climbed aboard yourself.
There's a bull waiting just for you. Go ahead. Climb on up. Show us how it's done. We'll watch closely and take notes. Pick up your tools and hang out a shingle.
When the green flag drops.......... the bullsh!t stops.
Ever buy anything made in some third world country? Did that show integrity on your part knowing that the manufacturing company was likely "exploiting" someone along the way?
Did you feel guilty about satisfying your desire/need at someone else's "expense" as you made the purchase?
Somehow I seriously doubt you'd stand up to the same sort of twisted critical analysis concerning what you deem to be integrity as you seem to like dishing out at the moment from that almighty self-constructed pedestal.
Knowledge is power, but only if applied in a timely fashion.
"When you, for instance, go to Walmart to buy a popcorn popper or a coffee machine..."
I see a price and say to myself yes or no, period.
Which is exactly what I suggested the pros do in at least three of the last several posts.
Why is this so hard?
What you and others are suggesting is that, while Walmart just says the popcorn popper is $22.98, the KMart down the street has the same one for $17.98 + a $5 shelving and check-out fee. All I have been suggesting from the beginning is that you preferably omit the breakdown. If, for whatever reason, you cannot function without the breakdown, then at least make it realistic. In this little scenareo I would go with Walmart even though it saves me nothing (so much for my whole arguement being based on money). But, if somehow everybody decided to have shelving and check-out fees, I would shop at the place where the popcorn popper was $21.98 with a $1 fee because that, clearly, would be closer to reality for the three minutes of minimum wage work involved.
Hey, it was your analogy. I've never even been in a Walmart.
In this state..........we are REQUIRED to breakdown the billing for the customer or we face paying earned income taxes on the entire amount of the bill. Not much future in that. If you personally don't want to know the breakdown.........don't look! Pretty simple, huh?
Knowledge is power, but only if applied in a timely fashion.
Well that would have been good to know about 30 posts ago. I guess you have to follow silly laws. That's unfortunate. Assuming laws vary from state to state, my point is still valid - whether you agree with it on principal or not.
Here's another attempt to explain to you the facts of integrity.
Two kitchen remodels
Total labor for each is 100 hours, labor includes all time dealing with subs, suppiers, etc.
kitchen #1 materials are $5000 big box.
Kitchen #2 is $150,000 TOL custom.
Are you suggesting that it is of higher integrity to charge kitchen #2 30X the labor rate of kitchen #1?
Or are you suggesting that my total profit for both kitchens should be the same?
SamT
Your example is an interesting one.
If you fully expect each to take absolutely equal time then what I would expect in a perfect world would be for the labor costs to be the same.
Given that it is not a perfect world, I would expect that you would be taking on a certain element of risk with the expensive kitchen such that it might wind up costing a lot more when that drill bit penetrates a little farther than you wanted it to. So I would expect a little "insurance" premium on top of the labor.
But even that is a little touchy. The guy at the garage doesn't charge any more for changing the oil in a Jag than he does for a Honda, as long as it takes the same amount of time.
But I suspect your premise is flawed. I think you know as well as I that the expensive kitchen will take 2-3 times longer to install, and therefore you will make 2-3 times as much.
Am I supposed to say you should get an extra (150,000x.4) $60,000 for that 3 weeks work (for 2-3 workers) for the hassle of handling expensive material even though the extra time involved is already accounted for?
In any case, let me say again, All I want to see is the total, then I will just say yes or no. You do what you feel you need to do, and then accept the risk that the customer will turn you down.
That's all.
Given that it is not a perfect world, I would expect that you would be taking on a certain element of risk with the expensive kitchen such that it might wind up costing a lot more when that drill bit penetrates a little farther than you wanted it to. So I would expect a little "insurance" premium on top of the labor.
OK, so you think it is ethical to change my labor rates depending on the client.
The guy at the garage doesn't charge any more for changing the oil in a Jag than he does for a Honda, as long as it takes the same amount of time.
He marks up his material, doesn't he? And he has very little material risk as auto parts suppiers garuntee their parts, just like GC's do. Of course, GC's have a lot higher risk of damage after delivery than most auto shops. For a lot more expensive items than a starter. And GC's garuntee appearance as well as functionality. Have you ever complained to the mechanic that your new starter was scratched?
I think you know as well as I that the expensive kitchen will take 2-3 times longer to install, and therefore you will make 2-3 times as much.
OK. I purchase (gamble my money) $3000 materials for the cheap job fror a $500 profit and gamble $100,000 materials for the other, and you want me to earn only $1500 on the expensive job. The countertop could cost more than that.
Am I supposed to say you should get an extra (150,000x.4) $60,000 for that 3 weeks work (for 2-3 workers) for the hassle of handling expensive material even though the extra time involved is already accounted for?
No, you're supposed to tell me what you think.
As it is, I have to assume that you think I should make almost the same total profit no matter what my risk is.
Are my statements correct? Or will you expand your thoughts?
All I want to see is the total
Can't do that. The sales taxman wants to know how much I am charging YOU for the materials.
Not how much I am paying.
SamT
See below:
Edited 9/11/2003 2:32:37 PM ET by SamT
The guy at the garage doesn't charge any more for changing the oil in a Jag than he does for a Honda, as long as it takes the same amount of time.
You're commenting on another business that you obviously don't know much about! It doesn't take the same amount of time or have the same cost of materials or cost the same amount for every vehicle to get an oil change.
Look, it seems to me that your point here is that you don't want to know what you are paying for. You'd prefer to be blind to how it breaks down. Fine. If that's the case, hire only the person who won't tell you.
You said you didn't volunteer to be a punching bag. WELL, maybe not, but you did come here on your own, hang yourself up, and make provocative statements to a group whose advice has evidently benefitted you. To quote my favorite musician: "Don't jump in the water if you can't swim"
You might consider: What does it do for you to come here and tell contractors how they "should" be operating?
BTW, I'm not in the construction biz, I've probably pi$$ed off various people here at various times, and I have very high respect for this group. My point is: Go ahead and lambaste anyone or their methods. But cowboy up when the hoss starts buckin!Any jackass can kick down a barn, but it takes a carpenter to build one.
"What does it do for you to come here and tell contractors how they "should" be operating? "
Well, it started with the thread title. Predictibly, at least 80% of the posts here have nothing to do with the thread title. I thought the perspective of a potential customer might be helpful. I was corrected.
Also, in one of my first posts (and again and again) I stated that if the reader is experiencing no problems, then pay no attention to my post. Why fix what isn't broken, after all.
Apparently my place here is to receive advice and be darn thankful for it, but to keep my own opinions to myself. That makes for a nice message board doesn't it.
"...you don't want to know what you are paying for."
LOL. Well, I wouldn't exactly put it that way. I very much want to know what I'm getting for my money. But I don't particularly care what category parts of the total fall under unless your going to let me go out and buy the materials for you. Let's not even go there....
"But cowboy up when the hoss starts buckin!"
I like the way that sounds :-)
OK, you're doing a good job of hanging in there.
If you want to express your opinions, especially ones that seem to pi$$ off the "locals", then I guess you aren't surprised when they bite back. As to the punching bag thing, that runs both ways... (but I'm redundant)Any jackass can kick down a barn, but it takes a carpenter to build one.
PR (Piffin Rocks)
rg
Pete,
Mike Smith I believe could tell you more---but I STRONGLY suggest you investigate some thing called the PROOF system-----essentially all profit,overhead,wages etc. will be based on the labor rate----not marked up materials.
Also, for jobs like you described ----the first thing i would do is charge a fee for a service call.homeowners are already well accustomed to this via appliance repair etc. charge em $65 service call plus $xx per fan for standard installation----changing the box is not a standard installation---so up charge.
BTW---you can't please everyone---a lot of them will always want it for less.But we aren't in business to provide goods and services for the lowest cost are we?
I know clients who would:
a) Pay $15/ 2x4 but refuse to pay ANYONE more than $20/hr for labor.
b) Sign a contract for $500K but not pay for time you're not on the site.
c) Tell me they know what my overhead is whan they have never seen my vehicles, storage spaces, or office.
d) Assume I only have one vehicle and don't need to account for future vehicles or vehicle maintainance.
Bottom line - it's a waste of time to figure how to charge based on Client expectations of cost distribution. The Company is yours, not their's, so you do what you need/ have to/ want to do.
IMO:
a) Steer away from time and materials jobs - unless you and the client have the same set of values (I've never seen this happen.)
b) ALWAYS carry blank Change Order Forms with you that can state any changes in proceedure/ process, time and cost. CO should be signed before the additional work is done.
c) When giving a price over the phone (not the brightest way to start a business relationship) always give a range and NEVER include a best case scenario price. If that is what they have, they would not be asking for your best price over the phone.
Frankie
Frankie, is this the same Frankie that got stuck wht a bunch of custom materials after a house got canceled after an unfortunate accident?
if it is, just curious, what ever happened in that whole deal?Never be afraid to try something new. Remember, amateurs built the ark, Professionals built the Titanic.
HA! A memory like an elephant's.
No more novellas. Got all my money. Client sold the co-op. He kept some of the plumbing and electrical fixtures. I installed some of them in his new house - out of town. The out of town part was a hassle but in the long run I enjoyed working with him. The money was good too.
It's great to be back at Breaktime. After my rant about a FHB article I thought I would take a break.
F
Welcome back, and glad all worked out in the end.Never be afraid to try something new. Remember, amateurs built the ark, Professionals built the Titanic.
"Inflating the price of materials to pad your bottom line is just a scam too many people have gotten too used to. "
That has got to be the stupidest post I've ever seen here. Go after life as if it's something that's got to be roped in a hurry before it gets away.
must, of course, defer to your judgment on these issues.
Just curious……….,
Would this qualify as the most hypocritical statement you've read here?
34521.63 in reply to 34521.58
Thank you john!
(Can I ask, how did you ever register with that name - not that it isn't a
perfectly good one? When I tried to register with "NannyG" - my preference - it
had already been taken. I would have guessed you would have been prompted
to try "john236" or something like that. Anyway, good to see you here.)
I hope I wasn't too off base with my last post re: kitchens, since this is your
area. For the record, I'm perfectly fine with being
corrected, just not spat at and belittled. I'm in the middle of my own
kitchen project, myself. With three kids tooling around requiring and deserving
attention, it'll be a long project. The value added to the house vs. the amount
of time I'll spend on it will probably work out to about $1.79/hr. But at least we
won't have to take out a loan to do it.
Cheers.
Knowledge is power, but only if applied in a timely fashion.
Knowledge is power, but only if applied in a timely fashion.
Do you mean the part where he walked in here and spit on every contrator in the room with his openning salvo re markup = scam?.
Excellence is its own reward!
Yep. That would be definitely be the most apparent one, but as you know there were others.
Seems interesting how some folks will lurk around here greedily gathering free valuable insight and info from the pros and then proceed to tell us we're a bunch of crooks. lol
It's 8:40 here. I just walked in the door ten minutes ago from delivering parts for three upcoming jobs. I've been about the business of gathering all the stuff together today and then delivering it. I must be one of those crooks cause I fully intend to get paid for the time and the wear and tear on my truck. I should be ashamed of myself, don't you think? Why the nerve of me!
Knowledge is power, but only if applied in a timely fashion.
How can you sleep with yourself tonight after that?
;).
Excellence is its own reward!
Heavy medication is called for. One extra beer. :-)
Knowledge is power, but only if applied in a timely fashion.
You have done a great job of explaining the problem discussed in this thread! Kudos to you.
Goldhiller... As in Gold Hill above Boulder Canyon?Any jackass can kick down a barn, but it takes a carpenter to build one.
Yes, sir. That would be the place. About 4 miles further up of Goldhill proper. Not now though as you see in my profile. Back on home turf these days. Sometimes still wish I did live up there. Those were good years in a beautifully simple place. Couldn't grow no tomaters nor corn up there tho. <g> Still, it was a special place to me.
Here's a pic of the joint. Old miner's cabin. Resurrected it and then lived in it. Pardon the quality but all the pics I took then were taken with a hand-me-down 1/2 frame 35 mm and printed on matt paper to boot.
Knowledge is power, but only if applied in a timely fashion.
Indian Peaks in the background...
Years back I used to live over by Gross Reservoir and before that near Pinecliffe. Spent a winter working on a job over above Jamestown (at about 9,500 feet) and driving back and forth on the Peak to Peak hwy. They used to plow it once every morning. By dark it would be drifted over and I'd be on blown-clean pavement going around the ridges, then in hood deep drifts in the gulches, blasting my old Dodge with the pedal to the metal, hoping to get back to pavement again... Ah, the good old days. Man was I dumb. I coulda got stuck and died out there on a hundred different nights!
Yesterday morning the peaks in the Sangre de Cristos were all covered with snow. Beautiful, but I'm glad I don't live that far up anymore.
I guess you and I can just let IMERC tell us about it... Of course, what'm I thinking! Winter in NW Illinois! Yikes, that can be worse than 10,000 feet in Colorado!Any jackass can kick down a barn, but it takes a carpenter to build one.
Hasbeen, Nanny's was a typical moronic comparison. Changing the oil on a beater, or a Mercedes, is unscrewing one bolt and then screwing it back in again. Ditto for the oil filter. I would compare the oil analogy to adjusting cabinet hinges on a $50,000 kitchen or a $15,000 kitchen - same fee.
However, Nanny seems to forget (or never learned) that everything in business - EVERYTHING - is based upon one factor - RISK.
Nanny, anything that has consequences, increases in direct ratio to the “cost†of the/those potential consequences, should something go wrong. That is why it cost more to cut a large flawless diamond than a small one with a small flaw. But about those consequences: They extend beyond what would normally appear to be the "simplistic" consequences. I often get a Work Order to correct a roof of a condo building where a lower roof butts into the truss “wall†of an upper roof. The joint where the flat cement shingles meet that truss wall (about 24†tall) was not properly flashed. So leaks develop and run under the shingles until they hit the lanai ceiling, causing damage. Rather than have the association incur the substantial cost of removing the course of shingles against the wall - about a 30†run, and remove the stucco down to the plywood, I’ve come up with a viable solution that will last at least 20 years.
I charge them $216 for each of these roofs I fix in the above manner (there are about 48) whenever the problem surfaces. It takes me about 30 minutes from when I pull up and unload my ext. ladder to when I drive off, and about $8 in material. So am I ripping them off by my $400 plus per hour rate? Let’s consider the RISKS:
1. For reasons I wouldn’t get into now, I have to do my thing in the morning. There is a glaze on these shingles and in the morning they are like ice from the dew. One misstep and I’m dead. What is my life worth? RISK!
2. Since I give a 5 year warranty, if anything goes wrong due to a misstep during my application, I incur the costs of repairing additional damage - on my dime. Again, RISK!
Benefit to the association is not having to initiate their only other option - $1600 plus, to redo that flashing - per roof, and with non-matching shingles since the originals are no longer available.
So, scam, or fair deal for both parties involved?
From chapter 3 - Business 101: RISK vs. REWARD Make sure they are commensurate.
Finally, condo associations are [generally] notoriously cheap. They know long my “fix†takes. Think they consider our arrangement - “commensurate�
RISK vs. REWARD Make sure they are commensurate.
Obviously, the risk in changing the oil in a Jag is one heck of a lot higher than a Ford Tempo. So, if the guy at the corner garage is charging the same, he's not very bright. Plus, the first rule of pricing is: what the market will bear. And generally speaking, people who drive Jags CAN afford more than a clapped out Monza. So, if he's a smart businessman, he'll charge more.
Well, shizam! You was once my neighbor....probably. Or I, yours. And........I had a big red Dodge PU, too! Bed usually loaded with wood in the winter. Give 'er hell, boys. Imerc knows. Shoulda died a hundred times, but the good Lord was smilin' on me too, I guess. From what I could tell, he was lookin' out for all of us up there. Never personally knew of anyone who lived up there that bit it, but you'd see the occasional car or truck hung up in the trees along Left Hand Canyon. Glad that wasn't me cause it didn't look it had been a fun ride.
Yeah, some rough weather up there from time to time. Best have some food and alot wood inside at all times ..........and some antibiotics on hand, just in case. A fella isn't goin' anywhere for a spell (not even to the outhouse) if Mother Nature says so. NW Illinois ain't no picnic in the winter either. You're right about that. Sun just disappears for months on end and it's damp to the bones mostly. Keep that Goldschlager handy.
Ever stop in at The Depot in Ward for some coffee and breakfast? We used to go up there a couple of times a week or so in the winter to get the mail. Kinda wonder if the place is still there. Made a trip to Nederland once every two weeks maybe. Folks tell me the place is all built up now and full of touristas day and night. Ugh. I don't wanna see that. Knowledge is power, but only if applied in a timely fashion.
Musta been about '71 I hung out in Black Hawk, Paradise Valley, and Nederland.
Brown '59 Chevy PU with a yellow submarine painted on the door.
Excellence is its own reward!
Yep. Time is right. Can't recall for sure if I ever saw that truck in Nederland. Maybe. Something vague back there in the cobwebs of my mind.
No yeller subs on my truck. Big yeller dog along for the ride frequently though.
I had a blue '59 Chev truck for years, too..at the same time I had the red Dodge PU. Orange Dodge Powerwagon for a little while.
Knowledge is power, but only if applied in a timely fashion.
Edited 9/13/2003 10:46:29 AM ET by GOLDHILLER
Look familiar? :-)
Knowledge is power, but only if applied in a timely fashion.
Not individdualy but God! Were't those the most beautiful, breath-taking tucks ever built! I had a '57 stepside and the '59 fleetside. Oh the memories....
Excellence is its own reward!
They were great. Wish I still had that one. Rebuilt the engine after some years and then sold it to a guy that was in love with the things. At least it went to a good home.
They're still out there, I know. Might be costly to maintain these days though.
Come to think of it, I just might sell the bike some day and latch onto one again. Them was trucks. Drove like a truck. Rode like a truck. ;-)
Maybe we'll go for ride. I might even let ya drive it, too.
Knowledge is power, but only if applied in a timely fashion.
I remember out in the desert losing the seal on the oil filter ( remember up on the firewall?) and cutting a new one out of an old moccasin.
Excellence is its own reward!
"and cutting a new one out of an old moccasin"
Just think of it................today you'd have to cut one from your pink slippers. :-)
Oh, how the mighty have fallen.
Knowledge is power, but only if applied in a timely fashion.
We still have our 53 Chevy one ton, dual wheels grain truck with dump bed.
Runs well, purring. Open the hood and there is nothing in there but a small engine we can work on ourselves, with lot's of room to do so. 6 volt battery inside under the floorboard that sparks like mad when you boost it.
It used to be dark green but we painted it silver, named it Silver Streak and use it to haul a 1000 gallon water tank, no baffles, down steep hills. Even in grandma, that water pushes you around more than the brakes like.
In the winter we can haul 75 bales of hay without losing them and it get's over the biggest drifts. You can put it in gear, get on the bed and feed off it without it getting out of a straight line - no power steering.
Still have the original title.:-)
Yeah, used to be able to crawl right in there with it and nuzzle up to old Betsy while working on her.
Excellence is its own reward!
You're right: You don't want to see what's happened up there. Nederland looks like a friggin strip maul (yes, I intended to spell it that way!)
Yes, used to stop off in Ward from time to time - famous for breakfast - amoung other things...
I can't stand Boulder any more. Still have friends there, but yow, college kids just aren't what they used to be and, well, I guess I just got old and boring.Any jackass can kick down a barn, but it takes a carpenter to build one.
Don't it always seem to go
That you don't know what you’ve got
‘Til it’s gone
They paved paradise
To put up a parking lot
Joni Mitchell - Big Yellow Taxi
Knowledge is power, but only if applied in a timely fashion.
Yes, and quoting Joni is a great paradox when paired with your tag line! ; )Any jackass can kick down a barn, but it takes a carpenter to build one.
I'm gobsmacked (as they say) that anyone would question markup on supplies, or paying someone's time to pick up supplies. Do the little elves come by every evening with the next day's shipments? Do those same elves do the accounting, pay the bills, and cover the carrying costs for the supplies?
Some people have NO concept of how the business world works.
They do.... (the people) But greed rules with the belief that they can get something for nothing to back them up.
Who ever invented work didn't know how to fish....
Agreed.
Problem is that usually these same people don't want to know or learn either because they might then find themselves standing in front of a mirror and therein see someone who's been nothing but self-absorbed for years/decades on end. Not good for their self-image. Can't have that.
Ignorance is truly bliss for these folks as it allows them the liberty to feel like a victim....unless of course they get what they want at a price that they've deemed to be suitable and appropriate. (Free is always suitable.)
View Image
Knowledge is power, but only if applied in a timely fashion.
Always quote a lower price than it would cost at time and materials.
That way the customer will benefit from you never making a penny.
I try and do all fixed price work. Almost everyone has problem with the hourly rates require to stay in business.
Tom
I'm here to help the humans.
Pete:
I can't speak as a contractor, but in my line of work, I markup all materials and vendor costs 20%. I also state this in my contract and label it as a handling fee. That said, because of that, I can't really charge for the time handling those materials on top of it. Granted, I don't usually need to do a whole lot of handling for them.
So, I suppose, as a HO, I'd agree with others, I'd rather see you charge more for your time and less for materials. Whatever you charge for materials, I'd like to see it in the contract.
Also, there's the age-old issue of simply padding your hours at a lower rate to come to the same end-bill. Folks will think you are crazy trying to charge $100 and hour for 5 hours of work but will find $50 and hour for 10 hours fine.
In my line of work, I typically give a fixed-rate, but then make it very clear in my contract that issues above-and-beyond will be billed at a standard hourly rate. I always give the client a heads-up that we're about to go into above and beyond hours and try to give them weekly updates as to how many hours we are going through.
I've also recently started putting in delay clauses, where if I delay the project for unforseen reasons, they client has a right to cancel the contract. In return, if the client delays the project for unforseen (of forseen, for that matter) reasons, I can cancel the contract and demand payment up to that point. This has cut down on those projects that get side-tracked by the client then re-appear 6 months later with them wanting it done now in two weeks.
I’ll simplify this for those who need simplicity:
Total Annual Materials ------ $ 25,000 (25% of Sales)
Total Annual Labor ---------- 40,000 (40% of Sales)
Total Annual Overhead ------ 28,000 (28% of Sales)
Total Net Profit ------------- 7,000 (7% of Sales)
Total Annual Sales -------- $ 100,000 (100% of Sales)
Note here all business make a NET PROFIT. All charitable organizations make “O†NET PROFIT.
So, in figuring a project that will “COST†$6500, how much percentage should be added to that $6500 to “RECAPTURE†that 28% of OVERHEAD†while also producing a NET PROFIT of 7%.
Some might say it’s 35%, a combination of that 28% and the 7%. For those who think that way let’s do the numbers. $6500 x 35% = $1820. So let’s now add that $1820 to the COST of $6500 and we get a total of $8320. That $8320 is supposed to be our SALES price on this job right?
OK, let’s double check our figures. Let’s take that $8320 and multiply it by that 35% and we should get our $28% OVERHEAD and our 7% NET PROFIT, right.
Son of a gun! $8320 x 35% = $2912. If we take that $2912 and deduct it from the SALES price of $8320, we end up with $5408. WHOOPS! Something is wrong here since our COSTS are $6500. That means that if we took the job at $8320, we would have lost the difference between that COST of $6500 and the $5408, which is $1092.
Again, I repeat, a LOSS of $1092.
Nanny, for your own information, since ALL cost of any business include vendors, suppliers, lenders, materials and all overhead expenses, called “operating expensesâ€, they ALL must be “marked up†by exactly the same percentage. As you can see from my example above, using a “markup†of 35% would leave a net “LOSSâ€.
To recapture a “gross margin†of 35%, one must use a “markup†of about 55%. Let’s go back to my example. COST is $6500 x 55% markup = $3575. Combining the two = $10,075, your “correct†SALES price. Now take that $10,075 and multiply it by our 35% and you get $3526. Deduct that $3526 from the SALES price of $10,075 and you get $6549 - pretty close to our COST of $6500.
So, Nanny, there are no scams going on. It’s strictly called Business 101, but you knew that, right? Furthermore, here’s the schedule for Markup and Gross Profit - “gross profit†meaning overhead and net profit, what economists call the “marginâ€:
Markup Gross Profit
20%----- 16.67%
25%----- 20%
30%----- 23.09%
35%----- 25.94%
40%----- 28.57%
45%----- 31.03%
50%----- 33.33%
55%----- 35.48%
60%----- 37.50%
61.28%-- 38%
67%----- 40%%
75%----- 42.86%
100%---- 50%
200$---- 66.67%
Go ahead. Be my guest and play around with the above “numbers.†It’s really simple mathematics, and as they day, “Numbers don’t lie.â€, nor do they represent a “scamâ€. See, Anderson Consulting lied, and is why their “numbers’ didn’t add up.
One more thing: Since any contractor does not utilize a crystal ball, he has absolutely no idea of what each “projected†year’s material percent is going to be, what each “projected†year’s labor percent is going to be, so he must use the SAME percentage of “markup†on BOTH, labor and materials, and subcontractors if he uses them. They vary from year to year. Therefore, he CANNOT put all of his “markup†on his labor only.
Again, numbers don’t lie!
BTW, I've lived in Chicago, a small town in Michigan, and for the last 13 years, here in Naples, FL, a very affluent city. I NEVER met a remodeler who was able to afford a home in an upscale development, and only rarely a builder, and even then only because he built the house himself using his own subs. If you want to think of people who make too much money, look to see who lives in those up scale developments. Of course, I suppose no upper middle class person earned his/her money. They must have ripped people off. Heavens, the rich one's must of really scammed people to the hilt.
No one "deserves" to be wealthy. Socialism, here we come.
Sonny, that was so succinct and well presetned that I have printed it out to staple to my wall and e-mailed it to myself for filing on disc.
But as you can see, the facts of business management don't mean anything to the Nanny. Gee! he's the one who came in here a year ago stating that his garage roof would only cost him 150 in materials buit that roofers were getting 700 so they were all crooks. Crooks is the word he chose to use back then.
(Nanny please be sure your lips are clean before you kiss my toes - second thought, never mind, I don't want to catch any thing from you.)
Anyway, after having all the real costs presented to him, he realized that it would really cost him closer to 250 and that it would cost a pro with insurance, vehicle and dump costs more like 500 and he had to admit that maybe they weren't crooks after all, but still sulked off with an attitude that profits are wrong. Now he's back with smae attitude but a refined arguement trying to cover it up..
Excellence is its own reward!
I often save threads info by right clicking and doing a save as, or highlighting and copy/pastingbobl Volo Non Voleo
Man! I know all that, but couldn't have explained it to the whiner/bitcher. Thanks for taking the time to do it.Any jackass can kick down a barn, but it takes a carpenter to build one.
I've been reading through all this crap and then you come along and sum it up so short and sweet!
Damn, man, I wish you'd just go ahead and become a reporter! ; )
Any jackass can kick down a barn, but it takes a carpenter to build one.