# Define "Fair" Pricing...



## daArch (Jun 8, 2007)

My fare is fair in this laissez–faire system. My old partner, "the little guy", was fayer than I, but our business was not feyer than those who charged beyond "what the market would bear". Because some of those guys worked in the bare applying Behr, which upped the consumption of Bayer.

My point? I love playing with words.

No no, seriously there is a difference between "fair market price" and "what the market will bear" You have more control of the former, while Suzie and Harry Homeowner decide the latter.


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## Herk (Aug 1, 2007)

From the customer's point of view, if they think you're going to give them everything for free, they'll think that's fair. They don't seem to know the definition of fair. Fair is fair to both parties, not a windfall to the customer.

As to insulating the attic, what's fair has to do with the insulator's cost of doing business? His only way to get a good market price is to provide better quality than you can by doing it yourself. But he isn't just paying for the insulation and some labor - he's paying for his facility, a place to store his product, taxes on same, power on same, an office, a truck, fuel, repairs on said truck, tires, wages for his employees, FICA, insurance, phones, advertising, maybe even health insurance and life insurance in case he gets hold of a loose wire in your attic and dies on the job.

He's also looking at a bigger truck so he can do more jobs in a day and his accountant just absconded with $80,000 out of the till. The guy fixing his truck's transmission just charged him double what he quoted, and his supplier just went under and he's got to get his stuff from another supplier who sells him his insulation at double his previous price.

His wife's tired of his low income and is divorcing him and her attorney is getting her the house and a healthy child support check.

And you told him he's over budget. Right about now, he's thinking nothing's fair.


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## dirt diggler (May 14, 2006)

any doctrine of "fairness" is discussed in the contract.


A change order is fair 

Coming back and hitting the HO up for money because you can't keep track of your finances, or bid a job right - is not fair.

imo


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## skylands (Dec 10, 2005)

Fair is a dangerous statement to me.

I told the HO the project would take about a week. I figured two men for 5 days.

I put 3 men on and completed the job in 4 days.

The HO wanted a break since we were only there 4 instead of the 5 days I told him.

.......It was a set fee for the job. Not a T&M project. 

He just didn't want to hear it. He just insisted I wasn't being "fair" with him.


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## send_it_all (Apr 10, 2007)

skylands said:


> Fair is a dangerous statement to me.
> 
> I told the HO the project would take about a week. I figured two men for 5 days.
> 
> ...


Tell him he actually owes you more money. You figured 10 man-days, and it really took 12...so by his logic, he owes you two man-days worth of pay.


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## Grumpy (Oct 8, 2003)

I use the word "fair" pricing very often. Fair is one of those realitive terms that can mean something different to different people. What is fair to me, is what I tell the customers in my presentation, setting them up for my price.


> "Mr Customer we price fairly, meaning we might not be the cheapest and probably won't be the highest but you can be damned sure you are getting a good price for a great scope of work. IN short we charge enough to do the job right so we don't have to cut corners to make a profit, but we are not out to get rich off your job or financially rape anyone.
> 
> I tell people that I price to eat and to sleep, and you may be wondering what that means. That means that we have to charge enough to pay everyone involved enough to feed their families and not have to struggle. I also have a conscious and want to be able to sleep eazy at night knowing I am not stealing from anyone by over charging."


That's what "fair" pricing is to me. I really just use it to explain to the customer that cheapest price isn't the most important thing.


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## copusbuilder (Nov 8, 2005)

skylands said:


> Fair is a dangerous statement to me.
> 
> I told the HO the project would take about a week. I figured two men for 5 days.
> 
> ...



I try and never commit to a steadfast time frame. People have weird ways of justifying things in their minds

If they ask how long I usually reply "It's in my best interest to finish the job but I will not rush it to hold to a time frame." Usually shuts em up with a smile.

But as mentioned above 4 days 3 men is more man hours so what's his problem. Do I need to come pay him a visit:no:


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## vinylguy (Mar 18, 2006)

ever seen the movie billiejean ? cause you guys sound like her when the creepy guy stole her bike! "fair is fair" good movie tho she was hot in the 80's wonder what contractor does her work? the guy that spent 4 days with 3 guys or the one that spent all 5 days with 2 guy's? please help me i'm confused ! are you able to sleep at nights with out a guilty consence? do you do what you promise to do? if so thats fair


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## Vinny (Jul 21, 2007)

mahlere said:


> is it the price that they guy in the 10 yr old van, living in a 1 bedroom apartment, that can't pay his bills and lives job to job charges?
> 
> is it the "$75/hr, we estimate it for 3 hrs, but it actually took 6...so it's $450 instead of $225" guys price?
> 
> ...


Its all of the above!!

No one can tell anyone how to run thier buisness. Therefore, what your cost basis is will dictate the "fair" or sell price. 

It may be higher than the competition or it may be lower, but the bottom line is its up to every and all contractors within a givin industry to determine the fair price for what they deliver is whats fair for them.

There is a larger issue though that will determine "fair". Its what the prospect percieves as fair. Thier perception in the end is really all that matters. After all they pay the bills.

Its our job as buisness owners to sell the value of what we do better than our competitor regardless of price. This will help the prospect determine whats "fair".


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## RizzoMaryland (Feb 12, 2007)

If I bid all my jobs fair in the HO's eyes then I would be home today posting on Contractor talk at 11:40 in the morning....,......wait a minute.....:blink:


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## Tom M (Jan 3, 2007)

Those guatemalens for $200 may not neatly insulate, they might not seperate the batts around the wiring, they could block the soffit intake vents as well. So do you get what you pay for? Does 2 men for a day and a supervisor/ boss earn $800.00. Add the $800.00 material now $1600 is looking fair. Realistically you might say 15-1800 is the fair price and 2000 is a bit high. Does that 2,000 get rid of the old stuff? Now its looking border line cheap. HAHAHA


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## mahlere (Aug 6, 2006)

tom m said:


> Those guatemalens for $200 may not neatly insulate, they might not seperate the batts around the wiring, they could block the soffit intake vents as well. So do you get what you pay for? Does 2 men for a day and a supervisor/ boss earn $800.00. Add the $800.00 material now $1600 is looking fair. Realistically you might say 15-1800 is the fair price and 2000 is a bit high. Does that 2,000 get rid of the old stuff? Now its looking border line cheap. HAHAHA


this is all well and true...but I don't think it's fair...so what is fair?


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## deckman22 (Oct 20, 2007)

Do you charge the cost of materials & $200 a day for your electrical jobs? I bet not.


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## mahlere (Aug 6, 2006)

deckman22 said:


> Do you charge the cost of materials & $200 a day for your electrical jobs? I bet not.


that's different...in that case I'm charging the money...:whistling

then, $2000/day doesn't seem fair...so what is fair?


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## Tom M (Jan 3, 2007)

mahlere said:


> that's different...in that case I'm charging the money...:whistling
> 
> then, $2000/day doesn't seem fair...so what is fair?


 You mean 1200.00 per day. Like many consumers these days your pricing out the material. You dont expect that company to mark it up? I know you mark up those eyeball cans. I think as a contractor we all say to ourselves "whats fair". We all disect the math in our brains. Whats not fair is paying a higher fee for proffesional sevices and getting those unproffessional guys. If a small company didnt charge what a bigger company did he could never grow to that operation either.


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## mahlere (Aug 6, 2006)

again...all well and good...but no one has defined "fair price" yet everyone refers to a "fair price"....my point is simple..what is a "fair price"?


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## mahlere (Aug 6, 2006)

tom m said:


> You mean 1200.00 per day.


nope, i meant $2000...if I'm the one billing, $5000/day doesn't seem "fair" to me. I mean, i'm doing all the work...


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## RizzoMaryland (Feb 12, 2007)

Fair price = Market value

Market value = Agreed upon price by consumer and supplier
(whatever that is for the situation-relative)


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## Tom M (Jan 3, 2007)

This is why people shop around and get a few prices. Its how the going rate gets determined. They hear all thats involved in the job from the different bidders and decide who's doing what. Then of course is the fact that no matter who you get they realize they are not going to pay less than xxxxxx for this type of service. If the consumer spoke to 3 Joes you cant up sell them if they spoke to 3 companys in uniform then your golden. Your upsell is easy. There should be a bulletin posted in the supply yards or some gossiping little worm we could pay to hang around and spread rumors on higher "going rates". Then we could all start charging more once the rumors become price bids. Is that fair?


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## mahlere (Aug 6, 2006)

RizzoMaryland said:


> Fair price = Market value
> 
> Market value = Agreed upon price by consumer and supplier
> (whatever that is for the situation-relative)


that means absolutely less than just saying fair...even your definition is not definitive...so again, what is the definition of "fair" that everyone keeps alluding to?


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## FCPWLLC (Jun 1, 2006)

Fair is in the eyes of the beholder.


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## gt4674b (Jan 15, 2007)

mahlere said:


> that means absolutely less than just saying fair...even your definition is not definitive...so again, what is the definition of "fair" that everyone keeps alluding to?


 Actually, I think that RizzoMaryland has offered the best definition of “fair price” yet. Economically speaking, with perfect competition, price and quantity of any product/service will reach equilibrium based on the market’s supply and demand. Any price higher than the equilibrium will not be purchased by the consumer and any price lower than the equilibrium will not be offered by the service provider.

Of course, we do not live in a “perfect” world and, therefore, opportunities arise to shift the supply and demand curves. This is what corporate strategy is all about; finding ways to change the equilibrium (aka fair) price of your service to your advantage.

Now be careful, there is an important distinction here. Undercutting your competition at the expense of profit does NOT change the supply curve of the market. However, lowering the cost of supplying your service DOES change the supply curve of the market.

Getting back to perfect competition for a sec. Perfect competition makes a lot of assumptions that aren’t applicable to the real world. It assumes things like no barriers to entry (think Microsoft, are there barriers?), service homogeneity (does Joe-Bob and Norm Abrams really offer the same service?), complete information (buyers/sellers know all prices set in the market for any level of service), etc. All of these cause distortions to the theoretical equilibrium price. In essence, it creates a million permutation of what the “fair price” really is. That is why we have seen so many different answers so far.

What the heck does all this mean? Your competition isn’t necessarily your competition. What all business owners need to consider is “How can I take advantage of these pricing distortions to MY advantage?”. Do you offer a superior service so that your business can’t be truly compared to Joe-Bob? Is the superiority of your service effectively communicated to your customers so that they value your offering more than Joe-Bob? These are the questions we must be asking. 

So what’s fair price? IMO, its whatever price you can get away with legally and ethically. No one’s holding a gun to the customer’s head or yours. Two parties enter into a mutual agreement and expect a service to be performed. If its performed, money is paid, and both sides are happy, that was the fair price.

PS I believe very strongly, as you may tell from above, that the concepts of microeconomics are IMPERATIVE to a successful business. Not saying someone won’t be successful without studying them, but either through education or street sense, these principles must be adhered to day in and day out to get to the next level. For anyone that is interested, I included a couple of links below relevant to the topic. 

http://en.wikipedia.org/wiki/Supply_and_demand

http://en.wikipedia.org/wiki/Perfect_competition


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## mahlere (Aug 6, 2006)

while I agree with all of it...well till the 4th paragraph at least, that's where I fell asleep:w00t...it kind of leads to my point...

there really is no such thing as "a fair price"...

because, based on what you wrote, me changing an electrical service for $10,000, with the customer told up front and agreeing to the price, performing the work when and how agreed to, etc...is a fair price.

however, there are many people on this board who will complain that that price is too high. it's a ripoff...etc.

so what is a fair price? 

it's a figment of the imagination of people who don't understand how to price their services. who don't understand their costs of doing business. who don't sell a job, but rather work T&M and sell their soul...

that's just my opinion though:whistling


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## RizzoMaryland (Feb 12, 2007)

RizzoMaryland said:


> Fair price = Market value
> 
> Market value = Agreed upon price by consumer and supplier
> (whatever that is for the situation-relative)


Therefore....

Fair price = agreed upon price by consumer and supplier

A consumer will not purchase something that they don't believe is a fair price.

Why can't you understand that concept mahlere????


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## mahlere (Aug 6, 2006)

RizzoMaryland said:


> Therefore....
> 
> Fair price = agreed upon price by consumer and supplier
> 
> ...


oh i understand the concept...especially on an individual basis...I also understand that if there is more than one person involved in a deal, at least one person will perceive the deal as "unfair" in some way...

but mostly I understand what most people mean when they refer to a fair price. And I understand the fact that fair is such an arbitrary term that it's incredibly useless to use in any pricing thread. 

does that make more sense?


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## kevjob (Aug 14, 2006)

Just had a conversation with my sales rep at my flooring center. I always bid my tile at 6.00 per sq ft for porcelain, tiles only. She said wow that doesn't leave much for labor and my reply was my labor is 10.00 per ft on straight lay She gave me the look and said don't you feel bad charging that much? I said why she said the going rate is blah blah blah, I said who's going rate?


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## copusbuilder (Nov 8, 2005)

kevjob said:


> Just had a conversation with my sales rep at my flooring center. I always bid my tile at 6.00 per sq ft for porcelain, tiles only. She said wow that doesn't leave much for labor and my reply was my labor is 10.00 per ft on straight lay She gave me the look and said don't you feel bad charging that much? I said why she said the going rate is blah blah blah, I said who's going rate?


Chances are you are bidding complete kitchens and baths where the tile price is rolled into the total?
If we bid a tile only job we are unlikely to get it because we are too high and slow for it to be profitable at a lower wage.


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## Gordo (Feb 21, 2006)

mahlere said:


> is it the price that they guy in the 10 yr old van, living in a 1 bedroom apartment, that can't pay his bills and lives job to job charges?
> 
> is it the "$75/hr, we estimate it for 3 hrs, but it actually took 6...so it's $450 instead of $225" guys price?
> 
> ...



Guy # 4.:clap:


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## mahlere (Aug 6, 2006)

Gordo said:


> Guy # 3.:clap:


the guy who hires illegals? i never knew you felt that way:whistling

3...4...220...221.....whatever it takes


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## Gordo (Feb 21, 2006)

mahlere said:


> the guy who hires illegals? i never knew you felt that way:whistling



:w00t: I will go back and edit.:laughing:


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## woodlover (Jul 4, 2007)

*contracts*

looking for help in finding a solid but fair contract form between homeowner and contractor


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## Gordo (Feb 21, 2006)

woodlover said:


> looking for help in finding a solid but fair contract form between homeowner and contractor


Check with your State Board of Contractors....the best place to start.


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## Putty Truck (Oct 6, 2007)

kevjob said:


> Just had a conversation with my sales rep at my flooring center. ....


It's like we are barflys, always running our mouths off to the bartender telling him things we wouldn't tell a corpse. 

I swear that every time I say something about my price the suckers raise the price of materials.

I never give a job name, either. I assign an invoice number to the job.


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