Hey guys,
Looking for some input on a situation or two as this is how our business has been running and its not running too well. Hence my rethinking the model.
Here is a standard situation.
Homeowner calls for a project, say an addition. We work up an estimate based on what our subs want and present the cost. HO thinks its too much. We are not shooting to make much in profit and overhead…I mean not much at all! Just want to keep landing jobs. I even swing the hammer on many of them to try to reduce some costs (yeah, I know about that line of thinking but I HAVE to have work coming in so losing a job becuase the framer wants to make $10k off of it and I will frame it for $7k has to work for me)
But now the market here is flooded with every guy with a hammer and pickup truck as they all got laid off from the big builders when they shut down so are taking any work they can.
So the thoughts are do you try to hire some of these guys to use them to work these same jobs or do you just lower your price although I imagine they will always undercut you as they have no license, insurance costs, etc. Or do you just wait it out and hope to land some jobs someday?
I know this is a really broad based question and could have a variety of answers. Just looking for some basic replies. Have lost the last three projects we estimated and were undercut by ALOT. $10k on a $30k project! $8k on a $42k job, etc
We all know the other guy may come back and shock the HO with extras but once he wins the job, we are out of the picture.
Any thoughts?
And working for someone else isn’t really an option as I’m almosy 40 and can’t go hard at it for 8-10 hours in the Florida heat like some 20 year old can. And that 20 year old will work for $10 an hour and I won’t. And no one is hiring project managers as the industry is so bad.
Our County building department even went top being closed every other Friday due to lack of building permit funding. And thats in a community of over 1 million citizens! Its bad here.
Mike
Replies
First off, are you losing jobs because they're more expensive than the HO expected (and hence aren't getting built at all, or in a much scaled-down version), or because you're being underbid by young whippersnappers?
Next, understand that anything that is sold because in some way it was the better choice than the other alternatives (including buying nothing) that the customer had. Sometimes it's low cost, sometimes it's better quality, sometimes it's convenience/schedule, sometimes it's confidence/security, sometimes it's just sex and glitz. And, of course, sometimes it's simply because the sales guy was a fast talker and took advantage of the customer.
You've got to decide what it is you're selling.
(Speaking as a HO, a lot of decisions are made based on confidence/security -- what are the odds of this choice turning out to be a very bad one down the road. Less important is getting the absolute optimal choice. But then again I'm probably not the typical HO in this regard.)
If they were employees before, they probably will go back to being employess again for steadier money and less worry. If you can get the jobs, and your competition is willing to work for you, why not? Don't know how easy it would be, but I'd look for proactive-minded people that want to get better every time they do something. I have no employees as a handyman though. But that's right now, a few years away I don't know if my body will let me keep going at it alone, 33 with a troubled back. Mostly do solo remodeling and such, plenty busy at the moment in central FLA.
Good luck-
"I wanna be a race car passenger. You know, the guy that bugs the driver. Say, man, can I stick my feet out the window? Do we have to keep going in circles? Mind if I turn on the radio? Boy, you really like Tide."
I don't think being the cheapest is the answer. I don't believe that over the long haul you can build a business and a future based on low bid. We have a local HVAC company that tried that. He built on volume alone. He just lost a large company (80 men) because he simply could no longer service the debt due to only going after low bid work.
Even in a slow market there is business going on and at a profitable level. It is simply happening by companies getting better leads than you and selling better than you are.
The first think to find is a way to generate more leads. Advertising comes to mind. Then to target the type of client you are after. What income level. We target comfortable seniors and working couples. So we advertise in areas we believe that they will see.
We ask every call where they heard of us. If a form of advertising doesn't produce a job with enough profit to pay for the ads for 90 days or multiple jobs that will pay for the cost of that advertising we drop that format and move on to another. Some will produce for awhile, some not at all, and some will be a steady flow. Set a budget and work with that.
We spend about 1k a month including business cards etc. With a little hustle and igenuity you can do some for little or free with leg work if you are not busy else where. We do some creative stuff when the office is slow. For instance every job sold we put a door card in the 5 houses around it with a "pardon our dust, we will be working at the neighbor" card. 250 pro done cards cost us $57.
Then put together a portfolio and sell yourself as a legit, trustworthy, reliable, insured contractor that will be there and produce the work that they want at a fair, not cheap, price. Sell your work based on value not price. Value in the items listed above and value based on the fact that if there are any issues along the way you will be there to take care of it, not back to work at a plant somewhere.
These are all the things we do. We live in a small county and things have been slow. But my theory is if 100 jobs are going on in a month there is no reason we can't sell 5. If you can generate enough leads you will sell enough work. It truly is game of numbers. That is enough to keep us busy. Not everyone is totally price oriented. It is just a matter of find those that aren't. DanT
Very well said.SamT
Well, don't discard the concept of cheapest too quickly. I don't mean doing crappy work with crappy materials, or even just doing stripped-down jobs, but rather specializing in doing good work efficiently and with low-cost materials (eg, Ikea cabs instead of custom). Not everyone's cup of tea, but if you have a mind to be an "efficiency expert" and learn how to squeeze the oink out of the pig, it's a segment of the market that could do well in "down" times.
So convenient a thing it is to be a reasonable Creature, since it enables one to find or make a Reason for everything one has a mind to do. --Benjamin Franklin
My opinion is the opposite. Well it's not truely my opinion, it's something I read years ago in, I think, Forbes.You know the three legs, Speed, Quality, or Price, pick two? I think the survivors in rough areas are going to be those contractors who specialize in standing on one leg. Since the call for pure speed is rare, that leaves being the cheapest or being the best. OK, Roofers could be "The Fastest."Remember that it is not that you are, in fact, the best or the cheapest in you market, but only that the market percieves you that way. Price, like it or not, is a huge factor in whether or not you are perceived as being "the Best."Walmart will survive any but the most calamitatios downturn, but they don't have to worry about government imposed warrentees or their product collapsing on a family. Niether does Joe Pick-up 'n' a Six-pak.SamT
It's not "cheapness" but "value" that people want, above all. And they want the maximum value for their budget. There's a market (agreed, not a huge one) for delivering value on a low budget.Eg, one could specialize in being able to redo a 1930s bathroom into a modern one, using attractive, durable materials that aren't terribly pricy and aren't labor intensive. Eg, using composite wainscotting instead of ceramic tile in non-wet areas, prefab composite pan in the shower, good quality vinyl instead of tile on the floor. You could likely cut the cost of a bath remodel by 1/3 or 1/2 over a mediocre all-tile install.
So convenient a thing it is to be a reasonable Creature, since it enables one to find or make a Reason for everything one has a mind to do. --Benjamin Franklin
I have no issue with doing low budget work. In fact due to being slow last week we installed a tub and surround that I considered a real piece of crap! But we did it in a mortar bed, built a few extra supports etc. Now it is a well installed cheap piece of crap lol.
What I was saying is you can still work hard at selling yourself better and getting more leads to work with so you are not doing a 10k job that will feed your family for a few weeks for 8k and working for free for 3 days. And you do that by driving up your lead numbers and selling better. We are talking about a guy that is new to the business with a low amount of referals as he simply hasn't worked for that many people to date. Just my opinion of course. DanT
Yeah, you've got to have leads, and well-qualified ones, more than anything else. You've got to sell yourself both before and after the contact. That's an art unto itself. It gets down to three things:-- Visibility -- you have to have people think to contact you (or somehow arrange to contact them) to begin with.-- Price -- a few contractors (Sears, eg) get away with a high price by selling to suckers, but that's a limited business with a lot of competition. So you need to control costs, and adjust costs to the customer's budget. Think value.-- Trust -- for most people their home is the most valuable thing they own, and it's the roof over their head (literally), their security blanket, their retirement account, and a family heirloom, all rolled into one. They don't want to have some bozo wreck it, and they don't want to be stuck with some yucky work they'll hate every time they see it for the rest of their days. (Note, adjust "heirloom" and "rest of their days" based on local turnover rates.) The contractor that can instill trust has more than a foot in the door -- he's virtually a shoo-in, and will only lose the contract if he's over-budget or can't do the work on a timely schedule.
So convenient a thing it is to be a reasonable Creature, since it enables one to find or make a Reason for everything one has a mind to do. --Benjamin Franklin
Agreed. DanT
It seems that the most common attitude that we have to deal with in the general population is the 'Wal Mart Mentality'. One of Target Stores' bylines is: "Expect More, Pay Less".
Funny, a local builder just started advertising as "The Wal-Mart of Home-Builders!"."I wanna be a race car passenger. You know, the guy that bugs the driver. Say, man, can I stick my feet out the window? Do we have to keep going in circles? Mind if I turn on the radio? Boy, you really like Tide."
We'll see how long that lasts.
So convenient a thing it is to be a reasonable Creature, since it enables one to find or make a Reason for everything one has a mind to do. --Benjamin Franklin
You know what it costs... yes you might be able to lower your price some by getting a few breaks from your suppliers that you can pass on...
but in the long run I think you'd be better served to be known as "yes we charge more but you can find us when you need us and we do the best work you can get"
people who have money will always pay for the best... thats who i'd try to work for...
we all know someone can always do it cheaper...
good luck
p
I'd say in your current local economy , you have no choice but to "play the game"
people can talk about Quality all day long, as they go out of businesscut your construction specifications to the bare minimum, ie 15 year shingles, foam board / windbrace instead of full sheathingcharge for every extra, change, whatevercut company vehicle use, make suppliers deliveri have friends in your area in the HVAC biz ... it's ... Nasty
I agree that you can always cut your cost... whatever you don't spend... you won't have to make....
BUT i've never seen the guys with the best reputation in an area go out of business ... some people will aways want to say... "oh yes we only use XYZ%$... we had to wait 6months for him... but they do the best work" the very top of the food chain almost never goes hungry
p
i wouldn't say our OP is in the Elite category of companies ...
he just fighting for work like any other carpenter
Here is an article in Remodeling mag. that may or may not help. Its available for free if you dont already have it. Its not like FH in that you wont find any how-to's on building, but plenty of how-to's for your business.
http://www.remodeling.hw.net/industry-news.asp?sectionID=194&articleID=512600
When everthing is going your way, you're in the wrong lane
Oops, I forgot the July issue article.
http://www.remodeling.hw.net/industry-news.asp?sectionID=194&articleID=532671
When everthing is going your way, you're in the wrong lane
Hey guys,
Thanks for the input. Some very good information.
Its just been a tricky last year or so. I know part of it is the economy around here and so many "hits" the consturction industry is taking.
Almost all of our leads are refferals and folks even said they know we are good and they trust us (I've lived here all my life essentially and am on the local Building Board) Just have been told by some folks "they can't afford us". I suppose I could hunt for cheaper subs but I trust the guys we use and they do great work.
Its a bit difficult to adjust to that as folks come to us with plans and say "I want this!" and then you estimate it at that. Of course for them its too high (not surprising as thats pretty common) However; we try to value engineer it for what they want but then they feel like they are getting "less" just to meet their budget. (I mean can anyone really build an addition for less than $85 per sq ft?)
And of course then they take our estimate to another guy (as they called us first as we were recommended) who says he will build it for less as he feels comfotable doing it without any engineering or his plumber can save them a bit here and the electrician a bit there.
No real answers I suppose just part of the business. Thanks for letting me vent.
Mike