# How do you handle volume discounts?



## Mike Finley (Apr 28, 2004)

This is kind of a tricky situation, as we grow in business volume our purchases from vendors naturally grow in volume too. There are established levels in specific material vendor categories where discounts are tiered. Since we do bathrooms we do a lot of tile so we've reached the top tier in that wholesale discount pretty quickly. 

A few months ago I was ready to take the next step in my business plan which was to start subbing out the tile setting. The initial goal was just to find reliable setters that could set tile and meet our needs based on time frames and quality. As you can imagine with anything new measuring the success of this changed on a daily basis. :laughing: 

Fast forwarding to now, we have a couple of reliable tile setters who we have established good working relationships with and have done enough work so that now we both know what to expect from each other.

*So here is the issue,* just like volume discounts with material vendors, as we increase business and purchase more and more from labor vendors like tile setters at what point do volume discounts enter into the picture?

On the one hand we have the issue of these guys have spent time and energy working with us and have been awesome in every way. We've never beat them up on price, nor have they taken advantage of us, and of course I have a feeling of loyalty to those who have taken care of us.

On the other hand, it is business and if you get to the point of purchasing large amounts of anything, discounts usually enter into the equation sooner or later. I see it that both sides of a relationship can benefit. My side can benefit from a reduced expense in purchasing the tile setting we need and the other side can benefit from a constant and steadily increasing volume of work.

I have no doubt I could approach the open market with $5000, $10,000 or $15,000 worth of tile setting a month and ask new setters to bid for our work based on this volume and reduce our costs pretty easily and quickly. But I don't want to cut out of the picture the guys we use now. So how do you go about approaching this with your established sub-contractors, with out making them feel like you are trying to squeeze them? That's the last thing I want to do, but I also don't want to over pay for work if we are justified not to.


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## mdshunk (Mar 13, 2005)

Mike Finley said:


> *So here is the issue,* just like volume discounts with material vendors, as we increase business and purchase more and more from labor vendors like tile setters at what point do volume discounts enter into the picture?


Never. Perhaps you have the mistaken impression that their costs got cheaper because they are doing more work for you? They're still working a 40 hour week, whether for you or someone else. Their costs are still their costs. Do they owe you a discount because you give them a lot of work? I hope not.


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## john elliott (Oct 23, 2005)

Basically they are selling you their time, and they only have so much of it to sell. A tile wholesaler can call and order another truckload of tiles, but where can a tile setter get more time from?
By supplying them with a lot of work, ongoing, all they are getting from you is the reduced risk of a day or more without work, and I guess that is worth something, but not actual money, more like increased effort on their part to keep you and your clients happy, maybe get out of bed when they don't feel too good, hire a truck when their own breaks down so as not to mess up your schedules, that sort of thing, but not actual money

John


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## go dart (Dec 6, 2005)

the best relationship w/ any sub is win-win. its enough for me to exspect professional workmanship and in turn have jobs ready and pay quickly


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## realpurty2 (Aug 18, 2005)

I have to disagree with MD this time. 

Logically thinking... Most if not all companies that do bid/contract projects have a contingency or markup of some sort on labor. Everyone typically estimates high to be on the safe side, so yes, that does leave them some wiggle room in most cases. 

When we are on the subcontracting side, all repeat clients get a 10% discount on future jobs. We might make 10% less on any job after the first one for that client but repeat business is well worth it. Every opportunity to do repeat business is an opportunity to improve our reputation and earn even more word of mouth from that client. The 10% discount total is then taken from my ADVERTISING budget and put back into the current working job. It's no different than selling the company in any other way. 

When we are on the GC side of this issue, after we've given repeat work to a sub firm that either meets the criteria of "we're paying their overhead in the amount of work we've given them" or "welcome back guys, at this rate you might as well move in" then I actually HOPE for a discount. * Note the HOPE not EXPECT*

The way I usually approach this is during the contract signing, I'll jokingly mention to the sub that as much as he's been around lately, isn't it about time for my repeat customer discount to kick in? Then leave the ball in their court. Sometimes all it takes is to put the idea in their mind. If they balk... it's never mentioned again. If you've worked with a sub long enough, you already know if he's giving you his bottom dollar or if he has room to come down a bit without harming his profit margin.

It never hurts to ask Mike. No sub will ever give up the gravy train over a simple question.


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## john elliott (Oct 23, 2005)

realpurty2 said:


> When we are on the subcontracting side, all repeat clients get a 10% discount on future jobs. We might make 10% less on any job after the first one for that client but repeat business is well worth it. Every opportunity to do repeat business is an opportunity to improve our reputation and earn even more word of mouth from that client. The 10% discount total is then taken from my ADVERTISING budget and put back into the current working job.


I'm surprised to heart that a subcontractor would have such a large advertising budget, more that 10% of their turnover.
People that sub for me don't usually advertise at all

John


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## realpurty2 (Aug 18, 2005)

Ours is sort of a unique situation John, we are two divisions operating under one name. 

The electrical division does mostly subcontract work and service calls. The construction division does everything else. Thus I have two budgets to distribute as needed. 

Also, our budgeted amounts were developed before the company even opened the doors and I revise as necessary. I see no harm in leaving funds in an interest earning account for advertising and marketing until it's needed. Call it my rainy day stash.. :laughing:


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## bcf (Mar 20, 2006)

Seems to me that asking them that question is very similar to a homeowner asking you to sharpen your pencils. If they are doing great work for you, not rapng you, and building your business image, maybe they deserve a bonus, not a paycut.


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## maj (Mar 13, 2006)

bcf said:


> Seems to me that asking them that question is very similar to a homeowner asking you to sharpen your pencils. If they are doing great work for you, not rapng you, and building your business image, maybe they deserve a bonus, not a paycut.


I agree. :thumbsup: 

MF.... If things are working out for the best, why risk that relationship? Personally, I would be insulted if I did alot of subcontracting for one guy, and then he suggests discounts in what I get paid. That would lead me to believe he thinks I am not worth what he is paying me. IOW, I am not doing a good job for him. If that were the case, I would prolly say,"screw you, there's other work out there!"

Most likely as a sub, they have already lowered their standard rate somewhat. That's what I do when I do sub work.


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## john elliott (Oct 23, 2005)

realpurty2 said:


> Also, our budgeted amounts were developed before the company even opened the doors and I revise as necessary. I see no harm in leaving funds in an interest earning account for advertising and marketing until it's needed. Call it my rainy day stash.. :laughing:


So it's not really an actual advertising budget then? More a savings account

John


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## realpurty2 (Aug 18, 2005)

maj said:


> I would be insulted if I did alot of subcontracting for one guy, and then he suggests discounts in what I get paid. That would lead me to believe he thinks I am not worth what he is paying me. IOW, I am not doing a good job for him. If that were the case, I would prolly say,"screw you, there's other work out there!"
> 
> Most likely as a sub, they have already lowered their standard rate somewhat. That's what I do when I do sub work.


Maj, in interest of our usual debates for pleasure.. I have to ask something here.  I've noticed this way of thinking on many ppl's post and it raised a curiousity. Without hijacking Mike's thread.. since this does tie in.. in your opinion... who is the "giver" or "upper hand" in Mike's situation? The project belongs to the GC to use whatever sub he chooses. In my most humble opinion only... the sub would not be working on that particular project if the GC (opps..or IC) did not hire him. Therefore the sub has no right to be offended if a question is asked. I don't see the logic that it would be an insult. Sure there is other work out there as you say, but at what cost? My point is, if you have a regular client, whether it be a GC/IC or H.O, you save expenses by doing repeat work. There are also nonmonetary benefits from repeat clients such as guaranteed work, a good working relationship in which you don't have the hassles and lost time chasing down answers, prompt pay schedules etc. 

I guess I still haven't mastered the "screw you, I'll work my way or no way" attitude. Give me some gender bias too here, my skin is not yet toughened up. But, I actually appreciate every customer we work for. I see them as the "giver" because they too had the choice of "screw you" but instead they chose to use our services. I choose to voluntarily make it part of our sales to offer repeat customer discounts, but even if I didn't.. I'd still never be offended if someone who repeatedly used us asked if it was an option. If it wasn't, I'd simply explain that I had already given them the best possible pricing since we were pleased they had chosen our services. I guess maybe I still believe in "Don't bite the hand that feeds you."

And John... I don't see it as a savings account simply because of how it is recorded on the books and the method it is funded from. Typically most ppl don't budget a routine savings account deposit into overhead, while a marketing and advertising budgeted amount is. We determine at the end of each fiscal year how much that budget should be and that's all that it gets. It's spent in whatever manor best benefits the company, usually company shirts, sponsoring some event for charity, newspaper ads, portofolios etc. Anything left over is considered profit at the end of the year and can be disbursed into other accounts, left for the next year to use as discounts or any other way needed. Maybe I just do things wierd but it works well for us.


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## Pearce Services (Nov 21, 2005)

If all the suncontractor needed to keep busy full time is the business you give him, his costs would be lower, and his life simplified, that is worth something, and should be considered in this discussion.

He would not waste time talking with potential customers, trips to look at work and find pricing for products, time spent doing estimates for work he may not get. No time would be wasted on customer expectation discussions, and the whole effort of explaining the process, the materials, the pay structure, the warrantee.

He would eliminated advertising costs, referral fees, and commissions.

He would eliminate the need to allocate 2% of his revenues for bad debt.

He would reduce his clerical costs by only dealing with one customer.

If I eliminated all these things from the course of my day, I could create 20 extra hours a week of constructive, billable time. I think I would take that for a small percentage of the projects. 

How much do you think the installers give to Home Depot or Lowes for the same arrangement?


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## john elliott (Oct 23, 2005)

Pearce Services said:


> If all the suncontractor needed to keep busy full time is the business you give him, his costs would be lower, and his life simplified, that is worth something, and should be considered in this discussion.
> 
> He would not waste time talking with potential customers, trips to look at work and find pricing for products, time spent doing estimates for work he may not get. No time would be wasted on customer expectation discussions, and the whole effort of explaining the process, the materials, the pay structure, the warrantee.
> 
> ...


Great..... and the day when Mike calls the sub and says, sorry, I've got no more work for you?

If I was a subcontractor the last thing I would want is to work for just one GC. I would keep looking for other work and if that other work payed better then that would be the work I would take.

John


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## Pearce Services (Nov 21, 2005)

I doubt that schedules and the inconsistency of work from a single contractor could allow for working only for one GC, fill in work is always going to be required. Just as the GC could not only have one sub.

The point is that the more you do for one customer the less you have to do for others. and if it is guaranteed, you have some economies that should be considered.


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## maj (Mar 13, 2006)

Maj, in interest of our usual debates for pleasure.. *And why is it everyone here feels they have to "debate" me and a few select others????.......... Oh yeah......the "herd" :whistling *I have to ask something here.  I've noticed this way of thinking on many ppl's post and it raised a curiousity. Without hijacking Mike's thread.. since this does tie in.. in your opinion... who is the "giver" or "upper hand" in Mike's situation?*The sub.* The project belongs to the GC to use whatever sub he chooses. *Correct, but he wants this particular sub because of the relationship they have developed.* In my most humble opinion only... the sub would not be working on that particular project if the GC (opps..or IC) did not hire him. *DUH....*Therefore the sub has no right to be offended if a question is asked. I don't see the logic that it would be an insult.*So why do the "contractors" on this board get so pissed off when a client asks for the "contractors" bottom dollar? Or when they are complaining about lowballers or someone underpricing their work?I hear it over and over on this board about how we, as "contractors" are always getting screwed, but now suddenly when I say it, it needs to be DEBATED???? WTF??? * Sure there is other work out there as you say, but at what cost?*No cost. Actually it would be more money.* My point is, if you have a regular client, whether it be a GC/IC or H.O, you save expenses by doing repeat work. *YEP.... been trying to say that for months too!  *There are also nonmonetary benefits from repeat clients such as guaranteed work, a good working relationship in which you don't have the hassles and lost time chasing down answers, prompt pay schedules etc. *Again.... That's what I've always said the whole time here on this board but.............It's always wrong when I say it.  * 

I guess I still haven't mastered the "screw you, I'll work my way or no way" attitude.*When did I ever say that???* Give me some gender bias too here, my skin is not yet toughened up. But, I actually appreciate every customer we work for. *And I don't? BULLCHIT!!!!*I see them as the "giver" because they too had the choice of "screw you" but instead they chose to use our services. *So the difference between a GC & a homeowner is????* I choose to voluntarily make it part of our sales to offer repeat customer discounts, but even if I didn't.. I'd still never be offended if someone who repeatedly used us asked if it was an option. If it wasn't, I'd simply explain that I had already given them the best possible pricing since we were pleased they had chosen our services. I guess maybe I still believe in "Don't bite the hand that feeds you."

And John... I don't see it as a savings account simply because of how it is recorded on the books and the method it is funded from. Typically most ppl don't budget a routine savings account deposit into overhead, while a marketing and advertising budgeted amount is. We determine at the end of each fiscal year how much that budget should be and that's all that it gets. It's spent in whatever manor best benefits the company, usually company shirts, sponsoring some event for charity, newspaper ads, portofolios etc. Anything left over is considered profit at the end of the year and can be disbursed into other accounts, left for the next year to use as discounts or any other way needed. Maybe I just do things wierd but it works well for us.


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## maj (Mar 13, 2006)

john elliott said:


> Great..... and the day when Mike calls the sub and says, sorry, I've got no more work for you?
> 
> If I was a subcontractor the last thing I would want is to work for just one GC. I would keep looking for other work and if that other work payed better then that would be the work I would take.
> 
> John


EXACTLY........ :thumbsup:


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## Gordo (Feb 21, 2006)

As both a contractor and subcontractor, I have seen this senario from both sides.

From the contractor side, I respect my subs enough to NOT ask for a discount. They do excellent work and they do it right the first time...saving me money due to delays. Another benefit from using the same subs is they are 'Johnny-on -the call' when I need them......saving me money by expediting the job.

From the sub-contractor side, if the GC asked for a discount....I would say forget about it because there is too much work out there from other sources (mostly HO).

What I have experienced, the cheaper subs that 'slash' their prices will always cut corners (these short cuts will come back to haunt you months or years down the road). 

The good subs are usually more expensive, but they save you $ in other ways.


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## maj (Mar 13, 2006)

Gordo said:


> As both a contractor and subcontractor, I have seen this senario from both sides.
> 
> From the contractor side, *I respect my subs enough to NOT ask for a discount. *They do excellent work and they do it right the first time...*saving me money due to delays*. Another benefit from using the same subs is they are 'Johnny-on -the call' when I need them......saving me money by expediting the job.
> 
> ...


:thumbup: :thumbup: 


Although I don't "slash" my typical rate, I do subcontract to other contractors for a few bucks less per hour, however this is usually just a day here or a few days there. Otherwise typical subcontract work is an agreed upon price with signed contract, just as anyone would do with the homeowner. Thus my point of subbing is no different than contracting directly with the end user (homeowner). Only difference is GC's are making money off subcontractors, so for God's sake why should they get a "volume discount" by screwing the sub out of his hard earned dollar?


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## mdshunk (Mar 13, 2005)

Getting a lot of work from one GC would be enough to cause me worry such that I'd never want to offer a discount. The 'too many eggs in one basket' school of thought. 

When I bid work for a repeat GC, I do tend to bid lower anyhow. I already know exactly how he wants things done, know how his jobsites are, have developed a rapport, and can expect few or no surprises. In essence, he's already getting a "deal" and doesn't really realize it. When bidding work for an unfamiar GC or a GC for whom you've only got a short track record, you tend to naturally bid a little higher for imaginary situations that may or may not crop up. If something does crop up, you're covered; if nothing unusual happens, you just made a few extra coins. Once you've got a sufficient historical data, you can give more 'normal' bids without the unnecessary padding. If such a customer asked for a volume 'discount', I'd have to explain that they're already getting it and they don't know it. (I would, however, never personally volunteer this information). This doesn't come out of some arbitrary 'advertising' budget. It's just not marked up extra, as previous bid might have been. 

What we're seeing here in this thread is the 'Wal-Mart mentality' spilling over into trade craft.


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## Gordo (Feb 21, 2006)

maj said:


> :thumbup: :thumbup:
> 
> 
> Although I don't "slash" my typical rate, I do subcontract to other contractors for a few bucks less per hour, however this is usually just a day here or a few days there. Otherwise typical subcontract work is an agreed upon price with signed contract, just as anyone would do with the homeowner. Thus my point of subbing is no different than contracting directly with the end user (homeowner). Only difference is GC's are making money off subcontractors, so for God's sake why should they get a "volume discount" by screwing the sub out of his hard earned dollar?


Yes Maj. The few bucks cheaper you charge the GC is because of the reduced PITA factor of dealing with an ORGANIZED GC. The easier a GC can make the job go smoothly.....the more $ the GC saves.

In return, as a sub you can fill in your schedule working for the GC whenever there is an opening. Planning and cooperation are the key in these GC/sub relationships. We've work with a few GCs in the past....most were unorganized and they were charged a higher rate (time is money). As a sub, the job is to get in and out as fast as possible while doing the highest quality work.

When I am the GC, I make sure to give heads up calls to the subs days in advance to keep the subs schedule rolling. Nothing worse than the GC calling the day they need you when you are already committed to a 2 week project.

Bottom line is I will not be as motivated to work for less as a sub if the headaches were the same as being the GC.

Another view....the more the sub charges means the more M/U you make as the GC. After all, the client is the one paying for the job.


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## dougchips (Apr 23, 2006)

maj said:


> Jeez Doug.............
> 
> Use the quote box at least.
> 
> ...



I copy and paste...do you really think that I would redo the whole thing? I quote short post HOWEVER, I do not know how to quote just part of a post....


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## Gordo (Feb 21, 2006)

mahlere said:


> I think that most subs try to give the GC their best price. I also think that most subs give the GC an unrealistically low price at first. Buying the work if you will. As time goes on, and the sub performs well for the GC, more work comes in, etc. The sub realizes that he's not making any money on this work. Yeah, he's busy, but at the end of the day, their is no money. So he slowly tries to raise his prices.
> 
> This is a tried and true method for idiotic sub contractors world over. A mythological idea of "give them a cheap price to get your foot in the door. Then when they know you do a good job, you can raise your rates."
> 
> ...


Nicely said!


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## mahlere (Aug 6, 2006)

Gordo said:


> Nicely said!


i'm just like a broken clock:thumbsup:


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## maj (Mar 13, 2006)

dougchips said:


> I copy and paste...do you really think that I would redo the whole thing? I quote short post HOWEVER, I do not know how to quote just part of a post....


That's fine, but like I said....... Why not use the quote box?




Like this



> I quote short post


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## Gordo (Feb 21, 2006)

Mike Finley said:


> Thank you purty.
> 
> More relevant information
> 
> ...


How can anybody bid a CUSTOM tile job by the square foot, especially showers? Unless you are building the same thing a hundred times, you are going to get an extreme variation in prices. I think you said something like this yourself concerning tile backsplashes. 

You may want to put everything out to bid at first, then when the cream rises to the top.......use them exclusively. You will have a grasp on their prices after a while...if they get out if line you can talk about it.

Are you bidding these jobs before the sub sees them? Or gathering prices from subs then tacking on your M/U?


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## Fence & Deck (Jan 23, 2006)

ALL of my carpenters are independent sub contractors. It is pretty much standard in my industry. Guys like Terry of Decks ETC (on of our members here) has his own company, but really only runs one or two crews ,including himself. I run as many as 12 crews, but because we are so highly seasonal, I use only subcontractors. They supply tools, their trucks, and labour, while I pay for everything else.
Anyway, this year I think I've had the best installers as a group in probablt a decade. I have had virtually no trouble with my decks, and generally only great appreciation from customers. (Fences can be a different story, no matter how good you are or how good a job you do, but that's a ....different story)
Anyway, I was so pleased with the overall work this year, that around July, I raised my basic labour rate by 16%. This is what I pay everybody.
If my customers continue to be so happy, I feel my business will grow exponentially. The more happy customers, the more solid my reputation. The better my reputation, the higher my prices. The higher my prices, the more I will pay for labour. The more I pay for labour, the better that labour will be. The better my labour, the happier my customers. And so on.

A bit of background, for those who wonder about this little diatribe and it's relation to the length of time I've been in the business.
I started selling decks in 1981. In 1990, I bought out my partner (my brother), and went on my own until 1998, when I took another partner.
That partner, (from 98 to Feb 05) cared NOTHING for reputation, and did no prepairs, no followup, treated the men lke sh*t, to the point that I walked out. Since then I have been trying to rebuild my reputation, and it's working. I'm up at least 30% this year over last.

The only time I ask my guys for a lower rate would be on a very large very simple job.


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## Bob Kovacs (May 4, 2005)

One thing that no one has mentioned here is that "volume discounts" are more relevant based on the size of a particular job- not the number of jobs.

Whether Mike Finley gives me one 70 SF tub/shower job a month, or 50 tub/shower jobs a month, for each job I still need to do the following:

- Drive to the site
- Set up my wet saw
- Protect the area
- Install and grout the tile
- Clean up, knock down, and drive home
- Invoice Mike
- Collect payment

How does Mike giving me 50 of these jobs a month decrease the amount of time on each individual job, which is the only reason he should get a "discount", since as has already been stated, all I have to sell is my time???

Now, if Mike comes to me with the contract to tile 20 multi-person toilet rooms in a new office building, I'll likely be able to do that at a lower cost per SF, since I save on set-up time (I only set up once for possibly 100 times the square footage), I'M working in larger areas, so the number of cuts relative to the SF is lower, and I've only got to prepare one bill for the 7,000 SF of tile, vs 100 bills for the smaller jobs. 

THAT is what gets one a "volume discount"- not more individual jobs.

Bob


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## Mike Finley (Apr 28, 2004)

Gordo said:


> How can anybody bid a CUSTOM tile job by the square foot, especially showers? Unless you are building the same thing a hundred times, you are going to get an extreme variation in prices. I think you said something like this yourself concerning tile backsplashes.


The same way they are doing it day in and day out. The same way somebody bids a custom home, they can do it by doing a take off. My requests of an estimate for tile are not just a "3x4 foot shower with a pretty shelf in the corner". They run on average 4 pages and include drawings and layouts usually down to actual placement of individual types of tile. They include measurements, what materials to use, what wil be supplied, on and on. I haven't had a tile setter yet have a problem figuring out his costs.

Now just to clarify, any tile setter I have used seems to use 3 combined methods for coming up with his costs for job, they use sq footage for areas of tile, they use linear footage for lengths of tile, such as chairrail, or lines, and they use piece rates for things such as a factory made corner shelf. Their prices are very consistant so far. The low guys comes in low the middle guys will come in at the middle and the high guys come in high, consistantly on every estimate.


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## Mike Finley (Apr 28, 2004)

I appreciate everyone answers, but as usual there always seems to be a disconnect to some degree between reality and what you should answer on a forum. It's wonderful to hear all the tales about how you run your companies and how paying more for everything will get you more business and make you an angel, and we all know about you get what you pay for and how you have to take care of those who take care of you... and how anyone that even sniffs around at lower prices is the devil.

*blah, blah, blah, now let's all step away from the computers and walk outside and have to deal with the real world again where the politically correct answers we post on a forum are just about on the verge of meaningless.*
So far out of some 40 odd replys only one person has actually even answered the very straight and direct question in post #25 - the answer to that question is the answer to this entire 50 some odd long thread, yet only 1 person chooses to actually address it. 

Very odd.


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## Gordo (Feb 21, 2006)

I guess they have an adder in there for when it is an upstairs bath and they have to set the wet saw up on the other side of the house. Now I know why we do all our own tile work.


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## Mike Finley (Apr 28, 2004)

Bob Kovacs said:


> THAT is what gets one a "volume discount"- not more individual jobs.
> 
> Bob


More like a beer commercial than reality...

_Tastes great less filling_... translates to "sounds good, but not based in reality", Bob.

It's going on everyday, in every city of the country. I'm just starting to roll my eyes at the rationalizations going on. Answer the question in post 25 and lots stop all the pretending and posturing.:no:


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## Mike Finley (Apr 28, 2004)

Gordo said:


> I guess they have an adder in there for when it is an upstairs bath and they have to set the wet saw up on the other side of the house. Now I know why we do all our own tile work.


Gordo, you give your fellow tradesman waaaaaaaaaaaaay too much credit.


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## mahlere (Aug 6, 2006)

Mike's question in post #25



Mike Finley said:


> Because that is really all it comes down to in my mind.
> 
> -- If you believe the new rates would come back lower then it would indicate I am currently over paying, because volume *is *a consideration for a tile sub-contractor.
> 
> -- If you believe the rates would come back the same either way, then it would indicate that I am not overpaying and volume *is not *a consideration to a tile sub-contractor.



My direct answer in post #38



> _Originally posted by me_[br]
> I think that most subs try to give the GC their best price. I also think that most subs give the GC an unrealistically low price at first. Buying the work if you will. As time goes on, and the sub performs well for the GC, more work comes in, etc. The sub realizes that he's not making any money on this work. Yeah, he's busy, but at the end of the day, their is no money. So he slowly tries to raise his prices.
> 
> This is a tried and true method for idiotic sub contractors world over. A mythological idea of "give them a cheap price to get your foot in the door. Then when they know you do a good job, you can raise your rates."


So again Mike:


> _Again, originally posted by me_[br]
> Mike, you will definately get a better price if you shop your work. But, I'd lay even odds that your new guys price will rise within a short period of time.



I believe that directly answered your question in a quite non-pc way.


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## Bob Kovacs (May 4, 2005)

Mike Finley said:


> More like a beer commercial than reality...
> 
> _Tastes great less filling_... translates to "sounds good, but not based in reality", Bob.
> 
> It's going on everyday, in every city of the country. I'm just starting to roll my eyes at the rationalizations going on. Answer the question in post 25 and lots stop all the pretending and posturing.:no:


OK, I'll answer your question, and I'll even restate it first so everyone doesn't have to go looking for it:

_Do you believe that today putting the work out for new bids as a volume of work such as $5000, $10,000 or $15,000 worth of tile setting month in month out, would or would not result in lower bids as opposed to getting the bids based on an individual tile job here, an individual tile job there... (which was how the current rates we have evolved)_

Sure the bids will come in lower, provided that you can guarantee that I'm going to get that much work from you every month, and were willing to pay me the difference between what you promised and what you actually give me. I say this because one of two things is going to have to happen if I'm going to lower my price to you and continue to make the money I need to make (because I'm sure as hell not going to work for less than that just so you can get better pricing...):

1. I've got to give up some of my other clients, possibly burning relationships that I've spent substantial time nurturing, just so I can service you- remember, I've only got so many hours in a month to lay tile. I'll also stop advertising, since I don't want to take on too much work outside of the volume you committed to me, since I then wouldn't be able to properly service you. Now, when you don't pull through with all this work you promised me at this great reduced rate, I'm screwed and have to scramble to get back on my feet.

2. I've got to hire additional staff to handle this work, which brings with it all of the headaches (poor quality, hiring/firing, babysitting, etc) that you know exists- otherwise you'd just continue to do the tilework in house (and hire additional staff yourself if need be). Now gone thru all this headache just to give you the great reduced pricing on all of your volume, and again I've got no guarantee that I'll continue to see that work- if you falter, I'm screwed again, and have to lay off my new guys, which isn't good for my reputation.

Now, of course there will always be the subs who are stupid enough to fall for what you're proposing, and that must be *your*"reality" you're accusing me of not being in touch with. *My* reality, on the other hand, seeing how the company I work for gives out over $100 million of subcontracted work a year (kinda makes that $5k/month in tile look a little small, no? so maybe I've got a pretty good handle on "reality"), is that the subs who lower their prices just because a contractor is going to give them "so much work" end up getting screwed in the end- I've seen it work out better for the GC than the sub 99 times out of 100, trust me. I've seen some great companies go out of business over this, and never once have I had a sub come up to me and tell me that the key to their success was giving us "volume discounts".

Bob


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## mahlere (Aug 6, 2006)

So Bob, if I give you a great price, will I get some of that $100mil?


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## Bob Kovacs (May 4, 2005)

mahlere said:


> So Bob, if I give you a great price, will I get some of that $100mil?


Sure. We've got a nice little project that's coming up in Jersey City- the electrical package should be in the realm of around $18-19 million- you interested?  

Bob


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## mahlere (Aug 6, 2006)

Bob Kovacs said:


> Sure. We've got a nice little project that's coming up in Jersey City- the electrical package should be in the realm of around $18-19 million- you interested?
> 
> Bob



uh, i'll get back to you. if it was $17.9mil, no problem. $18mil, a little much:thumbsup:


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## Mike Finley (Apr 28, 2004)

Once again, not reality. I appreciate the response, but it isn't the answer to the question. I didn't ask what you would do or how you would approach it or how you would deal with it, I asked putting it out to bid to the *market place*, not to you. Everything you responded with looks to me like it is based on your circumstances.

A little more back ground...


Bob Kovacs said:


> 1. I've got to give up some of my other clients, possibly burning relationships that I've spent substantial time nurturing, just so I can service you- remember, I've only got so many hours in a month to lay tile.


No tile setters I have talked to are fully booked, always feast and famine, feast and famine.



Bob Kovacs said:


> I'll also stop advertising, since I don't want to take on too much work outside of the volume you committed to me, since I then wouldn't be able to properly service you. Now, when you don't pull through with all this work you promised me at this great reduced rate, I'm screwed and have to scramble to get back on my feet.


Not a single tile setter I have ever talked to advertises. 



Bob Kovacs said:


> 2. I've got to hire additional staff to handle this work, which brings with it all of the headaches (poor quality, hiring/firing, babysitting, etc) that you know exists- otherwise you'd just continue to do the tilework in house (and hire additional staff yourself if need be). Now gone thru all this headache just to give you the great reduced pricing on all of your volume, and again I've got no guarantee that I'll continue to see that work- if you falter, I'm screwed again, and have to lay off my new guys, which isn't good for my reputation.


Could be a scenario that happens, but I doubt it, haven't seen a single tile setter that resourceful.


Bob Kovacs said:


> Now, of course there will always be the subs who are stupid enough to fall for what you're proposing, and that must be *your*"reality" you're accusing me of not being in touch with. *My* reality, on the other hand, seeing how the company I work for gives out over $100 million of subcontracted work a year (kinda makes that $5k/month in tile look a little small, no? so maybe I've got a pretty good handle on "reality"),


Once again, never asked what you would do, talking about the market place. If you don't have a handle on the market place it is okay to pass on answering the question, instead of answering it based on what you would do. 



Bob Kovacs said:


> is that the subs who lower their prices just because a contractor is going to give them "so much work" end up getting screwed in the end- I've seen it work out better for the GC than the sub 99 times out of 100, trust me. I've seen some great companies go out of business over this, and never once have I had a sub come up to me and tell me that the key to their success was giving us "volume discounts".
> Bob


So then now that we are finally talking about the market place and not yourself - yes, you've seen it happen, you've watched it happen... does that mean that in your opinion the answer to the questions in post #25 is it would or wouldn't? Thank you in advance.


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## Bob Kovacs (May 4, 2005)

Mike-

You already know the answer based on your marketplace- 99% likely, the bids will come in lower, because most subs haven't got a clue what they're doing business-wise. 

My point in my responses is to illustrate to the subs who come here, who I'm assuming are coming here to learn what _not_ to do as much as what _to_ do, is that just because "the marketplace" responds a certain way doesn't make it right. I'm sure you'll find that your subs will lower their prices. I'm also sure that as mahlere said, the prices will soon start to rise back up as soon as the subs realize what's happening to their profits. Given that, what's the point of this whole exercise anyway? To get a short term improvement in your pricing?

Bob


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## mahlere (Aug 6, 2006)

Good luck Mike.


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