This is the nightmare scenario- I quote on supply and fit of high quality kitchen cabinets. Let’s suppose I reckon I can make good money at $9000, so I ask $10,000 and they accept. What if I later find out (I don’t know how I would, but just suppose) that they would have been happy to pay twice as much, having had quotes for even more than that!!!!!!!
Could I console myself by thinking that I was still making money? This stuff worries me, I mean, one can do all the business analysis that one likes, figure the overhead, hourly rate etc, but in the end, knowing when you can ask and get a lot more might be even more important. Is it a bit like poker, maybe? Any tips on how to know when the time has come to ask for a lot more?
John
Replies
John, I've been in your shoes, and they stink.... What I mean is, I've bid much lower than someone was willing to pay. I talked to some custom woodworkers, visited a couple high-end showrooms, and got an idea of what they charge. Between $300 and $500 a linear foot, on average. I figure I can offer better service than, and at least equal quality to most guys. So once I do my sticks-and-man-hours estimate, I check to see where I fall in the $300 to $500 range. If the job is small or complex, it better be near the high end. Bigger or simpler job, near the low end, but I don't often get too close to $300 unless the cabs are unfinished.
If people think you're expensive, but worth it, you're right where you want to be.
John and Mike, as a remodeler I have run into the same thing many times on everything from cabinet installs to building retaining walls.
I see it as an ethical delima. I no longer question if I could have gotten more out of the job, but did I make what I thought I would make and give the customer the job that they paid for. If I charge $16.00/ft for a certin type of counter top, that is what it is to all of my clients, even if they could or would pay more.
Dave
You seem to know that it's time to ask for more.
Still, you can't second guess what is past. After all, the real nightmare scenario is when you give a price for 10000 and it costs you 12000. Be happy with your price and give the folks a great job. You can always ask for more on the next job. You will know you are about right when you start to lose some jobs to a cheaper competitor.
Go by your closing ratio. If you are getting more than half of your bids, up the price. If you are very busy, and are booked for a long time, up your price. If you get the feeling that the client is going to be a real ####, really up the price.
Sounds like a concern for increasing profits and efficiency, but not any kind of nightmare scenario. Unless it is just a poor choice of words and semantics, if you really have nightmares over something like this, you should be working for wages. The business world will kill you.
Excellence is its own reward!
I'd say for every job where they would have been willing to pay twice as much, you're going to have 500 where they thought you'd only charge HALF as much.
I think you're worrying about nothing.
If you're happy and you know it see a shrink.
Use it as an opportunity to use the clients as sales people for you. Do a great job- they will tell their friends that you do a great job at a reasonable price. But before you price THEM, ask where the new customer got your name. Price it accordingly..... they are already sold on your pricing and quality....do a great job for them....
Becomes DEFINATELY not a loss...
No more nightmares...
My DW says I'm a tool head with a sawdust brain !!
Edited 12/24/2003 7:39:46 PM ET by tickyboy
get a sales book or two and read up on "qualifing" ... or "prequalifing" the customer.
Now here's another thought to throw in ....
I've seen it happen ... in person ... to me .....
where what I thought was a "fair price" .... was taken by the potential customer as being way too low ... and that translated into us not getting the job .... as she would "pay someone that knew what there were doing"!
Longer story somewhat shorter ... doing carpent cleaning .... had 2 similar jobs with the boss ... same sq ft carpet ... one sofa .. one chair. 2 different parts of town .... one middle class ... one millionaire row ....
I see we just charged the first middle class lady $150 ... and see the "quote" on the second is $600 ..... I tell the boss I think that's unfair ... same work should be same money ...
He laughs .... then asked what I'd charge ... I say ... fair would be $150 ... buy maybe we cut the first lady a break ... so no more than $200.
He says ... OK ... U get to sell the job.
I knock .... (remember this is a preset appointment) .... go over what's to be cleaned ... say $200 ....
U know the rest!
Boss just laughed and said he knew that would happen .... but better to lose his money just once .... quick and painless ... so I could work on mnaking him money.
He was right.
If people are thinking $20K cabinets ....
Most will think your $10K .. even though we both know they're better ...
are "cheaper".
Sometimes it's nice to have high priced competition.
If U fully prequalified and knew their budget was right around $20K ....
Bet $18.5K would made ya both real happy!
Jeff
Buck Construction Pittsburgh,PA
Artistry in Carpentry
Hmmmmmmmmmmmm
You know I've read this a couple of times.
Know you can make good money at $9,000.oo
ask for $10, 000.oo and the bid is accepted.
Time to be happy and satisfied. Right?
Now you are wondering when to ask twice that for your product.
The answer should be when you are selling twice as much.
Now you don't have to worry about furnishing your customers with KY to seal the deal.
Hi John, Having been in the business for ten years I know exactly how you feel. When you start hearing from people that they would pay twice as much then it's time to start charging twice as much. The worst thing you can hear from a customer is "That's a good price" what you want to hear is "Well that's more than I'd like to pay but I still want to do the job" Never be afraid to charge the right price for quality workmanship! Remember the only thing more expensive than hiring a professional is hiring an amateur. Feel free to use that last line there John, I stole it from a friend myself.
Barefoot
Ive been in the same situation also and the way i look at it is if i get what im asking for then im doing o.k. and i will most likley to be called back for more work. example: 4 yrs ago called about bathroom floor/wanted new lenolium gave price, said go ahead, found rotted floor made more but didnt drag them over the coals.have been back to build two porches, replaced entry door/installed replacement windows/installed new bathroom including tiled shower, floor . all together about 15 weeks worth of work just by being fair and they dont even ask for price up front i just charge by the hour now and they dont even call anyone else for quotes,and i still make a good paycheck when I work for them. it good for me and good for them as long as I dont get gready.
dogboy
Chalk it up, big boy. :)
I started in the industry with residential bricklaying. Then about 7 years as a mechanical contractor. Now about 3 years working for a sitework / underground utility contractor. Most of my experience has been bidding jobs in the $150k to $1.5m range. Most of my mechanical jobs were public jobs, open bid. I have been $50,000 low on a $250,000 job - enough to give a soul nightmares. I did my job right and made money.
I saw someone bid a job off of plan view sheets and not check the profiles. He didn't realize all the piping was 25' or higher in the air, you never expect things like that? until you've posted a performance bond to do it. I saw someone win a union job, and the guy he beat by $10k buy all the labor off the bench for the duration.
My boss worked for an international dredging company. Their equipment is VERY expensive. They had a situation where if they didn't win a bid for redoing a coast line in Northern California, their boat (multi-million dollar piece of equipment) would likely sit unused for 3 years. They had a meeting to discuss their bid and one of the guys at the meeting was outspoken that they could charge a lot more. They left $55 MILLION DOLLARS on the table after bids were opened (public-federal). But what do you do? you don't know what the other guy's bid is, and they had to keep that equipment engaged.
I don't worry too much because at my company I do my bid, I double check my bid with fresh eyes, and then someone else checks my bid. And then we meet about it. Maybe not practical for small jobs, but double checking is a good habit and being thorough about it. I'm only concerned about job cost. I am systematic in how I do my bid so I don't make mistakes. I have an excel spreadsheet that shortcuts a lot of calculations I could screw up. And then we meet and decide what the mark-up should be given how busy we are, all the things mentioned in another post.
And if I end up "buying a job", for whatever reason - I don't worry about it. My estimate is based on job cost and I'm covered no matter what the mark-up out the door is.
remodeler
john,
a few things to keep in mind
1) there are four words you NEVER want to hear---" Oh, is that all?"----that tells you you just made a big mistake and lost an opportunity.
2)what you and your customer think are expensive are likely to be 2 very different things-----Re-read Jeffs' post. your $9000-$10,000 price has lost you more jobs than you really will ever know.
3) your goal in business is not to "be busy"------being busy is NOT a sign of success----many people busily work themselves into bankruptcy.If you properly price and market your work---it will pay for a lot of down time. wouldn't your life be a LOT better working half as much for twice as much money? your $9000 job sold for $18500 would have paid for a lot of down time---plus given you the luxury of perfecting several key details of the job---instead of just doing it really really nice.
4) you don't want every possible customer----you don't even want MOST customers. all you really want is the right number of $18500 customers. after you have plenty of $18500 customers you can start looking for even fewer $37000 customers........
Hmm.... Interesting divergence in the views expressed so far. I'm inclined to go with those who feel it is important, as I do, to get close to the maximum that the job is worth. I certainly agree with Jeff about the dangers of underpricing. It seems to me that it is worse to lose a really well paying job that it is to win a medium payer.
It will be another couple of months before I am clear to take on more work, but I realise I need to start focusing my marketing effort now. Got to start thinking about some advertising that is going to attract the right kind of enquiries
I've read a couple of books on selling and marketing, but the range available in the UK is different to North America, so if anyone has any other tips to pass on, I'm all ears
John
John:
Man, there is such a wealth of excellent advice here it is amazing. My hat goes off to all of you.
Early in my career as a renovator i walked out of a meeting with a client pleased that I had gotten the job of building a deck, even though I had to drop my price. I wasn't feeling too beat up until I walked past his Lexus and Mercedes and got into my rusty old GMC. This guy also ran a business (catering).
My point is never to feel that you are being greedy. The customer is never forced to by services from you, they could always go to someone cheaper. Charge what the market will bear, or a little more. Then impress the hell out of the customer.
Somewhere I read that the average customer can't see if your mitres are perfect and your drawers are dovetailed, but they sure do notice if you left mud on the carpet or trampled their roses. Even though it goes against my nature sometimes, I try to force myself to spend extra time cleaning up or protecting existing features instead of producing perfect work that will never be noticed by anyone.
So, you got the job, now go in and make them talk to all their friends and neighbors about your promtness, attention to detail, professional attitude, superb service.... Then charge more on all the referrals you get!
Cheers
Andy
"Somewhere I read that the average customer can't see if your miters are perfect and your drawers are dovetailed, but they sure do notice if you left mud on the carpet or trampled their roses. Even though it goes against my nature sometimes, I try to force myself to spend extra time cleaning up or protecting existing features instead of producing perfect work that will never be noticed by anyone. "
I notice, That is why I started doing things myself, to many issues with things not done to completion or up to quality standards. Present company excluded. Can’t find the caliber of people on this board to do work on my house.
That said you are probably right though, Next door had a ton of work done, most was good but the trim carpentry was ####, but they loved the job cause everything was kept clean. Miters were more then a few degrees off, 90s were more like 80s or 100s Sad because the majority of the work was top notch but when I saw the trim I was immediately suspect of the remodeler.
Also, I ran a rehab of a church Rectory, Ran is a loose term as I was the only sap that would take on the project to "GC" for free in my spare time, Way low budget, limited funds but I got it in on budget and had to bite my tounge with some of the work to fit it into the budget. I see all of the corners that were cut but everyone else raves that the place looks great. I am no means a perfectionist by the way. Just like good work.
RJ:
Not to get defensive or anything, my point is simply that being successful in the construction business means being more than the best carpenter in the world- you have to do things to an appropriate level of quality, keeping in mind that what you ( and I ) as a craftsman feel is top notch may not be worht the extra $$$ to many H.O's. A friend of mind just took a bath on a spec. house by putting in beautiful casing with backband, tons of crown, and 10" high baseboard. Did he get paid for all that - no - most people didn't notice the difference.
Live and learn
Andy
A friend of mind just took a bath on a spec. house by putting in beautiful casing with backband, tons of crown, and 10" high baseboard. Did he get paid for all that - no - most people didn't notice the difference.
In our market that would depend on the sophistication of the buyer, normally in direct proportion to the price.
For instance, the last job I held was running a shop for an upscale home builder. I convinced them to dovetail the drawers. All the customers noticed and were excited. Even after they fired me, they got another custom house that the client told them was due to their dovetailing drawers, which my replacement thought was a major waste of time and something that "nobody noticed". Wrong.
Once you get beyond square footage, the details are very important. It's just a matter of understanding when the details get important and how far to take it.PAHS Designer/Builder- Bury it!
"you have to do things to an appropriate level of quality"
I understand, hence the story about the rectory. I had to give up a little quality to get the job done on budget. I am sure I would be happy with your work, and not trying to insult you, just have a hard time finding what I need. all in all I agree with you. I like to add the little extra things and almost nobody notices, but then again it is my house, would I do that for some one else? Maybe if I liked them, but most likely not. I am wringing my hands right now over a steel and stone table I made as a gift that has a wee defect in the paint, very minor but, I am busy and it could go either way. But I bet they would never notice.
My comment on the trim work though is real. If they had adjusted the miter gauge it would have looked good. Simple thing that adds almost no hours or extra labor to the job but makes it look much better.
When I under estimate a job I just brush the saw dust off my shirt and think of it this way.....
Do the best job I know how.
Be overly polite to the customer.
Neverrrrr let them know I under estimated it...
Give them lots of business cards to pass on to their friends and family.....You'll eventually make it up.
Be self taught
andy
My life is my practice!
http://CLIFFORDRENOVATIONS.COM
That's what's called a "winner's curse".
DW went shopping in NYC and found a knock-off LV bag. Asked how much? $100. W said $30 and she got the deal.
Happens all the time, in life or in business.
Depends on how you see it. You can do as DAVERICHESON suggested, you are a winner and you were happy with what you thought was a favorable deal for you , so be it why second guess yourself after the facts.
Or you can go with what SHAZLETT suggested, raise your bids and work less. The theory goes every time you charge double for the same job you lose half of the clients so you end up even but you work half as hard.
In reality it's probably a combination of both and it depends on how good you can size up your clients and a lot of management skills.
John: Interesting thread. I would use this job as a stepping stone to higher end work that will bring you those higher paying jobs. You cant worry about how much more you could have received..but yet this could steer you towards landing these higher paying jobs in the future. As long as you are making a decent profit on this job..it will probably in the long run work out the best for you.
I would say to stay with the upper end clients when possible. Just remember that "rich" people have "rich" friends. If you desire to stay with upper end paying jobs....then thats where you need to concentrate your efforts.
I build stairways...most of them curved ones...and I have found out years ago to stay with the upper end clients for several reasons.
1. They can pay for more expensive details...
2. They arent looking for something "cheap" to put into their home.
3. They usually arent in a "get it built as cheap as you can mode."
I avoid taking on every job that comes my way. I also learned years ago that I could stay just as busy building curved stairways as I could building "two-step-stoops".
In fact...I have always thought that should the time ever come where I am slow on work...I feel my time would be best spent going out and looking for upper end work rather than staying busy doing the smaller jobs that I constantly turn away.
Upper end work just pays more because they want quality. You will find yourself working at a more leisurely pace doing quality work. You are getting paid to do high quality work.
Lower end jobs ...on the other hand...pay less because they want quantity. You will more likely be working at a pace similar to that as if you were "killing snakes" to keep the same amount of money coming in.
Tomchark,
I think you summed it up nicely. What I should have mentioned---( I have talked about it in past threads, but didn't elaborate on it in this thread)-------- Is that I used to price things the same way Davericheson describes---and for pretty much the same reasons.
I would price equivalent work the same on a $50,000 house,a $150,000, a $250,000 house. the problem was ---after a number of years I noticed my customer base was an ever increasing number of $50,000 houses-----bargain hunters,fixed income senior citezens,slum lords etc.------but I wasn't making a lot of progress cracking the better neighborhoods.
Having a lot of time on my hands every winter----I decided I had better take a hard look at who I accept as customers. Bargain hunters,senior citezens,slum lords tend to refer you to their like minded friends and it becomes a viscious downward cycle----or at best stagnation.
It took a number of years, a change in advertising and marketing, and a fine tuning of the types of work I will accept------but it made a nice difference in my levels of free time,my income, and my ability to search out new interests and opportunities.
anyhow, just my perspective