# Price Increase any one?



## jamesclerie (Mar 6, 2009)

This year marks two years in business looking at last year I billed i little over 2000 hours labor. That is about 30% more than expected 2010 was a great year. For 2011 I feel that I would like to cut down the hours I work and hire a helper with that I think its time for an increase in my hourly rate. After much consideration and analyzation I have decided on a 30% increase in my hourly rate. My largest customer that is responsible for about 55% of my work was receptive of the rate increase. The owner told me not that he like the increase but there business could not survive with out me and he was surprised the increase was not more. 

The hope is that the increase will increase the time I have at home with my family. My four kids have suffered this year with me out of town often. I made a promise to them that daddy will be home more this year.


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## Leo G (May 12, 2005)

jamesclerie said:


> ......but there business could not survive with out me and he was surprised the increase was not more.


Dammit:whistling


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## Timber Jockey (Nov 12, 2010)

I have pondered raising my prices, this year. Will the market support it? Not sure. Everyone I've spoken with seems to be holding their pricing for at least the next 3 to 6 months. A few contractors, electricians, and plumbers are raising their pricing, but not many. The guys raising their prices are booked well into the New Year! Contracts are signed based on this increase. Great for them. 

I have to do more checking, I think. I could shoot myself in the foot, so to speak, if I raise my prices . Thing is, I dropped my prices 1 1/2 years ago to stay competititve. I just want to go back to my original rates. Maybe in spring. OR...I can just raise my rate back to the original and see what happens! Worst people can say is "NO, too expensive!" I feel you get what you pay for. After over twenty years of doing this, it's time to use that experience to MY advantage. I'm just not sure if the economy is ready.


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## Mike Finley (Apr 28, 2004)

_*WTMWB*

Any well run business prices their services based on what the market will bare, not on their expenses, not on a business plan, not on anything other than judging their market place and measuring ratios of presentations to acceptance rates. 
If you're closing more than 30% of your leads you're working for less then you could.

A lot of guys will scream and yell about how wrong this is. That's fine.

I say F**k Michael Stone and go make some money._


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## katoman (Apr 26, 2009)

Mike's right. You can only charge what the market will bear. Whether that's low or high is to be determined.

You also need to know what you need to stay solvent. eg.. no point working for $30/hr when you need $40 to survive.

So know your true costs, but charge as much as you can.

I'm putting my rates up this year also. Not sure how much yet, but everything is getting more and more expensive.


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## Rob PA (Aug 30, 2010)

i have considered a small increase possibily around may.. i do not think the market in my area will/could support a large increase

the amount of non paying and slow paying customers have increased if not doubled from last year


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## Jason-F (Jul 4, 2009)

Sorry to say it but..... If the GC doesnt wish you dead after you told him this info, you have left money on the table.


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## Heritage (Mar 20, 2007)

Mike Finley said:


> *WTMWB*
> 
> Any well run business prices their services based on what the market will bare, not on their expenses, not on a business plan, not on anything other than judging their market place and measuring ratios of presentations to acceptance rates.
> If you're closing more than 30% of your leads you're working for less then you should.
> ...


Pray tell...how does one come to define "What the market will bear"?

Some of you guys throw this term around as if it's a quantifiable scale that can read "the market". Like I've said before, leave it up to the market and "the market" will want your services for FREE. How low will you go?

It's azz backwards economics.

The "cost" of doing business IS DIRECTLY LINKED to my expenditures/overhead/my business plan. The cost of the truck/trucks, tools, license, insurance, coverage, gas, telephone, internet, website, business cards, etc....these aren't "made up" numbers...they are the cold cut reality of the costs I need to cover just to have the doors open. Then I HAVE TO make $X/hr, at par with legitimate industry standard rates. My guys have to make $X/hr, at par with legitimate industry standard rates.

The company also has to make a profit...but...sometimes you can work for "cost" IF you need to fill in slots & there is no risk in the job (like T &M). That's the only thing that swings, from job to job.

Other than that...I could not give flying squirrel puzzy what "the market" will or will not bear. The costs are the costs...we're not talking about willy nilly charging 100% profit...we're talking "the market" can't even pay for legit work, so fugg the market.

3 years ago I had 5 f/t guys working for me, and jobs lined up a year down the pipeline. When all this chit happened, I just cut back. Because the "volume" was no longer there. I had to cut back down to pretty much a "one-man-show", and sub-contract the guys on an hourly basis and take them off f/t employees. But my rates didn't change.

If the "market" can't pay for my hourly rate + overhead of running a legitimate operation...then fugg the market I'm out. I'll throw in the towel and find a living somewhere else. Leave it up to the rest of some of you guys to kill eachother for scraps. The world is a big ****** place and if you've been perfecting your trade for 30 years to find you can't charge more than $15/hr...well...Godspeed to you :thumbsup:


You use that term "a race to the bottom" quite a bit...that's exactly how I see the principle of "what the market will bear" to be. Right now...the market can get EVERYTHING in our industry for BELOW cost. Electricians working for $15/hr, Carpenters working for $15/hr, GC's losing money to get jobs. So I might sit back and say..."It appears the market will only bear $15/hr".

I don't give a fugg about the "title"...a business has to make money, on paper it has to make sense. If you're working and losing money...you really need re-evaluate your life.


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## GettingBy (Aug 19, 2010)

Not an MBA, nor do I play one on TV, but. . .

What the market will bear:
look into everything to do with Consumer Price Index, CPI
http://www.bls.gov/cpi/
The BLS also publishes a salary survey for areas in the US each year. Just ask; your tax dollars have already paid for this research.

Anybody increasing their prices by 14% per year or more is "news" according to the "news"paper. I guess it's expected you increase your prices by the historical 3.5% per year, but lately this figure is around zero.

One recipe is that you increase your prices and then wait six months. If the customers don't leave in droves increase it again. You're testing "the market" because "the market" is somewhat unknown.

Also, with this,
http://zipskinny.com/
you may be able to figure out how much your locals can afford.

What works in the short term may not work in the long term.

http://www.google.com/search?client=safari&rls=en&q="pricing+strategy"&ie=UTF-8&oe=UTF-8


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## katoman (Apr 26, 2009)

Heritage - I hear what you're saying. I was basically saying the same thing. We need to know our costs. That will be the minimal amount you can work for otherwise you're going backwards.

'what the market will bear' to me means "how much can I charge" before I'm loosing work due to I'm too expensive. Not how low can I go, but how high can I go.

Agreed some guys are working for nothing basically. Let them. They'll go out of business and we'll have more clients. :thumbsup:


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## Leo G (May 12, 2005)

Only way to find out what the market will bear is keep raising your prices. When you get to about 20-25% closing rate you have reached what the market will bear. Not always a fun thing to do. At one time I raised my prices higher than that and had to reduce them because of lack of work. Everybody is different, every area is different. The same guys with the same overhead and expenses will have different pricing because one of them does a better job at what they do. His market will bear a more expensive product because he can deliver whatever he sells in a more appealing way. It may be a salesman thing, or it may be a better service.

You are right, it is bass ackwards. But you have to figure it out for your own company, cause no one else is gonna do it for you.


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## GettingBy (Aug 19, 2010)

Don't forget that tools or equipment that sit idle is costing you money. Figuring profit is not so easy and it's due to hidden costs, etc.

If you don't know how to run the Excel program on your computer, I'd learn how. Otherwise the numbers you'll need in figuring this out will have you going around in circles.


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## WarnerConstInc. (Jan 30, 2008)

That damn Leo is expensive.:laughing:


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## JustaFramer (Jan 21, 2005)

Pricing yourself out of the market is a two-way street. One way is being too high. The other is being to low. Either way you won't have enough capital to operate in the long term.


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## wellbuilt home (Oct 22, 2007)

I raised my price 15% last spring and sold work for the year, but im worried about next year . 
It seems like things are spiraling to a halt here . 
Had some good leads last fall ( 8 ) but i just didn't get any work ?
Only 1 job i looked at this year was ever built and it was just roofing siding and stone front and the guy wanted to GC it him self .
I have 5 weeks of work left and some sewer lines to run if things warm up . Nothing for next year . 
I missed a call last week some how , good referral from a old customer . 
The call came in on my cell phone and i did not get it for a week .:furious:
I hope i get some thing soon, or my guys will be on unemployment for the first time ever. 
I made good money last year the extra 15% really helps out the bottom line. 
The problem is the price spread on a given job could be as high as 50% There is no magic way to build . The costs are the costs , The guys get payed what ever ? 
I mite raise my price another 5/7% because i deserve it . :thumbup:
I think i will get what ever work that's coming my way regardless of price . 
I think the worst is still ahead . John


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## Warren (Feb 19, 2005)

To the OP:

After two years you should know what your operation costs are by now, and if not, you probably never will. Hiring a helper for half of your wage would allow you to charge the same rate per hour, and make probably 30% more. Run the numbers and see for yourself. Many contractors only look at the hourly rate. They would rather have less experienced workers, than to have that hourly rate increased.

For example; lets say you are charging $40/ hour for just you. You hire a helper for $15/ hour, pay all his taxes, WC, etc of say $5/hr, that makes your cost for him $20/ hour. So in this scenario, you just increased your profit by $20/hr.


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## Mike Finley (Apr 28, 2004)

Heritage said:


> Pray tell...how does one come to define "What the market will bear"?


Very easily, no magic to it:

Answer is right here -




katoman said:


> 'what the market will bear' to me means "how much can I charge" before I'm loosing work due to I'm too expensive. Not how low can I go, but how high can I go.


That's why I said before - 




> If you're closing more than 30% of your leads you're working for less then you should.


I will edit that to say instead of "should' to be 'could'


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## Jaws (Dec 20, 2010)

If your GC didnt flip out at the increase i would say you still either priced just right or more than likley underpriced If you perform a service that many others are doing and he cant imagine doing buisiness without you, i would say you are probably very good at what you do and should be payed for your abilities and skills, i am sure your other clients will pay your new price or you will find clients who will i say go for it:thumbsup:


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## Jaws (Dec 20, 2010)

who is Michael Stone?:blink:


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## GettingBy (Aug 19, 2010)

If you keep records you can use Excel to plot your business income and then look for seasonal variations, which are to be expected and not the sign of a downturn.

Here's a link on business cycles.
http://www.google.com/search?client=safari&rls=en&q="business+cycles"&ie=UTF-8&oe=UTF-8
For example, I think the sales of commercial airplanes follows a 12 year cycle; every 12 years half the workers are laid off and then people are rehired 12 years later. 
It kinda' sucks.

The Bureau of Labor Statistics keeps track of all this stuff so they can make predictions.

I don't know how well this has been shown to predict the future
http://en.wikipedia.org/wiki/Kondratiev_wave


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## Heritage (Mar 20, 2007)

Mike Finley said:


> Uh huh.
> 
> And your point is what?
> 
> And what's that go to do with a company selling base on WTMWB?




I don't know anymore :laughing:


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## cexcavation (Apr 17, 2008)

I think overall, we are in agreeance that the average pricing across the board has fallen behind the rates of yesteryears comparatively. Some of this is simply due to technology forcing us to produce more per hour. i.e. more efficient tools, cell phones, computers, bigger trucks/trailers, etc. etc. The end result is that we are expected to produce more than guys 20years ago were expected, and thus we end up "lowering" our prices due to the volume we can produce per hour. That is our "MacDonaldization".

The trick is in deciding which way you want to go with your company. Lots of employees, lots of technology, and lots of production to compete at the lower per unit pricing. Or, find a niche where you are tough to compete with on all levels. There may be guys who can slam a paint job on a 3 bedroom ranch style for $1,500 and actually make money as they do 3-4 of them per week with minimum wage workers. Take that same crew and ask them to paint a Victorian era home to perfection and their per unit price shoots through the roof assuming they are even capable in the first place. The quality guy can camp out on that job and not worry about getting to the next house and make good money and satisfy the customer. The quality guy should not worry about the $1,500 crew because they are swimming in a dirty pool.

Point is, there are quality guys working too cheap.....it is unfortunate, but we don't know their situation. I have worked too cheap, and likely do it more than I should. However, I know my market and I strive to be the best out there in my field. There are some things that I do that are only worth what they are worth, i.e. a quick regrading of your driveway. Do I pass the work up since they don't want to pay my minimum $250 fee, or do I arrange to pick them up on the way back from another job for $85? For $85, I give them $250 quality while making my hourly rate, and pick up a new client for the rest of my career. The balance between quality and price is delicate.....you win some and you lose some. 

If you look at the overall picture, are you making more money than if you were punching a clock?? We all have different expectations for our income, and that is what makes a free market free. I think what we are experiencing right now is a reality check as to what the market will truly bear, and some guys are making way less than they were and that hurts. There is no need to panick, rather re-evaluate. Some guys are actually doing better in this economic client and that proves it is possible. There are a lot of very intelligent businessmen and talented tradesmen on this site and out on the job site. The best plan of attack is to help your fellow tradesman get both his quality and price up. The consumer will pay $5/gallon for gas if they know that is the going rate for quality gas. Some will fall for the watered down $2.50/gallon stuff just outside of town, but they will be back buying the $5/gallon stuff if it is truly better. 

I am not suggesting collusion, but more encouragement to your fellow tradesman. I will gladly push work to a fellow excavator who provides quality service at quality pricing........the consumer is being trained to value the service and thus gladly pay the price. In the end, everyone benefits.


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## katoman (Apr 26, 2009)

Heritage, what you say is all true. But the people who buy $100 vodka will always buy $100 vodka.

There are more millionairs out there today than there ever was. 

IMO the number of highly skilled tradesmen has dropped, and will continue to drop. The average age of a skilled tradesman right now is 60 yrs. old.

We are starting to retire. In Canada they have laxed immigration laws to allow more trades to come to canada. Guess what? That will at best only fill 10% of the estimated demand over the next ten years.

They have also re-opened and are pushing trade schools again. Too little, too late. 

So what I'm saying is that the supply is not meeting the demand. Not in the high end work at least. I only know 4 other carpenters that are high end guys. Granted, there are more, and I'm not 'out looking for them'. But it's an indication of the lack of skilled people.

And not one young one. Nor have I met one young guy who has the passion to become highly skilled. If in the next 5-10 years I find one, he can have my clients. Right now I would have no one to take over them.

So, if someone, anyone, is doing high end work, you will have lots of work.

But they need to target that customer. And of course be able to deliver.


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## pcplumber (Oct 12, 2008)

*We raise your prices every year, .....*

regardless of the overall market because our increased quadruple taxation and increase in regulations makes this mandatory, but there is a safe way to raise your prices, earn more profit, and save from losing sales as a result of price increases. The way we do this is by putting all our prices and increases in a price book. 

"If you never ask you will never receive" or something like that. So, you print your price book with the increased prices you want and when you feel comfortable that you can get the price you 'ask'. If the price is not written you are less-likely or will never know when to ask for an increased price and ultimately lose thousands of dollars every year. It can't hurts to have a book with the highest prices you want.

We increase most of our prices every year around this time. Thank you for reminding me!


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## tinner666 (Nov 3, 2004)

Well, with Ins. rates, gas prices, food prices, utility, rents, vehicle and all the other prices dropping like rocks, why would you increase prices? :whistling

Not to mention use of exactimate and doing Ins. work. If the adjuster's price is $200. a square for roofing, but every roofer's proposal is $500., the Ins will pay $500.00
Same thing for any damage repair.

My prices only went up another 12%, or so.


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## inmo (Feb 27, 2010)

Heritage said:


> Pray tell...how does one come to define "What the market will bear"?
> 
> Some of you guys throw this term around as if it's a quantifiable scale that can read "the market". Like I've said before, leave it up to the market and "the market" will want your services for FREE. How low will you go?
> 
> ...


 

I was thinking the same thing. Pricing by what the "market will bear" is a sure fire way of going out of business. Like you said, "leave it up to the market and "the market" will want your services for FREE." In my opinion discounting to the point where you are working for cost or less would be the death of any company. Some are slowers than other but eventually it will come.


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## Mike's Plumbing (Jul 19, 2010)

You should charge what the market will bare! Why? Because this is construction and in our industry "What the market will bare" is lower than just about any other industry......it's too low already so you have to try and maximize.

From this price it's our job to align our business fundamentals to make it fit, sometimes people do and sometimes people don't. The people who don't are out of business.

I maximize my price whenever I possible can and let my other portions of my business (customer service etc) make people feel good about my price.

It's not as if the "market price" is too high.:laughing: Again, this is construction we are talking about. When the piss poor businesses are setting the market price you sure as phuc don't what to be lower than market price.:laughing:

Mike


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## inmo (Feb 27, 2010)

Heritage said:


> Here's the problem...you're ALWAYS going to lose work. You're ALWAYS going to be "too expensive" for some people. And because we live in the times that we do, where there is an enormous surplus of "supply" and a small pool of "demand", the suppliers have resorted to lowering their prices.
> 
> This doesn't increase the demand. There will not be more HO's rushing out to get renovations because the suppliers have dropped their prices. If that was the case...I could almost see a justification for price adjustments.
> 
> ...


 


Heritage, I couldn't agree more. The wal-martization of everything will be the death of us all. Maybe thats the plan!


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## Mike Finley (Apr 28, 2004)

inmo said:


> I was thinking the same thing. Pricing by what the "market will bear" is a sure fire way of going out of business. Like you said, "leave it up to the market and "the market" will want your services for FREE." In my opinion discounting to the point where you are working for cost or less would be the death of any company. Some are slowers than other but eventually it will come.


Let me clarify soemthing here. I don't really have any idea how anyone would fixate on WTMWB being in regard to lowering prices. I didn't in a million years think anybody would go in that direction with it when the entire subject revolves around making more money, not less.

So I guess I'll come out and state what I thought was extremely obvious, but I guess it isn't.

*The benefits of WTMWB - is in regard to raising your prices.*



If you go back and read from the start, everything should make sense if you take it from the perspective of *being in business to make more money, not less.*

I know we all love what we do and would do it for free if we could. But I think some of you are still interested in making money, right?


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## katoman (Apr 26, 2009)

Thanks Mike. 

I don't know how/what/when, but a lot of you guys have it backwards. Like I said WTMWB is about pushing my prices up, not down.

Price your work up until you are only closing an acceptable % to you. That may be 20%, might be 40%. You decide that. 

And yes, supply and demand will ultimately determine how much you can get for a job. Find the upper limit, not the lower limit.

Seems fairly simple to me. Hope some of you think about this and change the way you look at it. So you can make more money. :thumbsup:


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## TBFGhost (Oct 9, 2008)

Ok...so I didn't read all the posts...I am tired and can't focus, but at this point I would just like to point out what I was thinking. 

I really like the whole analogy of the night club scene. I think you pointed out a whole bunch of problems and the reasons behind them in quite a simple manner. That being said, if the night clubs are trash, you simply find something else to do and move on with your life....but in our line of work, if "every" contractor out there is hacking things for a lower rate, as soon as the clientele see their newly bought work failing and falling down, the more they will open up to see they need to pay for quality work. 

I can already see it happening around me. Clients are very leery of contractors and shady work.... I have come in and bid jobs against no body, the clients openly tell me they wants only me b/c we know the work I do. They have gone to prior clients homes and looked for themselves. These are the best clients, they pay on time, they don't look over your shoulder the whole time and basically just let you do your job and are grateful for the work when you're done! I am sure there are many of you who get the same. Referrals...people refer you and say you do great work...the bid is already closed by the time you meet. 

Our industry is full of hacks...but they are hacking their way right out of work and making the rest of us look all that much better and more desirable....One day it will get back to the point of clients hunting down your "competition" is nothing but hacks... 

So keep on doing what we all do...take pride in your work, do your best and the "market" will return when enough people get burned. It's going to get worse before it gets better. 

I can't tell you if you should raise or lower your prices....increase or decrese your overhead...that is really up to you as a business owner to find out.

This is my view on things....I just started out and I hope my view is correct...lol


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## DaVinciRemodel (Oct 7, 2009)

I've been following this thread for a while and I can't stand sitting on the sidelines.



Heritage said:


> Here's the problem...you're ALWAYS going to lose work. You're ALWAYS going to be "too expensive" for some people. And because we live in the times that we do, where there is an enormous surplus of "supply" and a small pool of "demand", the suppliers have resorted to lowering their prices.
> 
> This doesn't increase the demand. There will not be more HO's rushing out to get renovations because the suppliers have dropped their prices. If that was the case...I could almost see a justification for price adjustments.
> 
> ...


If you're going to compete with Walmart contractors, you will need to compete with their prices!

Heritage, We've seen your work, why are you caught-up with the Wal-martization of the industry? If you're trying to provide your level of craftsmanship at Walmart prices - see ya! You should be concerned with the Saks Fifth Avenue!

I've said it before on CT - I'll say it again: "If your customers won't pay your prices, don't lower your prices - GET NEW CUSTOMERS!"

There will always be a certain percentage of the market place that will pay for quality craftsmanship, service and return on investment. Find them and make sure you close the deal - not on price but on what you have to offer. If you have nothing to offer (other than price) - hello Walmart pricing.

BTW 2009 was our worst year in 17 years. We raised our prices (14% on labor) in 2010 and had our best year since 2005. 

To the OP - We've raised our prices again for 2011 by another 12.5% and we're booked through April. Offer something worth the price, find the customers that can afford you and sell the chit out of them. :thumbsup:

Paul


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## Heritage (Mar 20, 2007)

Me must admit...I took WTMWB to mean "lowering" your prices to appease the "market". I guess for those that espoused the idea, the concept was cut and dry...I just read it differently.

So, a part of being a man means knowing when you're wrong. So I would like to apologize on your behalf because you don't know how to express an idea................................:w00t::laughing:

I kid.


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## pcplumber (Oct 12, 2008)

*What is a.......*



inmo said:


> Heritage, I couldn't agree more. The wal-martization of everything will be the death of us all. Maybe thats the plan!


raggamuffin as described in the post by Heritage?


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## Heritage (Mar 20, 2007)

pcplumber said:


> raggamuffin as described in the post by Heritage?


:laughing:

*rag·a·muf·fin* or *rag·ga·muf·fin* (r







n) 
_n._ A shabbily clothed, dirty child.


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