# Pricing, Estimating, and Success



## Ed the Roofer

Brian said:


> *Since 99% of the contractors starting business today won't last 10 years, and since most of them aren't charging enough, I'm not sure why knowing the "going rate" will be helpful. The "going rate" is really the "going broke rate".*


Brian,

I have used almost that exact phrase when I occassionally have to deal with an insurance adjuster saying that the prices they offer are the average going rate in the industry.

I do not desire to be compared to the 90 % + of all contractors or small businesses who can not sustain their business operations.

Once again, great initial post. :thumbsup:

Ed


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## Tom M

Since estimates have been fewer and the competition is getting cheaper I think I will go out and buy some expensive toys. New trucks, and equipment and then invest in a large advertisement campaign. Then I could hire a group of guys on salary to try and convince 1 out of ten customers that paying my outrages overhead ensures them a better job than the small guy who puts on his tools and personally does the job. I have heard a client say more than once that they were getting 3 estimates, so to say there is no going rate is ridiculous. Everyone needs to know thier own bottom line over head going in a bid period but know matter what kind of dog and pony show you put on at the sale --its no sale if your cost is way over theirs. The more people slow down the more people are roaming into other types of work to stay busy. It should be no such a mystery that people as inquiry about cost others are getting. You also have no idea how many HO are going on line price checking thier own jobs.


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## Dave Mac

I for one love to know the going rate, of company's that have been in my market for well over 10 years, their are plenty of them. I collect their estimate packages, and learn from them. most of them around for twenty.


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## Frankawitz

Brian,

Great Post!:thumbsup: I've been in the dog and pony show for awhile now and if most guys would just take their time, they will pick up on things that will tell them how to price the job they are looking at. If they would know the numbers like you said and then it will fall into place. Great post.


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## Dave Mac

Is it that 99% fail because they dont charge the correct price???

I wonder, their has to be other reasons they fail.

whear did you get 99% buisness fail??

thanks
dave mac


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## Ed the Roofer

I have read from DOL statistics of all small businesses.

80 % fail withinf 1st 5 years.

Of the remaining 20 %, 80 % of them go 0ut of business in the next 5 years.

That would leave 4 % of the originals at the beginning of the 10 year period.

There are many other reasons to go out of business, but money in should be greater than money out, would have to be a high ranking one.

Ed


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## Grumpy

I concur with Ed's numbers above which seem to be in line with everything I have read. 

Why do "I" think so many businesses go out of business? I can think of lots of reasons. Money problem is probably the #1 reason. However I would say tailing in a close second are those businesses who's strategy it is to fold and re-open under another name to skirt lawsuites and warranty issues would be very common for the construction/remodeling industry. 

A 3rd very common reason is that it's the easy thing to do when things get tough, especially if you are a one man shop. Having a bad day? It's easy to get the attitude that you're going to close up and do something else.

I know I closed up my web design/hosting company years ago because I got bored of it and got a new girl friend whom I have since married. It was really easy to do since I was the only employee. I just deiced one day to stop, and I did. I sold it and bought some furniture for my new condo. That was the end of that chapter of my life, just made the decision to do so one afternoon probably after a few drinks. 

I'd say those are the #3 most common reasons that businesses fail. In my opinion of coarse.


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## Chip_Block

*Getting good at estimates and bids*

The only way you can get accuracy in your bid is to be scientific about your work. You need to keep track of the time it takes to do different aspects of your job. If you _think_ it takes 2 hours to hang and trim a door, but your _on site experience_ is 4 hours - then 4 hours is what's got to go into you bidding form. (What do most amatauers forget to include in their bid? setup, material handling, layout, cleanup, and the all important "misc, labor", the catchall for all those little unique oddities that show up in every job.)

In my spreadsheet, every aspect or phase of the job includes these 5 items. And whenever I run into something I didn't think of before, or a new wrinkle, I add it to my spreadsheet template. After 30 years it's massive. But I won't forget anything!

You've simply got to keep a timecard for yourself. It's a habit. Then, overtime, you'll see your bids being more and more accurate. You'll also notice that your bids are probably more expensive than some others - but that means you're really accounting for all that's involved - and you won't be working, working, working - and wondeing why your not making enough money. You'll also have longevity as a builder. That adds to your credibility as well as your bottom line.

For those great "sales" people who just sell themselves but don't have the goods to back it up, they're a flash in the pan. Not even worth thinking about.


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## arturjhawk

> For those great "sales" people who just sell themselves but don't have the goods to back it up, they're a flash in the pan. Not even worth thinking about.


Well...I am a salesperson with 5 years of laborer experience 
and know how much time you need to set and trim the door
but still can sell 5k for 10k :thumbsup:


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## Dave Mac

Chip_Block said:


> The only way you can get accuracy in your bid is to be scientific about your work. You need to keep track of the time it takes to do different aspects of your job. If you _think_ it takes 2 hours to hang and trim a door, but your _on site experience_ is 4 hours - then 4 hours is what's got to go into you bidding form. (What do most amatauers forget to include in their bid? setup, material handling, layout, cleanup, and the all important "misc, labor", the catchall for all those little unique oddities that show up in every job.)
> 
> In my spreadsheet, every aspect or phase of the job includes these 5 items. And whenever I run into something I didn't think of before, or a new wrinkle, I add it to my spreadsheet template. After 30 years it's massive. But I won't forget anything!
> 
> You've simply got to keep a timecard for yourself. It's a habit. Then, overtime, you'll see your bids being more and more accurate. You'll also notice that your bids are probably more expensive than some others - but that means you're really accounting for all that's involved - and you won't be working, working, working - and wondeing why your not making enough money. You'll also have longevity as a builder. That adds to your credibility as well as your bottom line.
> 
> For those great "sales" people who just sell themselves but don't have the goods to back it up, they're a flash in the pan. Not even worth thinking about.



On your spread sheet do you have a coulmn you list the item or work done, then in the row you list the time and condition it takes, is their any more to it?? thanks 

dave mac


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## True North

arturjhawk said:


> Well...I am a salesperson with 5 years of laborer experience
> and know how much time you need to set and trim the door
> but still can sell 5k for 10k :thumbsup:


The question is, are you enough of a rip-off to do it?


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## Ed the Roofer

Why in the world would you consider the price that is agreed to by both parties for the inherent value supplied to be a rip-off?

Maybe, it is all of the other contractors who "ONLY" charge $ 5,000 for the job that is the problem.

That could be a major reason why 80 % of all small businesses, including contractors, go out of business after 5 years and 96 % of the original group go out of business after 10 years.

Ed


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## George Z

True North said:


> The question is, are you enough of a rip-off to do it?


Why is that a rip off?
Doesn't the customer see the price up-front and wants to pay that price?

You,
the custodians of the customers money are welcome to change careers 
and become financial advisors,
or talk to them out of their Lexus and make them buy a Camry


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## True North

Ed the Roofer said:


> Why in the world would you consider the price that is agreed to by both parties for the inherent value supplied to be a rip-off?
> 
> Maybe, it is all of the other contractors who "ONLY" charge $ 5,000 for the job that is the problem.
> 
> That could be a major reason why 80 % of all small businesses, including contractors, go out of business after 5 years and 96 % of the original group go out of business after 10 years.
> 
> Ed


So Ed, if some slick talking @sshole sold your 85 year mother something for double what it's worth, that would be okay by you?

You guys... *shakes head*


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## Ed the Roofer

I guess you don't see the big picture and just want to focus on someone truly being taken advantage of.

If 96 % of all contractors are out of business by year 10, did they all just have a change of heart, or did they suffer from not earning enough from all of their hard work put forth.

If my Grandmothers were still alive and would want to buy a Cadillac instead of a Chevy, and received a sense of satisfaction from rewarding themselves, I would not attempt to prevent them from making their own decision?

Would You?

Is a better roofing system and the Peace Of Mind worthwhile for an elderly person? I think so. Many of my best customers have worked hard their entire lives and finally feel they deserve to reward themselves with upgrades they would have been too thrifty to choose years earlier.

I have to wonder, from what reference point do you come to the conclusion that a better and even pricier job is not merited? 

Have you been burnt before or worked in a situation that actually did that to people? I earn every single dollar I charge for and then some.

Ed


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## True North

Ed, first off, I truly believe you deliver a superior product, and secondly, when I see a post with your name on it, it's usually worth reading.

The part that I took issue with is the "sell $5000 for $10,000".

By making that statement the poster has already placed a value on "the product". That value is five grand. We're not talking about perceived value. We're talking about selling a Ford as a Lincoln.

I am all for selling a superior product for a higher price. That's how I make my living. I'm pretty sure that's how you make yours.

Am I totally off base here?


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## Ed the Roofer

arturjhawk said:


> but still can sell 5k for 10k


I take that to mean that what most other contractors would charge for is $5,000 versus that he believes the true costs of the total project, which Brian has stated succinctly, would really work out to be a $10,000 job.

Now, if the companys price list and included commission came up to around $ 5,000.00 and he knew he had some little old lady in the bag, and increased the price to $ 10,000.00 just because he felt he could get away with it, then that would be a different story.

I think we may both really be on the same page or at least heading there, but our interpretations of the posters intent difer.

Ed


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## True North

Ed the Roofer said:


> ...Now, if the companys price list and included commission came up to around $ 5,000.00 and he knew he had some little old lady in the bag, and increased the price to $ 10,000.00 just because he felt he could get away with it, then that would be a different story.
> 
> I think we may both really be on the same page or at least heading there, but our interpretations of the posters intent difer.
> 
> Ed


Okay, NOW we're on the same page. I guess I just interpreted his post differently.

I like that verse in the Bible that says "...the worker deserves his wages..." (Luke 10:7). It always makes me feel good to see a job well done with a fair payment in my pocket. My definition of fair may be a bit more than the infamous "going rate", but I'm confident that the work is better than the guys who charge the going rate.


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## daArch

Brian,

Many a trade mag would love to publish that, and SHOULD.

Are you PDCA? Their new mag, DECō would be a perfect venue. 

I know another small publication that should have that in it's article bank .........


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## The Home Doc

I agree wholeheartedly with you Brian. I have been guilty of not knowing my numbers before, and it almost pushed me into the 99%. I was more concerned with being the lowest bidder to ensure that I won the bid. Winning battles, but losing the war. After a few jobs where I barely made any profit, and one job where I lost money, I started factoring in my overhead and raised my labor. Now, my business is moving right along. I've been underbid before, and still won the job because of salesmanship. One thing I would add though when practicing salesmanship, don't trash another contractor. Customers don't want to hear why they shouldn't go with the other contractor... they want to hear why they should go with you instead.

Dan


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## Milhaus

Great sticky gents. Perfect for my day. 

I came in well over another couple guys in an estimate I put out last week. Customers were pretty concerned about price throughout the whole process. I talked with the customer today and he told me there was something wrong with my pricing. He is an architect and a past friend of sorts, so I'm intrigued by his statement, but I don't think I was overpriced. I went through this estimate three times, had someone else go through it, and knocked off some of my labor for the old friend clause. Customer really helped me out a while back. 

I plan on reviewing my overhead just to be positive that my numbers are right, but I am pretty confident that I understand where all the money goes when it comes in. And I NEED that money to come in to avoid being part of the failure stats in small businesses. I was up against a contractor that I have known for a while who has been in the game for over ten years. And then another guy who runs an handyman crew, but I'm not confident in his work. 

Both came in substantially below me on labor. I figure my overhead into my labor costs and I think I'm reasonable - not the cheapest but definitely not the most expensive. I think a lot of it has to do with what you guys have mentioned previously. I NEED to spend some more time finding out what the going rate is, not to base my estimates off of them but to know how my competitors are going to bid. Another is that it IS the win the war mentality that pays off in the long run. I'm trying to have some integrity with the business as I grow. I don't want to drop my price just to fill the schedule. (But I admit that it is becoming more and more appealing). I've held true to it so far, and I aim to continue. Another is that I have to look at the competition - what are their goals for their business? I don't know for certain, but I have a pretty good idea that they are not looking at this the same as I. I want to run a strong, solid business that can compete with the more well known construction companies in the biz, that is not what either of them is after to my knowledge, and I don't think they will get there charging the rates they bid on this job. There is no way that they could cover overhead or profit at the rates they bid. 
It is baffling me a bit, but I know I'm heading in the right direction with this business, and my quality is good, so I'm going to try to brush this one aside. 

Thanks for the ears. And the knowledge. When I talked to the homeowner tonight - you guys were the first ones I thought of. What would the guys on the web say? Awwwww, it's a bud light commercial. You guys should be on the 'here's to you....contractor guy' commercial. 

Thanks again. Oh, and sorry if I'm hijacking the thread. 

Mark


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## Milhaus

I just reread that post and I don't mean any harm to anyone who has made their biz go by dropping prices to get the word out or whatever the reason...to each his own. I'm just trying to find my little piece of the pie without having to do it.


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## dirt diggler

Milhaus said:


> I just reread that post and I don't mean any harm to anyone who has made their biz go by dropping prices to get the word out or whatever the reason...to each his own. I'm just trying to find my little piece of the pie without having to do it.


why do you think you should have too??

think about it in very simplistic terms

your expenses WILL remain constant. Will your lender give you a break on your mortgage just because "well, things are slow"

nope. and neither will vendors, the phone company, the grocery store, the gas stations, health insurance, etc.

I think it's human nature to just "drop prices" ... I think people get into this panic or something - they're afraid not to get work - and just start cutting prices. They figure that they can make it up in the good times.


Mistakes (intentional or not) in estimating WILL FOLLOW YOU down the road.






You know, I love what I do - I really do. But there's a lot that goes with that: scheduling, staying up to date with bills, meeting deadlines, making clients happy, etc. It's not uncommon for the novelty of it all to where off quickly.

It costs A LOT of money to make those things happen. It takes being realistic and awareness. You cannot just cut prices - because, most likely, your costs are staying constant. While, overall, construction is somewhat seasonal - bills are not!!!



I think the one thing that seperates successful contractors from unsuccessful ones comes down to one thing: the successful contractor has total control over his estimating & pricing. I think this even surpasses workmanship, craftsmanship, etc. You can be the best bathroom/kitchen remodelor in the country ... but without a solid grip on your pricing - nobody will ever know about it



i will say one more thing and then i have to work:

alot of people that got into business in the early 2000s got to experience a very friendly and booming construction environment. Maybe I'm wrong - but in a sense, I think this spoiled them. I hear guys on here AND in the real world say "man, i've been in business for 7 years and I've never been this slow" ... in essence, they grew in a "easy" economy and now that things are slower, they're finding that they never really had a solid "foundation" in their business and they're paying for it now. Talk about your indian summers ....


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## Susan Betz

We've seen it go both ways bidding. We always get good feedback for providing lots of specifications in our bids. But then, when we are underbid, they want our fence for the lower price. It becomes very easy to say, "the bid they gave you is not for the fence we priced." Apples to apples. If someone is bidding the same fence, and they are calculating their overhead, they will come in with approximately the same numbers. If they severely underbid us, they can have the job. We're not here to get distracted by bargain hunters and tirekickers; we tell customers when bids aren't realistic, and if that customer is all about price, we let it go. And there are companies that price higher than us - bigger fish in the sea, and it makes us look competitive. So far, there's enough work for everybody.

What gets me is when these companies lowball and you KNOW they aren't going to sell them the product the client wants for that price, they just want to get them in the door for the sales pitch. I've always found that kind of selling slimy. Think car dealers. But it works.


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## POOLMANinCT

dirt diggler said:


> why do you think you should have too??
> 
> think about it in very simplistic terms
> 
> your expenses WILL remain constant. Will your lender give you a break on your mortgage just because "well, things are slow"
> 
> nope. and neither will vendors, the phone company, the grocery store, the gas stations, health insurance, etc.
> 
> I think it's human nature to just "drop prices" ... I think people get into this panic or something - they're afraid not to get work - and just start cutting prices. They figure that they can make it up in the good times.
> 
> 
> Mistakes (intentional or not) in estimating WILL FOLLOW YOU down the road.
> 
> 
> 
> 
> 
> 
> You know, I love what I do - I really do. But there's a lot that goes with that: scheduling, staying up to date with bills, meeting deadlines, making clients happy, etc. It's not uncommon for the novelty of it all to where off quickly.
> 
> It costs A LOT of money to make those things happen. It takes being realistic and awareness. You cannot just cut prices - because, most likely, your costs are staying constant. While, overall, construction is somewhat seasonal - bills are not!!!
> 
> 
> 
> I think the one thing that seperates successful contractors from unsuccessful ones comes down to one thing: the successful contractor has total control over his estimating & pricing. I think this even surpasses workmanship, craftsmanship, etc. You can be the best bathroom/kitchen remodelor in the country ... but without a solid grip on your pricing - nobody will ever know about it
> 
> 
> 
> i will say one more thing and then i have to work:
> 
> alot of people that got into business in the early 2000s got to experience a very friendly and booming construction environment. Maybe I'm wrong - but in a sense, I think this spoiled them. I hear guys on here AND in the real world say "man, i've been in business for 7 years and I've never been this slow" ... in essence, they grew in a "easy" economy and now that things are slower, they're finding that they never really had a solid "foundation" in their business and they're paying for it now. Talk about your indian summers ....


hence, nurture your service business.... my work is done here young grasshopper....


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## te12c02w

Good info. I suspect, however, that there will still be those same questions asked in the future.


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## Gordo

te12c02w said:


> Good info. I suspect, however, that there will still be those same questions asked in the future.



I have a bath remodel coming up. How should I charge...by the sq. foot or by the hour?:w00t:


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## kevjob

we are charging sq ft by the hour!:laughing:


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## XanadooLTD

Very well said Brian. I will print this post and look at often to keep myself on a straght line. Thanks for taking the time to inform us all.


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## rbsremodeling

One thing that is also important is to know each of your guys productivity. It may sound simple, but I know what each one of my guys does well and their average time to complete a task. If I bid a job and I know which one of my guy or guys will work on it I also know how to adjust the numbers for their average completion time on jobs. This helps if I need to be very competitive on a bid tha i really want


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## mstjohn

*Remodeling Reference*

We've been working on publishing a free version of the Frank R. Walker Remodeling Reference book on the web at buildingcostsonline.com that is an estimating reference for remodeling work. Is the information on this site helpful for you guys to develop remodeling estimates? Any feedback you might have would be appreciated.


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## Ed the Roofer

Unless the prices were regionally adjusted and had a % variable and took into consideration long term legitimate contractors overhead, instead of sole owner/sole employee pricing structures and were updated as the cost indices fluctuated, it would only offer a minor amount of advice and realistic pricing wisdom to the estimating process.

I checked out the roofing and gutters section and the costs of materials are greatly under-estimated.

Ed


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## rbsremodeling

Two things I thought about that can really affect your job price. 
Gross volume dollar amout of work vs. overhead. I am truly blessed with my guys I am able to to a much higher dollar volume of work versus what my competitors do. So my markup is 10-20% less because my overhead is the same as theirs with more gross dollar volume of work completed. 

Secondly how many jobs to you do at a time. If your a one job at a time guy all your overhead is fixed on that job versus having several jobs to spread it over. Which goes back to my first comment on a higher gross volume so lower mark up to cover overhead and profit. I am of course simplying my thoughts it is a little more complicated that. 

Overhead is a bigger killer for many remodelers. Depending on the size of the job it may be better to sub some of it out and save time, money and lower overhead costs


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## BACKWOODS

mstjohn said:


> We've been working on publishing a free version of the Frank R. Walker Remodeling Reference book on the web at buildingcostsonline.com that is an estimating reference for remodeling work. Is the information on this site helpful for you guys to develop remodeling estimates? Any feedback you might have would be appreciated.


Labor prices seem many years outdated to me for many trades. 
Plumber for under $30, most around my area ar $90-125 per hr.


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## gunther.arneson

Great posts from everyone. I think it's important to know what your 'break even' rate is which means you have to understand what all of your expenses are and then go from there based on other factors (demand for services, prevailing hourly rates, etc.)


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## rbsremodeling

Went to a construction seminar this week and they basically relayed the same message I spoke about. There theme was to up your guys prodution to lower your mark up for the lean market ahead. The seminars speaker said the average remodeler makes about 150k per employee when I check my numbers I was at 200k per employee, well ahead of the average, next year I am going to shoot for 225k which should make up for the lower dollar jobs. We use to have 300-550k jobs now they average 150-250k because of the market slow down. I have to do a few more jobs but I am going to up effeciency and try to sqeeze a bit more production out of the guys. The seminar introduced them to new methods of working by themselves to increase one person productivity. I will try some of the suggestions out now and fine tune it for next year.


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## Pearce Services

mstjohn said:


> We've been working on publishing a free version of the Frank R. Walker Remodeling Reference book on the web at buildingcostsonline.com that is an estimating reference for remodeling work. Is the information on this site helpful for you guys to develop remodeling estimates? Any feedback you might have would be appreciated.


Although the wages are low, the productivity rates appear to be reasonable. If you apply these rates to your hourly cost, and mark up accordingly, this may be a good reference.


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## BobEBobE

*Pricing Response*




Vinny said:


> I would think perhaps you have a point.





Vinny said:


> Surely, if you are consistantly loosing jobs because your too high or, conversly, have every job you looked at because your too low, there may be some value to knowing "the going rate". Has this been posted"the going out of buisness rate"
> 
> Anyway, I digress. But the point being, and I,m sure you already know this, is that you cant run your buisness for the going rate if thats not enough for you to make profit.
> 
> Of course, everything must be in line: expenses not too high, salary not too high(or low), not paying too much on material. Then if its still not right, you gotta take another look at things like market, clients, geographic location.
> 
> And if that all looks ok, then you must start making a plan(a buisness plan) that has all components needed to make it work for you.
> 
> Back to your point, knowing "the going rate" has its uses, but you must be very carefull to know how to incorparate the info, if you chose to pay attention to it at all.







j_sims said:


> :thumbup:Very Good post Brian...You are dead on with what you are saying.





j_sims said:


> Early in my career I had a guy tell me,
> " Don't worry if your price is too high, just worry if it is high enough."
> 
> Again this was a long time ago...Initially I thought he had meant "get as much as you can" it took me a while to understand he was talking about what you posted.
> 
> If more these "how much" guys would sit down and figure out their fixed cost and overhead cost, company and personal goals. That is 70% of the Great Estimating Mystery.
> And that also means being a little bit of a soothsayer.."How much do I need to put back for the kid's college or How many times will I have to bail junior out of the hoosegow...weddings, my retirement, etc.... (pretty big list by the end of it) Also, they need to update and adjust their projections frequently!
> 
> I like the term " the going (broke) rate"
> Anyway, I am being redundant to what you said....good post:thumbsup:
> Ya done TEXAS proud.





*:whistlingI am new to this forum and have been reading many threads in order to acquaint myself with the information that I could obtain here. At first, I was impressed with the idea of having on-line mentors. But, I am becoming more and more disappointed as I continue to read these threads. It appears that there is an underlying "good ole boys club" mentality presented, and if one is new to the business, yall ain't too happy to see that he is successful. This keeps the competition out and ensures YOUR success, right? And, when he fails with the 99%, yall will catagorize him as lacking good business sense. Reading between the lines, I think you just don't want to give the secret ingredient to the winning recipe. The competition is stiff. If you really wanted to help the rookie, then why didn't you give him an EXAMPLE of YOUR pricing breakdown. The profit margin for "weddings" as suggested in the above formula, could easily be adjusted depending upon how many daughters the guy has, right? Don't be so smug about it. In our neck of the woods, EVERYONE in construction knows the "going rates", as do you! For EXAMPLE, a sub would bid in the market of $90.00-$100.00 per square for vinyl siding, give or take. Now, was that so difficult to do? Your disortation was informative, Brian, but you basically said that a guy who asks the "how much" question is ignorant to business. I think he is admitting that already, simply by asking the question. If you don't want to give constructive instruction with REAL numbers, why don't you just say so? You should just say, "here is a formula that you can use" (I assume you have an actual formula based upon your writings.). The free-flowing formula listed above is a good example of help that doesn't help. One cannot sell a hamburger for $200.00 just because of his financial goals. Remember, there is a MacDonald's and Burger King around the corner, both having Dollar Menus. I beg to differ; it is not a "gift" to be a good business person; it is exposure, information and education. This is where a good mentor would come in. I would like to see the flavor of these threads change by way of inspiring a new contractor to be the best he or she can be by giving information as to where he or she can find the good business education, of which you speak. If you don't want to share your personal bid numbers, just be clear and honest about it and tell the guy that the business is way too competitive to go down that path in this forum. Now, yall can respond with your rips, but when you are finished ripping, think about what I have said here, the next time you are asked these types of questions. Perhaps those of you who really would make a good mentor should start a Mentor's Forum. There, you could have easily accessible Work Order forms, Bid Grids, etc., as well as, the basics for beginning a SUCCESSFUL company. Remember the Golden Rule? What are your stories? How did you begin? Where did YOU obtain your training? Where did YOU obtain YOUR education? Really! This would be quite helpful!! Thanks!:rockon:*


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## George Z

BobEBobE said:


> *:whistlingI am new to this forum and have been reading many threads in order to acquaint myself with the information that I could obtain here. At first, I was impressed with the idea of having on-line mentors. But, I am becoming more and more disappointed as I continue to read these threads. It appears that there is an underlying "good ole boys club" mentality presented, and if one is new to the business, yall ain't too happy to see that he is successful. This keeps the competition out and ensures YOUR success, right? And, when he fails with the 99%, yall will catagorize him as lacking good business sense. Reading between the lines, I think you just don't want to give the secret ingredient to the winning recipe. The competition is stiff. If you really wanted to help the rookie, then why didn't you give him an EXAMPLE of YOUR pricing breakdown. The profit margin for "weddings" as suggested in the above formula, could easily be adjusted depending upon how many daughters the guy has, right? Don't be so smug about it. In our neck of the woods, EVERYONE in construction knows the "going rates", as do you! For EXAMPLE, a sub would bid in the market of $90.00-$100.00 per square for vinyl siding, give or take. Now, was that so difficult to do? Your disortation was informative, Brian, but you basically said that a guy who asks the "how much" question is ignorant to business. I think he is admitting that already, simply by asking the question. If you don't want to give constructive instruction with REAL numbers, why don't you just say so? You should just say, "here is a formula that you can use" (I assume you have an actual formula based upon your writings.). The free-flowing formula listed above is a good example of help that doesn't help. One cannot sell a hamburger for $200.00 just because of his financial goals. Remember, there is a MacDonald's and Burger King around the corner, both having Dollar Menus. I beg to differ; it is not a "gift" to be a good business person; it is exposure, information and education. This is where a good mentor would come in. I would like to see the flavor of these threads change by way of inspiring a new contractor to be the best he or she can be by giving information as to where he or she can find the good business education, of which you speak. If you don't want to share your personal bid numbers, just be clear and honest about it and tell the guy that the business is way too competitive to go down that path in this forum. Now, yall can respond with your rips, but when you are finished ripping, think about what I have said here, the next time you are asked these types of questions. Perhaps those of you who really would make a good mentor should start a Mentor's Forum. There, you could have easily accessible Work Order forms, Bid Grids, etc., as well as, the basics for beginning a SUCCESSFUL company. Remember the Golden Rule? What are your stories? How did you begin? Where did YOU obtain your training? Where did YOU obtain YOUR education? Really! This would be quite helpful!! Thanks!:rockon:*


Give a man a fish... never mind.
Why would you want Brian's or somebody else's stinky fish anyway?
That information is available for everyone to see, just search for it.
I got a lot of my information from these boards, it was useful.
There is no old boys' club.
I remember not long ago, I asked some of the people here questions,
I got some very useful information from people like Brian, ProwallGuy
No secrets, what you are reading is indeed as good as it gets.
Be open minded and learn how to fish yourself.


----------



## dirt diggler

George Z said:


> Give a man a fish... never mind.
> Why would you want Brian's or somebody else's stinky fish anyway?
> That information is available for everyone to see, just search for it.
> I got a lot of my information from these boards, it was useful.
> There is no old boys' club.
> I remember not long ago, I asked some of the people here questions,
> I got some very useful information from people like Brian, ProwallGuy
> No secrets, what you are reading is indeed as good as it gets.
> Be open minded and learn how to fish yourself.


George ... for once ....



:clap::clap::clap:




Bob - as great as it is to have a forum like this ... i think some might mistakingly be looking for the "simple answers" to huge questions.


Can you blame someone who has worked so hard to accomplish what they have to feel a little offended perhaps by some of those type of questions?


Personally, I think it's a bit assuming. Gotta be sharp in this biz ... and gotta learn fast. Mistakes can happen once ... after that - you're either lazy or stupid if they happen again.



I think this forum is great. But it it should not be The Internet Guide to Contracting. Someone who wants to look at it that way probably is not going to fair well in an already unstable, volatile type of life/career


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## HomeMedia Pros

*Margins - Volume - Big Picture*



ultimatetouch said:


> All of us should desire more money and greater profit margins. There should be a price point to where we all would not go beneath clearly its better for everyone in our business. Those guys saying 10% and even 15% should set that to 30 or 40% at minimum.
> But you have some guys who dont need as much money and profit to survive and thats all there looking for. They keep there living expenses down and try to do as much as they can themselves. It all depends on what you are happy with taking home at the end of the year. The guys that are never satisfied most likely make the most money and have the best profits. Always wanting more and figuring out ways to support it when it comes.


So what is wrong with my logic;

We are the lowest price contractor in our area. The sales guys (can’t hire fast enough) bring deals by dozens. Number of employees grows almost monthly. The business model is simple:
 Sales targeted to sell over 10M per year. Accounting / Operations run net margin of 10% (which keeps us the lowest in the area). If my math was correct 10% of 10M is 1Million - On a scale of single man or a few employees the 10% margin would shut the business down. But on larger scale its a million bucks.

Comments ?


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## john elliott

HomeMedia Pros said:


> So what is wrong with my logic;
> 
> We are the lowest price contractor in our area. The sales guys (can’t hire fast enough) bring deals by dozens. Number of employees grows almost monthly. The business model is simple:
> Sales targeted to sell over 10M per year. Accounting / Operations run net margin of 10% (which keeps us the lowest in the area). If my math was correct 10% of 10M is 1Million - On a scale of single man or a few employees the 10% margin would shut the business down. But on larger scale its a million bucks.
> 
> Comments ?


Sounds good to me.

John


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## Double-A

Business 101, as your company grows, your overhead grows with it, but as a percentage of gross sales, your overhead decreases with growth.


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## ultimatetouch

HomeMedia Pros said:


> So what is wrong with my logic;
> 
> We are the lowest price contractor in our area. The sales guys (can’t hire fast enough) bring deals by dozens. Number of employees grows almost monthly. The business model is simple:
> Sales targeted to sell over 10M per year. Accounting / Operations run net margin of 10% (which keeps us the lowest in the area). If my math was correct 10% of 10M is 1Million - On a scale of single man or a few employees the 10% margin would shut the business down. But on larger scale its a million bucks.
> 
> Comments ?


is 10% gross company profit?


----------



## HomeMedia Pros

*Business 101 - care to explain please*



Double-A said:


> Business 101, as your company grows, your overhead grows with it, but as a percentage of gross sales, your overhead decreases with growth.


Can you please explain: if it takes 2 man crew to install a home theater and you have 1 installation per day for that crew, which yields 10% net profit before tax. Then you hire a second 2 man crew to do one more install that also yields 10% net profit before tax. How is the formula you offered as business 101 applies ? As far as I see it: the main obstacle in rapid growth is ensuring that your utilization is high, and overhead growth matches your sales growth. the Margin of 10% stays fixed. Yes you are only as good as your sales and would have to cut costs when they go down. But we all know that 10% margin is very conservation hence the excess of 10% allows for some slack in utilization. 

I come to read this post daily, and get all excited about people who complain about lower cost contractors, or constantly getting their bids from under them.

If you are in our area, expect us to give a bid with 10% margin in it. And expect us to deliver the best service with legal employees, and well tested processes and procedures. We call it economies of scale. Example we by Romex by truckloads and hold it in stock. Average savings are 20-30$ per roll. But all these savings go to health, dental, and vision insurance of our employees. Almost anything up and until it cuts into 10%.

We are only as good as the people who work for us. I gladly share anything over 10% with them. Bonuses, SPIFS, Child Care and so forth. But by god I need 10M in sales and 10% margin. No alternatives.


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## shazamyman

Yep, this is what I was looking for, of course asking someone....duhh whddya ya think I should charge for this job is idiotic....I def. needed some advice on HOW to estimate, other then trial and error


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## Double-A

HomeMedia Pros said:


> Can you please explain: if it takes 2 man crew to install a home theater and you have 1 installation per day for that crew, which yields 10% net profit before tax. Then you hire a second 2 man crew to do one more install that also yields 10% net profit before tax. How is the formula you offered as business 101 applies ?


_
Home, I'm sorry I didn't see your question earlier. I missed it completely until today. After reading and rereading your post, I'm afraid I might have misunderstood your question/point. I agree that 10% net before taxes for a 10M/year company is a much stronger financial position than 10% net before taxes for a 1M/year company. My 'book' below explains how._

Your fixed overhead items are things such as office supplies, rent, office salaries, etc.

Variable overhead are items such as cell phones, uniforms, health and vehicle insurance.

Up to a certain point, adding more workers in the field will not change your fixed overhead, only your variable overhead. Your overhead overall goes up, but as a smaller percentage per worker as you add more workers. 

Take cell phones for example. If you supply one phone per crew, the first crew would require a contract with a carrier and an equipment purchase. Say that is $700.00 for the first year ($50.00/month for plan, $100.00 once for the phone).

The second crew would require an equipment purchase, ($100.00) but not a new plan, only a change to the existing plan (@$20.00 month). 

So, cell phone costs per crew/year with one crew = $700.00

Cell phone costs per crew/year with two crews = $520.00

Now lets say each crew can do 200 installs a year at $100.00 per install. That is $20,000.00 per year in Gross sales with one crew, $40,000.00 with two.

700/20000 = 3.5% of Gross sales in cell phone costs with one crew and;
1040/40000 = 2.6% of Gross sales in cell phone costs with two crews.

Now your overall costs went up by $340.00 per year for cell phones, but in terms of a percentage of Gross Sales, they actually went down 0.9%.

Adding a third crew doesn't really make that great a difference; about another 0.6%.

1380/60000 = 2.3% of Gross Sales in cell phone costs with three crews.

Now, what is all this doing to your profit? Well assuming you have enough work for these crews, these savings in percentages should show up in your bottom line. Its not going to be 1:1 ratio on the percents, but it will be on the dollars. Every dollar you save in variable costs is a dollar that can go into benefits or profit.

BTW, your 10% net profit does not remain fixed. Unless you allocate those extra dollars away from profit, they will be counted as profit. Your 10% profit is a manipulated target, not a result of serendipity. You're manipulating your monies to keep your profit at 10%, but I think you know that. I think the sharing the extra profit with the employees is a great thing.

Hope this helps


----------



## newenergy

Are you guys really just trying to trick me into pricing things high so you can get all my jobs?


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## john elliott

newenergy said:


> Are you guys really just trying to trick me into pricing things high so you can get all my jobs?



Many a true word is spoken in jest

John


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## JBBS

barreled said:


> really good Brian I have seen a lot of contractors do really well with thier business and not have a clue how to build a house. I can build the house, sure wish I could make the money work in business


Reminds me of a successful owner of a window and siding business around here. He ranked in the top 100 or 500 for sales/profits. He decided to install a window with one of his crews one day. After he left, they promptly reinstalled it "right side up" :no:


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## BMAN

I was told by a wise old man one time, "Busy Busy Busy, Bankrupt"

You can be the lowest price guy in town but if all it does is keep you busy then whats the point?

Margin is where its at. I put job cost into my program and it puts the burden and profit in for me, that way I don't feel pressured to change the price cuz of a customers sob story. 
We have a reputation and a price, you either want us to do the work or you don't.


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## St Anger

RobertCDF said:


> You think they will read this and not still ask? I hope so. From now on I will just post a link to this sticky whenever someone asks a pricing question.


 
So in other words,you have nothing of substance to add.You either do not know,or are not willing to impart the benefit of your experience to someone who came to this forum for its intended purpose.I have so far made only one post,and that was for help in determining a price.As Brian said,pricing is arguably one of the most important aspects of running a business.So rather than directing someone to Brians very astute post,why not just,say nothing at all.


----------



## Double-A

St Anger said:


> So in other words,you have nothing of substance to add.You either do not know,or are not willing to impart the benefit of your experience to someone who came to this forum for its intended purpose.I have so far made only one post,and that was for help in determining a price.As Brian said,pricing is arguably one of the most important aspects of running a business.So rather than directing someone to Brians very astute post,why not just,say nothing at all.


And have them miss this post of Brian's? How would that be helpful? Some folks don't know they can search the forums. Having the link posted in answer to their question might just be the answer they were looking for. Nothing at all certainly wouldn't be the answer they were looking for.


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## St Anger

Double-A said:


> And have them miss this post of Brian's? How would that be helpful? Some folks don't know they can search the forums. Having the link posted in answer to their question might just be the answer they were looking for. Nothing at all certainly wouldn't be the answer they were looking for.


 
Point taken.My apologies for jumping to conclusions.It is a very insightful read.


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## corona2005

*i need help on bid a job im new to this*



Brian said:


> One of the most challenging aspects of running a contracting business is estimating jobs. For someone with little experience, estimating can be a rather scary endeavor (it can also be scary for someone with tons of experience). After all, the accuracy of the estimate will have a huge impact on the contractor’s success.
> 
> This, I believe, is the primary reason we see so many questions asking what to charge for a job. But such questions are misdirected, because what I (or anyone else) would charge is completely irrelevant and doesn’t address the real issues.
> 
> The price of a job is comprised of 4 basic components: labor costs, material costs, overhead, and profit. Estimating is the process of identifying the labor and material costs. We add our overhead and profit to those costs to obtain our price.
> 
> Overhead—advertising, rent, insurance, utilities, phone, owner’s salary, etc.— is completely unique to each company. Without knowing these numbers, it is impossible to properly price a job.
> 
> Profit goals are also unique to each company. Again, without knowing the specific profit goals for a company, it is impossible to properly price a job.
> 
> Consequently, any attempt to answer a pricing question in the absence of these two key numbers is essentially meaningless. More to the point, pricing questions ignore the fact that a large percentage (often more than 50%) of the job’s price should be comprised of overhead and profit. (My suspicion is that those who pose such questions don’t know their overhead, and mistake gross profit for net profit. But that’s a different issue.)
> 
> As I said, estimating is the process of identifying the labor and material costs for the job. Labor costs are determined by the type of work being performed, the production rates of the company’s workers (the time required to perform each task), and pay rates. As with overhead and profit, these numbers will be unique to each company. Material costs are determined by the type of materials required, the quantity required, and their purchase price.
> 
> For example, let us say that a painting contractor knows that his painters can prepare and paint a certain style of door in 30 minutes. He looks at a job that has 10 of these doors. He knows that his painters can prep and paint these doors in 5 hours. He can also calculate the materials required by the spread rate of the product he will use. The contractor can now determine what his costs will be for the job. By adding his overhead and profit to these costs he will have his price for this job.
> 
> While the above example is simple and uses a painting project, the same principle applies to every contracting job—large or small, simple or complex—regardless of trade.
> 
> What should I charge for X? really means: what is the total of my labor costs, material costs, overhead, and profit? And the answer to that question requires a substantial amount of additional information. Providing an answer without that information is simply a guess.
> 
> Accurately pricing a job is not rocket science, but it shouldn’t be based on conjecture, blind guesses, or another company’s numbers either. Certainly accurate estimating takes effort, but owning a successful business isn’t easy. Asking what to charge for a job is asking for a short cut, but there are no short cuts to success.
> 
> Such questions about prices for a job are inappropriate, because they ignore the many factors that determine the price. Providing a price in response to such questions is also inappropriate, for the same reasons.
> 
> It is a documented fact that 90% of small businesses fail within 5 years. Of those that make it 5 years, another 90% will fail within the next five years. Which means, 99% of small businesses fail within 10 years. One of the primary reasons for failure is not charging enough. Contractors are as guilty of this as anyone.
> 
> There seems to be no shortage of hacks willing to work for dirt cheap prices. Nor does there seem to be a shortage of replacements when they inevitably fail. One of the most effective means for avoiding failure is to know your numbers. Asking what to charge for a job is simply an admission that you don’t know your numbers.
> 
> I hasten to add that there is nothing wrong or inappropriate with asking *how* to price a job. But *how* to price is different from *what* price to give. Learning the process is a good thing. Looking for an easy way out isn’t.
> 
> Putting paint on the wall is a trade skill. Pricing a job is a business skill. A skilled craftsman does not necessarily make a good businessman, because different skills are required. The owner of a contracting company does not necessarily need to have trade skills, but it is imperative that he have business skills if he is to succeed. The longer you wait to obtain those skills, the closer you move to joining those 99%.
> 
> Brian Phillips


im from iowa and i been framin for 7 yrs now i just started my own bussiness i know ho to do framing,siding,tile roof, most of the houses the i work on were 3000 to 6ooo sqft but i don't know how much to charge or what r the prices outhere on framing per sqft if any one outhere could help me i would preciate


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## john elliott

corona2005 said:


> im from iowa and i been framin for 7 yrs now i just started my own bussiness i know ho to do framing,siding,tile roof, most of the houses the i work on were 3000 to 6ooo sqft but i don't know how much to charge or what r the prices outhere on framing per sqft if any one outhere could help me i would preciate



Are you sure that starting a business is the right thing for you? Does it suit your talents? What you are saying here, in effect, is that you know how to do the job but that you don't know how to run the business. Would you be better off as an employee?

If you are sure that starting a business is the right thing to do then you need to start reading. There are masses of threads here, especially in the business section.

There is NO going rate. If whatever you read doesn't convince you of this then you are reading the wrong stuff, or you aren't taking it in. I would suggest you read through this particular thread again, and this time concentrate

John


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## rbsremodeling

Wrong thread:shutup:


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## ACTRenovator

Just briefly;

I just recently priced a job for two homes on one block of land. I said I'll price it cheaper because of two house (same size and design) and nice bloke (HO) etc. I priced them at $465,000. I rang the bloke up to tell the price and he said he had prices ranging from $520,000 as the highest and the lowest which he'll go for, was $368,000. Some cowboy priced that and how he will manage with making money on that figure, only God knows. 

A few months back there was this "price v's quality" article. Where is it now? Does anyone know? Please let me know cause I'd like a copy of it. Thanks!


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## Bleed

*just my .02*



BobEBobE said:


> *:whistlingI am new to this forum and have been reading many threads in order to acquaint myself with the information that I could obtain here. At first, I was impressed with the idea of having on-line mentors. But, I am becoming more and more disappointed as I continue to read these threads. ...*


 
I belive that everything should start from your own goals. How much money you wanna make a day/week/month/year/...life time?
For an example, you are estimating a mid size master bath remodeling project (complete gut out), and you are going to do it on your own, without any helpers. Lets say you will spend 2 weeks on the job site, 10 hours a day, 6 days a week.
All of that brings us to approx. 120 hrs (give or take) to get the job done, aight? Now, the question is HOW MUCH you think your hour of labor is worth to YOU? $8? $12?.......$40?.....$120?......
-Lets tackle the ball here for a sec.
What kind of a lifestyle you like? Do you go to McDonalds/BurgerKing for a dinner or you would like to go to a nice restaurant where you actually will ENJOY your meal? Do you plan to help your kids to graduate from the college or a HS only? You wanna live in a 1100 sf. condo, or you would preffer living in a nice 4500 sf. single family home? Whatever the answers to these questions are, they represent your goals in life, they basically represent HOW MUCH you value your self^^. With that said, lets get back grinding the numbers again (;
Lets assume you wanna get paid $20/hr. That will bring you to the labor estimate of $2400.00 before taxes. Lets assume your overhead is roughly @ $2500.00/mo. (Since you will spend 2 weeks on this jobsite, lets assume you will have another job simillar to this one to fill out the 2nd half of the month, and keep you busy). Split your overhead by half(making another half with your 2nd. job) and add your labor cost to it. That brings us to $3650.00, add your taxes to it and that could be your rough labor estimate. 

Personally, This is what I`d do. I`d estimate it for $12k for the labor. Two of my guys would get it done in a 5-7 days. (They make $45/hr each round year.) As you start growing, find more excellent workers, and pay them properly, spread out the business and in 1 year after you start, you could have 5 teams with 2 guys in it. 

Of coarse you will get underbid by other "contractors" every here and there, but if you do a great job and stand before it, you`ll do just fine (; 
As someone said in earlier post somewhere on the other thread, its a game of numbers, just play it with different ones and I`m sure you`ll find those that suit you best.
I hope this helps,
Regards


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## MadDog

True North said:


> So Ed, if some slick talking @sshole sold your 85 year mother something for double what it's worth, that would be okay by you?
> 
> You guys... *shakes head*


 
At 85 the old bag should know better.


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## Oldcarpenter

Great Post.
Thanks Brian.


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## gj2802

When you position yourself as an expert in your industry, your customers will come to you in their droves and price is immaterial.

I have a contracting business in the UK and we clearly state that we are not the cheapest, in fact we purposely position ourselves above everyone else.. but we will deliver the BEST result..Guaranteed.

I don't even look at competitors prices, it's of no interest. When you posture yourself and your business higher than others..you have to deliver.

Graham


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## Alphabuilder422

My father has been in business for over 20 years. His success in keeping the business success and alive was mainly in part in keeping a relation with the community and the giving to church/ temple / and community. This kept him busy 6 days a week and he never stop what worked for him. Todays business is a little more advance and that the challenge now is being completive and creditable to the client. Website, professional business card and letterhead makes a different. or do they... My father's business never needed a website. now that i think about it.


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## brutis

RobertCDF said:


> You think they will read this and not still ask? I hope so. From now on I will just post a link to this sticky whenever someone asks a pricing question.


in this case one of the best , of this forum would be null, personally 

i would like to thank every one on here that dose help with priceing and keep it up, 

most owners as you all know try to keep priceing in the dark for installers 

but come on now to the original post, at some point you ask or peak on a paper to find things out in the begining so why not ask it here? so at least you did the research on your own not from your employer to build or start or exspand unless you got in from daddy's bess. and had everything handed to ya !!!!!!!!!!!!!! 

i found this site just to find out if my priceing was inline for hardie board i was close to the average but a little low 

as far as pricing if you ask here your not going to get a pefect answer but thanks to the good people you can get enough information to help you figuire out what you need \


keep helping each other , it will come back to you six fold


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## brutis

Oldcarpenter said:


> Great Post.
> Thanks Brian.[/quote
> 
> :whistling


----------



## Kaabi

That's a great description of how estimates work. There are so many factors that go into pricing, that one little number doesn't do justice to how much thought goes into the final price decision.


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## pscinteriors

Oky guys, so I have a friend who started a fencing company a few years ago.he started with no experience in the industry and learned it all from his brother .He is now the sole owner of his company, and recently has been trying to expand to tile,remodeling, and flooring but he knows nothing about it.
I have owned my business for allmost 5 years now and have had to learn estimating by learning from my mistakes, and lots of research.I also track all my jobs and my estimating is alot more accurate now than it was when I started as it is with most of you I'm sure.
Now problem is that Ive been friends for tis guy for like 10 years, and he keeps calling me to ask how bid certain jobs.Asking things like"how long" "what would I charge per foot for tile" etc.He is bidding lots of jobs and keeping a crew of 10 busy, but not making ny money. Also ive seen some of his jobs and his estimates for them.Just cause Ive had to fix some his guys shoddy work. He is definitely a low-baller and his work shows it.But I think it is due to his lack of knowing better.
I dont want my name any where near his work! And I am getting tired of the "how do I estimate this calls" ? How do I tell a friend with tact that hes needs to figure it out on his own?
Thank You,
Nick


----------



## welovepainting

:thumbsup:



Brian said:


> Since 99% of the contractors starting business today won't last 10 years, and since most of them aren't charging enough, I'm not sure why knowing the "going rate" will be helpful. The "going rate" is really the "going broke rate".
> 
> I suppose it would be helpful in the sense that if I'm charging the "going rate" I better raise my prices.
> 
> I'm not very concerned with what others charge. Most of them don't know what they are doing, won't be around in a few years, and certainly don't offer what I do.
> 
> I think too many contractors are more concerned about price than the customer is. Too many contractors think the only way to get a job is to have the lowest price. Getting a job is the operative phrase-- they are trying to get a particular job and not build a business.
> 
> Anyhow, I appreciate all of the comments, both pro and con.
> 
> Brian Phillips


----------



## welovepainting

www.costestimator.com may help 



pscinteriors said:


> Oky guys, so I have a friend who started a fencing company a few years ago.he started with no experience in the industry and learned it all from his brother .He is now the sole owner of his company, and recently has been trying to expand to tile,remodeling, and flooring but he knows nothing about it.
> I have owned my business for allmost 5 years now and have had to learn estimating by learning from my mistakes, and lots of research.I also track all my jobs and my estimating is alot more accurate now than it was when I started as it is with most of you I'm sure.
> Now problem is that Ive been friends for tis guy for like 10 years, and he keeps calling me to ask how bid certain jobs.Asking things like"how long" "what would I charge per foot for tile" etc.He is bidding lots of jobs and keeping a crew of 10 busy, but not making ny money. Also ive seen some of his jobs and his estimates for them.Just cause Ive had to fix some his guys shoddy work. He is definitely a low-baller and his work shows it.But I think it is due to his lack of knowing better.
> I dont want my name any where near his work! And I am getting tired of the "how do I estimate this calls" ? How do I tell a friend with tact that hes needs to figure it out on his own?
> Thank You,
> Nick


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## aikenback

Brian, will you be my dad?


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## Sarah9910

I'm Baaack.....you drew me in with this one. Good thread. I try not to impose on your chat room for contractors but I do interject when I can speak from experience and when I think it may be a benefit for you. So from my experience...

Equipment is an important element in the estimate as well as in the job cost. Somewhere in this thread tom referrred to equipment as the "toys" of the contractor and where they like to spend their money. Very true, all the more reason to estimate the equipment usage along with the material and labor to the jobs. Tracking the cost recovery of your equipment which many software programs now-a-days does will tell you if you are spending more on your equipment than it's making you. What I often see is that the cost of the equipment usage never gets recorded to the cost of the job. The job ends and the company reviews the job reports vs the estimate and say "oh look, how well we did, we came in under budget". But..when you look closely, the cost of the equipment was never applied to the job.

Also, as someone else mentioned, Scheduling is so important. Every day the job is extended costs $$$$.

I was on line with a contractor recently and they insisted in posting the cost of notices and liens of a job to admin expenses. I advised them that it was in their best interest to post anything that is attributable to the job to job cost and not admin, this way they would see the true cost of the job. If they lost money on the job, they need to see that so they don't make the mistake again. Their answer was "but we've always done it this way so we are going to continue". Since they just met me a month ago and apparently I hadn't developed a "relationship" with this particular employee, I recommended that they discuss this with their CPA. Point here is that "always doing it like you did it" isn't always the right answer. It may be a reason why contractors go out of business.

Another reason contractors go out of business, and i have left working as an employee for contractors for this specific reason is: paying personal expenses out of the business. This drains the business funds and before you know it, the contractor is not paying bills on a job when they are paid for a job from the owner or GC. When this happens, it's usually a downward spiral. Pay yourself consistently so you don't pull money out unexpectedly from the business and live within your means personally like we all should do. If you need more money, get more jobs that make money so you can give yourself a raise.

That's my two cents. Great thread. I enjoyed it, but I must say, I didn't read all 111 responses!


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## jmgrahamjr

I also have a friend who always underbids his jobs. He always has to cut into his profits leaving none at all... Never sell yourself short.:thumbsup:


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## MattCoops

I don't really have much care for underbidders, lowballers, toestompers, whatever you want to call them.
Fact is they may know how to win jobs, by drastically reducing their prices.
But they don't know how to sustain a business.

These, you'll find, are the same ones who call you in September or November looking for work to hold them through the winter.

They don't stay in business. And there will be new generations of others to come. You just have to work through it.

It's like working in a house with no A/C in the heat of the summer.
You just keep your tools clanging and your grumbles to a minimum.

Pesty ants pile there mounds high. But a bit of rain, or even a hose, will rid their selves of a place.


----------



## lavish

*Search and you will find*

HomeTech Cost Estimator is a good website with a lot of very useful information for the new contractor. 

From that link (thanks!), I found a collection of articles at hometechonline.com/gorman


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## stone21

Your writing is so well . Good job:thumbsup:


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## Double-A

pscinteriors said:


> Oky guys, so I have a friend who started a fencing company a few years ago.he started with no experience in the industry and learned it all from his brother .He is now the sole owner of his company, and recently has been trying to expand to tile,remodeling, and flooring but he knows nothing about it.
> I have owned my business for allmost 5 years now and have had to learn estimating by learning from my mistakes, and lots of research.I also track all my jobs and my estimating is alot more accurate now than it was when I started as it is with most of you I'm sure.
> Now problem is that Ive been friends for tis guy for like 10 years, and he keeps calling me to ask how bid certain jobs.Asking things like"how long" "what would I charge per foot for tile" etc.He is bidding lots of jobs and keeping a crew of 10 busy, but not making ny money. Also ive seen some of his jobs and his estimates for them.Just cause Ive had to fix some his guys shoddy work. He is definitely a low-baller and his work shows it.But I think it is due to his lack of knowing better.
> I dont want my name any where near his work! And I am getting tired of the "how do I estimate this calls" ? How do I tell a friend with tact that hes needs to figure it out on his own?
> Thank You,
> Nick


Nick, the best way you can tell this friend is to show him his work and ask him how he made out on the job. You know he's losing money, or at best just churning money, but does he? Is he tracking his expenses associated with these projects? 

If you don't measure, you don't know. Ask any carpenter what length of wood he might need of a specific spot, and unless he's working from very detailed plans on the perfect project, his answer will be something like, "its about this much, but I'll have to measure to find out for sure."

And this is the golden rule of pricing. If you don't measure your costs, by getting quotes on material, and supplies, figure your labor costs by your actual production numbers, then you're just guessing and guessing means you don't know. Step back, and look at what you have done, and what you really wanted to do. See that gap in the dollars? That's ignorance. That's the stupid gap. That's EGO talking the talk, but failing to walk the walk.

Tell him to wake up and smell the coffee! Quit dreaming of making money on jobs and start doing his own homework so he can teach himself how to EARN more money on these jobs. You can only be a Jackass for so long before someone wants to hitch a plow to your ass. How long does he want to be a Jackass?

And that is what I would tell him.


----------



## CaptainAmerica

Double-A said:


> Nick, the best way you can tell this friend is to show him his work and ask him how he made out on the job. You know he's losing money, or at best just churning money, but does he? Is he tracking his expenses associated with these projects?
> 
> If you don't measure, you don't know. Ask any carpenter what length of wood he might need of a specific spot, and unless he's working from very detailed plans on the perfect project, his answer will be something like, "its about this much, but I'll have to measure to find out for sure."
> 
> And this is the golden rule of pricing. If you don't measure your costs, by getting quotes on material, and supplies, figure your labor costs by your actual production numbers, then you're just guessing and guessing means you don't know. Step back, and look at what you have done, and what you really wanted to do. See that gap in the dollars? That's ignorance. That's the stupid gap. That's EGO talking the talk, but failing to walk the walk.
> 
> Tell him to wake up and smell the coffee! Quit dreaming of making money on jobs and start doing his own homework so he can teach himself how to EARN more money on these jobs. You can only be a Jackass for so long before someone wants to hitch a plow to your ass. How long does he want to be a Jackass?
> 
> And that is what I would tell him.


Also tell him that judging from the last job you'd seen of his, you'd have no idea what to charge for something like that. And to call you when you could be of more use to him, after he found some higher skilled people for his crew.


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## losdad

*Material prices go up after giving estimate*

How do you handle a situation where you give an estimate, let's say for a roof, and the price for shingles goes up after the estimate has been given. Do you have some specific wording that you put on the estimate to cover yourself from losing money?


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## GregS

What's the time between the estimate and contract signing?

You can put things into the estimate such as "Estimate valid for 15 days" or something and hope nothing changes within that time. Depending on how embedded you are in your industry, you should be able to smell price hikes coming.



losdad said:


> How do you handle a situation where you give an estimate, let's say for a roof, and the price for shingles goes up after the estimate has been given. Do you have some specific wording that you put on the estimate to cover yourself from losing money?


----------



## Ed the Roofer

Either use an escalation clause or price allowances.

I posted thread topics on those subjects earlier this past spring when I saw this coming, which have a good deal of information and language in them.

Ed


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## Roof Clean

*Estimating a job*

*Do you have a formula for estimating overhead such as telephone, advertising, insurance, etc that you would normally spread over a year? Lake Lester*


Brian said:


> One of the most challenging aspects of running a contracting business is estimating jobs. For someone with little experience, estimating can be a rather scary endeavor (it can also be scary for someone with tons of experience). After all, the accuracy of the estimate will have a huge impact on the contractor’s success.
> 
> This, I believe, is the primary reason we see so many questions asking what to charge for a job. But such questions are misdirected, because what I (or anyone else) would charge is completely irrelevant and doesn’t address the real issues.
> 
> The price of a job is comprised of 4 basic components: labor costs, material costs, overhead, and profit. Estimating is the process of identifying the labor and material costs. We add our overhead and profit to those costs to obtain our price.
> 
> Overhead—advertising, rent, insurance, utilities, phone, owner’s salary, etc.— is completely unique to each company. Without knowing these numbers, it is impossible to properly price a job.
> 
> Profit goals are also unique to each company. Again, without knowing the specific profit goals for a company, it is impossible to properly price a job.
> 
> Consequently, any attempt to answer a pricing question in the absence of these two key numbers is essentially meaningless. More to the point, pricing questions ignore the fact that a large percentage (often more than 50%) of the job’s price should be comprised of overhead and profit. (My suspicion is that those who pose such questions don’t know their overhead, and mistake gross profit for net profit. But that’s a different issue.)
> 
> As I said, estimating is the process of identifying the labor and material costs for the job. Labor costs are determined by the type of work being performed, the production rates of the company’s workers (the time required to perform each task), and pay rates. As with overhead and profit, these numbers will be unique to each company. Material costs are determined by the type of materials required, the quantity required, and their purchase price.
> 
> For example, let us say that a painting contractor knows that his painters can prepare and paint a certain style of door in 30 minutes. He looks at a job that has 10 of these doors. He knows that his painters can prep and paint these doors in 5 hours. He can also calculate the materials required by the spread rate of the product he will use. The contractor can now determine what his costs will be for the job. By adding his overhead and profit to these costs he will have his price for this job.
> 
> While the above example is simple and uses a painting project, the same principle applies to every contracting job—large or small, simple or complex—regardless of trade.
> 
> What should I charge for X? really means: what is the total of my labor costs, material costs, overhead, and profit? And the answer to that question requires a substantial amount of additional information. Providing an answer without that information is simply a guess.
> 
> Accurately pricing a job is not rocket science, but it shouldn’t be based on conjecture, blind guesses, or another company’s numbers either. Certainly accurate estimating takes effort, but owning a successful business isn’t easy. Asking what to charge for a job is asking for a short cut, but there are no short cuts to success.
> 
> Such questions about prices for a job are inappropriate, because they ignore the many factors that determine the price. Providing a price in response to such questions is also inappropriate, for the same reasons.
> 
> It is a documented fact that 90% of small businesses fail within 5 years. Of those that make it 5 years, another 90% will fail within the next five years. Which means, 99% of small businesses fail within 10 years. One of the primary reasons for failure is not charging enough. Contractors are as guilty of this as anyone.
> 
> There seems to be no shortage of hacks willing to work for dirt cheap prices. Nor does there seem to be a shortage of replacements when they inevitably fail. One of the most effective means for avoiding failure is to know your numbers. Asking what to charge for a job is simply an admission that you don’t know your numbers.
> 
> I hasten to add that there is nothing wrong or inappropriate with asking *how* to price a job. But *how* to price is different from *what* price to give. Learning the process is a good thing. Looking for an easy way out isn’t.
> 
> Putting paint on the wall is a trade skill. Pricing a job is a business skill. A skilled craftsman does not necessarily make a good businessman, because different skills are required. The owner of a contracting company does not necessarily need to have trade skills, but it is imperative that he have business skills if he is to succeed. The longer you wait to obtain those skills, the closer you move to joining those 99%.
> 
> Brian Phillips


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## THINKPAINTING

Roof Clean said:


> *Do you have a formula for estimating overhead such as telephone, advertising, insurance, etc that you would normally spread over a year? Lake Lester*


Enough said. Brians one of the good guys.:thumbsup:


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## Stonewall357

I don't normally post but read a lot on this site. I just wanted to say thanks to the regulars and everyone that has mentioned the "Markup and Profit" book by Stone. Being new to the business and discovering this site a while back, I took heed to the advice regarding the value of that book. I bought it off ebay for about $35 last year and have since read and reread this book. I always get something more out of it.

It's not only got a wealth of information but it seems to work as a guide that you can go back to from time to time and "REFINE" your techniques.

So thanks for this valuable post and what a treasure of information and sound advice from the guys at CT!


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## rastagator

Question regarding Tremron pavers; they have 3 plants located in Florida..so i shall assume this is a SE US question. Anyone have any idea of a recession rate for 12x12 1 in paver tile; cubes are 300SF- needing 4 cubes as well as 400 1in bullnose pieces? This question is directed to those (if any) that have purchased product in the past or current. Zero screed sand or labor included; just raw material!
Thanks, if you can help!


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## mc handyman

Is your book on Amazon? If so... you got me with five copies!!!


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## Leonardorribeio

*Hello Brian*

Is it correct to say:
Of 100% , 25% for labor ,25% materials and 50% for profit and overhead?
Pleas let me know what you think.

LR


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## DavidC

Leonardorribeio said:


> Is it correct to say:
> Of 100% , 25% for labor ,25% materials and 50% for profit and overhead?
> Pleas let me know what you think.
> 
> LR


No.

Good Luck
Dave


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## Leonardorribeio

*So what is the mark ups that i should use?*



DavidC said:


> No.
> 
> Good Luck
> Dave


So what is the mark ups that i should use?


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## john elliott

Leonardorribeio said:


> So what is the mark ups that i should use?



Your question cannot be answered with a simple number, there is far more to it than that. Probably your best bet is to get some books on the subject and start reading.

Generally though, you need to answer a few questions before you can ask any-
First question, how many hours a year can you bill to your customers? Second question, what are your standing costs per year, these are the costs before you actually do any work, such as advertising, buying tools, truck etc?
Third question, how much money do you need to make each year?

Once you've got these answers you will be able to calculate your bids properly.

Let's do some example figures per year-

1500 hours billable
Standing costs $10K
Your wages $50K

So you need to cover that $60K in 1500 hours, simple aritmetic shows you need to add $40 to the job costs for every hour you bill. Doing it this way you don't need to mark up anything (assuming you are working to a fixed price), you simply calculate how many hours the job is going to take, mulitpy that buy $40 (in this example) then add on the other costs and that's your bid.

Example

Build a porch

Materials $1,750
Other job costs such as labor $2,375
Fuel for your truck $25
sub total $4,150
50 hours of your time @ $40 = $2,000

Total $6,150

Avoid markup systems where they suggest you mark up materials (on fixed price work) because they are inaccurate, on cheap materials you will be out of pocket, and on expensive materials you will be over-bidding. 

None of the above applies to T&M work


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## DavidC

Leonardorribeio said:


> So what is the mark ups that i should use?


John covered it very well. Bottom line is that there is no one size fits all. What works for me may not be enough for you, or it could have you rolling in the dough if you could sell it. 

There is no way for anyone here, other than yourself to know what the best markup for you is. But as John just illustrated there is plenty of help to figure it out for yourself.

Get stuck or need clarification just ask away.

Good Luck
Dave


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## KennMacMoragh

Leonardorribeio said:


> Is it correct to say:
> Of 100% , 25% for labor ,25% materials and 50% for profit and overhead?
> Pleas let me know what you think.
> 
> LR


I went to a JLC business seminar last year. They taught us that the basic breakdown should be 30% labor, 30% materials, 30% overhead, 10% profit. Of course those numbers will vary depending on what you're doing. Someone who does drywall repair and touch up, will have a lot less materials cost.


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## john elliott

KennMacMoragh said:


> I went to a JLC business seminar last year. They taught us that the basic breakdown should be 30% labor, 30% materials, 30% overhead, 10% profit. Of course those numbers will vary depending on what you're doing. Someone who does drywall repair and touch up, will have a lot less materials cost.


Don't wish to sound rude, but I think you should ask for your money back.


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## KennMacMoragh

john elliott said:


> Don't wish to sound rude, but I think you should ask for your money back.


No thanks, it was taught by a really successful builder who had been doing it a long time. I give him credibility.


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## john elliott

KennMacMoragh said:


> No thanks, it was taught by a really successful builder who had been doing it a long time. I give him credibility.


So would it be ok to sum up what he told you as "the basic breakdown should be 30% labor, 30% materials, 30% overhead, 10% profit- but that it might be different"? And if so, you were happy with that? Or am I misunderstanding?


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## KennMacMoragh

john elliott said:


> So would it be ok to sum up what he told you as "the basic breakdown should be 30% labor, 30% materials, 30% overhead, 10% profit- but that it might be different"? And if so, you were happy with that? Or am I misunderstanding?


That's correct, it's a general breakdown that works for him, more specifically remodels. Although he states it as 60% = cost of sales or direct costs, 30% = overhead or expense, 10% = net profit. That 60% covers labor and materials, it can be 30%, 30%, but that ratio can vary depending on what you're doing. 

His point is basically the same as what you are saying. Add in overhead and net profit, don't forget, like what most of us do, or you won't stay in business long. 

Anyway, this is him who explained it http://www.shawnmccadden.com/who-i-am/


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## john elliott

KennMacMoragh said:


> His point is basically the same as what you are saying



I am well known here for avoiding arguments, but I am going to have to take issue with you on that, also, I am not concerned with what _he_ is saying as he isn't here.

My point would appear to be the exact opposite of what you are saying. I went to some length to say to our new friend that he couldn't apply a simple formula such as "100% , 25% for labor ,25% materials and 50% for profit and overhead?", that he needed to work out for himself what he needed to charge to cover his costs and make a living, and a couple of posts later you put forward another formula!

If there is one thing we need to get across to Leonardorribeio is that he must NOT use a formula.


Let me make my point another way-
Let's look at your formula

30% labor, 30% materials, 30% overhead, 10% profit.

How does it work, how do you apply it? Let's suppose you are bidding a job, and you figure that the materials are going to cost $10k. Using your formula, that would mean that the labor would have to cost $10K too? But supposing it was a simple, quick job that only needed $3K worth of labor, would you still ask the full $10K? Would you then add a supposed $10K for overhead and $3.3K for profit? Would you still get the job by just asking for whatever the formula told you to?

Perhaps I'm misunderstanding, if I am then please explain, because I really don't get this formula stuff at all.


----------



## DavidC

Leonardorribeio

Let me try to confuse the issue a little more. 

My take on what Kenn is talking about is called a general rule of thumb. While I would agree that it is not a good idea to just apply it as a quick way to do a quote, our estimates will usually fall into a similar pattern for comparable remodels. It is useful as part of your gut check when estimating something new to you or that you haven't done in a while. Also useful for ballparking a quote.

John has laid out a more refined plan that will more accurately identify your job costs and how to recoup your overhead expense and realize a profit in the labor charge. I do doubt however that 40/hr. would do it, (I didn't see any allotment for a profit for ex. ) which is why you need to calculate your own rate.

The most recommended book on this site would probably be Michael Stone's "Markup & Profit, A Contractors Guide". That is a great place to start, I found it to be a great assist in establishing my right price. Also try googling "Jerrald Hayes" or "capacity based markup" for ideas on how to protect your OH & profit when your materials fluctuate considerably. 

Good Luck
Dave


----------



## KennMacMoragh

john elliott said:


> How does it work, how do you apply it? Let's suppose you are bidding a job, and you figure that the materials are going to cost $10k. Using your formula, that would mean that the labor would have to cost $10K too? But supposing it was a simple, quick job that only needed $3K worth of labor, would you still ask the full $10K? Would you then add a supposed $10K for overhead and $3.3K for profit? Would you still get the job by just asking for whatever the formula told you to?
> 
> Perhaps I'm misunderstanding, if I am then please explain, because I really don't get this formula stuff at all.


In that case you would say $13K for sales and direct costs, material doesn't have to equal labor, as I said before those two can vary.

If you wanted to apply a formula, you would take $13K/.6 = $21,667. That would leave you with $21,667 - $13,000 = $8667 of profit and overhead. Or you can do what you're doing and break down the overhead costs on every job, gas, advertising, tools, etc. But you'll probably find that your ratio of profit and overhead will be close to the same on every job, in that case it would just be faster to use a formula. 

In your porch example, you have:

Build a porch

Materials $1,750
Other job costs such as labor $2,375
Fuel for your truck $25
sub total $4,150
50 hours of your time @ $40 = $2,000

Total $6,150

Say you were the G.C using employees (it would be different if you were doing the work yourself.) Your direct costs would be $1,750 + $2,375 = $4125. You come up with a total of $6,150 which gives you $4125/$6150 = 67% direct costs, and 33% left over for profit and overhead. If you are spending 30% on overhead, that leaves you with 3% profit, which is dirt cheap. If your overhead costs are low, say 23%, then maybe you can get by. 

But the ratio, Cost of sales or direct costs = 60%, Overhead or Expense = 30%, Profit = 10%, is something that's been tested and works.


----------



## john elliott

KennMacMoragh said:


> But the ratio, Cost of sales or direct costs = 60%, Overhead or Expense = 30%, Profit = 10%, is something that's been tested and works.


I could say that my system (it's not mine actually) has been tested and works better. As soon as you apply a formula to anything you are establishing a relationship between the various components.

For instance if we say a + b + c = d then we are also saying that d - a = b +c. What I am saying is that you don't need to do any of that stuff, and using formulas that relate the various components such as labor, material and overhead just make the whole thing confusing and inaccurate.

There is only one thing that is in short supply, and that is your time. The rest is available in abundance. So it is your time that needs to be charged for, the rest is just job costs, be it bought in labor, materials or whatever.

Using the system I outlined above, your overhead and your wages (salary, profit, whatever you want to call it) are accounted for. All you need to know in order to prepare an accurate bid is how many hours of your time it will take, and what the other costs are going to be. You don't need to know what the relationship between them is.


----------



## Leonardorribeio

*Well*

I work mostly in Manhattan NY , I expend 4500 MO/ for advertise, insurance etc ( overhead ). SO
Recently i Did a job in Manhattan , It was a Apt Remodeling , Complete Remodeling . 1 bedroom apart about 55 k. 
so you understand...
money spent:
15k employees labor
3k painters/cleaning
5k electrician
2k plumber
4k cabinets
2k countertop
2k floors
7k Material (back splash,Sheetrock,paint,crown moulding etc)
2k garbage removal and disposal
5k new tools lol
8k i have no ideal where and how i spent that money
the job took me 5 weeks gut renovation

I changed from a floor company to Renovation company since October 09 so its pretty confusing sometimes.
I under estimated a bathroom ( first job ) and got screwed so much with that job. Now i calculate my price 5 times in 5 diffrent ways , that's why i came up with this percentage conversation..
Do you think i am on the right track?


----------



## KennMacMoragh

john elliott said:


> I could say that my system (it's not mine actually) has been tested and works better. As soon as you apply a formula to anything you are establishing a relationship between the various components.
> 
> For instance if we say a + b + c = d then we are also saying that d - a = b +c. What I am saying is that you don't need to do any of that stuff, and using formulas that relate the various components such as labor, material and overhead just make the whole thing confusing and inaccurate.
> 
> There is only one thing that is in short supply, and that is your time. The rest is available in abundance. So it is your time that needs to be charged for, the rest is just job costs, be it bought in labor, materials or whatever.
> 
> Using the system I outlined above, your overhead and your wages (salary, profit, whatever you want to call it) are accounted for. All you need to know in order to prepare an accurate bid is how many hours of your time it will take, and what the other costs are going to be. You don't need to know what the relationship between them is.


I see your point, I don't know where else we can go with this. I think the percentage method is a good way to check your progress if anything. Say you add everything up and your numbers come out low, 20% overhead, 5% profit, then you'd better have a good reason for it. 

If your system is working, with plugging in the overhead numbers on every job, then I think that's fine. But it's not the only way to go about it.


----------



## KennMacMoragh

Leonardorribeio said:


> I work mostly in Manhattan NY , I expend 4500 MO/ for advertise, insurance etc ( overhead ). SO
> Recently i Did a job in Manhattan , It was a Apt Remodeling , Complete Remodeling . 1 bedroom apart about 55 k.
> so you understand...
> money spent:
> 15k employees labor
> 3k painters/cleaning
> 5k electrician
> 2k plumber
> 4k cabinets
> 2k countertop
> 2k floors
> 7k Material (back splash,Sheetrock,paint,crown moulding etc)
> 2k garbage removal and disposal
> 5k new tools lol
> 8k i have no ideal where and how i spent that money
> the job took me 5 weeks gut renovation
> 
> I changed from a floor company to Renovation company since October 09 so its pretty confusing sometimes.
> I under estimated a bathroom ( first job ) and got screwed so much with that job that i calculate my price 5 times in 5 diffrent ways , that's why i came up with this percentage conversation..
> Do you think i am on the right track?


Well there's something wrong if you have no idea where 8k went  I see 55k equals all those numbers you have listed added together. Is that what you charged the customer? Or is that just you adding up the expense?


----------



## Leonardorribeio

KennMacMoragh said:


> Well there's something wrong if you have no idea where 8k went  I see 55k equals all those numbers you have listed added together. Is that what you charged the customer? Or is that just you adding up the expense?


Charged 55 K , the 8k was rent and overhead for 3 months...


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## KennMacMoragh

Leonardorribeio said:


> Charged 55 K , the 8k was rent and overhead for 3 months...


Then you have 55k/42k = 76% direct costs, which leaves 24% for profit and overhead, which is low.

You say 8k went to rent and overhead. My advice is separate your personal and business expenses, otherwise it will be hard to tell where your dollars are going.


----------



## Leonardorribeio

KennMacMoragh said:


> Then you have 55k/42k = 76% direct costs, which leaves 24% for profit and overhead, which is low.
> 
> You say 8k went to rent and overhead. My advice is separate your personal and business expenses, otherwise it will be hard to tell where your dollars are going.


16% short 8800$

Now i understand that depending on the job the %'s are diffrent but I agree that 60% should be for labor and materials .

Thanx.


----------



## john elliott

I asked this once, but didn't really get an answer, so I will ask again, how is this percentage applied?

To put the question in context, I presume what we are doing here is discussing ways of arriving at a bid on any given job that is a) low enough to have a good chance of being accepted, and b) high enough to provide a decent amount of profit if the job goes ahead. Obviously if we are not concerned about a) then there is no problem, just think of a number and treble it!.

So from that presumption it follows that the first thing we need is accuracy, in other words we want to bid no more than is high enough to provide the required amount of profit.

So, using a percentage system to arrive at a bid-
The known aspects of the job are (given a reasonable level of competence on the part of the bidder) are the cost of the materials and the cost of the labor, and these are set at 60% of the job? So (in order to keep the math simple) if we said materials and labor costs were going to be $30K then we simply add the other 40%- $20K, $15K is assigned to overhead and the other $5k is profit. Have I understood this correctly?

If I have, then I would have to say that it seems a rather inaccurate way of arriving at a bid, but if it works then I guess that's good enough. 

I would also say that anyine starting out needs to arrive at their own figures, and to do that then they are going to have to go into it a bit deeper.


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## KennMacMoragh

john elliott said:


> So (in order to keep the math simple) if we said materials and labor costs were going to be $30K then we simply add the other 40%- $20K, $15K is assigned to overhead and the other $5k is profit. Have I understood this correctly?


That's correct, keep doing it your way but try calculating out the percentages on each job to see how they compare. You may find they end up being pretty close to the same every time, in which case the percentage method wouldn't be that inaccurate. 

On a side note, read the book "Markup & Profit" by Michael Stone, which has been brought up on this site quite a few times. He goes over these percentages too. Use these percentages to analyze your jobs, you don't have to use it to create bids if you don't want, but it should be used as a tool to analyze your progress. He recommends for remodelers to keep profit and overhead in the 25 to 40 percent range. 25 I think is too low, and if it's less than that, then you're probably digging yourself into a hole.


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## john elliott

KennMacMoragh said:


> On a side note, read the book "Markup & Profit" by Michael Stone



Thanks, but no thanks!


It would take several pages for me to fully explain what I think is wrong with his approach, and if other people find his stuff helpful then it would not be appropriate for me to try to put them off.

All I want to say is that there are other, and more accurate, ways of bidding jobs that will work for any type of contracting, because they don't rely on percentages that _other people_ are advocating, but on figures that relate directly to the _contractor concerned._


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## DavidC

john elliott said:


> Thanks, but no thanks!
> 
> 
> It would take several pages for me to fully explain what I think is wrong with his approach, and if other people find his stuff helpful then it would not be appropriate for me to try to put them off.
> 
> All I want to say is that there are other, and more accurate, ways of bidding jobs that will work for any type of contracting, because they *don't rely on percentages that other people are advocating,* but on figures that relate directly to the _contractor concerned._


I find that interesting because what I got from his book was exactly that, find your own numbers. He did list what he called a normal range for profit but also stated that it was up to you to decide where you wanted to be in that regard. Other than that he explains very well (I think) how to discover your true overhead costs.

Later I ran across Jerrald Hayes and his opinion on recouping your overhead based on your labor and how many man hours you can reasonably expect to be productive. Thanks to him we now use a weighted labor rate and mark up materials only for the profit margin.

Having used both systems I can say that *most of the time *they will both produce about the same bottom line for a given remodel unless your bidding a job that is mostly labor. That is where Stone falls short in my mind.

I like to think that Stone taught me how to identify my overhead and Hayes showed me how to apply it correctly.

Good Luck
Dave


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## john elliott

DavidC said:


> Later I ran across Jerrald Hayes and his opinion on recouping your overhead based on your labor and how many man hours you can reasonably expect to be productive. Thanks to him we now use a weighted labor rate and mark up materials only for the profit margin.


I too have read Jerrald's stuff and he think his ideas are based in good sense. If he falls down anywhere, IMHO, it is making things a bit more complicated than they need to be.


On another note, I've never understood the concept of marking up materials on fixed price work. I get it if one is working T&M, but not fixed price work. When I price work I think in terms of how long it is going to take, and how much it is going to cost me in materials. As the customer isn't paying for the materials seperately to the other costs, marking them up is just an internal accounting procedure and one that seems to me to be a waste of time, but probably better if we don't get into that particular argument


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## AFOREMA1

john elliott said:


> I too have read Jerrald's stuff and he think his ideas are based in good sense. If he falls down anywhere, IMHO, it is making things a bit more complicated than they need to be.
> 
> 
> On another note, I've never understood the concept of marking up materials on fixed price work. I get it if one is working T&M, but not fixed price work. When I price work I think in terms of how long it is going to take, and how much it is going to cost me in materials. As the customer isn't paying for the materials seperately to the other costs, marking them up is just an internal accounting procedure and one that seems to me to be a waste of time, but probably better if we don't get into that particular argument


Can either of you post the title to Hayes book cannot find it on Amzon nothing comes up under the name.


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## DavidC

AFOREMA1 said:


> Can either of you post the title to Hayes book cannot find it on Amzon nothing comes up under the name.


He has not published a book to my knowledge. He has published a white paper and has many postings on various forums, including this one. Use the search feature here and type "Jerrald Hayes" or just google his name.

Good Luck
Dave


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## AFOREMA1

DavidC said:


> He has not published a book to my knowledge. He has published a white paper and has many postings on various forums, including this one. Use the search feature here and type "Jerrald Hayes" or just google his name.
> 
> Good Luck
> Dave


Thanks Dave


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## gtg

Somebody can tell me about price per SF for VCT Installation (Labor) in TX ?


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## DavidC

gtg said:


> Somebody can tell me about price per SF for VCT Installation (Labor) in TX ?


It varies. Anything else?

Good luck
Dave


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## Ayerzee

gtg said:


> Somebody can tell me about price per SF for VCT Installation (Labor) in TX ?


See post 1


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## john elliott

gtg said:


> Somebody can tell me about price per SF for VCT Installation (Labor) in TX ?


:wallbash:


This is GTG's post from the flooring forum, in a thread that was promptly closed by Framerman, who directed him to this thread. What Framerman meant, of course, was the GTG should actually read it, whereas what GTG thought he had to do was to post his question here, but not read the thread!

_"Hello Guys
I've been installing granite and ceramic tile for many years and now I need to figure out price for VCT installation.
There are 20,000 s.f. for installation in a new project (suite units)
How much it is the range price as a VCT contractor for Installation (Labor only) ? "_

My guess is that GTG has been working for someone else 'for many years' and now has the chance to bid a job on his own account. He doesn't want to hear anything about how to estimate a job, how to figure his own costs etc, he just wants someone else to give him a price, then, if he gets the job, he will either lose money, or break even, or do quite well. The thing is, does he feel lucky? Or maybe he should read the thread?


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## BrianNNOLA

*No one solution fits all*

I've been reading many posts here since I'm subscribed to this thread.
There really is no one solution to fit all contractors when estimating projects. The 30/30/30 rule might work for you "big dog" state contractor doing civil road and bridge work or skyscrapers, but for the residential market, that will only keep you sitting on your hands at home most the time unless you're well established and well known in your area. 
Prices vary from region to region, so what I did was google "estimation software" and got some free trial downloads to get an idea of average prices for labor and materials in my area. I estimate how long it will take me to complete the job, figure in how much I want to earn each day, add in the labor of how many people will also assist plus materials, then add 15 percent to cover excessive expenses. If change orders are requested during the process, that will be added on, but this method keeps me in the ballpark. Not as high as your big name companies, not cheap as your low ballers, but somewhere in the middle, and thats what I find clients really seek in a contractor, at least the ones you care to work for.:thumbup:


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## katoman

I agree with Brian. If you are putting 40% P&O on the job, you'll be sitting at home. Especially in todays market place.

I put on 20% won't go lower, and you make that work for you. Otherwise you simply won't be competitive.

If that's not enough markup, then I think your overhead is too high.

Whether we like it or not, if you can't sell the job, you're going down.

If you can sell the job with 40% on it I tip my hat to you, because most clients today get at least 3 quotes and do their homework. Pretty hard to justify that kind of markup to the client.


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## BrianNNOLA

katoman said:


> I agree with Brian. If you are putting 40% P&O on the job, you'll be sitting at home. Especially in todays market place.
> 
> I put on 20% won't go lower, and you make that work for you. Otherwise you simply won't be competitive.
> 
> If that's not enough markup, then I think your overhead is too high.
> 
> Whether we like it or not, if you can't sell the job, you're going down.
> 
> If you can sell the job with 40% on it I tip my hat to you, because most clients today get at least 3 quotes and do their homework. Pretty hard to justify that kind of markup to the client.


No doubt there, the residential market is very competitive, and the influx of those willing to work for less has made it that way, at least in the south. Some contractors really can get that markup, but not your average small company with a small budget. I can't count the number of jobs I lost last year because of low ballers, but I had already quoted as low as I could go without giving it away. The market does appear to be improving this year, and clients are waking up to the reality that the cheapest price is not the best solution. Many of these clients had this work done just 3 and 4 years ago, and are having to do it all over again. Some of it is due to the skills of the workers while for others its Chinese drywall, and the contractor who used it is no longer around.


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## Leonardorribeio

Ayerzee said:


> Really?


would you know how much i should charge ?


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## shanekw1

Dammit Angus, you're too fast.:laughing:


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## shanekw1

Leonardorribeio said:


> would you know how much i should charge ?


We all know how much *we* should charge.

No one knows what *you* should charge.


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## Leonardorribeio

shanekw1 said:


> We all know how much *we* should charge.
> 
> No one knows what *you* should charge.


Well , I am New with drop ceiling and for that SQ FTage , I reaaly dont know if the numbers are right . Dont wanna over price it and loose the job.


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## Leonardorribeio

Well lets say i have to remove existing 2'x4' ceiling tiles replace with 2'x2' acoustic ones
Total area: 6,500 sqft
1-Removal of existing ceiling tiles
2-Installing new acoustic Armstrong ceiling tiles including exposed tees 
4-Discarding material from job site

How long it would take to complete the a job like that?


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## Kent Whitten

I think you need to read it again.


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## BrianNNOLA

Leonardorribeio said:


> Well lets say i have to remove existing 2'x4' ceiling tiles replace with 2'x2' acoustic ones
> Total area: 6,500 sqft
> 1-Removal of existing ceiling tiles
> 2-Installing new acoustic Armstrong ceiling tiles including exposed tees
> 4-Discarding material from job site
> 
> How long it would take to complete the a job like that?


One day


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## SMA14

Brian said:


> Since 99% of the contractors starting business today won't last 10 years, and since most of them aren't charging enough, I'm not sure why knowing the "going rate" will be helpful. The "going rate" is really the "going broke rate".
> 
> I suppose it would be helpful in the sense that if I'm charging the "going rate" I better raise my prices.
> 
> I'm not very concerned with what others charge. Most of them don't know what they are doing, won't be around in a few years, and certainly don't offer what I do.
> 
> I think too many contractors are more concerned about price than the customer is. Too many contractors think the only way to get a job is to have the lowest price. Getting a job is the operative phrase-- they are trying to get a particular job and not build a business.
> 
> Anyhow, I appreciate all of the comments, both pro and con.
> 
> Brian Phillips


Brian, I know this was written awhile ago BUT it is such good stuff. I actually sat back and read this right here over and over. You are right! Most others don't know what they are doing. Sometimes we get caught up with "the going price". I am going to rethink this and focus on why the HO should choose us for quality. This forum is so wonderful. I appreciate all of your knowledge. I am constantly learning and rethinking "out of the box" . Thank you for your knowledge and sharing such straight forward thoughts.:notworthy


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## cwatbay

This topic is right on the money - no pun intended. 

The comment that most small business, which includes contractors, last no more than 5 years, and, then most of who is left fails within the next 5 years is so true. 

This was true in another industry I was in for over 20 years where I dealt with small business. Overall: the reason was money. Add to to that was lack of business knowledge and lack of research prior to open or starting a business. 

What I found was overly optimistic expectations as to what kind of income the new business would bring in. I believe that one of the main reasons new businesses last no more than 5 years is because this is how long it takes to completely run out of all of the investment monies. Not just your own, but all of your relatives, friends, 2nd mortgage and so forth. 

Those that survive the first 5 years - for whatever reason -- but crash during the next five, can be attributed to: (1) The investors (like mom and dad) regardless of how much money they have, finally get tired of supporting junior's experiment (2) After 5 years the scope of the business changes - it's bigger and more complicated, so that the knowledge you had to get past the first 5 yrs, no longer applies to the 2nd five years - this is called the evolution of the business (3) After the first 5 years and assuming it was successful, often the owner gets lazy or has burnt out and just lets the business go, assuming that past success will keep it going in the future. 

Anyway, my 2 cents worth.


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## UALocal1Plumber

The only way to succeed in business is to charge more for a product or service than in costs you to provide that product or service to a customer.

You can't be afraid to lose the job. Set a price based on your costs and profit and stick with it. You can't lose money on a job you don't do.

Keith


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## brooklynite

Leonardorribeio said:


> Well lets say i have to remove existing 2'x4' ceiling tiles replace with 2'x2' acoustic ones
> Total area: 6,500 sqft
> 1-Removal of existing ceiling tiles
> 2-Installing new acoustic Armstrong ceiling tiles including exposed tees
> 4-Discarding material from job site
> 
> How long it would take to complete the a job like that?


Someone said 1 day but I think for 6500SF you need more time, I'd say by the time you are said and done 2 days, and it really depends on how many people working on it, is it going to be only you? How high is the ceiling? are you working off a ladder or rolling scaffold?


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## hilal.itani

you guys are trade people who know their trade well. as a contracts manager, I use statistical data and price handbooks to compare prices, particualrly when their is tender evaluation.

Moreover, a comparison of direct costs between tenderers gives an avergae rate for each item. 

Of course, each company differ in its estimation, depending on its workforce, productivity, type of equivalent material, value engineering, size of office, type of stationary, indirect resources,etc... and how much profit it wants to make from each particualr job.


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## Fletchman

UALocal1Plumber said:


> The only way to succeed in business is to charge more for a product or service than in costs you to provide that product or service to a customer.
> 
> You can't be afraid to lose the job. Set a price based on your costs and profit and stick with it. You can't lose money on a job you don't do.
> 
> Keith


I agree, but you also cant make any money on a job you dont do.

What is hard is competing with contractors that dont pay their help very well.

Builder Dad can charge less for a pole barn or a roofing job cause he pays his kids and their buddys $8.00 hour.

It is a tough gig out there right now, you can sharpen your pencil and give the fairest price you can, and still get under bid by someone. Hell you can drive down to the local Pub and find all the help you need in all aspects of construction.


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## BrianNNOLA

Fletchman said:


> I agree, but you also cant make any money on a job you dont do.
> 
> What is hard is competing with contractors that dont pay their help very well.
> 
> Builder Dad can charge less for a pole barn or a roofing job cause he pays his kids and their buddys $8.00 hour.
> 
> It is a tough gig out there right now, you can sharpen your pencil and give the fairest price you can, and still get under bid by someone. Hell you can drive down to the local Pub and find all the help you need in all aspects of construction.


Yeah, welcome to the new America, where there's always someone willing to do the job for less, and you really don't have to look or drive far to find help. Just look out front your local building supply company or start working on the project, and someone is bound to ask if you need help whether they're skilled or not. Everyone places high value on their own time and service they provide. They just want a deal or bargain for anything or anyone they buy or hire. However, two to three years after the fact, when they're finding they have to do the job AGAIN, its the reputable contractor who gets to hear about all the bad experiences, static, and relations dealing with construction projects and personel.
The money they thought they saved cost them threefold in the long run.
Yes, construction can be a very tough industry with the semantics alone without considering the conditions and elements to work within.


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## playsinmud

Thanks for the info. A dumb question. How do you apply your profit and overhead for the year inot each job. Do you just take total overhead and profit (what you want to clear at the end) and divide that by workable hours in a year 1800? Embarrassed to ask something that seems so simple.


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## DavidC

playsinmud said:


> Thanks for the info. A dumb question. How do you apply your profit and overhead for the year inot each job. Do you just take total overhead and profit (what you want to clear at the end) and divide that by workable hours in a year 1800? Embarrassed to ask something that seems so simple.


The only dumb question is the one you should have asked but didn't. You pretty much have it generally speaking. Check out Michael Stones book, "Markup and Profit; A Contractors Guide" for straight forward and specific methods to discover your right price. 

Good Luck
Dave


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## piercekiltoff

playsinmud said:


> Thanks for the info. A dumb question. How do you apply your profit and overhead for the year inot each job. Do you just take total overhead and profit (what you want to clear at the end) and divide that by workable hours in a year 1800? Embarrassed to ask something that seems so simple.


The National Ground Water Association just release a Geothermal Cost Calculator for geothermal/exchange drilling companies to help answer these types of questions. It's worth a look.


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## ray32822

*well said!*

This is my first read on the message boards. Very well put!


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## CarpetRepairGuy

*Rather than try to bid against*

everybody and their brother-in-law, I'd focused on creating a niche business that has little competition.


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## neolitic

BrianNNOLA said:


> Yeah, welcome to the new America, where there's always someone willing to do the job for less, .........


I am 62, and it has been so 
as long as *I* can remember.
As near as I can tell it has been true
ever since the beginning of time.
It is not a "new" thing.


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## BrianNNOLA

neolitic said:


> I am 62, and it has been so
> as long as *I* can remember.
> As near as I can tell it has been true
> ever since the beginning of time.
> It is not a "new" thing.


Doing a job way below market value, which doesn't permit you to survive in this economy as an INDIVIDUAL unless you live with your parents and grandparents is NOT my idea of a succesful business. What you're refering to since the beginning of time and not too distant past (and making a comeback indirectly) is "slavery", not business.


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## Todd man

I've read a lot of things that I don't agree with, like when people write that contractors are more focused on price than customers are, and that most contractors don't charge enough, and "I'm not lowering my price I just haven't found the right customers yet". The bottom line is, we're in a recession (or whatever you want to call it) and there are a lot of contractors and subs out there who will work for "peanuts". YES, there is a "going rate", and supply and demand dictates that. Right now there are more contractors than there are jobs and that means the "going rate" is LOWER than it was 3 or 4 years ago. I know, some of you are still getting the same rates that you did when things were going gangbusters, but you are few and far between! If you haven't lowered your prices to change with the times, you're missing out on revenue! Swallow your pride. We've all heard of the airline price wars... one airline lowers fares, and the others follow suit TO BE COMPETITIVE. Like someone else said, "McDonalds and Burger King both have a dollar menu". If one had a $1.50 menu, for basically the same hamburger, they're not going to get as much business as the $1 menu. A customer DOESN'T care about your overhead, or that you have to send a kid to college or pay for that new truck and trailer. You have to be somewhat competitive on price with your competition, especially in this economy. Ultimately it comes down to explaining what YOU'RE going to do for your customer (before, during, and after the job). Then, when they realize the VALUE that they're going to get by going with you, the price is justified for them. Generally speaking, if you lose a bid you didn't sell the benefits enough, they don't feel like they're getting enough value. I know, it's easier said than done, and there are always going to be people who will go with the lowest bid. Good work isn't cheap and cheap work isn't good.
I just wanted to bring up the point of "supply and demand", being competitive, and selling value and benefits.


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## angus242

Todd man said:


> Right now there are more contractors than there are jobs and that means the "going rate" is LOWER than it was 3 or 4 years ago.


I disagree that there are more contractors than there have been 3 or 4 years ago. Lots of the existing low ballers didn't survive.

As for lowering your "going rate", how many of your suppliers have lowered theirs? How much has your insurance lowered over the past few years? What has your fuel costs dropped? If you have an auto loan, what has that decreased to? Has your time become less valuable?

Bottom line is those that have taken on the "dollar menu" mentality have only hurt themselves and the industry. If you're hurting for work, lowering your prices is not the answer. More focused marketing, diversifying, further training/educating and better sales techniques will help.

If you were a gouger before, yes, you need to lower pricing. However, I assume that's rarely the case. Building materials, insurance, fuel, accounting and most importantly, my time have not lowered in value or cost. Why should the cost to remodel a person's biggest investment decrease too?


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## Todd man

Angus.. Angus.. Angus...

You didn't understand what I wrote: I said there are more contractors than there are jobs right now. I didn't say there were more contractors than there were 3 or 4 years ago. Back then it was a contractors market, everybody wanted work done. Now it's a homeowners market, people are more aware of price. It's like the real estate market, there's a buyers and there's a sellers market. Supply and demand my friend! I agree with you, a lot of the low ballers didn't survive and will not in the future. YES, they are hurting us. I'm not suggesting everyone lower their prices! If a contractor is busy and has enough work, that would be STUPID to lower your price. You MISSED the whole point about being competitive on price with your competition. I'm talking about the guys that are complaining about not wanting to lower their prices. They're not busy and need to change something. You talk about your overhead costs not changing in the past few years. Look at the airline industry. Their fuel costs have gone way up! Yet they have lowered and lowered their prices for the same service from point A to point B. and they're still on the verge of going out of business. People are more aware of price, and how they spend their money. So in answer to your question, YES, your time has become less valuable. Your statement about "why should the cost to remodel a person's biggest investment decrease too?" If the airlines said a few years ago: "why should the cost of this flight decrease" and they didn't lower their prices.... they'd be out of business!
I very much agree with you about more focussed marketing and sales techniques, you hit it on the head! 
(try to agree with a little of what I've said in your reply) ha ha! Take care


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## angus242

I understand your point but I still disagree. The only reason someone should be lowering prices now is if you were charging too much before...and just got a way with it.

Your analogy of construction to airlines isn't really apples to apples. I used to fly every 6 weeks from Chi to Phx and it never cost me over $250...and I never had to pay to check a bag. I just looked for the same flight today, with stops it's $322 & non-stop (which I always used to do) is $409. So, the cost of flying has increased.

So back to the point, if you are not getting work, the answer is not to lower your prices but to increase the things I mentioned.

And I do take big offense to someone thinking my time is not as valuable. Not only have my business costs increased, but my cost of living has increased too. 

To be "competitive" does not mean I have to "compete" with low ballers. I lose jobs to them all the time. The point is, they are _not _my competition. There's nothing I can do with a HO that _only _cares about price. In my sales pitch, I do the best I can to explain the value of my services and how having a proper remodel job is worth the price charged. Guys that are truly my competition cannot low ball me without losing their asses. 

As I tile guy, you should understand. I recently bid a 1000 sq ft flooring job at $13k to remove existing flooring, use Ditra and install tile (tile not included). I didn't get the job. The HO went with someone who was charging $3k for the same job. Now you tell me if you could remove 400 sq ft of existing tile, remove 600 sq ft of luan, install 1000 sq ft of backerboard and then tile for that price. You can't. The bottom line is the hacks were not going to do a proper installation. So you see, lowering my price would not have gotten me anything. And since the hack-attack crew wasn't installing the tile correctly, they are _not _my competition.

My point, lowering your price does not help. Instead of looking to go backwards in one area (price), look to move forward in others (networking, marketing, training, sales, etc). Doesn't that make more sense? :thumbsup:


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## BrianNNOLA

angus242 said:


> To be "competitive" does not mean I have to "compete" with low ballers. I lose jobs to them all the time. The point is, they are _not _my competition. There's nothing I can do with a HO that _only _cares about price. In my sales pitch, I do the best I can to explain the value of my services and how having a proper remodel job is worth the price charged. Guys that are truly my competition cannot low ball me without losing their asses.
> 
> As I tile guy, you should understand. I recently bid a 1000 sq ft flooring job at $13k to remove existing flooring, use Ditra and install tile (tile not included). I didn't get the job. The HO went with someone who was charging $3k for the same job. Now you tell me if you could remove 400 sq ft of existing tile, remove 600 sq ft of luan, install 1000 sq ft of backerboard and then tile for that price. You can't. The bottom line is the hacks were not going to do a proper installation. So you see, lowering my price would not have gotten me anything. And since the hack-attack crew wasn't installing the tile correctly, they are _not _my competition.


I'm a tile guy myself...have been for over 20 years now, and have never lowered MY going rate. Before Katrina, I always had tile work, but since the flood of immigrants laying tile for a buck & a half, I simply can't compete with that since my rate is double for a standard install. Those hacks can only afford to do it because they cut corners. In most cases, going over the existing flooring or if they do removal, its half assed leaving glues and residues. For the most part, it'll stay down long enough to get paid and move on, but now I'm finding HOs (after a few years) having to do it all over, and calling in the pros. At least removing their work is really easy! With many of the better thinsets out there today, many jobs do hold up regardless of the installer. Heck, I see distributors lay tile on kraft paper in their showrooms and it holds up several years under heavy traffic. The bottom line, both HOs and commerical clients alike are only concerned with price and installation speed, especially commericial. I see so many of them with snakey grout lines and uneven sufaces. Their customers only there to do business, not report back to Better Homes & Gardens. Good thing I do more than just lay tile! You have to wear many hats in this day and age to survive. I agree you just can't compare any one industry to another, nor can you compare any one contractor to another. The airline industry gets support from the federal gov't, contractors don't, and airlines make up for their low airfares through other charges and methods. They're also nationwide, not local.:whistling


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## Todd man

Angus,

I had to sleep on this one....

After much thought, it makes sense. I understand what you're saying, and I DO agree with you! I surrender my point. That last example you gave about the 13k bid you lost to the hack attack made perfect sense to me. They are NOT our competition. The numbers and sq/ft you mentioned are very close to what I would charge so I see your point. Lowering price would not have done a thing. Although I was not advocating "slashing" prices like that but I see your point, move forward in other areas i.e. marketing and sales. I read somewhere that you should be selling 25% of your bids. That seems a little low to me, I don't know? I don't think that was pinpointed to just construction though. I don't know what a good percentage is. I've been busy, so I looked at the number of bids I've done since Jan 1st (25) and how many of those have turned into jobs (11) that's 44% that have turned into jobs. Anyone else have comments on bid/job ratio? Thanks for the conversation Angus!


----------



## angus242

Todd,

A wise business peer of mine told me; "When you start closing 75% of your bids, raise your prices 15%"

As for a nominal close ratio, I don't think there's a steady one. It really depends on the time of year. I surprisingly had a 100% ratio from October through February. Then the infamous $13k bid appeared. I went way down to 10% but have gotten back around 50% now. I know better than to get nervous if a particular season is giving me a lower ratio.

When the calendar year is over, I'd hope to be close to 50%. If I'm not, I'm wasting too much of my time _attempting_ to sell. 

My business has gone through a big transformation recently so I'm in a unique situation. I'm going to start recording all of my time spent on every job. I mean the phone calls, supply runs, printing docs, etc. This will give me a better idea of how my expenses fit into my "going rate". I know I'm comfortable with what I get paid but am I making enough to make the business profitable when I'm wearing other hats? Since I'm a 1-man show, it makes a difference. 

If I find a way to save the business money (ie, low my insurance rates) that only makes the business more profitable. That does not mean I can lower my going rate. 

Don't ever forget, cash reserves are a _good _thing!

Best of luck to you.


ps, stop by the tile section and join in :thumbsup:
http://www.contractortalk.com/f73/


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## UALocal1Plumber

playsinmud said:


> Thanks for the info. A dumb question. How do you apply your profit and overhead for the year inot each job. Do you just take total overhead and profit (what you want to clear at the end) and divide that by workable hours in a year 1800? Embarrassed to ask something that seems so simple.



That's what makes you a business owner. The final decision is yours to make. 

I bought the book "How Much Should I Charge?" by Ellen Rohr. It's like 15 bucks, totally changed my book keeping method.

When you estimate a job, you will know how many man hours are supposed to be dedicated to that particular job. So yes, take your annual overhead and divide it by the actual number of billable hours you expect to have yearly, and apply that to your estimate. As far as profit goes, you can do that hourly or figure in a percentage at the end of the estimate. Your choice, you're the boss.

I highly recommend the book.
Keith


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## ssdreambath

Very well said !!!


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## jjc725

*new to estimating*

How would someone who is new to being a contractor( I am used to being a carpenter and having my rate set through contracts) find out what others charge either per hour or by square foot for painters?


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## angus242

jjc725 said:


> How would someone who is new to being a contractor( I am used to being a carpenter and having my rate set through contracts) find out what others charge either per hour or by square foot for painters?



As you've already found out with your other closed thread, you will not find specific pricing info here. Only _you _know your operating costs. Only _you_ know what your price should be.

I don't think you read this thread. Go back & spend some time reading this thread instead of trying to get someone to put a sq ft number in your lap.


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## jjc725

*I don't think you read this thread. Go back & spend some time reading this thread ins*

no angus, I did read the posts, I was just trying to feel the waters alittle. So far I am not doing so great on bidding and was trying to see if i was missing something. I had a client tell me that I bid to low on a fence install, I offered $200 for 80ft of vinyl so i can get a deck job, then i rebid at $60 a section for 10 sections and they said that was alittle to high. So I don't know if i am doing something wrong or not. I am not trying to make a ton of money but I would like to make something.


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## rselectric1

jjc725 said:


> no angus, I did read the posts, I was just trying to feel the waters alittle. So far I am not doing so great on bidding and was trying to see if i was missing something. I had a client tell me that I bid to low on a fence install, I offered $200 for 80ft of vinyl so i can get a deck job, then i rebid at $60 a section for 10 sections and they said that was alittle to high. So I don't know if i am doing something wrong or not. I am not trying to make a ton of money but I would like to make something.


I'm the moderator who closed your post.

I hope you can understand that pricing questions simply don't work on a forum that covers so many geographical areas, not to mention that every business has a different structure with extremely varied overhead, and expectations of profit.

These posts (without many exceptions) have turned into wars in the past, so in order to keep this a civil place for all our posters, pricing questions are eliminated quickly.

Again, we apologize for any inconvenience, and you are welcome here as a fellow contractor.:thumbsup:


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## deyodrywall

We just bid a drywall project last week in Massachusetts. It is a prevailing wage rate project. I am familiar with the architecht (most approach constructuion the same everytime) so knew the drawings as I just built the last library a year ago from the same architect. I thought I had it beat.The prices were form $318,000 to $780,000. Now we were $640,000 and I had it correct. The GC's I bid it for knew better than to use the $318,000 number, but they knew someone was going to use it and win the job. Now eaither this guy made a mistake, we've made a few, or just flat out low balled to get a job hoping for change orders to break even. Either way, the resposible GC's we bid for didn't get it and neither did my guys. Luckily we have a few 2 year projects rto carry us over the next 2 years. I just hope all the funny business is over by then. It's crazy out there. Now when we get a job, I dont get excited because I think we got it becaused we missed something big. All the fun's gone, and the money too.


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## dprimc

JJC,

The fact that you are wanting to 'feel the waters' says a lot. You need to know your costs and desired profit, and then you need to SELL.

Just as other contractors can't tell you numbers, clients can't either. If a client says you're too cheap, I'd guess there was a confidence issue where they didn't believe you could do the job to their standards for that price.

I venture that with 'QUALITY CLIENTS' it takes just as many sales skill to be the cheapest as it does to be the most expensive. Many people around here will throw out the cheapest price first thing.

There are many very talented trades people out there. I didn't make it into the 1% being in business for over ten years by being the most talented. The best thing I ever did was to read a bunch of sales and people skills books. 

I also learned to know which jobs to pursue and which to run from, by asking the right questions on the phone. Rarely do I leave an appointment without feeling like I made the client confident that I can do the job professionally and that we could work together. Whether it is worth 'X' dollars more to them, remains to be seen. Sometimes yes and sometimes no.


Dave :thumbsup:


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## Mike's Plumbing

For those who have read through some of my threads on here you know that when I started I failed in just about every area except for the ACTUAL plumbing part. It wasn't until the last 18 months or so that I started to really make great money and turn this pig around.

The top reason for this is the combination of being cheap and poor marketing.

There is a certain "price to play poker" in business. Now days the more I charge the more demand I have. I was warned in the beginning not to be cheap but I didn't take the advice and I found out those with experience knew the price of poker.

What I have discovered through trial and error is that bad marketing equals bad business, good marketing equals good business, and great marketing equals great business. I started with bad, I'm now at good, and my goal is to eventually hit the "great marketing" level. Marketing has found my customers for me it doesn't matter what I charge.

On pricing I don't know what my competition charges and I don't care. I paid the price of being cheap and almost lost everything in the process. What I do now is simple, I know what something takes to get it done and that's all I really need to know, that's the price of poker.

I figured out what I'm worth per hour and that's what I charge, in that price range I'm not going to get every job and that's more than fine with me. My material is market up 20% because that's the price of poker.

When I started I had a rusty piece of junk van and I was the cheapest guy around. My competition had new vans and were expensive. I failed, they succeeded. Now days, I have the biggest, the best, the most decked out cube van in the area......and I'm expensive to do business with.

But here is where I was able to pul it off. In my market I'm the only one with any real marketing, my competition is getting tired and negative. There results are slipping while, finally, mine are growing. 

I wouldn't be able to explaine this but I have a carpenter/builder friend that told me why. He said it's like fishing....you cast your line out and you get nibbles. The more marketing you have the more nibbles you get. Nibbles don't make money, ya gotta hook it then carefully drag it in and get it in the boat. That's the process of marketing and pricing, at least how I see it.

I know of businesses who are going bankrupt and I know businesses who are growing at record levels. All of them have the same economy, the difference I think is in rock solid marketing this gives you more fish to to nibble on, then close the deal.

When the marketing is solid then charge what your worth, that's why you market yourself.

Just my thoughts

Mike


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## Mike's Plumbing

After reviewing my post it occured to me that in my area and with my competition something else might have happened. Everything has reversed, now I'm the most expensive, and the busiest plumber. My competition is forced, because of poor attitudes and poor marketing, to be cheaper.....a strategy that is known to fail.

Mike


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## rbsremodeling

angus242 said:


> Todd,
> 
> *A wise business peer of mine told me; "When you start closing 75% of your bids, raise your prices 15%"*
> 
> As for a nominal close ratio, I don't think there's a steady one. It really depends on the time of year. I surprisingly had a 100% ratio from October through February. Then the infamous $13k bid appeared. I went way down to 10% but have gotten back around 50% now. I know better than to get nervous if a particular season is giving me a lower ratio.
> 
> When the calendar year is over, I'd hope to be close to 50%. If I'm not, I'm wasting too much of my time _attempting_ to sell.
> 
> My business has gone through a big transformation recently so I'm in a unique situation. I'm going to start recording all of my time spent on every job. I mean the phone calls, supply runs, printing docs, etc. This will give me a better idea of how my expenses fit into my "going rate". I know I'm comfortable with what I get paid but am I making enough to make the business profitable when I'm wearing other hats? Since I'm a 1-man show, it makes a difference.
> 
> If I find a way to save the business money (ie, low my insurance rates) that only makes the business more profitable. That does not mean I can lower my going rate.
> 
> Don't ever forget, cash reserves are a _good _thing!
> 
> Best of luck to you.
> 
> 
> ps, stop by the tile section and join in :thumbsup:
> http://www.contractortalk.com/f73/


I see this repeated often and disagree with this slightly.. Its to early to put in to words, but I will be back to discuss this one later.


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## SC sawdaddy

Heard the same thing put a slightly different way.
If you get 7 out of 10 jobs that you bid on, your prices are too low.


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## angus242

rbsremodeling said:


> I see this repeated often and disagree with this slightly.. Its to early to put in to words, but I will be back to discuss this one later.


Oh boy, am I now in trouble? :shutup:


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## rbsremodeling

angus242 said:


> Oh boy, am I now in trouble? :shutup:



lol no.. 

I have just never found that argument convincing.

If I calculate all my cost and profit goal, then apply my mark up percentage, if I sell 70% or hell 100% of my job why would I raise my mark up?

If I am bringing jobs in on cost and budget, I am realizing my profit goals, why am I raising my price??

Because I successfully bid and closed a high percentage of projects?

I thought that was the goal..


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## J F

Because, theoretically, you can make _more _on the jobs you sell. :jester:


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## J F

Unless you're of the notion of _"If I'm maximizing my profit, I'm ripping off my clients" 

_:whistling


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## rbsremodeling

J F said:


> Because, theoretically, you can make _more _on the jobs you sell. :jester:


True... If I sell at the higher markup. What if I don't? 

Then I have potentially lost work right?


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## J F

Yes.

_If_ you end up losing gross sales.

_If_ you're selling 70-100% of your prospects, you have a lot of room to maneuver.

And I'm not saying that everyone has to raise their rates. If you're happy where you are and with your profit margins, there is no law stating that you must make more.

Just looking at it as purely business.

J


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## Mike's Plumbing

Because I'm a plumber it's hard to totally relate to you guys who do remodeling but what about upselling? Instead of marking up prices to increase profit don't you have some good opportunities to upsell during the process? I should keep better numbers on upselling but I don't, If I had to estimate though I would say 30-40% of any plumbing remodeling I do I end up upselling past the original bid.

Like I say though I just don't have accurate math on this. I do know that upselling increases my margins quite a bit. I'm not sure how you would go about this but maybe that's a better way to go.

Mike


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## Cjeff

When you say up-selling are you talking selling more work to the same customer or selling the customer a higher priced item?

Selling more work to the same customer does not increase margin much. Maybe a little because it is an existing customer and so no advertising expense and maybe some tools left at job so less set-up time.

Now selling a higher priced item can make more margin because your mark-up (lets say 15%) on a $1000.00 item is way more then your mark-up on a $10 item.

Occasionally I can do that but not often. Usually it is just selling more work.


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## Mike's Plumbing

Cjeff said:


> When you say up-selling are you talking selling more work to the same customer or selling the customer a higher priced item?
> 
> Selling more work to the same customer does not increase margin much. Maybe a little because it is an existing customer and so no advertising expense and maybe some tools left at job so less set-up time.
> 
> Now selling a higher priced item can make more margin because your mark-up (lets say 15%) on a $1000.00 item is way more then your mark-up on a $10 item.
> 
> Occasionally I can do that but not often. Usually it is just selling more work.


Usually selling a different product at a higher marging. 

So if a customer starts out with a Moen Villeta faucet I later sell them on a higher priced Kohler. The Moen is sold for the same price as Home Depot so the margins are poor. A higher end Kohler has a larger margin for me, yet I still put a faucet in. No matter what I have to put in a faucet, I would rather put one in with a higher margin and if possible a better quality unit. Kind of a win-win situation.

For remodeling it may mean better quality trim or subfloor. It still has to go in so that labor doesn't change much but if margins can be increased it's a better deal and out of 10 times the HO ends up with a better finished prodect.

Selling on "a better quality finished product" is east to sell and many times the price isn't that much more. The possibilities are endless.

Mike


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## UALocal1Plumber

Is the customer paying you for your ability to provide them with material? Or with a unique service? 

Keith


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## Mike's Plumbing

UALocal1Plumber said:


> Is the customer paying you for your ability to provide them with material? Or with a unique service?
> 
> Keith


I'm not sure if your asking me or not. If you are then my answer is neither. I supply a package, and that package starts out as X in the equation, when I'm done and if I can up-sell then my new package is X+up-sell profit.

Not a big deal really but some things carry more margin than others. Up-selling can also mean a labor increase. Either way it's a good thing.

It's kind of like a new truck, the base price has a certain margin and if you go with the loaded version the total price for the truck can be double. Loaded trucks are a profit center because the margins are quite large. When the truck is double the price you certainly don't get double the truck.

That's about the best way I can explain it.

Mike


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## Flacan

Although I agree with the concept of upselling, you have to be careful when you do it. The customer needs to see the added value, and not feel that you are trying to rip them off. 

In 2000, I completed a small remodel in a condo unit in Palm Beach, which cost my customer about $50K. The plumber was charging me about $2K for his portion of the work.
During the job, the customer decided that she wanted the vanity sink in the master bathroom moved about 4 feet (this was as the rough plumbing was being done, and before the plumber had begun any work in that bathroom - in other words, he did not have to redo any work which he had already begun).

I asked the plumber to do it, but did not get a price from him before hand, as I was expecting him to charge according to what he was already charging - I knew it would be extra, but not how much extra. 
I was on the job site when the plumber ran the supply and drain over the extra 4 feet. However I was surprised when the plumber submitted the bill for the extra work: $700. This was not at all in line with what he was charging for the rest of the work. I estimated that after his cost of pipe, he was trying to charge me about $300+/hr. 

Again, if he was charging 4-5K for the job, then it would have been in line. Maybe he underbid the job, knowing that he'd be able to make it up somewhere, somehow?

This made me look bad to my customer, and I lost all trust in the plumber - it was the first time I had used him, after a friend recommended that I try him out. 

My point is that you have to be careful, that's all.


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## rbsremodeling

The only person at fault is you for not getting the quote in writing from the plumber before he started work with the new scope..


I guess the plumber upsold on you.. :laughing:


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## Mike's Plumbing

Of course I can't speak for that plumber but that's not what I mean by up-selling.:laughing:

I will say however that even though it's your job to know the price before hand it's good practice for the plumber as well.

I always confirm price before I do anything except for GC's that I do regular business with and they will back me 100% as long as I'm not out of hand with the prices.

Mike


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## mahlere

rbsremodeling said:


> True... If I sell at the higher markup. What if I don't?
> 
> Then I have potentially lost work right?


no, because if you are a sole proprietor, you only have so many hours in a day to work...you should want to maximize those hours...

and if you have employees, well, you know the pitfalls there...the more work you get, the more employees you need to hire, the more screwups that will occur...

and even if you sub out most of your work, you'll get the same screwups from your sub's employees...

time is finite...we only get 168 hrs in a week...make the most of them...


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## mahlere

there is a difference between upselling and a change order...in the commercial world we use a saying "Clouds cost dollars"....simple as that...


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## Flacan

Mike's, rbs, mahlere,

I learned something that day. Exactly what you guys are now telling me.

I also was aware of the good ol' saying: those that don't remember the past, are doomed to repeat it. Needless to say, that was the last time I used that plumber.

Yeah, I did get up-selling and change order mixed up today. My bad.


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## Mike's Plumbing

mahlere said:


> there is a difference between upselling and a change order...in the commercial world we use a saying "Clouds cost dollars"....simple as that...


 
I love it, "clouds cost dollars".....I'm stealing that line from you for future conversations.


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## aikenback

Just thinking about changes should cost money. Sometimes there has to be a deterrent or the H O can get out of control. then your jobs overlap on others and the current job becomes the never ending storey and the other scheduled customers get pissed.


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## aikenback

...


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## Danthehandyman

@ Warren
actually Waarren I got three quotes, i merely mentioned that one. They varried between 68-80. i used the highest one in my example....ok I thought the first one of 68 was high - but they just kept going up.


----------



## JesseCocozza

Mike Richards said:


> for a while now i've been doing handyman services for alot of people around my town. i am thinking about getting a business license and liability insurance.... the works. one of my concerns is i usually charge $50/hr + materials for what i do. but when i get licensed w/ tax id and everything i am thinking that my hourly rate is going to have to go up some to accommodate paying taxes, insurance etc. my question is are there any handymen type people on here?... i have plumber friends and electrician friends that charge anywhere from $80 - $120/ hr. i don't see how my services are any less valuable than there's but in the past people seem to bock at prices like that for a handyman. any thoughts, ideas are much appreciated. thanks.


You make $50/hour running a business that's technically not a business? I'm moving to where you live. Further more I'm not sure it is where you live, but in Florida the liability that an electrician / plumber has on his work surpasses that of a GC. Therefore more expensive liability insurance and more exposure to risk for a longer period of time. What kinds of things do you do without even having an occupational license that warrants $50/hour?


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## angus242

Dan, you're missing the point.

Yes, there are always going to be unscrupulous people out there. However, the difference in proposals is not always attributed to that. You can have a (legitimate) single man show that runs a bare-bones business vs a super-mega, multi-location remodeling company. Of course their overhead and profits needs will be vastly different.


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## Danthehandyman

@ matt

would you like them at the address :*[email protected] *

*guess i better go grab the camera matt, and shoot a few fer ya !!!!!*


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## ohiohomedoctor

Danthehandyman said:


> @ matt
> 
> would you like them at the address :[email protected]
> 
> guess i better go grab the camera matt, and shoot a few fer ya !!!!!




Thankyou. If they look good I'm going to hire your guy. I'm sure it turned out great. Angus is dead on.


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## Danthehandyman

@ angus,
surely I agree overhead and profit vary as much as sheeps legs.
I merely think some pricing methods are not done in a logical or systematic
way. If you simplify it, as i see some do, its hard to come up with such number and truly justify it. Come on ow , I know small companies dont have that kind of overhead. 
I call that kind of bookkeeping - greed. I guess its up to conumers to say enough is enough !!!!!
(nice hair Angus ')


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## ohiohomedoctor

Danthehandyman said:


> @ matt
> 
> would you like them at the address :[email protected]
> 
> guess i better go grab the camera matt, and shoot a few fer ya !!!!!


Don't get so compliant, Jus messin @ . We COO.


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## john elliott

Danthehandyman said:


> Wow, you blow a load and people think you're god.


What does 'blow a load' mean in this context?


----------



## BrianNNOLA

*Dan the DIYer*



john elliott said:


> What does 'blow a load' mean in this context?


I think he means his "licensed" carpenter friends jerked him off. 
He also didn't earn $50,000 profit, he just saved $50,000 from the highest bidder. Interesting how Dan made a point to include the term "licensed" regarding the guys who did the work along with "paid them well", which I interpret as being he hired Mexicans and fed them a few tacos.


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## rselectric1

tosimple4 said:


> Hey guys,
> I tried posting this earlier but I dont think it worked, Sorry if this is a duplicate post.
> I'm working on a bid for a business friend who wants me to build 300 linear ft. of partition walls for his retail store. I'm not sure how to price commercial. The walls will be 2x4 timber framed and 8 ft tall. Each varying in length from 4 ft.- 10 ft. What would you charge for labor only? Customer will provide all material.
> Im located in Eastern North Carolina and the job is in a wealthy part of town near the beach.
> thanks


Your previous post was deleted by a moderator since it flies in the face of what this entire thread is about. Please do not ask pricing questions here.


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## Kenny Meek

Danthehandyman said:


> @ angus,
> surely I agree overhead and profit vary as much as sheeps legs.
> I merely think some pricing methods are not done in a logical or systematic
> way. If you simplify it, as i see some do, its hard to come up with such number and truly justify it. Come on ow , I know small companies dont have that kind of overhead.
> I call that kind of bookkeeping - greed. I guess its up to conumers to say enough is enough !!!!!
> (nice hair Angus ')


If you truly work up a budget you generally find there's a lot more overhead than you think. Realistically you're not going to have much more than 1000 hours a year billable. It isn't like a day job that way. I bill at $155 an hour. That allows me $4500 a year for truck expenses, 2k for advertising, $2k Phones, data , 2k for bad debt, 20% profit margin and $80k salary with no health insurance.(wife is govt retired) 80k for a 20+ year electrician is hardly greed....or any other talented service person who works their tail off. Not where I live anyway...

oh...2k for tools. Not all numbers are right on but very close.


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## tosimple4

*sorry*

I was directed to this thread with the understanding it was ok to ask. I'm new to this forum and am sorry if I was inappropriate. Is there a thread where pricing questions are ok?
thanks


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## angus242

tosimple4 said:


> I was directed to this thread with the understanding it was ok to ask. I'm new to this forum and am sorry if I was inappropriate. *Is there a thread where pricing questions are ok*?
> thanks


No.

You were directed to this thread so as to read and learn *how* to price instead of asking a question no one other than you can possibly answer.

Also glance this thread. And by that, I don't mean skip to the end and ask another how to price question:
http://www.contractortalk.com/f11/why-discussing-pricing-frowned-upon-here-contractor-talk-100555/


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## tosimple4

Just a misunderstanding. I appreciate the help 
thank you


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## Danthehandyman

Hmmmmm.........hire illegals and pay them in Taco's......Brian I think you're onto something there.....lol


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## Danthehandyman

@Kenny,

your method Sir, is in fact, systematic - i thank you for being one of the logical ones


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## Tech Dawg

This thread makes me laugh... :laughing:


----------



## dwebb

I agree with grumpy, none of us are competing for each others business, but we are all sure as heck trying to stay alive in the construction business. I look for pros like y'all for advice because I have had to move from sheetrocking houses to commercial sheetrocking. The sheetrock is a no brainer for me, but to bid hotels they want the paint figured in, to bid tenant finishes they want the framing, paint and acoustic ceilings bid with the sheetrock. Since this is not my area I have to bid it out and I have no idea what is a good price or bad price. Your willingness to at least give a range help guys like me.


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## ohiohomedoctor

dwebb said:


> I agree with grumpy, none of us are competing for each others business, but we are all sure as heck trying to stay alive in the construction business. I look for pros like y'all for advice because I have had to move from sheetrocking houses to commercial sheetrocking. The sheetrock is a no brainer for me, but to bid hotels they want the paint figured in, to bid tenant finishes they want the framing, paint and acoustic ceilings bid with the sheetrock. Since this is not my area I have to bid it out and I have no idea what is a good price or bad price. Your willingness to at least give a range help guys like me.


Read whole thread and you will be a bidding jedi I say. Then you will bid way too low and you'll learn the hard knock way.


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## DavidC

dwebb said:


> I agree with grumpy, none of us are competing for each others business, but we are all sure as heck trying to stay alive in the construction business. I look for pros like y'all for advice because I have had to move from sheetrocking houses to commercial sheetrocking. The sheetrock is a no brainer for me, but to bid hotels they want the paint figured in, to bid tenant finishes they want the framing, paint and acoustic ceilings bid with the sheetrock. Since this is not my area I have to bid it out and I have no idea what is a good price or bad price. Your willingness to at least give a range help guys like me.


You probably don't understand yet that the biggest help is to not give a range. The last thing you want to do is borrow somebody else's numbers to bid your work. Way too many variables. Wicked ass perils.

What you should know is how much you need to operate your business the way that meets your goals. When you get outside of your areas of expertise, look for a trusted sub that can/will do the work. Add his cost into your bid while adding to that what you need for overhead and profit.

It's all in this thread. I dare you.

Good Luck
Dave


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## skcolo

Whether you like it or not, there are "going rates" for all trades. Even doctors are regulated by what they can and do charge. Some jobs that require a higher skill level can charge more, but all "like kind" jobs must be in a comparable range unless you are a heck of a salesperson. No one cares what your overhead is. No one cares if you "need" to make more because you buy a new truck every year and want a new waverunner. No one pays you extra because you can't manage your money.

I have built dozens of houses and I can assure you that there is a "going rate" on everything. The only real differential is geographical location and level of skill required.

Even in remodeling, once the demolition is complete, and the project is going back together where there are no more "surprises", comparable rates apply.

My trades know what the rates are in my area. I know what the rates are. Charge double and see how many jobs you get and then tell me it's specific to your business model. It's specific to the laws of supply and demand, just like everything. The only reason you need to know what your costs are is to find out where you can cut your costs to be more competitive, not so you can charge more.


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## angus242

Every has opinions like yours about a going rate. It's wrong but thanks for sharing :laughing:


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## Tech Dawg

skcolo said:


> Whether you like it or not, there are "going rates" for all trades. Even doctors are regulated by what they can and do charge. Some jobs that require a higher skill level can charge more, but all "like kind" jobs must be in a comparable range unless you are a heck of a salesperson. No one cares what your overhead is. No one cares if you "need" to make more because you buy a new truck every year and want a new waverunner. No one pays you extra because you can't manage your money.
> 
> I have built dozens of houses and I can assure you that there is a "going rate" on everything. The only real differential is geographical location and level of skill required.
> 
> Even in remodeling, once the demolition is complete, and the project is going back together where there are no more "surprises", comparable rates apply.
> 
> My trades know what the rates are in my area. I know what the rates are. Charge double and see how many jobs you get and then tell me it's specific to your business model. It's specific to the laws of supply and demand, just like everything. The only reason you need to know what your costs are is to find out where you can cut your costs to be more competitive, not so you can charge more.


This really makes no sense to me... At this rate a home owner would never have a need to get multiple quotes because everyone should be the same, right?
In remodeling, after the demolition is complete, comparable rates apply?? If that's the case then why wouldn't the demolition be the same rate?


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## Jaws

skcolo said:


> Whether you like it or not, there are "going rates" for all trades. Even doctors are regulated by what they can and do charge. Some jobs that require a higher skill level can charge more, but all "like kind" jobs must be in a comparable range unless you are a heck of a salesperson. No one cares what your overhead is. No one cares if you "need" to make more because you buy a new truck every year and want a new waverunner. No one pays you extra because you can't manage your money.
> 
> I have built dozens of houses and I can assure you that there is a "going rate" on everything. The only real differential is geographical location and level of skill required.
> 
> Even in remodeling, once the demolition is complete, and the project is going back together where there are no more "surprises", comparable rates apply.
> 
> My trades know what the rates are in my area. I know what the rates are. Charge double and see how many jobs you get and then tell me it's specific to your business model. It's specific to the laws of supply and demand, just like everything. The only reason you need to know what your costs are is to find out where you can cut your costs to be more competitive, not so you can charge more.


 I could give a **** about "the going rate" We are high and advertise it. My subs are high, I use good materials and we are knowlegable and skilled builders, we will be payed for that. 

See how many jobs you get? About 15 to 20% of the qualified leads we got that weren't from a referal this year. 80% or so of refered leads. Good thing we have a good referal base.

We mostly do high end renos and truly full service remodeling. We aren't builder's who remodel because it's slow. We used to be custom home builders who put in the time and effort to become true remodelers. We are the guys you want working in an occupied home. There aren't many of us around, we charge acordongly. 

We still build a few customs, but we only bid projects refered to us. Not trying to be a small fish in a huge lake. 

The going rate is for people who can't sell themselves as better than your average Joe, imo. Or for those who dont have a great skill set.Going rate means average rate. 

I believe I'm far above average.


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## skcolo

Tech Dawg said:


> This really makes no sense to me... At this rate a home owner would never have a need to get multiple quotes because everyone should be the same, right?
> In remodeling, after the demolition is complete, comparable rates apply?? If that's the case then why wouldn't the demolition be the same rate?


I said there was a range. I said there were variables. I said you don't set the price, the laws of supply and demand do. Why not just charge everyone a million bucks to cover your overhead. Hint: because you don't get to determine the value of your services, the market does. 

Charge what you want. This business is not the government or a utility. You don't get to charge cost plus just because your overhead is ten times what everyone else is.


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## Jaws

skcolo said:


> I said there was a range. I said there were variables. I said you don't set the price, the laws of supply and demand do. Why not just charge everyone a million bucks to cover your overhead. Hint: because you don't get to determine the value of your services, the market does.
> 
> Charge what you want. This business is not the government or a utility. You don't get to charge cost plus just because your overhead is ten times what everyone else is.


No you don't, you get to charge cost plus or a rate you feel is worthy of your abilities because YOU are in demand, and you can sell that. It's not easy, and its not going to happen for most people. Its easy to lose the ability to do it, and it is a struggle to get established at these rates, but its possible.

If I feel a home I'm bidding is worth 200 a foot , do you think I'm going to drop it to 145 a foot because most of the crappy houses of its kind are 145 a foot. Or because my " competition " charges less? :no:

This does not mean you can charge astronomical rates, like 1500 a foot. But if I'm 30% higher than the next bidder, I don't worry. If I don't get it, ill get the next one, or the one after, at my rates.


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## skcolo

jawtrs said:


> I could give a **** about "the going rate" We are high and advertise it. My subs are high, I use good materials and we are knowlegable and skilled builders, we will be payed for that.
> 
> See how many jobs you get? About 15 to 20% of the qualified leads we got that weren't from a referal this year. 80% or so of refered leads. Good thing we have a good referal base.
> 
> We mostly do high end renos and truly full service remodeling. We aren't builder's who remodel because it's slow. We used to be custom home builders who put in the time and effort to become true remodelers. We are the guys you want working in an occupied home. There aren't many of us around, we charge acordongly.
> 
> We still build a few customs, but we only bid projects refered to us. Not trying to be a small fish in a huge lake.
> 
> The going rate is for people who can't sell themselves as better than your average Joe, imo. Or for those who dont have a great skill set.Going rate means average rate.
> 
> I believe I'm far above average.


So I guess you charge $1000 Psf for tile installation.


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## Tech Dawg

skcolo said:


> I said there was a range. I said there were variables. I said you don't set the price, the laws of supply and demand do. Why not just charge everyone a million bucks to cover your overhead. Hint: because you don't get to determine the value of your services, the market does.
> 
> Charge what you want. This business is not the government or a utility. You don't get to charge cost plus just because your overhead is ten times what everyone else is.


Do you contract every single job that you bid?


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## Jaws

skcolo said:


> So I guess you charge $1000 Psf for tile installation.


 Don't be ridiculous. I put together labor+ material+ overhead + profit. My overhead is actually relatively low. The margin I expect for profit is apparently higher than many I'm bidding against. There for my mark IP is higher. 

Because of my price, I don't do as high a volume of business, which is important to the attention to detail I require. There are a couple of other guys in my area who are higher, both been around a long time.

You are correct, a client won't care what your overhead is. Most people balk at the price I give them, if they aren't a referal. I don't care. It is what it is. I'm not rich by any means, and I feel I worth what I'm charging.

If you mark up at 15%, why would I care? I wouldn't unless I was competing on price. I'm betting on the fact a few people will see my work and decide I'm the better choice


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## Jaws

To be honest, I'm not usually that much higher than most of my real competitors, sometimes lower. I am usually the high bid though, and I am prepared to lose most leads, even after qualifilying them. Most people want big, not quality.

Most of our price difference is not in our mark up, but our subs and materials. Most guys here use ****ty framers at 3.50 a foot. Im paying 11 a foot on a project right now. My framer could give a **** about the "going rate" to apparently. I pay it because I require his abilities.

Our mark IP is probably just slightly above average because we do have low overhead. In twenty years, I plan to charge a lot more.


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## angus242

skcolo said:


> I said there was a range.


There's your safety word. This can be debated for hours and hours. You can't really have a going rate and a range. The range you speak of is really just the diversity of what each contractor's pricing is. 

Pricing needs to be realistic so you can stop the 1000/sq ft pricing argument. It's not like any of are driving Bentleys to our summer homes. 

I do think it's not a great idea to advise folks to let market determine their pricing. There are enough of us here that know better and don't work that way. My customers don't regulate my pricing, suppliers and overhead does. 

If my tile supplier raised their prices 20% next month, my pricing goes up. If my insurance company raises their rates, my pricing goes up. When fuel costs rise, my price goes up. If demand for my service lowers how can I stay in business by lowering rates? I can't. What I need to do is market the VALUE of my service. It's not my fault that all of the other aspects of business has changed. The customer will ultimately pay for that service.

Did you stop buying gas when it was $5/gal? Probably not. You pay what you have to for the service you want.


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## Kent Whitten

Rate is specific. Range is not. You are debating rate logic with range numbers.

My finisher is twice as much as everyone else around. He is good and efficient, thus I pay about the same in the end. The "rate" shouldn't be discussed. The value should.


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## Tom M

There is always a cost limit for what the market will bear unless you do custom work or sell a service no one else does. Unfortunately too many new home contractors that just install, fast repetitous work wander into remodeling and under estimate all the prep work and lost time that goes with it.


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## skcolo

I visit this site regularly. I never post much because of the good ol boy club here that attacks when you don't concur with their opinions as they pick and choose what part of a post to go after, without reading the whole thing. 

For the most part, I like the advice on this site. I admit that I leave here with better information than when I started, usually. But I cringe when see someone asking about a pricing model and the answer is always, "figure out your expenses and then mark up your price to cover your overhead and profit". That's just lazy and bad advice.

The market doesn't work like that. Let's say you build a house and need to sell it at $900k even though it appraised for less because you have a nice office, employees that waste time, nice new equipment and a new truck. Does the appraisal or the comparables in the neighborhood not matter?

Does the appraisal not matter when someone refinances their house to do a major renovation and the bank will only loan what the appraiser came in at?

The market always determines price, always. Some guys get more money than others, but people aren't stupid. They aren't going to pay you extra just because you need extra. That would be charity.

You need to be competitive. You need to hammer on YOUR costs to keep them down. You need to find out what others are charging in order to be in the ball park.

Maybe you will find that you are not charging enough. Maybe you will be on the low end of the generally acceptable rates that most people charge.

But the market ALWAYS decides what price is acceptable, you are giving out poor advice if you think differently. 

The idea is to get as much as you can relative to the type of quality you offer so that the customer feels that they got their money's worth, doesn't feel cheated, and recommends you to their friends. Your costs and overhead always need to be brought down in line to be competitive in the marketplace so that you don't feel cheated at the end of the job, not the other way around.


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## skcolo

angus242 said:


> I do think it's not a great idea to advise folks to let market determine their pricing. There are enough of us here that know better and don't work that way. My customers don't regulate my pricing, suppliers and overhead does.


If the market didn't determine prices we would all be on the Forbes 400 list.

Last time I checked, no one on this site is even close to making the list.


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## Tech Dawg

skcolo said:


> I visit this site regularly. I never post much because of the good ol boy club here that attacks when you don't concur with their opinions as they pick and choose what part of a post to go after, without reading the whole thing.
> 
> For the most part, I like the advice on this site. I admit that I leave here with better information than when I started, usually. But I cringe when see someone asking about a pricing model and the answer is always, "figure out your expenses and then mark up your price to cover your overhead and profit". That's just lazy and bad advice.
> 
> The market doesn't work like that. Let's say you build a house and need to sell it at $900k even though it appraised for less because you have a nice office, employees that waste time, nice new equipment and a new truck. Does the appraisal or the comparables in the neighborhood not matter?
> 
> Does the appraisal not matter when someone refinances their house to do a major renovation and the bank will only loan what the appraiser came in at?
> 
> The market always determines price, always. Some guys get more money than others, but people aren't stupid. They aren't going to pay you extra just because you need extra. That would be charity.
> 
> You need to be competitive. You need to hammer on YOUR costs to keep them down. You need to find out what others are charging in order to be in the ball park.
> 
> Maybe you will find that you are not charging enough. Maybe you will be on the low end of the generally acceptable rates that most people charge.
> 
> But the market ALWAYS decides what price is acceptable, you are giving out poor advice if you think differently.
> 
> The idea is to get as much as you can relative to the type of quality you offer so that the customer feels that they got their money's worth, doesn't feel cheated, and recommends you to their friends. Your costs and overhead always need to be brought down in line to be competitive in the marketplace so that you don't feel cheated at the end of the job, not the other way around.


I don't think there was a club attacking you... Alls I said is that you don't make sense and Angus just told you that you are plain wrong:laughing:
I didn't read your full last post because 1/2 way through it I realized that it was the same crappy rant as your other ones :whistling:


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## J L

skcolo said:


> *I visit this site regularly. I never post much because of the good ol boy club here that attacks when you don't concur with their opinions as they pick and choose what part of a post to go after, without reading the whole thing. *
> 
> For the most part, I like the advice on this site. I admit that I leave here with better information than when I started, usually. But I cringe when see someone asking about a pricing model and the answer is always, "figure out your expenses and then mark up your price to cover your overhead and profit". That's just lazy and bad advice.
> 
> The market doesn't work like that. Let's say you build a house and need to sell it at $900k even though it appraised for less because you have a nice office, employees that waste time, nice new equipment and a new truck. Does the appraisal or the comparables in the neighborhood not matter?
> 
> Does the appraisal not matter when someone refinances their house to do a major renovation and the bank will only loan what the appraiser came in at?
> 
> The market always determines price, always. Some guys get more money than others, but people aren't stupid. They aren't going to pay you extra just because you need extra. That would be charity.
> 
> You need to be competitive. You need to hammer on YOUR costs to keep them down. You need to find out what others are charging in order to be in the ball park.
> 
> Maybe you will find that you are not charging enough. Maybe you will be on the low end of the generally acceptable rates that most people charge.
> 
> But the market ALWAYS decides what price is acceptable, you are giving out poor advice if you think differently.
> 
> The idea is to get as much as you can relative to the type of quality you offer so that the customer feels that they got their money's worth, doesn't feel cheated, and recommends you to their friends. Your costs and overhead always need to be brought down in line to be competitive in the marketplace so that you don't feel cheated at the end of the job, not the other way around.



This forum has rules and guidelines. They are clearly defined. So it's not a "good ol' boy club" going after you. It's upholding the guidelines set forth by Nathan. If you don't like it, so sowwy grasshoppa'.

The market has nothing to do with my price. My clients decide if my price is acceptable based on the amount of value they believe they will receive. I don't care what my competition bids. I'm regularly $5k over my competition on a $20k job, and yet I'm still awarded the contract. Am I ripping them off or are they just giving me the extra for charity? Nope. My pricing is fair based on my costs and markups. I live modestly within my means and keep as low an overhead as possible to run an honest operation (W-2 employees and work comp).

From what I hear you saying, using an example, if a drywall contractor was charging $1/sf and was just breaking even, and then the competition begins charging $.85/sf, he should lower his rates to stay competitive? Absolutely not. He'll be bankrupt in no time. On occasion one may have to lower their price to get a job to keep their crews working. I'm not talking about that. I'm talking about you saying that you should lower your price to stay competitive. It's a bad argument and will result in more contractors whoring up our industry with low prices and shoddy work as well as put more contractors in financial jeopardy which always results in someone getting screwed - suppliers, subs, clients.

From what I've seen, using going rates increase the rate at which you'll be out of business.


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## RobertCDF

If there is a range then we should answer all "Going rate" questions with "Between $1 SQ ft and $100,000 Sq Ft" But how is that any more helpful than L+M+O+P=C...? There are guys who LIVE in a truck bidding work, they clearly have the lowest overhead of all of us, why should I try to match his price? Do I want to live in a truck? I will if match his price OR even come within 20% of his price. But I guarantee he does not build the project we build. 

We are usually the highest sometimes by 20-30%, however we have been the lowest by 10% (I honestly think the other guy did not want the project so he marked it HIGH) If my guys hadn't made 2 rookie (moronic mistakes) I would have been *very* happy with how that project turned out, in the end it was still good.


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## skcolo

" The market has nothing to do with my price. The client's do" Funny. I guess your clients must be relatives, and not the market.

"I charge what I want". Code for: you don't want much.

You guys are kidding yourselves. Good luck. Maybe it makes you feel better to think you are in control of the marketplace. And by the way, hack pricing doesn't count unless someone is looking for a hack. I don't consider someone who loses money on every job "the market", but drywall hanging in Denver has a very narrow range of acceptable pricing. Get very far out of that range and you will have a long vacation. It's really that simple.


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## Mike-

skcolo said:


> " The market has nothing to do with my price. The client's do" Funny. I guess your clients must be relatives, and not the market.
> 
> "I charge what I want". Code for: you don't want much.
> 
> You guys are kidding yourselves. Good luck. Maybe it makes you feel better to think you are in control of the marketplace. And by the way, hack pricing doesn't count unless someone is looking for a hack. I don't consider someone who loses money on every job "the market", but drywall hanging in Denver has a very narrow range of acceptable pricing. Get very far out of that range and you will have a long vacation. It's really that simple.


Good posts. I feel the same way in this my friend but you can't ask here. It has that don't ask,don't tell rule. 

I just have a few things on my mind in this regard. When it comes to an overall Reno, I will price accordingly for the overall factors but when i get into a small single trade type work,that I am unfamiliar with... The going rates... It can be daunting to price within what other trades are pricing.


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## J L

skcolo said:


> drywall hanging in Denver has a very narrow range of acceptable pricing. Get very far out of that range and you will have a long vacation. It's really that simple.


Atlanta is no different. That's why my drywall guy got out of doing work for builders/remodelers and works directly for homeowners making 3 times what he used to make.

We each control our own destiny. I don't work for other builders prices just because it's the "going rate". If I did, I wouldn't have enough money to get by. I do charge what I want because I know my numbers inside and out and exactly what I need to make a profit. 

I say the market doesn't determine price, my clients do because each client is different. Each client is looking for some type of value. Our clients understand our value and our price tag associated with that value. If they don't they weren't our target market anyway and I should have done a better job screening them.


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## Tech Dawg

skcolo said:


> " The market has nothing to do with my price. The client's do" Funny. I guess your clients must be relatives, and not the market.
> 
> "I charge what I want". Code for: you don't want much.
> 
> You guys are kidding yourselves. Good luck. Maybe it makes you feel better to think you are in control of the marketplace. And by the way, hack pricing doesn't count unless someone is looking for a hack. I don't consider someone who loses money on every job "the market", but drywall hanging in Denver has a very narrow range of acceptable pricing. Get very far out of that range and you will have a long vacation. It's really that simple.


Last I checked, I'm the one that sits down and calculates the estimate. If the HO doesn't like it or thinks its too high then they can choose cheaper products if they want but the labor etc... doesn't change. I simply don't do a job because the HO has a price in their head and they think that I should do the job for their price offer so that puts me in control of the market. If another contractor is cheaper or more its typically the same situation just a different price. The Market and the Economy is two different monsters...
Good luck with your pricing theory :thumbup:


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## Mike-

RemodelGA said:


> Atlanta is no different. That's why my drywall guy got out of doing work for builders/remodelers and works directly for homeowners making 3 times what he used to make.
> 
> We each control our own destiny. I don't work for other builders prices just because it's the "going rate". If I did, I wouldn't have enough money to get by. I do charge what I want because I know my numbers inside and out and exactly what I need to make a profit.
> 
> I say the market doesn't determine price, my clients do because each client is different. Each client is looking for some type of value. Our clients understand our value and our price tag associated with that value. If they don't they weren't our target market anyway and I should have done a better job screening them.


Good post. 

What happens when you do bid, they like your work, but have 5 other bids that are much lower?


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## BrianNNOLA

jawtrs said:


> We mostly do high end renos and truly full service remodeling. We aren't builder's who remodel because it's slow. We used to be custom home builders who put in the time and effort to become true remodelers. We are the guys you want working in an occupied home. There aren't many of us around, we charge acordongly.
> 
> The going rate is for people who can't sell themselves as better than your average Joe, imo. Or for those who dont have a great skill set.Going rate means average rate.
> 
> I believe I'm far above average.


Great point made there!!! This is the class where I fit in, and the type of client I prefer to work for, which is about QUALITY, NEATNESS, and PROFESSIONALISM in the WORK PLACE. Most contractors are accustomed to working in vacant homes, speedy building, cutting cost but usually end up with flaws everywhere and a punch list which takes months to complete. My typical client appreciates the idea of me being a one-man do all remodeler who thinks ahead of the next craft operation to perform each step with consideration for the next, unlike specific crafts who leave the next trade in a trick bag, only concerned for their task at hand. I've seen so much of that in typical track homes, and while those homes look good on the surface enough to get a buyer, that buyer often ends up hiring a remodeler to correct issues a few years down the road.
This kind of knowledge only comes from years of experience and skill in the industry, and knowing the proper procedures step by step to achieve quality and efficiency. I rarely ever have a punch list since I pay close attention to details as I go along. This gets the client (who lives in the house) back to normal living much sooner.:thumbup:


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## BrianNNOLA

Mike- said:


> Good post.
> 
> What happens when you do bid, they like your work, but have 5 other bids that are much lower?


Then the client must decide;
Do I want to contend with headaches to save a few bucks.
OR
Do I want to go about my own business and feel confident of who I've hired.

That is the difference in price. All too often, a client is only concerned with price but doesn't realize the other tangibles that go along with saving a few bucks until after the fact. I've even seen clients that hope for these instances so they don't have to pay. I try to avoid those types of clients.
My typical rule of thumb is; IF the client has very expensive taste in materials but ask how much the labor cost, then that client probably can't afford me.


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## Tom M

All of us learn something new all the time and when someone is trying figure how long something may take they are checking a going rate to see if they are in line. This will only really ever help in a new construction atmosphere. I dont see the harm. You can easily under estimate or over estimate your bid and lose the opportunity to gain the experience. 
There is a lot of good advice here on how to learn or properly consider the expenses of coming up with a cost for your services. In the real world the going rate or knowing these cost will help very little. Its all about the knowing your abilities and considering the obsticles that can kill you on job .....that is how you succeed.
If your a single trade service subcontractor you have to be in line with going rates or you are kidding yourself. If your remodeling privately then its open ended. People will pay more, it could the referral, the quality, the timely response or your smile.


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## BamBamm5144

Let's allow pricing threads. We give them what we would charge then they promise to come back in a year to tell us how business is.


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## J L

Mike- said:


> Good post.
> 
> What happens when you do bid, they like your work, but have 5 other bids that are much lower?


Good question. My first response is why am I bidding a job against 5 other guys? That means I didn't interview the client well enough over the phone. One of our qualifying questions is "how many contractors will you be discussing this project with?" If they say we're getting 5-6 bids, we'll pass because typically this means they're shopping and we're not going to win at that game. If they're talking to 2-3, that's fair and we'll be there. 

Anyways, back to your question. When they tell you they have 5 other bids and they're all lower, you need to go into sales mode. They're talking with you and being honest. This is huge. THEY WANT TO BE SOLD!!! You need to review exactly why your price is higher: more detailed scope, more competent subs, guaranteed completion dates, no nitpicky change orders, etc. Review your selling points and then start discussing scheduling. 

You should have asked during the initial phone interview or during the first meeting when they're looking to have the project done. Based on that information, assuming your schedule can accommodate their project, tell them that you're going to be signing a good size project later in the week that wouldn't allow you to start their job for a month or two - whatever your typical project length is. Then tell them if they're willing to sign today, you can fit them in and get them started right away. Then ask them to sign the contract.

You won't get every project. I can remember a handful of proposals this year where we were the highest bidder and the clients really wanted to work with us but they wanted us to lower our price (usually something substantial). We just tell them thanks but no thanks. But this year I also heard many times that we were the highest bidder but we have a lot of confidence in your company that it will be done right the first time and then they signed the contract. 

We even had one client tell us he ran the numbers and we should be at $12k when we bid at $16k. I told him our price was firm and I was certain I knew exactly what it took to complete the project. A few days later he called and asked me to come by so we could sign the contract at my price. We did the work, and then 3 months later he had us back to do another $22k project. :thumbup:


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## Mike-

RemodelGA said:


> Good question. My first response is why am I bidding a job against 5 other guys? That means I didn't interview the client well enough over the phone. One of our qualifying questions is "how many contractors will you be discussing this project with?" If they say we're getting 5-6 bids, we'll pass because typically this means they're shopping and we're not going to win at that game. If they're talking to 2-3, that's fair and we'll be there.
> 
> Anyways, back to your question. When they tell you they have 5 other bids and they're all lower, you need to go into sales mode. They're talking with you and being honest. This is huge. THEY WANT TO BE SOLD!!! You need to review exactly why your price is higher: more detailed scope, more competent subs, guaranteed completion dates, no nitpicky change orders, etc. Review your selling points and then start discussing scheduling.
> 
> You should have asked during the initial phone interview or during the first meeting when they're looking to have the project done. Based on that information, assuming your schedule can accommodate their project, tell them that you're going to be signing a good size project later in the week that wouldn't allow you to start their job for a month or two - whatever your typical project length is. Then tell them if they're willing to sign today, you can fit them in and get them started right away. Then ask them to sign the contract.
> 
> You won't get every project. I can remember a handful of proposals this year where we were the highest bidder and the clients really wanted to work with us but they wanted us to lower our price (usually something substantial). We just tell them thanks but no thanks. But this year I also heard many times that we were the highest bidder but we have a lot of confidence in your company that it will be done right the first time and then they signed the contract.
> 
> We even had one client tell us he ran the numbers and we should be at $12k when we bid at $16k. I told him our price was firm and I was certain I knew exactly what it took to complete the project. A few days later he called and asked me to come by so we could sign the contract at my price. We did the work, and then 3 months later he had us back to do another $22k project. :thumbup:


I hear what you are saying. Makes sense. When a HO is infiltrated with a few other quotes, has seen a ballpark estimate from other contractors, in essence they have become armed and prepared with the market value of the work. Then you come in with your price and you ate way higher than the rest. The HO asks why you are so much higher than the rest and you say... My work blah blah blah and my referals Nd completed projects in the past and so on. Now you are fighting an uphill battle. Instead, being prepared for what the rates around you are and doing your homework to see what the "going rates" in your area are and what the work is worth to the HO and what you need for your business. 

To me, that is a huge plus in landing that job. Now if shortage of work is plaguing you, you will have to play their game and drop your price, thus giving all power to them and when extras do come up, you won't get what's is worth. 

I agree with everything you are saying. I guess each job really depends on is it worth it to you financially or for a future reference and future business exposure.


----------



## angus242

skcolo said:


> But the market ALWAYS decides what price is acceptable, you are giving out poor advice if you think differently.


You could not be more incorrect.

Example. I do not charge per sq/ft because that model doesn't work for me but since you mentioned it, I'll use it.

Say I charge $5/sq ft to install tile. On January 1st, tile and installation costs increase 20%. My insurance increases by $400 for the year. And finally, fuel costs jump $50 per month. You're saying I cannot raise my prices because the market will only bare $5/sq ft. So my alternatives are to make less money or go out of business? That's it?

You are suggesting inflation has nothing to do with pricing?

What about my example of gasoline pump pricing. How does the market decide what you pay? Do you decide what you'll pay at McDonalds for a hamburger or do they tell you what you have to pay if you want their product?

A going rate number to me is no different than unicorns. They might be fluffy and glittery but they are fictitious in the real world.


----------



## blu

its because your 5 buck a foot was inflated during the boom time. you were getting 5 bucks for a 4 dollar job/ supply and demand. you only have an understanding of half of the equation. so now you take the 4 bucks because your competition understands and has adjusted accordingly. its your competition that will continue to stay in biz. yoiu will not.


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## Tech Dawg

Woah is me 

All the recent argument here from skcola is just a situation to stir the pot. To me, anyone that claims they don't post here because of the mean guys in the cool crowd is way off base. Since when will a forum of contractors, mostly men, get along with each other like Wally and the Beaver :laughing:
I've seen quite a few disgruntled people here before... 
I have never seen someone so wrong with a claim and keep trying to back it up, over and over and over again...but we all have opinions and entitled to it so that's great!

Grow up, grow a pair
Merry christmas and Happy New Yair

:laughing::laughing:
:rockon:


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## angus242

I wasn't tiling during the boom.


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## KennMacMoragh

Tech Dawg said:


> Woah is me
> 
> All the recent argument here from skcola is just a situation to stir the pot. To me, anyone that claims they don't post here because of the mean guys in the cool crowd is way off base. Since when will a forum of contractors, mostly men, get along with each other like Wally and the Beaver :laughing:
> I've seen quite a few disgruntled people here before...
> I have never seen someone so wrong with a claim and keep trying to back it up, over and over and over again...but we all have opinions and entitled to it so that's great!
> 
> Grow up, grow a pair
> Merry christmas and Happy New Yair
> 
> :laughing::laughing:
> :rockon:


It's not a right or wrong, it depends what you mean by 'market'. If you asked "how much will someone pay you?". I'd say it's how much trust you can build up with your customer. I agree your overhead costs does not determine how much someone will pay you, they don't care about that. Trust is the number one reason a person will choose you over another contractor, price is about #7 on the list.


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## Tech Dawg

KennMacMoragh said:


> It's not a right or wrong, it depends what you mean by 'market'. If you asked "how much will someone pay you?". I'd say it's how much trust you can build up with your customer. I agree your overhead costs does not determine how much someone will pay you, they don't care about that. Trust is the number one reason a person will choose you over another contractor, price is about #7 on the list.


Hey whatever... Overall this thread really does suck :laughing: that's why I never show up... Its worse than the P&R but Nathan should make a 250 post minimum for this one to since low posters like to gripe here but don't add much insight but that's my opinion so I know I'm right 
I'm not throwing anything at you Kenn, just so you know and I'm definately not coming back to this thread.

I'm going back over to the tile section and convince all the guys to promote 4 bux a square foot like Lowes so we can make stellar amounts of cash on our new price venture :lol:


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## blu

me neither!!


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## skcolo

angus242 said:


> There's your safety word. This can be debated for hours and hours. You can't really have a going rate and a range. The range you speak of is really just the diversity of what each contractor's pricing is.
> 
> Pricing needs to be realistic so you can stop the 1000/sq ft pricing argument. It's not like any of are driving Bentleys to our summer homes.
> 
> I do think it's not a great idea to advise folks to let market determine their pricing. There are enough of us here that know better and don't work that way. My customers don't regulate my pricing, suppliers and overhead does.
> 
> If my tile supplier raised their prices 20% next month, my pricing goes up. If my insurance company raises their rates, my pricing goes up. When fuel costs rise, my price goes up. If demand for my service lowers how can I stay in business by lowering rates? I can't. What I need to do is market the VALUE of my service. It's not my fault that all of the other aspects of business has changed. The customer will ultimately pay for that service.
> 
> Did you stop buying gas when it was $5/gal? Probably not. You pay what you have to for the service you want.





angus242 said:


> You could not be more incorrect.
> 
> Example. I do not charge per sq/ft because that model doesn't work for me but since you mentioned it, I'll use it.
> 
> Say I charge $5/sq ft to install tile. On January 1st, tile and installation costs increase 20%. My insurance increases by $400 for the year. And finally, fuel costs jump $50 per month. You're saying I cannot raise my prices because the market will only bare $5/sq ft. So my alternatives are to make less money or go out of business? That's it?
> 
> You are suggesting inflation has nothing to do with pricing?
> 
> What about my example of gasoline pump pricing. How does the market decide what you pay? Do you decide what you'll pay at McDonalds for a hamburger or do they tell you what you have to pay if you want their product?
> 
> A going rate number to me is no different than unicorns. They might be fluffy and glittery but they are fictitious in the real world.


Really, I never mentioned psf for anything.

Really, I could care less what you do.

I can't help it that you don't understand economics and market clearing prices. 

But you are stuck in a supply and demand method of setting prices regardless of what you think, otherwise you could charge whatever you want, and you can't. You can pretend, I suppose, just like the others who think they can charge what they want. Good luck.


----------



## Jaws

skcolo said:


> Really, I never mentioned psf for anything.
> 
> Really, I could care less what you do.
> 
> I can't help it that you don't understand economics and market clearing prices.
> 
> But you are stuck in a supply and demand method of setting prices regardless of what you think, otherwise you could charge whatever you want, and you can't. You can pretend, I suppose, just like the others who think they can charge what they want. Good luck.


 We aren't stuck, you are.

No one said you can charge what you want, just don't care what others charge. Obviously some clients are willing to spend more than others on getting what they want.


----------



## Tech Dawg

jawtrs said:


> We aren't stuck, you are. January 15 I'm starting a 300,000 addition and the next bid was 263,000. THAT is supply and demand. :clap::clap:
> 
> No one said you can charge what you want, just don't care what others charge. Obviously some clients are willing to spend more than others on getting what they want.


He would spend a lot less time typing by copy/paste the same post over and over and over and over again because its the same thing... Congrats on the 300k addition :clap:


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## Jaws

Tech Dawg said:


> He would spend a lot less time typing by copy/paste the same post over and over and over and over again because its the same thing... Congrats on the 300k addition :clap:


I was supposed to start a month ago, but he was in Africa hunting, and wanted to be here for the "ground breaking" Looking forward to it, its a huge trophy room. Ill be posting pics.


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## Tech Dawg

jawtrs said:


> I was supposed to start a month ago, but he was in Africa hunting, and wanted to be here for the "ground breaking" Looking forward to it, its a huge trophy room. Ill be posting pics.


Sweet! Start a picture post. Can't wait to see the project


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## Jaws

Tech Dawg said:


> Sweet! Start a picture post. Can't wait to see the project


 Me too. :thumbup::thumbup:


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## skcolo

You guys win. Really, it's not worth the argument.

Sorry for overreacting.

Good luck with your addition and Merry Christmas.


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## AContractorWife

I searched the web and made a list of all the sq. ft. prices I found for remodeling bathrooms, kitchens, basements, etc. My husband and I are really frugal so when he finishes a bid, he looks at it as being expensive. I being the bookkeeper know that he is not charging enough. So I made the list so I could tell him to charge more and show him that charging what we need is not going to make the job over-priced. We made it through our first year in business, but I want to have a profit in 2012 (not just survive).


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## ohiohomedoctor

AContractorWife said:


> I searched the web and made a list of all the sq. ft. prices I found for remodeling bathrooms, kitchens, basements, etc. My husband and I are really frugal so when he finishes a bid, he looks at it as being expensive. I being the bookkeeper know that he is not charging enough. So I made the list so I could tell him to charge more and show him that charging what we need is not going to make the job over-priced. We made it through our first year in business, but I want to have a profit in 2012 (not just survive).


Well then throw the list out.


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## AContractorWife

ohiohomedoctor said:


> Well then throw the list out.


Why?


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## ohiohomedoctor

Apparently you did not read this thread :whistling:


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## angus242

AContractorWife said:


> Why?


Because someone elses pricing, from the internet, does *nothing* to help cover _your_ costs of doing business.


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## AContractorWife

angus242 said:


> Because someone elses pricing, from the internet, does *nothing* to help cover _your_ costs of doing business.


I know our costs of doing business. I know that to cover our labor costs, overhead, and profit we need to charge $XX.00 an hour, but my husband insists on charging $5 an hour less and no markup on materials or subs. I made the list to show him that we could charge the hourly rate that we need to and maybe even a markup on materials and subs and still be on the low range. 

This year we brought in $15 less per hour than we needed to and he was happy with that -- as for me I've been stressed the whole year. 

He is not going to use the list to make his bids. He has kept a record through the year of how long it takes him to do each part of a job and adjusts his future bids accordingly. He puts hours into making bids, he just doesn't charge enough for his work.


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## angus242

You should smack him in his sleep :laughing:

Tell him he might be happy but mama's not :no:


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## WildWill

AContractorWife said:


> I know our costs of doing business. I know that to cover our labor costs, overhead, and profit we need to charge $XX.00 an hour, but my husband insists on charging $5 an hour less and no markup on materials or subs. I made the list to show him that we could charge the hourly rate that we need to and maybe even a markup on materials and subs and still be on the low range.
> 
> This year we brought in $15 less per hour than we needed to and he was happy with that -- as for me I've been stressed the whole year.
> 
> He is not going to use the list to make his bids. He has kept a record through the year of how long it takes him to do each part of a job and adjusts his future bids accordingly. He puts hours into making bids, he just doesn't charge enough for his work.



I don't know if you're already doing this or not but you should sell a few of those jobs. When I deliver a contract I sit with the owners and look them in the face and go over every detail in the contract, including price. If I feel like I'm charging them too much, I couldn't stand sitting there. If you do sell the jobs at a higher rate, well then your problem is solved.

I have been to jobs that I knew were going to be costly and cringed while giving the bid waiting for the HO to throw me out. Funny thing is, it's never happened and they almost always accept my bid.:thumbsup:


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## AContractorWife

No I haven't sold any jobs -- for two reasons:

1- I am no good at construction talk. I can talk all day long about budgets or anything else to do with money management. But don't ask me how to use a level. 

2- I clam up, but he is great at talking to people. I can't talk face to face. I get too scared. Could never be a saleswoman.


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## J L

What's your closing ratio? If you're closing 9/10 jobs, it's not because your husband is the best salesman (although he may be very good), it's because the price is very low. I've been there. My first 2 years I just survived.

You are in business to make money. Not marking up the subs or material is insane. What happens if a board get's miscut, or if the takeoff was a few short? Where does this money come from?

Do you guys do a review of project expenses versus the bid after each job? If not, you really should. 

So please, from the rest of the contracting community, do yourself and us a favor and raise your rates.


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## AContractorWife

It's 9 1/2 out of 10. Every person who has received his bid has signed, but we had 2 jobs that he lowered the price to get.  I don't want to have another just survive year; I want to have money leftover at the end of our 2nd year.

He compares his hours, but I don't think he compares the actual material expenses. We will start doing a full review of bid vs. actual costs right away. If I'm sitting next to him when he finishes a bid I always ask how many hours it is for his schedule, I'll need to write on our copy of the bid the total hours cost, materials, and subs costs. Then when I have all the receipts I can compare the materials cost for him.

Thanks RemodelGA


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## BamBamm5144

AContractorWife said:


> It's 9 1/2 out of 10. Every person who has received his bid has signed, but we had 2 jobs that he lowered the price to get.  I don't want to have another just survive year; I want to have money leftover at the end of our 2nd year.
> 
> He compares his hours, but I don't think he compares the actual material expenses. We will start doing a full review of bid vs. actual costs right away. If I'm sitting next to him when he finishes a bid I always ask how many hours it is for his schedule, I'll need to write on our copy of the bid the total hours cost, materials, and subs costs. Then when I have all the receipts I can compare the materials cost for him.
> 
> Thanks RemodelGA


Yikes. I thought my 3 out of 10 was good!


----------



## BrianNNOLA

*About bath & kitchen remodeling*



AContractorWife said:


> I know our costs of doing business. I know that to cover our labor costs, overhead, and profit we need to charge $XX.00 an hour, but my husband insists on charging $5 an hour less and no markup on materials or subs. I made the list to show him that we could charge the hourly rate that we need to and maybe even a markup on materials and subs and still be on the low range.
> 
> This year we brought in $15 less per hour than we needed to and he was happy with that -- as for me I've been stressed the whole year.
> 
> He is not going to use the list to make his bids. He has kept a record through the year of how long it takes him to do each part of a job and adjusts his future bids accordingly. He puts hours into making bids, he just doesn't charge enough for his work.


The bottom line is; If you can charge whatever and get the work, more power to ya, but I know when I first started out 20 yrs ago, I'd work for $10/hr until I gained some clients and leads, then up my scale year after year. Now I charge $25/hr and been that way for close to 10 years now with the recession and competition. If I can make around $50k / yr, I can live pretty happily. Making much more only means paying uncle Sam half of anything on top of that, so my clients are happy, I'm happy, and my clients get full turn-key service without the need to call in other tradesmen or crafts. I prefer to work by the hour since it CMA where I don't lose, but sometimes people want a proposed bid, and then I set it much higher, like figure my time plus one half of that. If I get it, fine. If not, at least I don't lose. Materials I always either have the client purchase them or sell them at cost since otherwise, you get into inventory issues and tax issues otherwise, and I'd rather keep tax returns simple by using the "cost of goods sold" on a schedule C. Besides, clients can be particular about fixtures and trim.


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## AContractorWife

Okay we had the disagreement again. He just finished a bid, I told him that he needed to add another $735 to the labor cost. Didn't go so well. 

"We need to be competitive" If we are giving people bids and they say yes without getting other bids I don't think we have a problem being competitive. 

"I gave them an estimate, when she asked how much to budget, and the bid came to what I told them. I can't make it higher or they'll say no." :furious:

What can I say? I don't want him to sale less than 7/10 but I can't get him to adjust the price at all.


----------



## J L

AContractorWife said:


> Okay we had the disagreement again. He just finished a bid, I told him that he needed to add another $735 to the labor cost. Didn't go so well.
> 
> "We need to be competitive" If we are giving people bids and they say yes without getting other bids I don't think we have a problem being competitive.
> 
> "*I gave them an estimate, when she asked how much to budget, and the bid came to what I told them. I can't make it higher or they'll say no." :furious:*
> 
> What can I say? I don't want him to sale less than 7/10 but I can't get him to adjust the price at all.


Stop doing that for starts. No ballpark numbers. I always respond with I'll need to do my measurements, take-offs, and then figure out labor and materials costs, so I can't give you a ballpark, sorry.

Being competitive is a load of crap. If you're a new construction sub, you'll need to be competitive. If you're bidding commercial against 25 other companies, you need to be competitive. But when bidding directly to a homeowner, you need to sell your value. You need to explain to them exactly why you cost so much. For many of us here it's normal for us to be the highest bid. Are we ripping the customer off? Absolutely not! We know what it takes to run the job, run the company, and make a PROFIT to keep the company growing and ensure it's around in a few years. Profit is not a dirty word. It's what keeps companies thriving.

Bam's 3/10 closing number is normal from cold leads - meaning ones that found you online or through some marketing campaign. From those sources, we close about the same. Lately we've been working for primarily referrals and we close 7/10 of those.

I'd challenge your husband to add that extra $735 for labor and just see what happens. If they give him resistance, he can always give them $300 off to get them to sign today, and you guys will still end up with more money in your pocket at the end of the day. But my guess is most clients wouldn't bat an eye at the additional cost.

There will come a time in the future when he'll tire of working for pennies and never having anything left over and he'll begin to raise his rates. My hope is that he'll heed the words and experience of other contractors who have been there and raise his rates sooner rather than later.


----------



## summithomeinc

RemodelGA said:


> Stop doing that for starts. No ballpark numbers. I always respond with I'll need to do my measurements, take-offs, and then figure out labor and materials costs, so I can't give you a ballpark, sorry.
> 
> I agree 100%. every time I have "ballparked" a number It's off. Sometimes a little. Usually alot. The reply if the true number is higher is allways "but you said it would be XX.00 and now it's ***.00. Why did you raise the price" Better to do your measurements, find out your costs ect. Then give your price.


----------



## Tiger

AContractorWife:

Since you are the bookkeeper, try calculating the number of hours you and your husband worked in the business in 2011 and figure your the hourly rate you were paid. Maybe that number will get through. If you don't like your hourly pay I suggest you stop doing the bookkeeping and look for a better paying job.

A little blunt maybe. I had some bad years but my wife didn't work for me for free. I don't know what that calculation will come to but you may be interested to see how much less it is than a carpenter or bookkeeper in the area earns.


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## kevjob

The race to the bottom continues!!


----------



## DavidC

BrianNNOLA said:


> This is all I've known for 20+ years, so changing industries at this point in my life is NOT an option. What I offer and do for clients keeps me in business, and *if it means undercutting other contractors*, oh well, its their problem, not mine. In this economy, *its survival of the fittest*, and *home owners are becomming more and more savvy of what a fair price *and cost to build is. Of course there is a few clients out there where the sky is the limit and pay whatever, but there are many more contractors in the industry. Do the math over time. Its not a question of who is *"real" (or should that be "greedy")* but rather a question of who wants to keep working and *providing for their family*. Good luck keeping up the pace in the long run.
> 
> I've seen many more big time union contractors fold while many more non-union contractors spring into business and take control of the industry. Thats been the trend in the commercial industry, and well as the residential industry with home owners.


I am now at over 30 years in the business but I was also at over 20 years in when I realized that the biggest block between me and higher prices was sitting in my chair.

Yep, me.

Believe it or not, it was my thinking that dictated having to undercut other contractors to continue to get the work. I've since come to realize that I was simply buying my work for the sake of having work to do. It was not profitable and I lamented over and over how I could not be making any money with all of this work.

Until I admitted that it was me in the way, there was no advice that I could take because I knew "it'll never work that way around here".

It is true that HO's are getting more educated before they buy. They are getting a better idea of what a fair price is and are becoming increasingly wary of the lowest price. Once I was able to admit that it was me in the way I was able to study the appropriate materials and adjust my rates to where they should be. The confidence that you are at the proper rates for you will come with practice and then you will discover that it's not that different than selling on price. You're still trying to convince the client that you are the best buy for the money.

It is survival of the fittest. Having a lot of work to do at break even pricing or less is not a sign of fitness. 

Until I admitted that it was me in the way, there was no sense in reading anything about how to set my rates realistically and for a profit. You see, I knew that "they'll never pay that much in my area".

"Real", as you put it, means that your pricing reflects your business model and provides for the company so that there are funds for you to withdraw so that you can provide for the family. Greedy is how it seems to those that can't see who is in the way of their success so don't understand yet.

Providing for the family is best accomplished by tending to your business so it produces the best that it can. 

Seriously, if you have a need to work for the lowest rates or even free you should check into community service organizations that need volunteers with skills. If you would rather run a profitable business that provides for your family than you have to realize that your business and your clients are not two separate entities working against each other. They are a team that works well together for mutual benefit. 

Look real hard at the real obstacle in your path and set to work on clearing it.

Good Luck
Dave


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## Shark49

Good points. I find that my pricing is "middle of the road" so to speak, is fair and I have always felt my quality of work is in the higher end. Its true we are constantly competing against the "pickup truck petes" who will do it for nothing because they dont have insurance, are not licensed, do poor quality work and very often just run off with peoples money.

I really dont want to debate whether i should do it or not. I have concluded that its necessary and fair and want to know how others do it.


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## kevjob

It still amazes me that that contractors will say "thats too much to charge" and then cant pay bills that month or buy materials or pay their subs. 

Nowhere else in any business do I see the mentality of charge as little as possible to "win" the job and then wear it like a badge of honor. 

The average contractor makes 28k a year. That is chump change for how much liability we take on. 

It you want to charge minimum wage then do it, but tell us that we are over charging or you cant charge that much. That is BS. 

I like making profit on every single job, so do my clients when they have a warranty issue a year down the road and I am still in business to cover that warranty. 

If all you get is cheap people, the problem is YOU and your marketing, not the guy charging too much.


----------



## DavidC

Shark49 said:


> Good points. I find that my pricing is "middle of the road" so to speak, is fair and I have always felt my quality of work is in the higher end. Its true we are constantly competing against the "pickup truck petes" who will do it for nothing because they dont have insurance, are not licensed, do poor quality work and very often just run off with peoples money.
> 
> I really dont want to debate whether i should do it or not. I have concluded that its necessary and fair and want to know how others do it.


Shark49, this is how I have done it. I read, including the test projects, Michael Stone's, "Markup & Profit: A Contractors Guide". In fact I made sort of a self study program out of it. As a result my company now is one of the higher priced firms in the area. And our clients seem to agree that it is money well spent.

It's not a magic elixir or one dose cure. You can still do an amazing job at screwing up an estimate. But it gives you solid ground to build on.

I also studied the words of another who's name escapes me now. His mantra is capacity based pricing, where all of your overhead and most of your profit are included in your hourly rate. Materials are only marked up for profit. Takes a lot of frustration out when you go from a materials rich job to a mostly labor job and wonder where the money went.

Also a good leveler for labor only (as in some sub contract work) jobs.

Hope that helps.

Good Luck
Dave


----------



## AContractorWife

DavidC said:


> I am now at over 30 years in the business but I was also at over 20 years in when I realized that the biggest block between me and higher prices was sitting in my chair.
> 
> Yep, me.
> 
> Believe it or not, it was my thinking that dictated having to undercut other contractors to continue to get the work. I've since come to realize that I was simply buying my work for the sake of having work to do. *It was not profitable and I lamented over and over how I could not be making any money with all of this work*.


You used to sound just like my husband does "Well, I didn't make enough on this job." He has said that about every single job he has done. There's only so many hours in a week you can work. If you are working almost 50 hours a week and not making enough there is something wrong.



> *Until I admitted that it was me in the way, there was no advice that I could take because I knew "it'll never work that way around here".*
> 
> It is true that HO's are getting more educated before they buy. They are getting a better idea of what a fair price is and are becoming increasingly wary of the lowest price. *Once I was able to admit that it was me in the way I was able to study the appropriate materials and adjust my rates to where they should be.* The confidence that you are at the proper rates for you will come with practice and then you will discover that it's not that different than selling on price. You're still trying to convince the client that you are the best buy for the money.
> 
> It is survival of the fittest. Having a lot of work to do at break even pricing or less is not a sign of fitness.
> 
> *Until I admitted that it was me in the way, there was no sense in reading anything about how to set my rates realistically and for a profit. You see, I knew that "they'll never pay that much in my area".*


I bought Michael Stone's Markup & Profit Book and Tapes. Trying to get him to listen to the tapes is like pulling teeth -- he has listened to 5 of the 10 sessions. I haven't even tried reading the book to him and we have had them since October. I hear "If I raise my prices at all I won't get any work" and "When was that made? 2000!, oh it's not relevant anymore." 



> *"Real", as you put it, means that your pricing reflects your business model and provides for the company so that there are funds for you to withdraw so that you can provide for the family.* Greedy is how it seems to those that can't see who is in the way of their success so don't understand yet.
> 
> Providing for the family is best accomplished by tending to your business so it produces the best that it can.


I'm trying to convince him to use the real pricing that we need and not just a number he pulled out of thin air. I'm a "bean counter" so I have looked over the numbers over and over, yet they haven't changed. I know that Our Paycheck + Overhead + Profit = Hourly Rate. He thinks the hourly rate is "Well we want to make $$ an hour so that sounds good."


----------



## J L

AContractorWife said:


> You used to sound just like my husband does "Well, I didn't make enough on this job." He has said that about every single job he has done. There's only so many hours in a week you can work. If you are working almost 50 hours a week and not making enough there is something wrong.
> 
> 
> 
> I bought Michael Stone's Markup & Profit Book and Tapes. Trying to get him to listen to the tapes is like pulling teeth -- he has listened to 5 of the 10 sessions. I haven't even tried reading the book to him and we have had them since October. I hear "If I raise my prices at all I won't get any work" and "When was that made? 2000!, oh it's not relevant anymore."
> 
> 
> 
> I'm trying to convince him to use the real pricing that we need and not just a number he pulled out of thin air. I'm a "bean counter" so I have looked over the numbers over and over, yet they haven't changed. I know that Our Paycheck + Overhead + Profit = Hourly Rate. He thinks the hourly rate is "Well we want to make $$ an hour so that sounds good."



It seems like you've got your act together but you need to get your husband on board. That's the hard part. Best of luck to you with it. :thumbsup:


----------



## Shark49

80 for a paperback of that book seem right? Anyways im stll curious how people attack this. Do you put a line item in as a % markup of the Owner provided scope? Markup by hours spent? Put a disclaimer of responsibility in contract?


----------



## DavidC

Shark49 said:


> 80 for a paperback of that book seem right? Anyways im stll curious how people attack this. Do you put a line item in as a % markup of the Owner provided scope? Markup by hours spent? Put a disclaimer of responsibility in contract?


I got my copy for about $30-35 from the JLC Bookstore. A disc was included that allows you to print out the forms he talks about in the book.

No markup on owner provided items for me. They have to accept the risks associated with their purchase, I get to charge hourly when it affects the schedule.

Not sure what you mean by "markup for hours spent". Our labor is marked up to recoup OH costs and profit goals.

Also not sure what you mean concerning the disclaimer. Our proposals do have a list of owner responsibilities and sometimes contain specific disclaimers when I feel they're needed.

Good Luck
Dave


----------



## DavidC

AContractorWife said:


> You used to sound just like my husband does "Well, I didn't make enough on this job." He has said that about every single job he has done. There's only so many hours in a week you can work. If you are working almost 50 hours a week and not making enough there is something wrong.
> 
> 
> 
> I bought Michael Stone's Markup & Profit Book and Tapes. Trying to get him to listen to the tapes is like pulling teeth -- he has listened to 5 of the 10 sessions. I haven't even tried reading the book to him and we have had them since October. I hear "If I raise my prices at all I won't get any work" and "When was that made? 2000!, oh it's not relevant anymore."
> 
> 
> 
> I'm trying to convince him to use the real pricing that we need and not just a number he pulled out of thin air. I'm a "bean counter" so I have looked over the numbers over and over, yet they haven't changed. I know that Our Paycheck + Overhead + Profit = Hourly Rate. He thinks the hourly rate is "Well we want to make $$ an hour so that sounds good."


I think your husband has to come to his own eff it moment. That's when he's had enough and doesn't care to continue the same-o-same-o. 

You might suggest a trial period to him. Let him get booked up in his own style to a point where he can feel comfortable experimenting. Having a couple of weeks worth of sold work ahead of him may be enough.

Then the next new quote gets tested. Simply add 10% to your husbands final number and deliver the quote. 

I would wager that your client does not notice, hubby gets the job done in the same manner as before and you smile broadly on the way to the bank. Next question will be how far you can push it.

And the answer will surprise you.

Good Luck
Dave


----------



## Shark49

DavidC said:


> I got my copy for about $30-35 from the JLC Bookstore. A disc was included that allows you to print out the forms he talks about in the book.
> 
> No markup on owner provided items for me. They have to accept the risks associated with their purchase, I get to charge hourly when it affects the schedule.
> 
> Not sure what you mean by "markup for hours spent". Our labor is marked up to recoup OH costs and profit goals.
> 
> Also not sure what you mean concerning the disclaimer. Our proposals do have a list of owner responsibilities and sometimes contain specific disclaimers when I feel they're needed.
> 
> Good Luck
> Dave


Exactly you figure your hours spent scheduling etc. and charge your hourly rate as project manager. Disclaimer wording relieving you of responsibility for owner provided subcontractors but I bet my attorney wife would say those dont mean diddlly since gc's are so involved in the construction process may not be able to wipe your hands clean of it totally.


----------



## DavidC

Shark49 said:


> Exactly you figure your hours spent scheduling etc. and charge your hourly rate as project manager. Disclaimer wording relieving you of responsibility for owner provided subcontractors but I bet my attorney wife would say those dont mean diddlly since gc's are so involved in the construction process may not be able to wipe your hands clean of it totally.


I see now that you are talking about disclaimers regarding owner hired subs whereas I was on owner supplied materials. That one is real simple.

The answer is no. But I want to hire my own subs. No. But I've known this guy for years and he works real cheap for me. No. Look, he's my daughters boyfriends uncles best friends brother in law and I have a family obligation to hire him. I know he can do the ________ well enough. No.

If you are holding the contract on the job then there is no reason to have subs under someone else's control patrolling the job. If the HO wants a specific sub to perform the work then it has to be under contract and direction of the GC. It can be a hard line to hold and I have lost bidding opportunities because I won't waver unless I know the sub personally and am comfortable with his work.

But I think we're drifting here. Maybe take these questions to start a new thread Shark.

Good Luck
Dave


----------



## Shark49

DavidC said:


> I see now that you are talking about disclaimers regarding owner hired subs whereas I was on owner supplied materials. That one is real simple.
> 
> The answer is no. But I want to hire my own subs. No. But I've known this guy for years and he works real cheap for me. No. Look, he's my daughters boyfriends uncles best friends brother in law and I have a family obligation to hire him. I know he can do the ________ well enough. No.
> 
> If you are holding the contract on the job then there is no reason to have subs under someone else's control patrolling the job. If the HO wants a specific sub to perform the work then it has to be under contract and direction of the GC. It can be a hard line to hold and I have lost bidding opportunities because I won't waver unless I know the sub personally and am comfortable with his work.
> 
> But I think we're drifting here. Maybe take these questions to start a new thread Shark.
> 
> Good Luck
> Dave



Dave i totally agree with you on this. However, back to my original dilemma concerning cabinet shops. Client goes to cabinet showroom, come up with a design, cabinet company refers client to use me and then Im hired. The Client contracts with cabinet shop separately. How do you handle getting reimbursed for your time in this situation because obviously you are very involved with cabinets like any other scope on the project.


----------



## BrandConst

kevjob said:


> It still amazes me that that contractors will say "thats too much to charge" and then cant pay bills that month or buy materials or pay their subs.
> 
> Nowhere else in any business do I see the mentality of charge as little as possible to "win" the job and then wear it like a badge of honor.
> 
> The average contractor makes 28k a year. That is chump change for how much liability we take on.
> 
> It you want to charge minimum wage then do it, but tell us that we are over charging or you cant charge that much. That is BS.
> 
> I like making profit on every single job, so do my clients when they have a warranty issue a year down the road and I am still in business to cover that warranty.
> 
> If all you get is cheap people, the problem is YOU and your marketing, not the guy charging too much.


$28k? Really??? :blink: My super's make more than that!


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## TheItalian204

It can't be that low...if this numbers are also based on turnover of handymen,illegals and hacks then its closer to truth.

I can turn 28k bi-weekly(gross).

I would figure number would be around 60k for established,busy contractors.


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## ranteso

"Client goes to cabinet showroom, come up with a design, cabinet company refers client to use me and then Im hired. The Client contracts with cabinet shop separately."

This I classify as "Owner Supplied Material" , and I have a separate line item for it that gets marked up just like anything else I handle on my projects. 

So if client comes to me and wants a complete kitchen remodel, but says I'll supply all cabinets, I say no problem. I touch base with cabinet shop to ensure we are on same page with design/measurements so all will fit with no surprises during install and give client fixed price for entire project.


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## J L

TheItalian204 said:


> It can't be that low...if this numbers are also based on turnover of handymen,illegals and hacks then its closer to truth.
> 
> I would figure number would be around 60k for established,bush contractors.


I'd believe it. I knew a guy who was happy to have total sales for the year of $70k. That includes materials, gas, and everything else.

I made a lot less than that my first two years. I did put a lot into the company then, but I wasn't charging near enough to get by.


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## TheItalian204

RemodelGA said:


> I'd believe it. I knew a guy who was happy to have total sales for the year of $70k. That includes materials, gas, and everything else.
> 
> I made a lot less than that my first two years. I did put a lot into the company then, but I wasn't charging near enough to get by.


really..wow thats nothing...I would think he netted about 20k and thats not including repairs on his car/health :laughing:


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## summithomeinc

RemodelGA said:


> I made a lot less than that my first two years. I did put a lot into the company then, but I wasn't charging near enough to get by.


Me too. I've doubled my sales every year for the last 3 years. If I double this year I'll actually make a decent profit. Of course I can't complain about the last 3 years either. I've paid my bills and Haven't had to borrow money so I figure I'm good.


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## BamBamm5144

I was off. I was thinking 100k sounds right.

Do you mean contractor or employee?


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## summithomeinc

john elliott said:


> So, according to that book, if you want more money you just ask for it? Is that how it works in the States? You guys are lucky.
> 
> Over here we have to take account of what the market will bear, just because a book says we should put the price up in order to obtain X amount of profit doesn't always go down too well with the customers.


If you are not selling then you need to adjust or find higher paying customers. Using the formula does tell you how much you need to make to stay in business with a profit though. Many business owners don't really know how much they need to charge to profit.I've had plenty of people tell me I was too high priced. That's fine with me because I know what I need to profit. The price they had in mind was less than I need to profit. So if the market won't bare my prices I have the option of not working or lowering my price. Using the formula in the book I will know how low I can go and still make money. If I go below that amount I just don't work. So no the market or going rate doesn't affect my pricing.


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## UALocal1Plumber

john elliott said:


> So, according to that book, if you want more money you just ask for it? Is that how it works in the States? You guys are lucky.
> 
> Over here we have to take account of what the market will bear, just because a book says we should put the price up in order to obtain X amount of profit doesn't always go down too well with the customers.


What the market will bear? Unfortunately the market is constantly depressed by contractors who don't bother to price their jobs according to their costs, and who instead price everything according to... what the market will bear.


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## DavidC

john elliott said:


> So, according to that book, if you want more money you just ask for it? Is that how it works in the States? You guys are lucky.
> 
> Over here we have to take account of what the market will bear, just because a book says we should put the price up in order to obtain X amount of profit doesn't always go down too well with the customers.


What!? You can't just ask and then receive?

The book in question does not simply state that you raise your rates to point x and carry on. Although the truth is, if you don't ask you can't get higher rates. But I digress.........

The book instructs the avid reader how to arrive at the price that he really needs to conduct a profitable business. It has very little to do with the so called "going rate". 

It interesting that as it works out, the market can bear what it's asked to if properly presented. 

Good Luck
Dave


----------



## john elliott

summithomeinc said:


> So no the market or going rate doesn't affect my pricing.


That's impressive, to be able to operate outside the market like that. Your service must be especially unique. Unfortunately for me, I have competitors and I can't ignore what they are doing or I would be put of business soon.





DavidC said:


> It interesting that as it works out, the market can bear what it's asked to if properly presented.


Right, so every time a contractor loses a job because he was 20% higher than the other contractors then he can console himself with the thought that his bid wasn't 'properly presented'.


I'm going to carry on taking a more intergrated approach to pricing, I will take account of the amont of money I need to make AND the amount of money I am likely to be able to get AND how badly I need that particular job at that particular time. That way, when the good jobs come along as they do from time to time, I wil still be in business and be able to benefit from them.

If I was in different circumstances where all I had to do was ask for whatever the book said in order to get it, or take the option of not working for an unspecified length of time, then I wouldn't need to concern myself with 'what the market will bear' and I could get down to the Mercedes dealers and place a couple of orders.


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## summithomeinc

john elliott said:


> That's impressive, to be able to operate outside the market like that. Your service must be especially unique. Unfortunately for me, I have competitors and I can't ignore what they are doing or I would be put of business soon.
> 
> 
> 
> 
> 
> Right, so every time a contractor loses a job because he was 20% higher than the other contractors then he can console himself with the thought that his bid wasn't 'properly presented'.
> 
> 
> I'm going to carry on taking a more intergrated approach to pricing, I will take account of the amont of money I need to make AND the amount of money I am likely to be able to get AND how badly I need that particular job at that particular time. That way, when the good jobs come along as they do from time to time, I wil still be in business and be able to benefit from them.
> 
> If I was in different circumstances where all I had to do was ask for whatever the book said in order to get it, or take the option of not working for an unspecified length of time, then I wouldn't need to concern myself with 'what the market will bear' and I could get down to the Mercedes dealers and place a couple of orders.


Another way to look at it is like this. If I know the other guy bid 1000.00 to build a deck, and because I have used the L+M+O+P=price formula, I know that my costs to build that deck come to 1000.00 Then it really has nothing to do with the "market price". If I base my price off of what the other guy charges I'll go broke. Maybe the other guy gets a super deal on materials from his brother that owns the lumber yard. Maybe the other guy doesn't carry insurance. Maybe the other guy is happy working for 15/hr. I can't compete against that. The only thing I can do is to look at MY costs and what I need to profit and price based off of that. If the "going rate" is 50.00 per deck then I just don't build decks because I would go out of business.


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## john elliott

summithomeinc said:


> Another way to look at it is like this. If I know the other guy bid 1000.00 to build a deck, and because I have used the L+M+O+P=price formula, I know that my costs to build that deck come to 1000.00 Then it really has nothing to do with the "market price". If I base my price off of what the other guy charges I'll go broke. Maybe the other guy gets a super deal on materials from his brother that owns the lumber yard. Maybe the other guy doesn't carry insurance. Maybe the other guy is happy working for 15/hr. I can't compete against that. The only thing I can do is to look at MY costs and what I need to profit and price based off of that. If the "going rate" is 50.00 per deck then I just don't build decks because I would go out of business.


And in a situation where everybody else is asking 2000 to build that deck, what are you going to do then? Are you still going to bid 1000?


And the point you make about going out of business if you don't charge enough- well of course that is true, but you can also go out of business by charging too much. Ignoring the market is a sure-fire recipe for failure. There's plenty of US car makers that could tell you all about that.



The real point I want to make is that it's all very well knowng your costs and knowing what you need to make in order to stay in business, but that very attitude can also lead to going out of business. If I found that my competition was able to undersell me I wouldn't just shrug my shoulders and walk away, saying "I can't work for that", I would look into it and find out what they were doing right and I was doing wrong. If my costs were higher than the competition's then that's where I would be focussing my efforts, getting my costs down so that I could compete in the market that I work in.


----------



## summithomeinc

john elliott said:


> And in a situation where everybody else is asking 2000 to build that deck, what are you going to do then? Are you still going to bid 1000?
> 
> 
> And the point you make about going out of business if you don't charge enough- well of course that is true, but you can also go out of business by charging too much. Ignoring the market is a sure-fire recipe for failure. There's plenty of US car makers that could tell you all about that.
> 
> 
> 
> The real point I want to make is that it's all very well knowng your costs and knowing what you need to make in order to stay in business, but that very attitude can also lead to going out of business. If I found that my competition was able to undersell me I wouldn't just shrug my shoulders and walk away, saying "I can't work for that", I would look into it and find out what they were doing right and I was doing wrong. If my costs were higher than the competition's then that's where I would be focussing my efforts, getting my costs down so that I could compete in the market that I work in.


If I can make the profit I need and sell myself for half of my competition yeah I'd sell the deck at 1000.00 and hire more guys so I could do 10 a week while my competition sits not working.

I really think we are saying the same thing, just in a different way. I agree I should be aware of my competition but my prices are based on what I need not my competitors prices. I also would take a good look at my prices if I was consistantly not selling. Same deck. My competition sells for 1000.00 I sell it for 2,000.00. As long as I'm selling why do I care about the guy gettin a 1000.00? I agree with what you are saying about knowing the market and the competition. I just disagree about setting my prices based on the going rate or what the market will bare. I would rather charge more, work less, and make the same amount of profit.


----------



## john elliott

summithomeinc said:


> Same deck. My competition sells for 1000.00 I sell it for 2,000.00. *As long as I'm selling why do I care about the guy gettin a 1000.00?* I agree with what you are saying about knowing the market and the competition. I just disagree about setting my prices based on the going rate or what the market will bare. I would rather charge more, work less, and make the same amount of profit.




As long as you are selling. That's fine. The problem comes when yoiu are not selling. If you can sell something for twice the market rate and still get sales that that's great for you, but most people find that if you ask twice the market rate you don't sell. I think there are more people in that position than there are in your position.


----------



## J L

I have no idea what my competition charges. I bid so many different types of jobs with different scopes that it would be a full time job trying to figure out what the other guys are bidding. I do hear, however, that I'm usually the highest. 

What I need to know is my numbers. I have to know what my overhead is and how much I need to bring in to survive. If I can't get those numbers, then there's no sense in me doing the job.

Just remember, if you don't ask for your price, you won't get it. 

Also, if times are tough and I'm doing less work, I actually need to raise my rates to make up for the lack of sales. 

John, surely there was a time in the past where you were able to sell your jobs for what you wanted. Look back at those clients and look at every aspect of them. What kind of car? House? Married? Kids? Dogs? What type of jobs? Did the wife work? You've got to figure out who your ideal client is and market towards those people. In essence, you create your own market. And when you create your own market, you can charge what you want. :thumbsup:


----------



## TheItalian204

RemodelGA said:


> I have no idea what my competition charges. I bid so many different types of jobs with different scopes that it would be a full time job trying to figure out what the other guys are bidding. I do hear, however, that I'm usually the highest.
> 
> What I need to know is my numbers. I have to know what my overhead is and how much I need to bring in to survive. If I can't get those numbers, then there's no sense in me doing the job.
> 
> Just remember, if you don't ask for your price, you won't get it.
> 
> Also, if times are tough and I'm doing less work, I actually need to raise my rates to make up for the lack of sales.
> 
> John, surely there was a time in the past where you were able to sell your jobs for what you wanted. Look back at those clients and look at every aspect of them. What kind of car? House? Married? Kids? Dogs? What type of jobs? Did the wife work? You've got to figure out who your ideal client is and market towards those people. In essence, you create your own market. And when you create your own market, you can charge what you want. :thumbsup:




Same...the way I look at it,you just bid what you think is fair and what is enough for you to stay operating in market/make profit and not worry about other guy...

Somebody may be underchopping ten times doesnt mean I will.


----------



## DavidC

john elliott said:


> Right, so every time a contractor loses a job because he was 20% higher than the other contractors then he can console himself with the thought that his bid wasn't 'properly presented'.


You may be getting stuck on a single idea here. The topic is how to arrive at your right price. And that is what the "book" illustrates. Once you have arrived at the price you figure you need to operate your business properly it is ludicrous to try and operate at lower numbers because "the market demands it".

Along with learning your numbers, many of us do need to learn proper presentation of those numbers. I went from selling on price to selling my price. As it turns out, it's not that much different.

If you need 1,000 to build a deck and I need 2,000, it would only make sense that my presentation needs to be different than yours or I won't get it. Otherwise, price is the only difference to the client. 

But if I decide that the market only will bear 1,000 because that's what you sell for I am on the way to broke. 

Good Luck
Dave


----------



## KAP

john elliott said:


> The real point I want to make is that it's all very well knowng your costs and knowing what you need to make in order to stay in business, but that very attitude can also lead to going out of business. If I found that my competition was able to undersell me I wouldn't just shrug my shoulders and walk away, saying "I can't work for that", I would look into it and find out what they were doing right and I was doing wrong. If my costs were higher than the competition's then that's where I would be focussing my efforts, getting my costs down so that I could compete in the market that I work in.


John,

There is ALWAYS someone else more expensive AND cheaper than you in ANY market. 

If you are going to waste time chasing after competitors pricing, I would encourage you to instead of looking at your "competition" prices and trying to imitate them (i.e. - race to the bottom), find out which of your competition are charging the most and still in business and emulate that... Someone's paying them and they are NOT all rich people...

Point is, you have absolutely NO CONTROL over what others charge so it is folly to try and pretend that you do. A guy working out of his garage making cabinets has a much different cost basis than a guy who owns a 10,000sf shop. Their prices will NEVER be analogous, so it is WASTE of time and effort for the 10,000sf shop owner to try and compete with the guy out of his garage.

That's where charging what you need to charge to stay in business and meet your personal and business goals come into play, as well as, ways to set yourself apart and develop a name for yourself. 

What the market will bear is another way of saying everyone is my customer... they aren't, and that is one of the hardest things for alot of small business owners to come to grips with... instead of chasing after what your competitors are doing, use that energy to find customers that match what your business needs... THAT is your customer. Use online tools such as this one to find out ways to reduce costs, instill better process, etc... but don't then LOWER your price, but instead INCREASE the ROI in your business and perhaps in the process develop capital reserves, an emergency fund, a retirement fund or perhaps even PAY YOURSELF MORE...

Woodmode doesn't waste time and effort trying to sell to the apartment or low-end market because they can't make their business run with that market. They recognize that they are NOT their customer, no matter how much they wish they were.


----------



## john elliott

DavidC said:


> You may be getting stuck on a single idea here. The topic is how to arrive at your right price. And that is what the "book" illustrates. Once you have arrived at the price you figure you need to operate your business properly it is ludicrous to try and operate at lower numbers because "the market demands it".


I'm not saying that. I'm saying that unless people are particularly fortunate and are able to operate outside the market (as many people here seem to be), then they should not ignore the market.

It works both ways. If a contractor finds he can do a job profitably at 1000, and everybody else is on 2,000, then he should think about raising his price to at least 1,800. It's not about fair, it's about business. Some jobs are more profitable than others, and when something good comes along that helps to make up for the times when things are not so good.

On the other hand, if he needs 2000 and everybody else is on 1000, then he's going to need some very special sales techniques to keep gong for any length of time. Assuming he doesn't have those techniques he should be looking at his operation and those of his competitors seeing what they are doing different and where he can save money, and failing that he should be looking for a different line of work.

The world of commerce is littered with defunct companies that thought they could ignore the market.


----------



## KAP

john elliott said:


> It works both ways. If a contractor finds he can do a job profitably at 1000, and everybody else is on 2,000, then he should think about raising his price to at least 1,800. It's not about fair, it's about business. Some jobs are more profitable than others, and when something good comes along that helps to make up for the times when things are not so good.


John,

What you describe is THE formula for getting stuck in robbing Peter to pay Paul cycles...

BTW, I have absolutely NO clue what my competitors charge in my market... I can tell you from a macro-POV, but what individual companies charge... no...


----------



## john elliott

KAP said:


> John,
> 
> What you describe is THE formula for getting stuck in robbing Peter to pay Paul cycles...


That comes across as nonsense, I'm afraid. If you think there is something wrong with what I am saying them I think you need to go into a bit more detail. As it is, I can't see how you arrived at that statement starting from anything that I have posted on the subject.


----------



## DavidC

There simply is a difference between knowing your market and basing your pricing on what anyone else is doing. 

I do know that I have sold on price in the past. I also know that those prices where what I determined to be the going rate, what people would pay around here or what the market demands. Take your pick because they are all wolves in sheep's clothing. In the end the real sheep bleeds.

I also know that I was able to change by making an adjustment, tweaking the controls if you will, to the connection between my keyboard and chair. This has improved my lot as my pricing became based on what my business truly needed.

I still can't pay cash for Trump Towers or anything like that. But I can expect to remain in business and turn a profit when I work.

Good Luck
Dave


----------



## KAP

KAP said:


> John,
> 
> What you describe is THE formula for getting stuck in robbing Peter to pay Paul cycles...





john elliott said:


> That comes across as nonsense, I'm afraid. If you think there is something wrong with what I am saying them I think you need to go into a bit more detail. As it is, I can't see how you arrived at that statement starting from anything that I have posted on the subject.


If you are basing your pricing on what the market will bear and competitor pricing, instead of charging what you need to operate your business to attain your personal and business goals, and focusing on your customer base that will support that, you will ALWAYS be stuck in robbing Peter to pay Paul cycles, as you will always be in the mode of finding the jobs to _*"make up for the times when things are not so good"*_... hope that clears it up for you...

If you are operating at a profit, that means your company is getting paid as well as you (i.e. - capital reserves, emergency fund, retirement, etc.). This is not the case for most small business. They equate what they personally pay themselves as Profit... it is not.

As a cabinetmaker (as is also part of our business), what demographic are you targeting?


----------



## Jaws

john elliott said:


> That's impressive, to be able to operate outside the market like that. Your service must be especially unique. Unfortunately for me, I have competitors and I can't ignore what they are doing or I would be put of business soon.
> 
> 
> 
> 
> 
> Right, so every time a contractor loses a job because he was 20% higher than the other contractors then he can console himself with the thought that his bid wasn't 'properly presented'.
> 
> 
> I'm going to carry on taking a more intergrated approach to pricing, I will take account of the amont of money I need to make AND the amount of money I am likely to be able to get AND how badly I need that particular job at that particular time. That way, when the good jobs come along as they do from time to time, I wil still be in business and be able to benefit from them.
> 
> If I was in different circumstances where all I had to do was ask for whatever the book said in order to get it, or take the option of not working for an unspecified length of time, then I wouldn't need to concern myself with 'what the market will bear' and I could get down to the Mercedes dealers and place a couple of orders.


 Presentation of the estimate is very important. Reputation and abilities that set you apart, and a bad ass team are more important.

Our company is small, much like David Cs, myself, my dad and mom are partners, my brother is a lead and we have 4 other employees. No high price sales people or absentee contractors here. 

We consistently win Jobs we are considerably higher on, and more importantly, even in a heavily competitive market our referrals often have us as the only bidder. We are not alone in our ability to do this I am sure.

Was it all sunshine and roses as that book may make it seem? No.:no: We made peanuts charging our rates, because we didn't get as much work as now. Structural repairs and window and door replacements were our main money makers. We didn't take any profits from the company until last year, and paid our selves low salaries. We paid cash for work vehicles and equipment. I networked 20+ hours a week. This is not to mention the 20 years previous my dad spent becoming a superb builder and craftsman ( still far superior to my own skills) making our last name known for honesty and workmanship. 

The #1 most important thing past becoming a master of your professional, building a team, and practicing better practices, is networking. My dad never did, and he never made the money he should have. My last name was already known in the community, I just had to make the first mean something. So it was easier, but not much. Takes a large investment of time. But, when I am refered by a friend or client, they already know before they call I'm not cheap.

I'm no expert, I only know my own experience. I do know we do a lot of jobs where our price is far above "market will bear prices" and we are by no means an "elite " company with trophy offices. If we can do it, anyone can.


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## BamBamm5144

I bid my projects at the going rate minus 50%. I'm swamped with work!


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## Jaws

BamBamm5144 said:


> I bid my projects at the going rate minus 50%. I'm swamped with work!


:laughing:


----------



## world llc

oktex56 said:


> Great posts...I think they ALL have merit.
> 
> 
> 
> I agree that this is the best referral you can get....he was expensive but worth every penny.
> 
> Steve:thumbup:


i find i win over the clients that want quality and know that most cheaper quotes need to make up on time or material, and some fake it!:no:

i will always use best methods and they have to be paid for....


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## Victorrmejia

*Labor rate to hang rock*

intrested in knowing the hanging labor rate in canda ?? 

where is the best place to go?

any info will be greatfull thanks!


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## Jaws

Cant ask straight pricing questions here, bro.


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## Victorrmejia

where can i find this information


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## angus242

Victorrmejia said:


> where can i find this information


Read this:
http://www.contractortalk.com/f16/pricing-estimating-success-27899/#post301824

Notice, I suggested to "read"? That's because _you_ need to figure out _your_ own rate, not have someone arbitrarily give you numbers.


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## UALocal1Plumber

Victorrmejia said:


> intrested in knowing the hanging labor rate in canda ??
> 
> where is the best place to go?
> 
> any info will be greatfull thanks!


425 loonies/square meter


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## Spike7

UALocal1Plumber said:


> 425 loonies/square meter


are " loonies " the amount of replies this post has ?
you callin us loonies??:sad:


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## Spike7

UALocal1Plumber said:


> Did you just say that plumbers and electricians profit on every job?????


yeah , plumbers and electrican who charge time , and materials almost never lose money on service jobs .
if they take too long , most times they`re not going to say " i`m sorry mr. jones , i took too long becuase i just made too many mistakes, i`m gonna charge you half of the time i`m here " ( mind you i said most plumbers , and electricians) " 
they`ll make more for taking longer. if they use too much materials , they won`t tell the client the cut 2 or 3 pipes wrong . they`ll just bill the client that cost.
they charge travel time.
let any carpenter try this . they will never get called back

am i saying this angrily?
no 
i`m saying this enviously.

in south florida , electricans , and plumbers charge double what we can charge as carpenter contractors.
electricans , and plumbers mostly work at the same hourly rate as each other 

carpenters , and handymen , all have thier own unorthodox way of bidding , so prices are drastically different.
call a plumber and most charge roughly the same to change a toilet 
call a carpenter , and his price might be half of the next guys cost.
and a woman with poop gushing out of her toilet will pay that plumber no problem
if the a/c is not running because the breaker broke down , and its 100 degrees out , they pay the price to get it fixed right away .
but rotted wood , doors , and crown are usually something that can wait till they get a handful of bids .

if i were to start out again , id probably be a plumber or electrican.
its just point blank a higher profitting trade 

let me know if you guys agree , or not.i truly want to know


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## Spike7

in no way am i saying plumbers or electricans are doing anything wrong 

i`m saying carpenters , and contractors should be more on the same page , and have estimaters guide that does work for us better 
there should be some kind of union( for lack of a better word) , where we do keep our payscale at a certain level, and let our skill be the decider on who gets hired , 
not the costs because some bozos will work for half of what the rest of us have to because of overhead .
there should be more certification for carpentry , like there is for plumbers , and electricans ,
i`m licensed and insured , but a very booksmart guy could have gotten the same license i got. 
getting a G.C. license had nothing to do with my actual , builders , or carpentry skill.
most plumbers and electricans had to start out , and get experieince in each level.


----------



## TNTRenovate

Spike7 said:


> in no way am i saying plumbers or electricans are doing anything wrong
> 
> i`m saying carpenters , and contractors should be more on the same page , and have estimaters guide that does work for us better
> there should be some kind of union( for lack of a better word) , where we do keep our payscale at a certain level, and let our skill be the decider on who gets hired ,
> not the costs because some bozos will work for half of what the rest of us have to because of overhead .
> there should be more certification for carpentry , like there is for plumbers , and electricans ,
> i`m licensed and insured , but a very booksmart guy could have gotten the same license i got.
> getting a G.C. license had nothing to do with my actual , builders , or carpentry skill.
> most plumbers and electricans had to start out , and get experieince in each level.


I am all for less regulation, not more. I also don't need someone telling me I need to hire a skilled guy versus a guy that I can train. I don't want pay scale dictated to me by how many hours they have or how many classes they have taken. I want to pay them based on their performance.


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## Spike7

TNTSERVICES said:


> I am all for less regulation, not more. I also don't need someone telling me I need to hire a skilled guy versus a guy that I can train. I don't want pay scale dictated to me by how many hours they have or how many classes they have taken. I want to pay them based on their performance.


you always have a choice to hire a skilled guy or hire a guy who you can train.

i totally understand what your point is , but isn`t that just because, after being burned so many times , we know most guys don`t know half of what they profess to know ?
it would be nice to interview a guy , and know he has some credentials?
if a guy has at least gone through some work program ,and has some documentation that shows he has some training , ( like a mechanic , or electrican , or plumber , or a/c contractor) it shows some commitment on his end. 
carpentry seems the only trade where there is not much certification
it definelty would cost more on the hiring end.

but maybe that would be a reason we could charge the same hourly rate as those other trades that do have certified workers


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## Roberto16

*Epoxy armorguard paint*

Brian! I thank you very much for your point of view and sugestion
pertaining on the swimming pool issue.
I honestly did not mean to ask about pricing, but I did not know how to put it together. I also forgor the rule and or regulation to the site. I apologize for the inconvinience. I read your sugestion / article. Very helpful when in doubt. 

Thanks again 

Roberto

RC Painting


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## BrianNNOLA

*Money talks....*



Spike7 said:


> you always have a choice to hire a skilled guy or hire a guy who you can train.
> 
> i totally understand what your point is , but isn`t that just because, after being burned so many times , we know most guys don`t know half of what they profess to know ?
> it would be nice to interview a guy , and know he has some credentials?
> if a guy has at least gone through some work program ,and has some documentation that shows he has some training , ( like a mechanic , or electrican , or plumber , or a/c contractor) it shows some commitment on his end.
> carpentry seems the only trade where there is not much certification
> it definelty would cost more on the hiring end.
> 
> but maybe that would be a reason we could charge the same hourly rate as those other trades that do have certified workers


I feel like if I have to stand over and train someone spending most of my day doing that, I might as well do it myself. At least that is the value I place on my time, and time is money, even if I'm paying a guy minimum wage.
Regarding certification, thats true, since the most that can happen with an uncertified Carpenter is have your house cave in (which never happens) or have doors/windows that don't close properly or other shabby work where really no one can end up hurt. Whereas with plumbing, your house could get flooded out or create a sanitation hazard, and with electrical, someone could get fried or have their structure burn down to the ground, so certification is mandatory to prevent that from ever happening.
Its also very true most guys (expecially new ones to the trade) with proclaim how good and skilled they are, simply because they're desparate for work and usually their words speaking louder than their actions. If someone boast, brags, or talks to much about their abilities, then usually it is a big red flag. Skilled and experienced workers don't need to talk much, since they've been around long enough in the trade to know what they can and will do. You'll either hire and try them out at face value, or they'll move on, since highly skilled workers don't have a problem finding a job, they just have a problem finding someone willing to pay them what they're worth. Its a low-balling business, where everyone is out to get something for nothing, and we all know that in the real world, you get what you pay for OR what you pay for don't last long when its cheap on either end (cheap employer/cheap work or cheap employee/short tenure)

The truth is, we never really know till after the fact what we're getting for our money, and no paper or reference can truly guarantee you that as well (not with product, not with labor), since anyone can produce a document (and who has time to research that), as anyone can get someone to vouch for them (friend/relative/etc.). Many of my high end clients really don't want me giving their phone # or address for a reference to the general public. One time, I did this and a potential new client showed up at my client's house at 9pm one evening wanting to see the work I done for him while another called at a bad time. Having a license doesn't guarantee you'll get quality work either. I've seen plenty of licensed contractors who do shabby work, and while a client can report them for license revocation, it rarely happens on one or two instances, and when it does, the contractor just files bankruptcy, changes the business name and applies for a new license. 

Money talks.....


----------



## BrianNNOLA

TNTSERVICES said:


> I am all for less regulation, not more. I also don't need someone telling me I need to hire a skilled guy versus a guy that I can train. I don't want pay scale dictated to me by how many hours they have or how many classes they have taken. I want to pay them based on their performance.


Yeah, I feel exactly the same way, especially in regards to the licensing requirements imposed by Parish/County governments where it is CODE you must have licensed plumbers/electricians perform and have inspections for ALL work, even if it is just changing out a toilet. Of course, I do believe there should be a strict CODE for everyone to follow, whether you're licensed or not, but such is not always the case for those even licensed, and I've seen plenty of licensed electricians/plumbers butcher structures just to get their work done easily, when many times it is totally unnecessary. What do they care? Its not like they'll have to repair/fix or burden the expense to totally finish the job. This is why often times a client will have me do the electrical/plumbing. First, because I can do it as well as anyone out there and better. Second, because I save them on those rates plus the added cost of finishing unnecessary work, and Third, because they get a "turn-key" operation through one guy instead of many, which avoids scheduling delays and keeps production moving along.
Unfortunately though, because so many home owners/clients have been burned by unqualified contractors, plus insurance company's policies, lawyers and litigation, this is why the rules are what they are, AND, I find there are very few and far between those out there who possess the same knowledge and skills as myself. I'm certain they are out there, but finding them is very difficult and hard to decipher among the many.


----------



## Spike7

BrianNNOLA said:


> Yeah, I feel exactly the same way, especially in regards to the licensing requirements imposed by Parish/County governments where it is CODE you must have licensed plumbers/electricians perform and have inspections for ALL work, even if it is just changing out a toilet. Of course, I do believe there should be a strict CODE for everyone to follow, whether you're licensed or not, but such is not always the case for those even licensed, and I've seen plenty of licensed electricians/plumbers butcher structures just to get their work done easily, when many times it is totally unnecessary. What do they care? Its not like they'll have to repair/fix or burden the expense to totally finish the job. This is why often times a client will have me do the electrical/plumbing. First, because I can do it as well as anyone out there and better. Second, because I save them on those rates plus the added cost of finishing unnecessary work, and Third, because they get a "turn-key" operation through one guy instead of many, which avoids scheduling delays and keeps production moving along.
> Unfortunately though, because so many home owners/clients have been burned by unqualified contractors, plus insurance company's policies, lawyers and litigation, this is why the rules are what they are, AND, I find there are very few and far between those out there who possess the same knowledge and skills as myself. I'm certain they are out there, but finding them is very difficult and hard to decipher among the many.


 2 really good posts
i can`t argue much .
i have to agree with you disagreeing with me

its also more how we get along on the jobsite , since we`re with these guys more than our own wives .
i`ve had full skilled guys who were just not very comfortable to work with all day , every day.
i`d rather have a great personality , with no ego who is excited to come to work , than the know-it-all guy who won`t work " with me.

the best guy who ever worked for me came up to me while i was doing a large condo remodel
he parked cars there 
he said in a strong puerto rican accent ," hey! you need somone ? i hate this job , i am very fast worker! . i`ll work for anything !"
i hired him
he started out as a full laborer .
he saw probably 20 guys or so come ,and go over the next few years 
he kept getting better , and better .
eventually " mario " was doing everything . he bought tools little at a time . changed his motorcycle in for a pick up.
he learned all phases , and was eventually a great carpenter 
the running joke was " well mario , your almost a good carpenter"
i kiddingly never said " your a good carpenter" so i wouldn`t have to give him a raise.
he`d always say " how bout now boss!! am i a good carpenter now??"
" not yet mario "
he always was smiling 
the clients loved the guy 
he stayed with me 14 years till he died year before last. 
best guy who ever worked for me .


----------



## BrianNNOLA

Spike7 said:


> its also more how we get along on the jobsite , since we`re with these guys more than our own wives .
> i`ve had full skilled guys who were just not very comfortable to work with all day , every day.
> i`d rather have a great personality , with no ego who is excited to come to work , than the know-it-all guy who won`t work " with me.
> 
> the best guy who ever worked for me came up to me while i was doing a large condo remodel
> 
> he learned all phases , and was eventually a great carpenter
> 
> i kiddingly never said " your a good carpenter" so i wouldn`t have to give him a raise.
> 
> he stayed with me 14 years till he died year before last.
> best guy who ever worked for me .


Such has been the corporate mentality since the beginning of time, which is why Unions were formed to achieve collective bargaining agreements, fair wages and benefits for workers, and create the "middle class" in a capitalistic society. It set the benchmark for wages in the USA, and is why people earn more money in the USA than any other nation, and why EVERYONE on the planet wants to immigrate to the USA. However, as with any hierarchy in society, as time progresses with any organizational body, those at the top become corrupt, and fail to abide by their original mission and purpose. The leaders begin mismanaging resources, accept bribes, look out for only their family and closest friends, and castrate those on the bottom of the hierarchy. 
Unions are still important to have though, because if they had never been formed or cease to exist, then the USA would be like say Russia, where the average professional occupation worker earns roughly $400/ month while the average blue collar worker earns $100/ month.

I began my career by joining the Carpenters union, spent 4 years in apprenticeship, attending school 2 nights/week. I learned through a program that had been around for 100 years with sound fundamentals. I'm not saying a carpenter can't learn the trade through any other trade program/school, as experience is always the best teacher, but this is no different than going to Harvard business school vs University of Phoenix business school. Both will give you a "title", but there is a difference that most people can't comprehend or will refuse to accept.

I left the union after 8 years because of corruption and "Reganomics", returning to college and venturing on my own to form my own business, because as the originator of this thread stated, "business skills are essential to become successful in business".

I hired a guy very simular as the one you named, but learned about the tile trade from him as he learned the carpentry trade from me. I paid him $100/ day for about 10 years, but unlike Mario, he realized he could do better on his own. The trouble is, he doesn't have the business skills to be very successful, but at least he is his own boss somewhat. Its not very often one can find a strong back with a weak mind. Most people have some ambition in life, and want to be compensated according to their worth, not taken advantage of their position for very long.


----------



## TNTRenovate

BrianNNOLA said:


> Such has been the corporate mentality since the beginning of time, which is why Unions were formed to achieve collective bargaining agreements, fair wages and benefits for workers, and create the "middle class" in a capitalistic society. It set the benchmark for wages in the USA, and is why people earn more money in the USA than any other nation, and why EVERYONE on the planet wants to immigrate to the USA. However, as with any hierarchy in society, as time progresses with any organizational body, those at the top become corrupt, and fail to abide by their original mission and purpose. The leaders begin mismanaging resources, accept bribes, look out for only their family and closest friends, and castrate those on the bottom of the hierarchy.
> Unions are still important to have though, because if they had never been formed or cease to exist, then the USA would be like say Russia, where the average professional occupation worker earns roughly $400/ month while the average blue collar worker earns $100/ month.
> 
> I began my career by joining the Carpenters union, spent 4 years in apprenticeship, attending school 2 nights/week. I learned through a program that had been around for 100 years with sound fundamentals. I'm not saying a carpenter can't learn the trade through any other trade program/school, as experience is always the best teacher, but this is no different than going to Harvard business school vs University of Phoenix business school. Both will give you a "title", but there is a difference that most people can't comprehend or will refuse to accept.
> 
> I left the union after 8 years because of corruption and "Reganomics", returning to college and venturing on my own to form my own business, because as the originator of this thread stated, "business skills are essential to become successful in business".
> 
> I hired a guy very simular as the one you named, but learned about the tile trade from him as he learned the carpentry trade from me. I paid him $100/ day for about 10 years, but unlike Mario, he realized he could do better on his own. The trouble is, he doesn't have the business skills to be very successful, but at least he is his own boss somewhat. Its not very often one can find a strong back with a weak mind. Most people have some ambition in life, and want to be compensated according to their worth, not taken advantage of their position for very long.


There is too much misinformation in this post to even fully respond. If the unions are the reason for the "middle class", then why in 2009 was it reported that over half the world was middle class? There isn't a proliferation of unions in the world. In fact, it quite the opposite.

The fact is there are many factors that contributed to the rise of the middle class. One being railroads connecting large cities. The impact of WWII on the economy. They are too numerous to name.


----------



## ohiohomedoctor

I thought this was a holy thread not subject to union non union nonsense.


----------



## TNTRenovate

ohiohomedoctor said:


> I thought this was a holy thread not subject to union non union nonsense.


He started it! :whistling


----------



## r4r&r

TNTSERVICES said:


> He started it! :whistling


Well you didn't have to play, now did you?


----------



## summithomeinc

r4r&r said:


> Well you didn't have to play, now did you?


He really did have to.. It's a compulsion for him. Maybe we can start a counseling thread for compulsive disagreement?


----------



## ohiohomedoctor

My roommate in college was like that. He is a lawyer now. I suppose that was best for him..


----------



## TNTRenovate

summithomeinc said:


> He really did have to.. It's a compulsion for him. Maybe we can start a counseling thread for compulsive disagreement?


I do a lot more than just disagree. There are just a few subjects that I am more compassionate about. I don't like unsubstantiated bashing. Ignorant people annoy me. The four subjects I can think of are Holmes haters, Service Magic haters, Bosch haters and Pro-Union. Other than that I think that most of my posts are either light-hearted or add to the discussion.


----------



## BrianNNOLA

TNTSERVICES said:


> There is too much misinformation in this post to even fully respond. If the unions are the reason for the "middle class", then why in 2009 was it reported that over half the world was middle class? There isn't a proliferation of unions in the world. In fact, it quite the opposite.
> 
> The fact is there are many factors that contributed to the rise of the middle class. One being railroads connecting large cities. The impact of WWII on the economy. They are too numerous to name.


I don't really want to get into a debate here, but to simply answer your argument, the "2009 report" is exactly what it is, 2009, not a 1934 report or right after the great depression, when such was not the case. The USA set the standards for wages and labor relations/law for which the rest of the democracy world to follow during the onset of the INDUSTRIAL REVOLUTION. Actually, Nazi Germany probably started it with the "Free workers party", but I won't get into a history lesson either.

The railroads in the USA were primarily build by Chinese immigrants for slave wages. There was no union, and FYI, I didn't start this, someone else did or made reference to them, for which I responded to that person. Several posts in this thread mention "unions" if you care to read them ALL.


----------



## BrianNNOLA

ohiohomedoctor said:


> I thought this was a holy thread not subject to union non union nonsense.


You'll find in most every forum in most every thread there is "thread derailment" and subject changing as well as references outside of the primary discussion. This thread really didn't start out as a discussion, but rather a statement to say "if you want to be a successful contractor, business skills are more important than trade skills", and really provides nothing on the subject of "Pricing" or "Estimating", which I'm sure many come here thinking they can find out the "going rate" or help with such issues because of the label, which in turn they get trolled for asking such things.

I won't attempt to be a moderator here or a "forum nazi"


----------



## BrianNNOLA

TNTSERVICES said:


> I do a lot more than just disagree. There are just a few subjects that I am more compassionate about. I don't like unsubstantiated bashing. Ignorant people annoy me. The four subjects I can think of are Holmes haters, Service Magic haters, Bosch haters and Pro-Union. Other than that I think that most of my posts are either light-hearted or add to the discussion.


I'm not "Pro-union" or "Anti-union" (remember I said I left the union). I just give credit where credit is due. Its easy to hate something you've never been associated with or needed. I could have been born in a country where I work all day for a bowl of rice or a couple burritos, so I don't bite the hand that paved the way.


----------



## Spike7

BrianNNOLA said:


> You'll find in most every forum in most every thread there is "thread derailment" and subject changing as well as references outside of the primary discussion. This thread really didn't start out as a discussion, but rather a statement to say "if you want to be a successful contractor, business skills are more important than trade skills", and really provides nothing on the subject of "Pricing" or "Estimating", which I'm sure many come here thinking they can find out the "going rate" or help with such issues because of the label, which in turn they get trolled for asking such things.
> 
> I won't attempt to be a moderator here or a "forum nazi"


ok , i`ll go back to the thread starter .:
i made the mistake of trying to give a break to a brother of my a/c contractor . ( he and i have work together for about 20 years , so its seemed like a good idea)
brother is a young fireman , and he and his wife bough their first home 
i started out letting him know i`ll drop my percentage to 15% on my subs( i`m the c.g. , and its a permited job at around $85,000)
he has an agreement with the bank that they pay this and it goes inot the mortgage.
as we started , i found out i can`t get a deposit . i have to have me , and subs working , and show substantial work done to apply for a deposit.i have to meet the agent , he inspects what i have done , and then the paper work is submitted.
the only reason mt subs agreed is because we have long-standing relationships and they trust me.but their not happy to start without deposits
well " brother" is too busy over shopping each subs price 
every few days its " he spike i got another window price ! its $2000 less than the last one !"( we`ve gone through 3 now )
he did the same with my electrician.
he asked for another comparison price , since my electrican seemed high .
i got one . then he got one throguh his brother . it was 1/3 lower than the lower of the two i got .
he still hasn`t signed a contract .i`ve done some work ( demo ), and got paid for it
but the starting date has dragged for about a month .he hasn`t submitted the plans because he keeps changing ideas , and hunting for better prices so he can use that savings on other parts of the house( he is o.c.d. to the max)

and you know who`s to blame??
me!!
i should have been more of a business man , and just stood my ground.
but he need help , i felt for him , hes a really nice guy . the banks hard to work with . he`s looking for me for guidance 

like that should really make a difference when your trying to bid , and get a job signed for , but haven`t gotten signed for yet.

today for the third time i told him " i have to step back till you stop shopping the costs , and sign a contract . this isn`t the way to do business "
told my wife i`m dissapointed with myself for dragging this out, and putting other clients on the back burner , waiting for this all to come to fruition. at least i haven`t had any subs do any work yet.

54 years old , and i still do this crap!
yeah , my wife said from day one " don`t take it ! its going to be a pain in the a**!"


----------



## Jaws

Spike7 said:


> ok , i`ll go back to the thread starter .:
> i made the mistake of trying to give a break to a brother of my a/c contractor . ( he and i have work together for about 20 years , so its seemed like a good idea)
> brother is a young fireman , and he and his wife bough their first home
> i started out letting him know i`ll drop my percentage to 15% on my subs( i`m the c.g. , and its a permited job at around $85,000)
> he has an agreement with the bank that they pay this and it goes inot the mortgage.
> as we started , i found out i can`t get a deposit . i have to have me , and subs working , and show substantial work done to apply for a deposit.i have to meet the agent , he inspects what i have done , and then the paper work is submitted.
> the only reason mt subs agreed is because we have long-standing relationships and they trust me.but their not happy to start without deposits
> well " brother" is too busy over shopping each subs price
> every few days its " he spike i got another window price ! its $2000 less than the last one !"( we`ve gone through 3 now )
> he did the same with my electrician.
> he asked for another comparison price , since my electrican seemed high .
> i got one . then he got one throguh his brother . it was 1/3 lower than the lower of the two i got .
> he still hasn`t signed a contract .i`ve done some work ( demo ), and got paid for it
> but the starting date has dragged for about a month .he hasn`t submitted the plans because he keeps changing ideas , and hunting for better prices so he can use that savings on other parts of the house( he is o.c.d. to the max)
> 
> and you know who`s to blame??
> me!!
> i should have been more of a business man , and just stood my ground.
> but he need help , i felt for him , hes a really nice guy . the banks hard to work with . he`s looking for me for guidance
> 
> like that should really make a difference when your trying to bid , and get a job signed for , but haven`t gotten signed for yet.
> 
> today for the third time i told him " i have to step back till you stop shopping the costs , and sign a contract . this isn`t the way to do business "
> told my wife i`m dissapointed with myself for dragging this out, and putting other clients on the back burner , waiting for this all to come to fruition. at least i haven`t had any subs do any work yet.
> 
> 54 years old , and i still do this crap!
> yeah , my wife said from day one " don`t take it ! its going to be a pain in the a**!"


When dealing with banks, you generally have to have some operating capitol.

Just a word of advice, not picking on you at all, but have a nailed down scope and signed contract before starting. In pre construction meetings, explain that you have to use your subs, because they are dependable and stand behind their work, and as you are responsible for their work and are liable for it, you must choose your subs. Explain that the low bid is not generally a good route for quality work. Explain that your subs have to make a reasonable profit to stay in business, and you need them to stay in business, so you cant ask them to lower their price. Their price reflects years of knowledge and experience, and they gave the price they need to do the work. Tell him that they are qualified and experienced tradesman and certainly deserve to make a living commiserate with their abilities. Explain that it is disrespectful to ask them to lower their price.

I would tell him, that because we are friends, I have lowered my mark up. My subs arent your friends, I wont ask them to lower theirs. 

You might consider offering to allow him to buy his own flooring, fixtures, ect... and you wont mark it up. I go that route sometimes, but I am clear in the meetings and my contracts that I dont warranty things I dont buy. Just the installation.

Good luck with the project. :thumbsup:


----------



## Spike7

Jaws said:


> When dealing with banks, you generally have to have some operating capitol.
> 
> Just a word of advice, not picking on you at all, but have a nailed down scope and signed contract before starting. In pre construction meetings, explain that you have to use your subs, because they are dependable and stand behind their work, and as you are responsible for their work and are liable for it, you must choose your subs. Explain that the low bid is not generally a good route for quality work. Explain that your subs have to make a reasonable profit to stay in business, and you need them to stay in business, so you cant ask them to lower their price. Their price reflects years of knowledge and experience, and they gave the price they need to do the work. Tell him that they are qualified and experienced tradesman and certainly deserve to make a living commiserate with their abilities. Explain that it is disrespectful to ask them to lower their price.
> 
> I would tell him, that because we are friends, I have lowered my mark up. My subs arent your friends, I wont ask them to lower theirs.
> 
> You might consider offering to allow him to buy his own flooring, fixtures, ect... and you wont mark it up. I go that route sometimes, but I am clear in the meetings and my contracts that I dont warranty things I dont buy. Just the installation.
> 
> Good luck with the project. :thumbsup:


not taking it like your picking at me at all.

i do like to use my own subs just for the reasons you stated.
i take pride in giving a good job .i`m not the highest price . i have stuck with the same subs ( plumber for about 20 years , electrician , i have a few but have worked with each for years.as for a/c guy , its his own brother , and i have worked with him also for about 20 years .
i did tell him , that at this point ,my profit won`t change . if he wants to get a cheaper sub , i can only be so responsible , and that i will still get the same amount no matter who he uses . i cant lower my profit anymore.

i do allow clients to purchase their own appliances , and fixtures.
i feel like i`m giving too much , and not getting . and again thats my fault right now

even tonight , after a long day ,
he called frantic
" hey , the plans processor needs to you fill out the permit , and get all your insurance and license certificates over to her . she`s going tomorrow at 7a.m.!"
i had to tell him " bob( not his real name) i can`t do it . theres no way i`m going to pull a permit on a project that isn`t signed over to me . you keep changing numbers. at this point i need a signed agreement . "

talked to the plans processor and told her to run the permit with no contractors name on it as of yet.
i`m doing too much for him


at this point i`m going to have to stone wall him , and just say " we have to finalized this , or i have to move on till , and if your ready"

Dad always said ( 30 years back)" don`t work for friends or relatives" i thought he was a jerk for that then .not anymore


----------



## BrianNNOLA

Spike7 said:


> ok , i`ll go back to the thread starter .:
> i should have been more of a business man , and just
> today for the third time i told him " i have to step back till you stop shopping the costs , and sign a contract . this isn`t the way to do business "
> told my wife i`m dissapointed with myself for dragging this out, and putting other clients on the back burner , waiting for this all to come to fruition. at least i haven`t had any subs do any work yet.
> 
> 54 years old , and i still do this crap!
> yeah , my wife said from day one " don`t take it ! its going to be a pain in the a**!"


I've done work for my brother as well when he built his home many years ago. Its never easy working for family, and anything more than free is too much. LOL
There has to be ground rules when this comes along. Either he's going to handle it or since he's looking for your help, let you handle it. No in between stuff, just cut and dry. It can be hard, but a brother should trust you more than anyone, especially when this is your area of expertise. By his taking it upon himself to scout out cheaper prices, this would be an indication to me he feels confident and better off doing things himself, but dragging you along for the ride should things not work out quite so well from his undertaking. That isn't fair to you, and quite frankly, I'd let him know it and give him the ultimatum. After all, you wouldn't call him first if your house was on fire unless you felt confident he could get over there and put it out faster.


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## pjcoop

*Tool expense*

I have been reading this thread and I can figure almost everything out. But my question is regarding tool costs, I know the sky is the limit for me when it comes to tools, is there a standard percentage like 10% of a job goes to a tool fund. I have in the past included the cost of a special tool needed for a job in that job bid. But it is not the customers fault that I need a new brushless impact driver to go along with my 2 other impact drivers.
I hope this all makes sense and it can be driven down to a percent.
Thanks for the help


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## ohiohomedoctor

pjcoop said:


> I have been reading this thread and I can figure almost everything out. But my question is regarding tool costs, I know the sky is the limit for me when it comes to tools, is there a standard percentage like 10% of a job goes to a tool fund. I have in the past included the cost of a special tool needed for a job in that job bid. But it is not the customers fault that I need a new brushless impact driver to go along with my 2 other impact drivers.
> I hope this all makes sense and it can be driven down to a percent.
> Thanks for the help


I purchase tools directly from our business account as needed. The funds come from the overhead charge. I have never put a value or percentage to how many percent of gross income I spend on tools but if your charging enough to cover your expenses, your overhead, and your profit than there will likely be enough money in your account to cover spontaneous tool purchases. If you have to bill a client directly to cover the purchase of a new tool you are likely not charging enough money to provide a sustainable profit for yourself over a long period of time. It is very easy to break even or even operate at a loss in this business without even knowing your doing it if you are not properly tracking your expenses and incomes..


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## TNTRenovate

ohiohomedoctor said:


> I purchase tools directly from our business account as needed. The funds come from the overhead charge. I have never put a value or percentage to how many percent of gross income I spend on tools but if your charging enough to cover your expenses, your overhead, and your profit than there will likely be enough money in your account to cover spontaneous tool purchases. If you have to bill a client directly to cover the purchase of a new tool you are likely not charging enough money to provide a sustainable profit for yourself over a long period of time. It is very easy to break even or even operate at a loss in this business without even knowing your doing it if you are not properly tracking your expenses and incomes..


This is the way I operate most of the time. Occasionally I will charge for a tool that I need for that job.


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## pjcoop

I guess what I was trying to get is if I am spending $10k a year on tools and only making $30k, then I am in trouble but if I am making $100k then I am probably okay.
Why I asked this question is the very original post talks about being able to know what these numbers are and this will help in establishing pricing for your bids. If one of your costs is way too high then your bids are going to be high and you are going to lose jobs. So I was looking for a general percentage if it existed. Which might help me in keeping my pricing in line and help maximize profits.


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## rselectric1

Standard tools are OUR responsibility to provide. However if it's an unusual tool needed for a particular job, I will rent it and charge the customer. That expense will be job-costed to the particular job in the books.

(One example might be a scaffolding or man lift for a hard to reach area) I will usually know this going in to the job so there are no surprises to the client.

Regular and standard tools are OUR responsibility. How much you spend on them is up to you. It completely depends on what quality of tools you want to carry.

Edit: I just checked my QB for tools in this fiscal year, and I am just under 5 percent of gross sales in this category. Hope this helps.


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## Warren

While I am sure this is different for every situation, I have actually charted mine over several years. Mine tends to run between 1 and 2 %. This is not for initial start up tool purchases. I think running a larger crew helps to keep the percentage a bit lower.


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## UALocal1Plumber

pjcoop said:


> I have been reading this thread and I can figure almost everything out. But my question is regarding tool costs, I know the sky is the limit for me when it comes to tools, is there a standard percentage like 10% of a job goes to a tool fund. I have in the past included the cost of a special tool needed for a job in that job bid. But it is not the customers fault that I need a new brushless impact driver to go along with my 2 other impact drivers.
> I hope this all makes sense and it can be driven down to a percent.
> Thanks for the help


Dude if you've been reading you should know that the only way to for you to know how to charge is to know your costs.

So you to should use your experience to set our some method of charging for tools. As you get more experience, your method may modify. But you have to know, not just guess.

Depending on what works for you, you could set an ST&S (small tools and supplies) budget per man hour, as a fixed percentage per job, per diem, flat rate per job... only you as a business owner will know how to best approach this. 

One employer I used to work for had us assess a "torch charge" of 9 dollars every time we did any soldering or burning. It didn't seem like much, but that's what he calculated for covering his consumables. Another employer had a budget for all their bid work of $16/mhr (for plumbers, it was $9/mhr for iron workers) for st&s, and specialty equipment was billed to the job.

It's different for everyone. That's why you get the big money...you're the boss!

Keith


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## Tinstaafl

pjcoop said:


> is there a standard percentage like 10% of a job goes to a tool fund.


No there isn't. When first starting out, almost by definition you will be light on tools and needing to buy quite a few. The longer you are in business, the more tools you will have accumulated, so the budget will decline to a more or less "steady state" where you're just replacing those you've worn out.

Obviously, on occasion you'll have a job where you need a specialty tool not normally required in your line of work. That either gets rented or billed directly to that job.

If I see future uses for a tool I don't already own, I don't hesitate to grab it. While it might hurt a bit at the moment, I'll be that much more well-equipped the next time. And more profitable as a result.


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## pjcoop

Thanks for the replies
I like the 5% and that was what I was looking for what other people are spending as a percentage on tools.
I like the small tools and supplies, I currently have a flat supply charge that I apply to each job.


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## VAviaCo

Tinstaafl said:


> The longer you are in business, the more tools you will have accumulated, so the budget will decline



The longer you are in business, and especially the more idiots you hire to help ruin stuff, the higher your tool repair costs will go.


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## ryanshull

If you want to be successfull in buisness, you have to be more about the buisness than the trade at some point. It is sad when a really great craftsman gets out on his own, turns out great work, makes many happy, then goes broke. 

I make, save, find, and learn how to make more $ in my 30 minutes of office time than 9.5 hours on the job. Get educated any way you can.


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## ohiohomedoctor

You mean you have figured out how to make money? :woot:


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## ryanshull

I think I found a way to not be broke anyway. :thumbsup: I learned the hard way. I really don't know how I made it through the first year or so.


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## VAviaCo

I know that I have no head for business. I had options in college and stayed away from anything that had to do with business, because I didn't want to wear a suit. 
Not the smartest move, I know now, but one cannot turn back the clock.
I can't think of any reason I haven't gone under yet except that I don't live the high life. Instead of interning at Phillip Morris in my 20-30's, I traveled and lived on the cheap. It's a trait that comes in handy. 
It still seems to me that if I jack my rates to make some big profit margin, I'm going to lose business. It may be the area. A lot of people here don't need much $ to get by. Very rural.


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## Tinstaafl

VAviaCo said:


> The longer you are in business, and especially the more idiots you hire to help ruin stuff, the higher your tool repair costs will go.


Then you are hiring the wrong idiots. :laughing:


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## BrianNNOLA

VAviaCo said:


> The longer you are in business, and especially the more idiots you hire to help ruin stuff, the higher your tool repair costs will go.


After 35 years working as a carpenter helper, journeyman, foreman, superintendent, to branching out on my own, I've had the opportunity to live, see, and understand how people's attitudes relate to work ethic. You really can't win by being cheap, and workers won't respect you, your tools, or take pride in their work when they have no motivation, which requires fair pay. Hire a cheap worker, you get someone who doesn't care about your tools and will only perform enough to remain around until a better opportunity comes along. Hire somebody skilled who takes pride in their work and care of your tools, then they want a bigger share of the pie. As a contractor, you'll either pay out in wages or you'll pay out in loss of tools and materials. 
This is the reason I scaled down my operation to just me and a helper. I might not make a fortune and it will take longer to do jobs, but I won't contend with the headaches, especially workers who botch up jobs when you're not around forcing you to redo the work while having to fire and pay off those idiots, as well as buy/repair tools.
Like a previous responder in this thread, I too only buy the tools I need to do the job, which has been an accumulation over time, or rent tools I rarely use for specialty jobs. Most have lasted me 20 years.
I see some people who work in the business that many call "tool fools", meaning they're always buying 2 or 3 of the same tools or the newest, latest, and greatest tool out there. So many of them just end up on shelves collecting dust. Kinda reminds me of women and shoes.:laughing:


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## BrianNNOLA

VAviaCo said:


> I know that I have no head for business. I had options in college and stayed away from anything that had to do with business, because I didn't want to wear a suit.
> Not the smartest move, I know now, but one cannot turn back the clock.
> I can't think of any reason I haven't gone under yet except that I don't live the high life. Instead of interning at Phillip Morris in my 20-30's, I traveled and lived on the cheap. It's a trait that comes in handy.
> It still seems to me that if I jack my rates to make some big profit margin, I'm going to lose business. It may be the area. A lot of people here don't need much $ to get by. Very rural.


Feelings mutual, especially when there are a flood of people willing to do your work for half the cost, and don't pay income taxes or insurance.:sad:


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## TimN8er

Boogga said:


> Just briefly;
> 
> I just recently priced a job for two homes on one block of land. I said I'll price it cheaper because of two house (same size and design) and nice bloke (HO) etc. I priced them at $465,000. I rang the bloke up to tell the price and he said he had prices ranging from $520,000 as the highest and the lowest which he'll go for, was $368,000. Some cowboy priced that and how he will manage with making money on that figure, only God knows.
> 
> A few months back there was this "price v's quality" article. Where is it now? Does anyone know? Please let me know cause I'd like a copy of it. Thanks!


Old post but would love to know how that guy made out on the two houses after all this time. i assume the first guy to the partial payment and ran after a few boards were nailed.


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## killerdecks

Realy this business thing isn't that hard a concept. 

1 Sell a product.
2 Be good at your trade, teach people how to do what you do.
3 Sell more product
4 Have your best people become crew leaders, establish guidlines.
5 Sell lots more product
6 Get out of the field, keep yopur crew leaders happy, try to set your product as unique and different in the market place.
7 Sells lots more product.
8 Train a sales guy that is not and doesn't know any of them. one of your installer crews
9 Sell more and more and more
10 start divesting in different suppliers, keeping you eye on supplying yourself in the future
11 Now you really start selling 
12 Slowly 1 product @ a time become your own supplier, start leveling the field of competiotion.
13. Keep on selling get more sales people, develop a policy procedure book for your company which spells out all the rules
14 sell more than you ever thought you would or were capable of doing
15 own the marketplace by being your own supplier, take any job you want as a result of your new competitive edge.


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## kcchiefsfan1982

I wasn't able to read all 12 pages of this, but, there are some nice things to consider when analyzing what type of year you are wanting to have...for the big guy or the small guy. 

Example: 

One company may have a goal of making $500,000 gross revenue for the year. They know their overhead will be roughly $750,000 in this scenerio. 

So, they could get there different ways. One way...Do $5 million in sales and attempt to record a 26% profit margin average on the year's sales (before deducting overhead). $5 million x .26 (profit margin) = $1,300,000. Then, subtract your $750,000 overhead and you have a gross profit of $550,000 and beat your goal!

Now, for the smaller guy, maybe he wants to make $50,000 for the year starting out. So he may need to do $500,000 in sales for the year if he has an overhead of $75,000 and would still have to make 26% gross margin average on all his sales combined. That leaves making $130,000 gross profit BEFORE subtracting overhead. Subtract overhead and you have $55,000. You beat your target.

So, of course, you have to know your market and your own business to come up with a plan like this for the year. Even then, you are still making an educated guess, and at the end of the year, you either didn't reach your goal, reached it exactly, or exceeded your goal. That is life. Know your market. Know yourself. If you are starting out, do the math still to decide what you want to profit at the end of the year. Yes, it will be a guessing game, but make it as much of an "educated guess" as possible. Then, adjust each year. After 5 years, you will be fairly accurate. After 10 years, you will be getting pretty darn good at it. After 30 years...well, you may be dead.:clap:


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## brunothedog

reads like a lot of tradesmen here inherited a business that was already set up.

Me, I love underbidding my competition, labor is the biggest factor in small companies.
I will work a 20 day job for 100 bucks. I see no problem with doing so.
And the thing is. I am one of the considered one of the best at what I do.
when youngsters set up in my field, I know their start-up costs. and i know what they need to make to get by.
but to make the really good money, you gotta keep the others at bay.
So these 3 guys start up and bid a 8000 dollar job last december, I knew the architect that done the designs and agreed to undercut them by 3000. it was a small job, but, a lot of times you gotta throw the small fish back into the pond to catch the bigger fish.
thats life


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## DavidC

Am I reading this right? You will work for 20 days @ $5 to earn $100? Ramen noodles for dinner?

It's unclear, did you look at any plans or calculate an estimate before agreeing to undercut the job?

Good Luck
Dave


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## rselectric1

brunothedog said:


> I will work a 20 day job for 100 bucks


20 hours in a day for $100? Please clarify for us what you meant.:blink:


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## brunothedog

100 a day, i didn't read what i wrote,


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## rselectric1

brunothedog said:


> 100 a day, i didn't read what i wrote,


I have no words. (Well actually I do but it would be best if I just ask how you pay your bills at this rate)


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## TxElectrician

brunothedog said:


> 100 a day, i didn't read what i wrote,


I hope you're kidding. I wouldn't do this chit for 100 a day net profit, much less 100 a day wages.


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## Oconomowoc

When I was 18 a $100 night in bartending was considered a bad night. That's crazy.


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## KAP

brunothedog said:


> reads like a lot of tradesmen here inherited a business that was already set up.
> 
> Me, I love underbidding my competition, labor is the biggest factor in small companies.
> I will work a 20 day job for 100 bucks. I see no problem with doing so.
> And the thing is. I am one of the considered one of the best at what I do.
> when youngsters set up in my field, I know their start-up costs. and i know what they need to make to get by.
> but to make the really good money, you gotta keep the others at bay.
> So these 3 guys start up and bid a 8000 dollar job last december, I knew the architect that done the designs and agreed to undercut them by 3000. it was a small job, but, a lot of times you gotta throw the small fish back into the pond to catch the bigger fish.
> thats life


Well, you certainly know your value...

I couldn't see a more clear case of leaving money on the table than this...

Why $3K? You KNEW this guy, and the only way to get the job was by dropping your pants for a guy you KNEW?...


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## Oconomowoc

KAP said:


> Well, you certainly know your value...
> 
> I couldn't see a more clear case of leaving money on the table than this...
> 
> Why $3K? You KNEW this guy, and the only way to get the job was by dropping your pants for a guy you KNEW?...


It's not who you know, it's WHO you know. Lol


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## hdavis

He doesn't have much competition to drive down his price, so when someone tries to start up and compete he makes them starve and find another market. Then he's back to charging the big bucks.


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## kcchiefsfan1982

brunothedog said:


> reads like a lot of tradesmen here inherited a business that was already set up.
> 
> Me, I love underbidding my competition, labor is the biggest factor in small companies.
> I will work a 20 day job for 100 bucks. I see no problem with doing so.
> And the thing is. I am one of the considered one of the best at what I do.
> when youngsters set up in my field, I know their start-up costs. and i know what they need to make to get by.
> but to make the really good money, you gotta keep the others at bay.
> So these 3 guys start up and bid a 8000 dollar job last december, I knew the architect that done the designs and agreed to undercut them by 3000. it was a small job, but, a lot of times you gotta throw the small fish back into the pond to catch the bigger fish.
> thats life


well, you, sire gave me a good laugh. I feel like I should pay you for it, it was that funny!!! :clap::laughing::no::thumbup:


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## KAP

Oconomowoc said:


> It's not who you know, it's WHO you know. Lol


With friends like that who needs enemies... :whistling

$3 GRAND!... :no:


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## rselectric1

kcchiefsfan1982 said:


> I feel like I should pay you for it


And you should pay him for it. It probably took him 15 minutes to compose this post and since he works a 20 hour day for $100, that would make you bill tally up to $1.25. (Yes I got the calculator out for that one! :laughing


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## Jaws

I dont think the guy is saying he works for a hundred a day often. 

His business philosophy may be different than most of ours, but maybe it serves him well. Different demographics, cultures, and countrys may change things considerably.


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## rselectric1

Jaws said:


> I dont think the guy is saying he works for a hundred a day often.
> 
> His business philosophy may be different than most of ours, but maybe it serves him well. Different demographics, cultures, and countrys may change things considerably.


Could be but he put it out there a bit differently.

On days when I am quoting jobs and creating estimates/contracts, etc, technically I have made no money that day either unless one of them pulls the trigger. And many times that is the case.:sad:

But to actually offer up a professional service for as low as $5 per hour is absurd. Even if he mans up and charges $20 per hour the next day.

Perhaps he can enlighten us on his business strategy, because all I see is the "H" word.


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## Jaws

rselectric1 said:


> Could be but he put it out there a bit differently.
> 
> On days when I am quoting jobs and creating estimates/contracts, etc, technically I have made no money that day either unless one of them pulls the trigger. And many times that is the case.:sad:
> 
> But to actually offer up a professional service for as low as $5 per hour is absurd. Even if he mans up and charges $20 per hour the next day.
> 
> Perhaps he can enlighten us on his business strategy, because all I see is the "H" word.


From his picture post, he is far from a hack. Im sure he makes more than $20 on hour on average. 

I dont agree with it either. I ***** about low ballers all day. Some have been around for 30 years. 

Just saying, he may be in the middle of nowhere, and shafting himself a few times may get rid of his competition. Different strokes.


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## EthanB

I read it the same as hdavis and Jaws. Bruno is talking about working for less for a time to drive his competition out.


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## rselectric1

EthanB said:


> Bruno is talking about working for less for a time to drive his competition out.


Then what? I guess I'm just too much of a straight shooter to understand how this will benefit anyone in the long run.

Educimate me!:jester:


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## Jaws

rselectric1 said:


> Then what? I guess I'm just too much of a straight shooter to understand how this will benefit anyone in the long run.
> 
> Educimate me!:jester:


If your in a secluded locale, you have the capital to take it the seat a few months, you knock out the competition and go back to making money. Lots of old timers did it here before the area and competition grew. My granddad was one of them. He actually built a few houses in the mid eightys for about what he paid a foreman. Was in business for 45 years and retired well. 

Not my cup of tea, but if your in it for the long haul, it is what it is.


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## Jaws

By the way. I don't drink tea unless its iced, and in a glass. Just wanted to clear that up.


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## rselectric1

Jaws said:


> If your in a secluded locale, you have the capital to take it the seat a few months, you knock out the competition and go back to making money. Lots of old timers did it here before the area and competition grew. My granddad was one of them. He actually built a few houses in the mid eightys for about what he paid a foreman. Was in business for 45 years and retired well.
> 
> Not my cup of tea, but if your in it for the long haul, it is what it is.


I hear you. Small town vs large town. If I were to try to do that around here, others would quickly fill in the gaps. I mean QUICKLY like hours.

Just ask Angus, TNT, and the others in this area. There are literally over one thousand "contractors" to pick from in our target town. Only about 50 of us are legitimate and we all kind of know each other too.

Small towns must be a completely different animal. Interesting to hear the differences.:thumbsup:


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## Jaws

rselectric1 said:


> I hear you. Small town vs large town. If I were to try to do that around here, others would quickly fill in the gaps. I mean QUICKLY like hours.
> 
> Just ask Angus, TNT, and the others in this area. There are literally over one thousand "contractors" to pick from in our target town. Only about 50 of us are legitimate and we all kind of know each other too.
> 
> Small towns must be a completely different animal. Interesting to hear the differences.:thumbsup:


Interesting to me too....

In 2007 there were 427 registered GCs in a three county area of 40, 000.


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## jlsconstruction

What happened to angus


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## Oconomowoc

What country? Taiwan

So ya drop your price, by a massive margins by the way, to get further work? And then raise prices by the same margin later on? I'm sure that goes over well. 

If a business is after repeat work what work is that? Landlords? Home builders? 

Of course, none of this matters because people will do what they do regardless of opinions but I'd rather have a customer want my services for other reasons. If a person is willing to lose $3k that time is wasted. You'll never get it back unless you charge for it later on. So how does that work? Does the same guy who received the deal pay it back later on?

We're talking a big % here, not a $100.


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## rselectric1

jlsconstruction said:


> What happened to angus


He's not here at CT anymore as a mod.

He's doing well and I worked with him just this morning on a job.


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## Jaws

Oconomowoc said:


> What country? Taiwan
> 
> So ya drop your price, by a massive margins by the way, to get further work? And then raise prices by the same margin later on? I'm sure that goes over well.
> 
> If a business is after repeat work what work is that? Landlords? Home builders?
> 
> Of course, none of this matters because people will do what they do regardless of opinions but I'd rather have a customer want my services for other reasons. If a person is willing to lose $3k that time is wasted. You'll never get it back unless you charge for it later on. So how does that work? Does the same guy who received the deal pay it back later on?
> 
> We're talking a big % here, not a $100.


I have no idea :no: Not my bag, and I wouldn't do it. Doesnt make any sense to me. 

My only point is, we dont all know everything. :no: Unless he took a picture of someone elses wall, he is a very good mason. From his posts he has been around a long time. He lives in another country. 

His theory is how big business strangles small businesses out of business. Dog eat dog, who is tougher in a street fight business. Gas companies were notorious for it here in the 50s and 60s.


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## BrianNNOLA

For a $100 a day, you might as well work for someone else and avoid the headaches and waste of time.

Selling yourself short won't gain you any respect among your peers or clients, and when they do refer or pass your name off to others, they might say you do good work but also say you work very cheap, for which they'll be expecting that cheap price. Otherwise, they'll think your trying to gouge them.
When I first started out trying to gain new clients, I actually lost some bids for being too cheap, as the client at that time probably had doubts about the quality of work they would get for being so cheap, and wonder if I'd walk out for not finishing the job due to the lack of money involved. Clients these days are pretty well informed as to market prices and going rates where they know when a price is too high or too cheap. Its always best to be somewhere in the middle.

Driving out the competition? Hardly, since there is no limit to the new people trying to break ground in this business.


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## Oconomowoc

Jaws said:


> I have no idea :no: Not my bag, and I wouldn't do it. Doesnt make any sense to me.
> 
> My only point is, we dont all know everything. :no: Unless he took a picture of someone elses wall, he is a very good mason. From his posts he has been around a long time. He lives in another country.
> 
> His theory is how big business strangles small businesses out of business. Dog eat dog, who is tougher in a street fight business. Gas companies were notorious for it here in the 50s and 60s.


I understand your point. 

That's why I used the expression "percentage". I don't care where you live, that's a big azz cut, most things are relative. If he's older, and been at this awhile, why continue dropping to such dramatic extremes?

Must me a schit pile of profit in masonry


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## Jaws

Oconomowoc said:


> I understand your point.
> 
> That's why I used the expression "percentage". I don't care where you live, that's a big azz cut, most things are relative. If he's older, and been at this awhile, why continue dropping to such dramatic extremes?
> 
> Must me a schit pile of profit in masonry


No idea :no:

I do know some of the old timers think of this stuff as a commodity instead of a service. Low price wins. Quality should be expected regardless of the price.


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## brunothedog

BrianNNOLA said:


> For a $100 a day, you might as well work for someone else and avoid the headaches and waste of time.
> 
> Selling yourself short won't gain you any respect among your peers or clients, and when they do refer or pass your name off to others, they might say you do good work but also say you work very cheap, for which they'll be expecting that cheap price. Otherwise, they'll think your trying to gouge them.
> When I first started out trying to gain new clients, I actually lost some bids for being too cheap, as the client at that time probably had doubts about the quality of work they would get for being so cheap, and wonder if I'd walk out for not finishing the job due to the lack of money involved. Clients these days are pretty well informed as to market prices and going rates where they know when a price is too high or too cheap. Its always best to be somewhere in the middle.
> 
> Driving out the competition? Hardly, since there is no limit to the new people trying to break ground in this business.


90% of my clients are from word of mouth, and i will undercut ANYONE that is my competition, 

do you get the point? COMPETITION.

i usually pull in from 5-9 k a month, that job i undercut My competition was just after a very good summer, very very good.
so, in the general concept, i made money.end year results.

some days i lose a hundred, some days i make a hundred.

last year i wanted to get into government job bids for stone exterior street work. there was only 1 Company doin the bidding,
so i registered to bid too. there mosty jobs ranging from 10-50K.
I knew what his last bid was for a similar job he did months before.
the job was to lay granite cubes(8by8by8) in a turn around. 80 sq. meters of stones to lay. his bid was 37.50, i bid 28.00.
I knew what his bid was and 37.49 would of got me that job. 

But, thats not the point.

I had to introduce myself.

another 3 small jobs, I did the same.

the last job offer, he didn't bid.

the job was to cut and lay 300 sq. meters of limestone in an old "Piazza"

the total was 52K for that work

I was the only bidder.

Was what i did wrong?
was losing 3K on one job and earning 12k on another wrong.

THATS THE CONSTRUCTION BUSINESS

"little fish catches BIG fish"


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