# Mentoring An Underpriced Competitor



## Ed the Roofer (Dec 12, 2006)

This came about during the discussion about when will the hacks wind up going out of business, but I thought that this premise might be worthwhile to consider. 

I do not mean to give away any of your best tips and secrets to sales, but as a business to business development with a newbie or competitor of yours, who seems to undervalue his work by charging way too little. If you could upgrade their stance on proper pricing, would that not allow for you, yourself to remain more competitive in the market place?

I actually know of a competitor of mine, who does significant volume, but charge sometines 1/2 as much as myself. Obviously, they do not have as many upgraded options included in their sold projects as I do, but there is so much money being left on the table on almost every single job they get.

The danged shame of it, is that they provide a decent looking job site and nicely looking installed roof and deserve to charge so much more for it. They would rather have 3 crews working each day, making only $100.oo per day in profit on the whole job. WTF?

So, here goes with the rest of the premise from a copy/paste out of that other thread.



*Are They Hacks, Or Just Untrained Businessmen?*

I feel that both a great economy and a poor one, will bring out the proliferation of so-called hack contractors.

Not all of them are hacks, but are beginners and unfamiliar with the true costs of doing business properly.

They tend to price their jobs for slightly more than previous wages and not for company profit and sustainability.

Has anyone ever considered taking such a contractor out to lunch and possibly even offer some business mentorship?

What could it hurt, if they were to believe what information you had to dispense to them?

The worst thing that I see happening out of that scenario, is that they actually take some of your advice and learn to price for profit and not for wages. Then there is not such a large disparity in prices, yet there will still remain one for some time while they gain the confidence and grow and learn how to actually run a business rather than keep themselves employed.

If that is the definition of many "Hacks" out there, then I was one for several years minimum, before someone else offered me such advice. Yes, one of my own current competitors co-owners took me off to the side and showed the prices that they were getting, which was about double of what I had been charging during my early years.

In a good economy, I see some employees see the field of "Greens" that seem to be rolling in, and they justifiably want a piece of the pie.

In a poor economy, it may be just a matter of survival, for without working for themselves, they may not have any job and could not support their families.

There are no economic times where the so called "hacks" are forced out of business.

Don't be so quick to disparage someone who just doesn't know what he doesn't know yet.

Ed


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## Susan Betz (Feb 21, 2007)

You're a good man, Ed.


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## mikec (Jan 2, 2007)

you're a smart man ed:thumbup:


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## rbsremodeling (Nov 12, 2007)

Ed

I have actually done this with two contractors here where I am. Both did good work but undercharged badly. We use to meet on jobs all the time and finally I would speak to them and invited them to my office and showed them how I thought they were undercharging and also not providing homeowners and their workers with basic necessities. I showed them how improving their companies image and providing workmans comp, insurance etc for their guys was must to become sucessful as a business. 

The problem I have found are many HACKS that just want to get buy and make a few bucks or have some hidden agenda so they don't have or want the legal, licensing and insurance problems associated with running a legit business.

They are in business because they offer a service at a price point that some ho are looking for. A price point you or I and many here can't match because we pay our dues for being legit contractors and care about our work and employees.

We can only help the ones that want to be helped. But most hacks from what I have seen in my 20 plus years in this business are content with being hacks. Believe it or not I know many of them that make more money than I do at that price point, because they don't carry the business burdens I do or cut corners with their work and make big bucks.

Most homeowners are not aware of the pitfalls of hiring these guys. HO's want their house paint. Rory of R&B'S wants 8000 and Mack the painter wants 5800 and all they have is 5000 who do you think gets hired. Mack does after they negotiate him down to 4800.

HO's do not think about accidents, deaths, some one might burn the house down, slips and falls on their property and gets sued does not come into play in their minds.


Drugs are illegal and jail time for buying and selling them are more than enough to scare me away from them but It's still a multi billion dollar industry. Why? someone is always willing to take the chance on selling them and there is always people willing to buy them even knowing the consequences are enormous.

The HO's keep buying from the Hacks and they have no incentive to reform or better themselves so the cycle continues on and on


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## slickshift (Jun 14, 2005)

I may not be reading this right, but to me it looks like you (Ed) are talking about good tradesman (not "hacks", or bad quality ones so to speak), that severely under-price or under-bid

Certainly many may be un-trained in the ways of business
But I believe many of those types are of the "Price To Close" school of sales
They feel that they are more likely to get the job if they can beat any price out there
As they have no sales skills, and/or any desire to get any
Why should they, they are not a "salesman", or don't care for the 'salesman" type...they probably think that's why they are so busy
Because they are busy, they think they are doing business right

This is just an observation I have found to be true over the years
If the competitor you are taking to lunch is one of these, they may have this perspective that they have to price cheap or the work will dry up

This would be a good point to bring up at your meeting, and a tough one for them to wrap their head around...being less "busy" but more profitable is a good thing


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## silvertree (Jul 22, 2007)

I took a competitor out to lunch a few years ago. We both lived and worked in the same area. If my bid was 10K his would be 7K. He told me he did a million in sales and had to borrow 25K from his wife to pay the bills. He is licensed and legit and a nice guy. I told him I was asking people if he was giving them a price also, and if he was I didn't pursue the jobs because when I bid against him his price was always a lot lower. I think I got through to him, but he still bids low and I no longer market in that area. I gave him my older Hometech books and helped him put a bid together for a large job, he thought using Hometech was great but he just wouldn't markup past 20%. He's still a nice guy and still broke. What ya gonna do?


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## rbsremodeling (Nov 12, 2007)

Slickshift

You are right I use the term HACKS and should have been clearer in my response and maybe say hacks and underpriced contractors. But my rant was focused on two things HACKS that want to stay hacks and underpriced contractors. Who like you say are happy having work and don't really care about being solid business men, just having work and getting by and not realizing that it will lead to burn out or one bad job or non paying customer or job accident wipe them out of existence


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## slickshift (Jun 14, 2005)

silvertree said:


> If my bid was 10K his would be 7K. He told me he did a million in sales and had to borrow 25K from his wife to pay the bills. He is licensed and legit and a nice guy.


High sales hide a multitude of sins
And it's very difficult to get through to some of these people
Often because their sales figures are high, they figure they are doing it right and don't want to change...after all, they have high sales right?

Obviously if this guy was pricing closer to you, he might be "working" less
But if he dropped 25% in sales, but charged 25% more, he wouldn't have to borrow money from his wife to pay the bills


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## woodmagman (Feb 17, 2007)

Ed,
I am a firm believer of this mentality, and the comment that Slick made about the thought that work will dry up rings true to alot of guys starting out as tradesman becoming businessmen.
My experience is that if you are pricing fair, based on your costs, you will be maintain growth and as time goes on will begin to either charge more or less based again on costs. The small guy does charge too little, 99 percent of the time. Talking to them today about it will help in the future.
This can be a good reason for belonging to an association or inviting them as a guest to join the association. It shows that professional business do come together for a common goal.
Keeping your enemy closer then your friends is a good way of looking at it aswell. That fact is that he may teach you something.


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## Floordude (Aug 30, 2007)

I say it all goes back to the first day that guy was first called a subcontractor.

Now to eds original post. As a business, volume will make up some, for a low price. I read somewhere if you discount your rates 10%, you have to do something like 88% more volume to break even, or to get back where you were at.


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## Mike Finley (Apr 28, 2004)

I'd have to totally agree. This industry has seen to much downward price pressure causing it to be too hard to provide living wages for our employees. The industry looks like it's for sucker's when young people consider it for a career. Why go into construction and make a crappy living? When I was a kid construction was a coveted job that paid very well. The construction guys I knew made great money, had money in their pockets, drove fast cars.... etc..


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## tnt specialty (Apr 19, 2007)

Educating the competition has always been a major aspect of this business.......Learning from them also......


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## ChrWright (Jul 17, 2007)

Mike Finley said:


> I'd have to totally agree. This industry has seen to much downward price pressure causing it to be too hard to provide living wages for our employees. The industry looks like it's for sucker's when young people consider it for a career. Why go into construction and make a crappy living? When I was a kid construction was a coveted job that paid very well. The construction guys I knew made great money, had money in their pockets, drove fast cars.... etc..


Flash forward to now & how many are still in business? I saw guys like that when I was coming up, too. When you're young & broke, it's easy to be deceived by these "flash in the pan" types. 

One guy in particular had it all--big house, cars, boat, vacations to the Caymans every Christmas. But it was all show. The IRS finally caught up to him--as did a divorce, various other legal issues, and his habit of using his subs/employees money to go on vacation or buy new toys.

I still see guys like that around--but I see them for the monuments to indebtedness and excess they really are.


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## Any Season (Nov 19, 2007)

Ed, 
Is this just a futile subject though? I agree with you, and I feel that most painting contractors, I would include other trades but I don't work in those fields, if examined, do not charge nearly enough. It's easy to do. Figure out how much you pay in a year for everything and what percentage of sales that is. Here is a sample:

For me,

Labor- 30-33%
WC/benefits- 10-12%
Marketing- 10%
Paint/Materials incl. HD, Lowes, etc-12%
Misc. overhead (cell, internet, whatever, vehicle payment, etc)- 10%
True Profit- 21-28%

That true profit number is basically what my taxable income comes out to, so I could be wrong, but it yours doesn't fit into that equation the prices need to come up. Not just to bank more money either, but to be able to pay your bills. Is this an unrealistic illustration for other guys or am I in fact charging too little?


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## Mike Finley (Apr 28, 2004)

I understand what you are saying Chris. What I meant was more about workers in construction and not owners. When I was a kid the highest paying summer jobs around were in construction and you had to know somebody to get the job. It took me 2 summers to get a construction job back then. I think things are a little different now.


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## ChrWright (Jul 17, 2007)

Point taken. I agree.


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## GoodPainter (Apr 23, 2006)

This is a wide and vast subject.

I started in contracting as a painter two years ago after getting my life together and in order. I grew up not liking school and trying to find a way to retire young and rich. My father owned a business and worked hard to support his family. I had a passion of being "good with my hands" but couldnt think of what to do. I got a manufacturing job and was paid "good" wages but not good enough for my own thoughts. Since I started reading self help books, business books, investment, and retiring rich books. I knew I had to do this on my own.

Now after seeing what business really is by experience, its a hard thing harder than one can imagine(actually a profitable and growing business) I still would urge people try after educating themselves. 

I dont know if its painting or what but I havnt been affected by the socalled "hacks" although I do see the $250 for two rooms walls only yada yada crap. I never lowered my price over this and never thought it was competition, just a laugh and hope they satisfy their customers.

I think 2-3 years ago when I wanted to start a business I heard about
the career choices out there:
Either go to school for a computer line of work 
or
become a contractor
Becoming a contractor always has better numbers and security: hence there is always population growth meaning more land development, houses being built, electric work, framing, roofing, siding, decks, etc. 
or
renovations of older homes and sorts
So there is always "work to do"

Now someone that got into contracting and lowers their price to get more volume but less profit has a way of doing business just like someone raising their prices to have higher profits but less work(unless recyling the profits into adv and marketing to get more work)

If a hack is a hack (in your eyes) then let them be because if they are doing something illegal then great it will eventually catch up to them (or nudge the law to help before someone gets hurt)

For Example to any Contractor---The big guy that was here before me might think I am a hack if my prices are lower than his and he see's less wok for himself. But what about me thinking he does work that is lesser in quality I think he is a HACK!

Did this topic come about because of the economy and less work or slow time of the year/season?

I tell myself "whatever" but maybe I dont have the true hack-hater in me yet!


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## Double-A (Jul 3, 2006)

Dayexco has an interesting proverb in his signature, "When the student is ready, the teacher will appear."

I think that in order to help some of these folks, they must first realize that what they are doing is not working for them; that they are not getting the results they expected.

Several of the subs we've worked with over the years are like this. They prefer to operate out of a checkbook instead of a business software package. When tax time comes, they just turn over their checkbook register to the accountant and hope for the best.

They manage their business by fighting brush fires instead of making plans to avoid those problems.

In order to mentor these folks, they first have to realize they have a problem and they have to decide its time to make a change. Sometimes just asking two questions can make all the difference in the world. 

Do you have a problem running your business the way you think it should be run? If so, would you like some help to make those changes?


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## Ed the Roofer (Dec 12, 2006)

slickshift said:


> I may not be reading this right, but to me it looks like you (Ed) are talking about good tradesman (not "hacks", or bad quality ones so to speak), that severely under-price or under-bid


Yes, I was referring to someone who tries to do quality work. It may not be at the top of the pricing pyramid and they either intentionally or unknowingly leave too many upgrades out of the specifications and charge too little to be fair to them and their workers.



slickshift said:


> High sales hide a multitude of sins
> And it's very difficult to get through to some of these people
> Often because their sales figures are high, they figure they are doing it right and don't want to change...after all, they have high sales right?


It is called "EGO". I am busy so I am right. I went to a seminar back in 1988 and about 10 additional times, from Richard Kaller, who was running a CES, Contractor Educational Series, program sponsored by Certainteed. One thing he did with these middle of the road but adequate contractors, was to sit them down and explain business and true profit to them. He would show them that they could make more money by being his subcontractors than by working for themselves. Basically, he bought up a whole bunch of company names and phone numbers and eliminated some of his low ball, yet decent quality contractors from the equation. 



woodmagman said:


> Ed,
> I am a firm believer of this mentality, and the comment that Slick made about the thought that work will dry up rings true to alot of guys starting out as tradesman becoming businessmen.
> 
> Talking to them today about it will help in the future.


 
This is called "FEAR" of survival. Now, we have EGO and FEAR. Two very strong, yet opposing emotions. To get past these, a true image, not the imagined perspective of their business must be believed by them.



Double-A said:


> Dayexco has an interesting proverb in his signature, "When the student is ready, the teacher will appear."
> 
> 
> In order to mentor these folks, they first have to realize they have a problem and they have to decide its time to make a change. Sometimes just asking two questions can make all the difference in the world.
> ...


That signature line is so true and right on the mark.

I would further add, that one way to teach someone to accept your ideology, is to NOT tell them how they should be doing things. Most of us are guys and we just plain old reject someone telling us that we are wrong. We will rationalize our weaknesses into our perceived strengths.

12 Step programs break down this barrier in a simple method. It is called story telling. In this manner, you do not tell the disparaged individual how and what they are doing is wrong. 

Instead, you share your story with them.
How it was back then.
What happened.
How it is now.

By projecting your own defects and weaknesses and short-comings, the other party can hopefully see some similarities in the picture being drawn. At that point, they are teachable.

Very good responses from everyone so far.

Ed


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## Wood_slinger (Feb 23, 2008)

I’m really grateful that I stumbled upon this thread. I just recently found this website and have been reading everything for the past several days. I find this forum to be a wealth of knowledge.

I am a newly licensed contractor, focusing mainly on smaller jobs like decks and basements, etc. I take pride in the quality of my work, but have been very disappointed in my returns thus far. My biggest problem is that I was “away” from the industry for almost 6 years and just had no idea how much costs have actually gone up in that time. I find that while pricing a job I am always second guessing myself, thinking that my prices are going to be too high, only to find out that I undercut myself. A good example is recently I priced a job that I did not really want in the first place because it was a little further than I wanted to go. I thought that I really padded the price to where if I did get it, it would be worth my while. The HO had two other quotes from local contractors and mine was the cheapest by about 30%. This was when I realized that I was not doing something right on the business end, and hence led me to start searching online for help such as this forum. 

I’m a small contractor right now, no employees, work out of my home, etc. Since I do not have previous year sales data it is very difficult to project my overhead, taxes, business expenses, etc in order to add all of these important factors to my prices. I would love some advice on common practices for other companies when they were starting up. I normally price my jobs by figuring out my materials, then estimating the time in which it will take me to get it done. This is just not working for me. I want to be inline with the industry, and definitely do not want to be considered a “hack”, as I feel I offer high quality craftsmanship. 

Thanks again for this thread and your willingness to help the new guys.


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## Vinny (Jul 21, 2007)

Wood_slinger said:


> I’m really grateful that I stumbled upon this thread. I just recently found this website and have been reading everything for the past several days. I find this forum to be a wealth of knowledge.
> 
> I am a newly licensed contractor, focusing mainly on smaller jobs like decks and basements, etc. I take pride in the quality of my work, but have been very disappointed in my returns thus far. My biggest problem is that I was “away” from the industry for almost 6 years and just had no idea how much costs have actually gone up in that time. I find that while pricing a job I am always second guessing myself, thinking that my prices are going to be too high, only to find out that I undercut myself. A good example is recently I priced a job that I did not really want in the first place because it was a little further than I wanted to go. I thought that I really padded the price to where if I did get it, it would be worth my while. The HO had two other quotes from local contractors and mine was the cheapest by about 30%. This was when I realized that I was not doing something right on the business end, and hence led me to start searching online for help such as this forum.
> 
> ...


Wood slinger, I will hopefully give you good but quick advice that maybe someone else in your industry may be able to elaberate on. 

Yes, your right, its very difficult if not impossible to know what your overhead is with no previuos years data to look at, so what i would suggest is take your material add it to your burdened labor (that is what you either pay your self or what you would pay an emplyee, which ever is greater plus tax obligations and W/C + G/L) then double that number. 

This will give you a 50% Gross Margin.

Then job cost it. I mean job cost every job you complete and catorgorize them on a spread sheet. Then review that info at the end of each month, then at the end of the year and make adjustments accordingly. BTW, I cant stress this part enough. YOU NEED TO DOCUMENT EVERYTHING. This way you will have documented info on what to expect when you hire someone to do the work for you from a production capability and a material use standpoint.

Look at that info next to your prevously completed years P&L and you'll probably start to see how to continue pricing and you can adjust from that if you decide to add employees. You may find you can ratchet down the price a little, still be profitable and sell more work or you may be able to squeeze more money out of your selling if you can raise a price.

Good luck


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## Vinny (Jul 21, 2007)

Ed, I have done this exact thing twice and it can be good or it may be bad. 

I had one guy I helped use it against me and one guy I helped did very good with the help i gave away so I would sugest going slow and make sure it dont turn around and bite you in the a$$


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## Wood_slinger (Feb 23, 2008)

Vinny,
Thank you for the advice. I will try this formula on my next bid. I normally do materials + estimated time plus a small % for insurance, but that is about it. I think your formula will have me actually putting a little something into the company instead of just paying the bills. The job costing will take me a little while to get the hang of, but I see where it would be very helpful in the long run. 

Thanks again


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## AtlanticWBConst (Mar 29, 2006)

If someone is a legitimate business, providing good service, quality work, but undercharging...I'd pull them aside and say something in a heartbeat. 
You can't but want to help someone like that, because you respect what they are trying to accomplish.

We have a network of contractors. Personal friends and professional friends. Some of us are competitors, but we all repsect eachother's work and businesses.
We all help each other out from time to time (sending some workers to help catch up on a job, subbing some work, or whatever). We often do lunch (Fridays especially), we talk "shop", and in the process, we mentor each other. 

We all need help in this business. We all need friends in this business. Friends will help you, with a simple phone call.


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## send_it_all (Apr 10, 2007)

This thread, while heart-warming and fuzzy, seems very contradictory to the exremely common smart-ass responses on this site to the endless "how much should I charge" posts by the very same legit, yet under experienced, contractors you are all talking about helping now. 

I have always been a proponent of open dialogue about this very subject on this site, but I was part of a very small minority here. All the "how much?" question threads here get slapped down rather quickly any more. Of course when someone asks that question, what they really mean is "what am I doing wrong?" 

Now suddenly everyone wants to help? I'm all for it. 

Thanks Ed.:thumbsup:


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## AtlanticWBConst (Mar 29, 2006)

send_it_all said:


> This thread, while heart-warming and fuzzy, seems very contradictory to the exremely common smart-ass responses on this site to the endless "how much should I charge" posts by the very same legit, yet under experienced, contractors you are all talking about helping now.
> 
> I have always been a proponent of open dialogue about this very subject on this site, but I was part of a very small minority here. All the "how much?" question threads here get slapped down rather quickly any more. Of course when someone asks that question, what they really mean is "what am I doing wrong?"
> 
> ...


The problem with the questions posted on pricing, I've noticed, that illicit sarcastic backlash seem to be these 3 points;

PRIMARY REASON # 1: You can't guess someone's weight acurately over the internet. The same can be said about pricing a job on the internet. There are too many variables, regardless of general sf ranges. A contractor with some kind of experience (even after 1 year) knows this. This leads into point # 3.

2.) The person does not generally start off with: _Hi, I'm new to the field, or, I am just starting out, can someone help me ...._
If people were a little more humble and sincere in their asking for help, they would get more answers.
Instead, they generally say: ...I _*have a 1600 sf house, and blah, blah, blah,...how much to do this, or that. *_
It is usually their first post. Like they come on only to "use" the site (and member's experience) for one thing. That raises some ire.

3.) They list in their title that they are a GC, or remodeling Contractor, or Builder. Then they ask some ridiculous question that totally blows their cover.
If they are such, then they would know the answers to some of the basic pricing questions that they ask. 
If they would be honest about who they are, and what they do. They are rookies. There is nothing to be ashamed about that. We all were at one time, and we all still are, dependant on the exact trade we are compared against.

Getting back to point # 1: It can be quite difficult to price anything for anyone on here, because there are other factors involved. No one prices anything over the phone. One job may be such and such price for a 1000 sf addition. The same size addition can be another price, based on the issues that are inherent with that particular addition.


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## AtlanticWBConst (Mar 29, 2006)

Possibly the recent points made by Send It All, pose a suggestion. 

Maybe the site could use a forum, just for helping out newbi contractors, or contractors who are pricing something that they have never priced before?

A Price Suggestion Forum, or a *Need Help Pricing Forum* or a *Mentoring *Forum? Then people wouldn't get all the sarcastic backlash that comes around with the standard "how much", or other basic questions....


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## send_it_all (Apr 10, 2007)

I agree that we can't know someone's overhead costs and such. In my post above, I vaguely addressed this by saying when they ask how much, what they really mean is what am I doing wrong? What I meant by that is that they need help with the estimating process...not the numbers. I think your suggestion (Atlantic) about a pricing/estimating forum is an outstanding idea, and one that would be a HUGE step toward accomplishing Ed the Roofer's goal of mentoring the lesser experienced estimators. 

The only problem I forsee with this forum is that it would get repetitive pretty quickly, but I would abslolutely love to get everyone's take on the entire estimating process from figuring overhead numbers to applying them to the price of a job.

A forum like that on this site would be good for this industry on several levels. It would educate less experienced estimators who now undercharge due to not figuring enough o&p into their pricing. (These are the ones Ed is setting out to help). It would be a start toward a semi- standardized estimating procedure which would put more of us into a smaller price ballpark, reducing the chances of being ridiculously underbid by Ed's unwitting hacks...lol. 
Even if some of our potential clients stumbled onto the forum it would open their eyes to the reason our prices make it seem like we make $200 per hour.

If this seems like a mindless rant keep in mind that I'm up late...not early...lol.


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## tnt specialty (Apr 19, 2007)

Send it all; While I tend to agree with your comments; There are some of us that are perplxed/amazed....whatever the case may be....That a contractor would "price" his job based on what others charge....

From day one I knew my costs, and that's how I arrived at the prices I would charge.....If fact, when a customer offers another contractor's bid/price for me to look at, I typically refuse until I've presented mine. If there is a considerable differencew, then, and only then would I agree to review the others and dertermine the possible reasons for the wide price difference. Whereby, I may be required to justify my higher price......On a couple of occaisons I've had to justify a lower price! (I can only think of one, but surely thwere must have been more over the past 25 odd years).

When I educate a competitor it's typically to enlighten the newcomer/naive as to particular business dynamics that will affect his/her ultimate operating costs.....He/her ought to have enough sense to figure their individual overhewad costs.


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## AtlanticWBConst (Mar 29, 2006)

Bottom line, it is still always good to know what the average rates are around the country and by region...
They may not be the same as others, but it's a feeler guage, that can allow us to see where we are at. We may be able to get more, we may feel we have to charge less, etc..

I know that when I do certain proposals, especially in commercial bidding work, it's more so based on a rate, or SF. Then it is adjusted for the little, or the big, incidentals....


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## Railman (Jan 19, 2008)

It's not too hard to start out using someone else's prices, if you know for sure that it's a for real proven price. Many builders give out their existing subs and suppliers pricing, to help generate more competition, even though it's not ethical. These numbers will usually get you started, even if you don't have the most efficient operation to start with, because your simply don't have the established business's overheads. Also, a started business don't need to have the same expectations for profit. This will only work for a while though. Eventually, YOU HAVE TO KNOW WHAT IT COSTS TO DO YOUR WORK!

Tough love:
Back in the early 80's, my oldest brother (of 7) had good size residential framing company, with over 100 employees. It was common for him to have to compete with guys he trained. One guy in particular kept beating him out on condo projects. So he finally figured out what was going on. The builder was giving out my brothers bid to the new guy, & hence he stole the work. What my brother ended up doing was low balling the next job by about 50%, & sure enough the other guy got the job. He didn't realize what was going on until he had the job framed half way, at which point he just pulled off... lesson learned!

BTW, he remained friends with the guy he mentored.

Moral is : Eventually, YOU HAVE TO KNOW WHAT IT COSTS TO DO YOUR WORK!
Joe


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## Wood_slinger (Feb 23, 2008)

I thought maybe a “newbie” could put his two cents in on this topic. Being new to the business-end of this is sometimes difficult. Especially with the current market as it is, it seems that competition is a little more heightened than normal. I completely understand and appreciate the frustration with some people asking questions such as how much per square ft to price this job and so on, but I don’t really see anything wrong with asking other people if $20 a sheet is too much to pay a sub for hanging/finishing drywall in my area or if there is a better formula to price out jobs and not leave so much on the table. 

I have yet to find a good forum in my area to network with others in the business as it seems like there are either very large home builders or the guy who advertises as a handyman to dodge the licensing requirements. I don’t fit either one of those categories. I’m not ready to start building houses yet, in fact, I try to keep my jobs fairly small right now just because I know that I do not yet have the business skill set to handle the larger jobs.

I agree with Atlantic, one has to come to this board a little bit humble to begin with. I’m in my mid 30s and I have spent a lot of my life learning and growing a passion for my trade, but I admittedly have a lot to learn about the business side of it. For me at least, the business end is like learning a new language and I didn’t fair that well at French in school. Worker’s Comp laws and rules, filing deadlines, sales tax on labor (never did understand that), G/L and who is listed on the policy, and a host of other things that tradesmen don’t normally think about. I know, this is all part of doing business, but sometimes one just has to ask some questions. I feel more comfortable asking other people in the business than I do some suit in an office that has never dealt with running a business.

I appreciate the willingness of those to help out “newbies” like me.


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## SelfContract (Dec 6, 2007)

Together we stand, divided we fall. :thumbsup:


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## Double-A (Jul 3, 2006)

I might be one of the ones you're complaining about, being hard on folks, but I'm not one to beat around the bush.

Asking for prices over the internet on something that is really not a product, but more of a custom, one off service, such as working in someones home, is just not good business.

Now, asking how to go about pricing that job is something entirely different. 

"What items should I include in a proposal, what items should I leave out? What goes into a scope of work? Should I take my workers labor rate and use a multiplier to figure labor burden or can I just add up the numbers and use that?"

verses "My plumber says he'll plumb my second floor bathroom for $2000.00. I think that is too high. What would you guys charge?"

Now honestly, which of those questions can you really answer?


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## silvertree (Jul 22, 2007)

I think we should mentor the guys coming up but I don't see where actually pricing anything helps. Some of us posters say "Guess how long it will take you, add materials and figure what you need to grow a good business". Most of that advice goes unheeded. I have been sarcastic to some of these postings, and remember the good and bad advice I got when starting out. From now on I will only be sarcastic to the idiot postings which are easy to spot. Sometimes it will be hard not to tease the new guys, after all my generation looked for left handed screwdrivers, skyhooks and brass magnets.


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## Wood_slinger (Feb 23, 2008)

silvertree said:


> I think we should mentor the guys coming up but I don't see where actually pricing anything helps. Some of us posters say "Guess how long it will take you, add materials and figure what you need to grow a good business". Most of that advice goes unheeded. I have been sarcastic to some of these postings, and remember the good and bad advice I got when starting out. From now on I will only be sarcastic to the idiot postings which are easy to spot. Sometimes it will be hard not to tease the new guys, after all my generation looked for left handed screwdrivers, skyhooks and brass magnets.


I went after a skyhook my 1st year as an apprentice; I was 18. I must have asked a dozen people before I figured I had been played with. Luckily I never fell for the "metric crecent wrench". Thanks for reminding me of FNG games...

I don't mind taking my lumps in this business. I'm glad to still have all my fingers and toes at this point, so a few bumps and bruises are not going to kill me. Just want to make sure I don't make too many business mistakes if I can help it. My father has always told me, "if your going to be dumb, you got to be tough." I spent a good part of my life being tough, so I'm trying to help grease the rails a little.


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## woodmagman (Feb 17, 2007)

Vinny said:


> Ed, I have done this exact thing twice and it can be good or it may be bad.
> 
> I had one guy I helped use it against me and one guy I helped did very good with the help i gave away so I would sugest going slow and make sure it dont turn around and bite you in the a$$





woodmagman said:


> Ed,
> I am a firm believer of this mentality, and the comment that Slick made about the thought that work will dry up rings true to alot of guys starting out as tradesman becoming businessmen.
> My experience is that if you are pricing fair, based on your costs, you will be maintain growth and as time goes on will begin to either charge more or less based again on costs. The small guy does charge too little, 99 percent of the time. Talking to them today about it will help in the future.
> This can be a good reason for belonging to an association or inviting them as a guest to join the association. It shows that professional business do come together for a common goal.
> Keeping your enemy closer then your friends is a good way of looking at it aswell. That fact is that he may teach you something.


That fact is that he may teach you something....and if not then why worry.


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## Publisher1 (May 30, 2006)

I'm not a lawyer, but think you should be careful when you are discussing pricing with a competitor. In Canada we have the Competition Act; in the U.S. there is anti-trust legislation, and counseling competitors to raise their prices might overstep the rules. (It is okay for me, as a publisher, to give advice to contractors that they are underpricing -- in fact I've done it a few times -- but it would definitely be against the law here for me to approach a competing publisher and urge his business to raise rates!)


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## Ed the Roofer (Dec 12, 2006)

Just for clarifications sake, this premise is not and should not in any way at all be perceived as a collusion between contractors and price fixing.

I did make an earlier reference about a competitor of mine, who many years ago, showed me what their bid prices were on similar projects that I was bidding on. He did not show me his price on a job that we both had quoted.

Even with the knowledge of how much more his company was properly charging, I still could not immediately justify to myself the upgrading of my prices to their level.

Rationally, I did not have the same company overhead and other costs of running that a more established firm had.

Irrationally, and self manipulatively, I convinced myself that I would not get enough work if I increased my prices to their level. That would have been true years ago, but as I have built up my company and gotten a firmer grip on true buisness operation costs, I slowly have rode the tide upwards.

Just by having the necessary information alone, does not allow a person to put their faith and full belief in the justification of doing things that they are told. But, it gave me the opportunity to open my eyes and begin to learn from that experience.

Today, I wish to share that learning experience with others, especially those that offer potential as being good high quality craftsmen and have enough savvy to learn the business and accounting portion well enough to flourish.

Ed


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## Footfall (Feb 27, 2008)

I'm glad I found this thread. I am in the planning stages of branching out on my own into flooring, and I was going to do exactly some of those things you mentioned. I had found out the "going rate" here in town for laminate, and I was going to undercut it by a few cents. I never even thought of sitting down and thinking about WCB, CPP (canada pension), etc etc... so I'd thought I'd share what I've done.

I started with "duuuh, I wanna make $50 an hour 'take home' ", and ended up with:

Deductions
WCB - 5.33%
CPP - 9.9% (optional)
Prov Tax - 11%
Fed Tax - 15%
Liability insurance (1 mill) approx $400 / year
Disability - unknown as of yet, covered under WCB to an extent.

Total deductions with cpp is 41.23% plus any insurance, not including vehicle or other costs.

Reaction: "Holy crap, I lost 50% of my earnings!!"

Talk about being schooled.


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## Grumpy (Oct 8, 2003)

I'll help anyone who asks me for it. We are only competitors when we are bidding on the same job. 

It is hard to pay well and to not cheat and still be competitive unless you are in an incredibly specialized niche. 

To your question, are they hacks or under trained? Both maybe. To me a hack is one who doesn't care at all about quality and will do what ever is faster and easier to maximize his profit. In other words a hack will take short cuts. An under trained businessman will still do the job properly but be doing it for too cheap because he doesn't know what he should be charging or doesn't think he can get it. 

That hack should be put in jail and that under trained business man should either learn real quick or go work for someone else.


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