# competition with extremely low prices



## brock029 (Jan 21, 2013)

In my town there are 3 main players in concrete work one of them being us. As of two weeks ago we finally lost our last home builder because our prices are too high. In a way it was a good thing last year we branched out and now bid jobs as the general contractor and erect steel buildings so not having to worry about houses with crazy deadlines while we have a bunch of other work going on is alright by me. But it's been this way for a long time. Im not 100% sure on my competitions actual prices but for an example last week I bid a small 35'x40' building slab that was going to be like a small apartment/shop building. After I gave my price the owner came back and said one of my competitors bid it significantly lower then me. I don't remember exact numbers right now but there price was so low just after materials alone they were left with about $1000. That's not including tax or labor just on material. So something seems fishy. I do everything the way it should be. We are licensed general contractors in the state of New Mexico. We pay all of our taxes and insurance and are bonded. New Mexico has state payroll taxes so each week my guys making $12 an hour actually cost me close to $20 an hour. We also are SMI certified which meant adding allot on to our insurance. Then on top of all of that materials keep going up and we have had our same prices for years. About 3-4 years ago 5 sack concrete with fiber was $100 a yard now it's $120. I guess I'm just looking for some insight. I think either they don't do things the way they are supposed to or they just produce so much that $50 profit per job adds up quickly. Our standard rate each job varies is $4.50 per sqft on house slabs and $4 on the exterior work (porches, driveways, sidewalk). Metal building slabs are usually around $6. We do loads of other work and some really big jobs and we never make money on houses they are just a good filler in between the big jobs to keep the company going and my crew employed. This last home builder I hope will notice the difference in quality but now a days allot of home builders are just worried about the bottom line.


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## huggytree (Nov 3, 2013)

if your competition is apples to apples with you and pricing themselves low they may be out of business....i also find it hard to keep new home builders due to price.....i focus on small custom home builders instead...they will pay for higher end...the bulk builders wont

change your advertising to explain to the customer why spending more = get more by using you

dont try to compete...if your not making 10% profit dont bother being in business....i shoot for 20-40%

i also get out bid by enormous amounts sometimes.....let the idiots work for peanuts


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## brock029 (Jan 21, 2013)

I completely agree. I usually go for 30-40% profit on jobs. The crazy thing is both of my competitors have been in business for awhile. One of them almost as long as my family. My grandfather started the first batch plant in a 100 mile radius years and years ago then came his competition. They batch there own concrete and do the work. The other competitor started about 8 years ago and instantly undercut everyone. They have grown and grown and I don't get it. We have really expanded our working area. I've worked in Colorado, Oregon, Oklahoma, and have done allot of work in Texas but this year only about 45 minutes away.

And to add on some we do go for quality vs quantity. I have seen both of my competitors just throw dirt into house slabs and not compact anything. I have had calls from home owners with houses built within the last 10 years that have cracked and started sinking and separating. In an area that has a massive layer of limestone right under the top soil. Our house footings only have to be 12" x12".


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## JBM (Mar 31, 2011)

I worked for a large block company in florida and everyone got 2 paychecks. 1 for 32 hours and another one for the rest. 

Who knows what kind of stuff the other guys are doing.


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## Chris Johnson (Apr 19, 2007)

So let's pretend your 35x40 shed is quoted as 4" thick, 17.5 cu Yds rounding slightly, your competition may only be pouring 3"...13 cu Yds, chances are I just found out how he's outbidding you.

Laugh as you may, I lose many jobs for this reason


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## brock029 (Jan 21, 2013)

Chris Johnson said:


> So let's pretend your 35x40 shed is quoted as 4" thick, 17.5 cu Yds rounding slightly, your competition may only be pouring 3"...13 cu Yds, chances are I just found out how he's outbidding you.
> 
> Laugh as you may, I lose many jobs for this reason


You could be 100% right I already know they don't compact any of there dirt so labor saving right there. So yeah I wouldn't put it past them to do that even when you never want to pour concrete less then 4" thick.


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## brickhook (May 8, 2012)

I fell your pain, I deal with these hacks every day. I'm class A licensed, fully insured to the max, I pay my employees well, I have enough equipment to do any job, and those guys come in there and blow my bid out of the water.

I just tell them if they want cheap...Im not their man.


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## pcplumber (Oct 12, 2008)

Your answer may be to get yourself in a position where you have little to no competition. There are millions of small-time contractors who are fighting for bread crumbs, but there is a small amount of competition for the very large jobs i.e. laying 100,000+ sq ft of concrete. 

Tomorrow morning, I'm starting the first of one my my $450k+ jobs and working with the big-time classy general contractors has been very enlightening. Last Friday, the general contractor told me to send him a bill for an additional $15,000 (before we even signed a contract) because we accommodated his company with many of the engineer's blueprint changes and we spent hundreds of hours re-bidding this job.

We are bidding jobs for several very large construction companies and I'm finding a world of difference, but I also took on a partner who knows how to get the change orders.

My point is; start looking for work that your small-time competitors can't do and get away from the trailer trash jobs.


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## cwatbay (Mar 16, 2010)

In another industry, 40 years ago, I was hearing the same thing. And I still hear it, being underbid by others....usually new guys. 

It has to do with overhead, income and final pricing. So let me tell you about 40 years ago and see if it sheds some light on what is going on. 

This has to do with a retail industry which is pretty much shrunk down and thinned out now......but 40 years ago, it was an easy to get into and fairly lucrative business that could pay your bills, buy a house, keep the wife at home and send the kids to college. And don't forget the white picket fence and collie dog too. 

Nonetheless, established businesses were family owned and did rather well. Then the bug hit, everyone thought "wow" what a great business, let's get into it!! Banks thought that way too, "let get everyone into this thing".... so folks with savings, a loan against the house, borrowed money from mom, dad, relatives and friends.......plus a total LACK of basic business knowledge and trade skills ...all got into this thing. 

Overhead....The new guys had overhead, but it was paid by others, or by savings and loans....with little or no business experience, they didn't care. Some had parents and others who used the business as a tax write off... which meant, they hoped the business would make money, but it didn't have to, they were happy if it broke even. 

Most new business had no real clue what overhead was until it hit them..either at the end of the quarter or simply when a lot of bills came due. In which case they put a lot of stuff on sale, collect the money for the short term and pay the bills that were most current, leaving the rest to age until they could sell more stuff. A business could do this for about 3-5 years, constantly paying bills late, asking for better terms and borrowing more money from other (or a second mortgage). 

Income....the new guys usually got an initial surge in income, either from the fact they were the new guys, or, they had big sales all the time. Many times when business got slow, they would discount all the items that traditionally, you never put on sales cus you could double and triple the price....which meant, these items sold no matter what, so why not just triple your money...you are going to sell them anyway. IN the short term, you collected a bunch of money quickly, but little or no profit. The problem was, you couldn't do that forever, cus you "money makers" weren't making any money, just trading dollars. 

But business income isn't all the income. Like I said before, with little or no business knowledge, even if you are breaking even, you still think you are making money. Plus, if other things are bring in money( ie: loans, money from parents-friends and relatives, and in some cases, drug sales) you really didn't care a whole lot if you primary business make money or not. 

Final pricing........Low, discount prices brought in clients, while the belief was, once they clients came in, you could sell them on other more profitable stuff. The thing was, after year 3 to 5 when all the external money sources dried up (except wealthy parents) the newer business would put everything on sale while trying to get credit terms from other suppliers (usually no name or 3rd to 4th tier brands). 

In the end, for every new guy that got into the business by discounting and lowering prices, then going out of business 3-5 years later....there was a long line of folks ready and willing to take their place, thus continuing the trend over and over again. 

The thing that wiped almost everyone, including all the discounter was market change.........people simply bought other stuff or found on line venues for it......and that killed off all but the largest or niche market retailers. 

In the construction business I have seen the same thing over and over again. The big housing collapse killed off a lot of established contractors, but it really killed off all the short term discount hacks that caused grief with guys that played by the rules. Now that is happening all over again, although slower, in the fact that construction has again picked up.


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## SteveinNEPA (Jun 5, 2014)

Ive been outbid by a mile... Only to eventually have them come back and ask me to fix the screwups...

Its cliche, but truth is...


Fast and Cheap ---- Will not be GOOD...

Cheap and Good ---- Will not be FAST...

Good and Fast ---- Will not be CHEAP...


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## FrankSmith (Feb 21, 2013)

SteveinNEPA said:


> Ive been outbid by a mile... Only to eventually have them come back and ask me to fix the screwups...
> 
> Its cliche, but truth is...
> 
> ...



That is the most ridicules saying. Take cheap and good. So the work is good. In the end its hard to argue with good work. But some how the fact that it was cheap is supposed to correspond to it being slow? I don't get it. Please tell me more about this.


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## brock029 (Jan 21, 2013)

pcplumber said:


> Your answer may be to get yourself in a position where you have little to no competition. There are millions of small-time contractors who are fighting for bread crumbs, but there is a small amount of competition for the very large jobs i.e. laying 100,000+ sq ft of concrete.
> 
> Tomorrow morning, I'm starting the first of one my my $450k+ jobs and working with the big-time classy general contractors has been very enlightening. Last Friday, the general contractor told me to send him a bill for an additional $15,000 (before we even signed a contract) because we accommodated his company with many of the engineer's blueprint changes and we spent hundreds of hours re-bidding this job.
> 
> ...


That's what we do. We are the GC on a $400,000 building right now forms set footings done and almost ready to pour. Hopefully if everything goes good we have a 2.5 million job coming up with loads of concrete paving and a ware house. It just blows my mind how people can work for nothing and stay in business as long as these guys have. And actually now have probably 90% of the new home market here.


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## SteveinNEPA (Jun 5, 2014)

FrankSmith said:


> That is the most ridicules saying. Take cheap and good. So the work is good. In the end its hard to argue with good work. But some how the fact that it was cheap is supposed to correspond to it being slow? I don't get it. Please tell me more about this.


I remember seeing that saying on a sign hanging on an old boss' wall above his desk. This is how he explained it to me.

Cheap and Fast will not be good. - Everyone wants something for nothing or next to nothing. AND they want it done yesteday. As a professional you arent going to charge 300 bucks to retile a kitchen floor, install a new sink and replace all the cabinets and counters in 2 days. However there are people who WILL. They offer it cheap and they do it FAST. And 9 times out of 10 it NEVER ends up being good.


Good and Fast will not be cheap. - Giving them the best work available, and being fast because they want it done yesterday is not cheap. More man power, high grade materials and more time being spent on it and as I said they want it done yesterday. It will cost MORE.


Cheap and Good will not be Fast. - They want the work done for cheap prices, but they want it done to perfection. You know your getting killed on it since you slashed your price to get it, and now you have no motivation to get it done quickly or the customer is constantly rearranging a layout or changing SOMETHING a minute and a half before you do it. . So it is not fast.

Thats how it was explained to me.


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## FrankSmith (Feb 21, 2013)

SteveinNEPA said:


> I remember seeing that saying on a sign hanging on an old boss' wall above his desk. This is how he explained it to me.
> 
> Cheap and Fast will not be good. - Everyone wants something for nothing or next to nothing. AND they want it done yesteday. As a professional you arent going to charge 300 bucks to retile a kitchen floor, install a new sink and replace all the cabinets and counters in 2 days. However there are people who WILL. They offer it cheap and they do it FAST. And 9 times out of 10 it NEVER ends up being good.
> 
> ...



I think it is supposed to be that you can have any two of the fallowing. 
Price, Quality, Customer service. 

I know that the jobs where the price does not match the task at hand are the one that are the most likely to get me to work through dinner. I hate working for free for one day. Why would I want to go back?


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## brunothedog (Sep 8, 2013)

or maybe, they are better than you, faster, their crew is able to do more sq,ft a day.
or maybe, your competition wants to expand and they need your Co. to go out of business and is pricing you to fail.
or maybe, They do more with 1 g of profit than you can do with 5 g of profits.

These threads all suck because it seems that if you dont ask high dollar, your doing something wrong.

remember, the highest bid almost NEVER assures the highest quality.
And if that doesn't make sense, go back working in the shoe factory


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## RobertCDF (Aug 18, 2005)

brunothedog said:


> or maybe, they are better than you, faster, their crew is able to do more sq,ft a day.
> or maybe, your competition wants to expand and they need your Co. to go out of business and is pricing you to fail.
> or maybe, They do more with 1 g of profit than you can do with 5 g of profits.
> 
> ...


I never understood the mentality of "I want to make less than I could" that you seem to have. Never seen someone say "no thanks, I don't want a raise". That is essentially what you are saying.


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## Xtrememtnbiker (Jun 9, 2013)

RobertCDF said:


> I never understood the mentality of "I want to make less than I could" that you seem to have. Never seen someone say "no thanks, I don't want a raise". That is essentially what you are saying.


My dad is funny like that... I need to have a chat with him about it. He pays himself $40 an hour. Has since he started the business 6 years ago. Doesn't want a raise cause he "doesn't need the money". House and cars paid off, etc.

He also only has mom pay him for only 40 hours a week when he works 70-80 every week.

I personally thinks that's just stupid... I just need to tell him that in a nicer way than "Dad, your stupid"


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## Inner10 (Mar 12, 2009)

Xtrememtnbiker said:


> My dad is funny like that... I need to have a chat with him about it. He pays himself $40 an hour. Has since he started the business 6 years ago. Doesn't want a raise cause he "doesn't need the money". House and cars paid off, etc.
> 
> He also only has mom pay him for only 40 hours a week when he works 70-80 every week.
> 
> I personally thinks that's just stupid... I just need to tell him that in a nicer way than "Dad, your stupid"


That's different, he's leaving more money in the company which he holds share's in to lower his yearly tax burden. I'm sure many on this forum don't earn a very big salary but choose to hold more money in the company.


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## Xtrememtnbiker (Jun 9, 2013)

Inner10 said:


> That's different, he's leaving more money in the company which he holds share's in to lower his yearly tax burden. I'm sure many on this forum don't earn a very big salary but choose to hold more money in the company.


He does. But, the business doesn't make enough to cover his hours. As in, there is not an extra 80k each at the end each year for those 40 hours he didn't pay himself for. He works for free part of the time. I understand the tax thing, but it's that not we are making it and he is just not taking it. We aren't even making it.


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## going_commando (Feb 19, 2013)

brickhook said:


> I fell your pain, I deal with these hacks every day. I'm class A licensed, fully insured to the max, I pay my employees well, I have enough equipment to do any job, and those guys come in there and blow my bid out of the water.
> 
> I just tell them if they want cheap...Im not their man.


Is it ironic that I'm price shopping for that sign? :laughing:


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## flashheatingand (May 3, 2008)

RobertCDF said:


> I never understood the mentality of "I want to make less than I could" that you seem to have. Never seen someone say "no thanks, I don't want a raise". That is essentially what you are saying.


I am a guilty participant. Maybe I am too much of a sap, but, the goal is to have a win-win situation. That's hard to come by when one party is seeking top dollar.

I am not saying one should work for free, but, pigs get slaughtered.


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## Tiger Tom (Jul 4, 2014)

Pigs do get slaughtered. 

I recently started my business and my overhead is less than 500 a month including insurance, I can afford to under bid most people and still have plenty of room. When your starting out and bidding for a new customer, sometimes you need to account for the value of acquiring a new customer.


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## brunothedog (Sep 8, 2013)

RobertCDF said:


> I never understood the mentality of "I want to make less than I could" that you seem to have. Never seen someone say "no thanks, I don't want a raise". That is essentially what you are saying.


i have NEVER said i want to make less.

and as someone already said... pigs do seem to get slaughtered.


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## SectorSecurity (Nov 26, 2013)

Tiger Tom said:


> Pigs do get slaughtered.
> 
> I recently started my business and my overhead is less than 500 a month including insurance, I can afford to under bid most people and still have plenty of room. When your starting out and bidding for a new customer, sometimes you need to account for the value of acquiring a new customer.


Your truck, gas, wear and tear, car and business insurance, ect is less then 500 a month? :blink:

I can spend several hundred a month in fuel alone. 

I don't set out to underbid people, and if a customer has a lower bid, I don't try to match it. I charge what I need to in order to stay in business not obtain every low ball customer.


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## RobertCDF (Aug 18, 2005)

brunothedog said:


> i have NEVER said i want to make less.
> 
> and as someone already said... pigs do seem to get slaughtered.


You're proud of under bidding... how is that not "making less than you could"?


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## RobertCDF (Aug 18, 2005)

You can't be a pig and rip someone off when they have the choice of you or others... I'm thinking off a project we did in November where we were 15% higher than other bids. We won the project.


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## brunothedog (Sep 8, 2013)

dont get upset and all bent out of shape because their are Contractors that make more money than you underbidding you.
the problem isn't with the "lowballers".
I thinks the problem is elsewhere.

This business isn't for everybody


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## brunothedog (Sep 8, 2013)

RobertCDF said:


> You're proud of under bidding... how is that not "making less than you could"?


Oh how I love when my competition is crying.

if I can finish a job in 20% less time than the others, I can bid 10% less than them and make 10% more than the highest bidder.

more or less.

Quality and SPEED is EVERYTHING


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## JBM (Mar 31, 2011)

Bruno Im hoping to be more expensive, go slower and go fishing more.


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## Tiger Tom (Jul 4, 2014)

SectorSecurity said:


> Your truck, gas, wear and tear, car and business insurance, ect is less then 500 a month? :blink:
> 
> I can spend several hundred a month in fuel alone.
> 
> I don't set out to underbid people, and if a customer has a lower bid, I don't try to match it. I charge what I need to in order to stay in business not obtain every low ball customer.


I don't own any vehicles/equipment, I rent what I need. I am talking about my fixed month to month costs.


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## SectorSecurity (Nov 26, 2013)

Tiger Tom said:


> I don't own any vehicles/equipment, I rent what I need. I am talking about my fixed month to month costs.


So your business insurance, website, telephone, marketing ect is all free? This all has a monthly cost.

How do you get to and from job sites? You must have a vehicle, that vehicle must need gas, and must need insurance, even if its your personal vehicle, it still has a cost aspect to it.


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## Tiger Tom (Jul 4, 2014)

SectorSecurity said:


> So your business insurance, website, telephone, marketing ect is all free? This all has a monthly cost.
> 
> How do you get to and from job sites? You must have a vehicle, that vehicle must need gas, and must need insurance, even if its your personal vehicle, it still has a cost aspect to it.


Website costs $0, made it myself
Brochure $0, made it myself
Phone $30 a month unlimited talk text using sprint framily 
Po box $10 a month
Business card $10, made them myself. 
I don't advertise, I cold call for 3 hrs every day.

I can go on.


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## Jaws (Dec 20, 2010)

Tiger Tom said:


> Website costs $0, made it myself
> Brochure $0, made it myself
> Phone $30 a month unlimited talk text using sprint framily
> Po box $10 a month
> ...


Gl? WC? Tool replacement and maintenance? Fuel? Vehicle and maintenance? Internet? Office supplys? Ect....


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## Tiger Tom (Jul 4, 2014)

Jaws said:


> Gl? WC? Tool replacement and maintenance? Fuel? Vehicle and maintenance? Internet? Office supplys? Ect....


GI 2k a year
No wc, I am a one man show right now
Internet is 30 a month

I know my costs, I've been planning this for 4 years. I failed once because I did not know my numbers and it won't happen again.


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## Jaws (Dec 20, 2010)

Tiger Tom said:


> GI 2k a year
> No wc, I am a one man show right now
> Internet is 30 a month
> 
> I know my costs, I've been planning this for 4 years. I failed once because I did not know my numbers and it won't happen again.


Good for you :thumbsup:


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## Jaws (Dec 20, 2010)

OP, wow.

We dont have state income tax or mandatory WC. If I could get concrete poured for a third more than you are charging my guys and I would never form or pour mud again.

Our concrete is cheaper too....

Sometimes its just not apples apples to apples. Do your builders give specs or call out for slab thickness, mix, slump? Steel?

Your competition doesnt compact the soil?  I hope those builders have good insurance.


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## Tiger Tom (Jul 4, 2014)

Jaws said:


> Good for you :thumbsup:


To be honest its closer to 1k a month, including my personal vehicle which I use to bid jobs, but my point is there are creative ways to save money when building a business that allow you to be more competitive. You would be surprised how much you can get done with a 20 dollar u haul pick up truck.

And I'm sure you are aware, I've read your posts.


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## Jaws (Dec 20, 2010)

Tiger Tom said:


> To be honest its closer to 1k a month, including my personal vehicle which I use to bid jobs, but my point is there are creative ways to save money when building a business that allow you to be more competitive. You would be surprised how much you can get done with a 20 dollar u haul pick up truck.
> 
> And I'm sure you are aware, I've read your posts.


I agree 100%. Cash reserves are built by that ethic. 

Our overhead is a lot higher than it was when we started, but it could be dropped back to a shoestring very easily. 

Cash in the bank is the most important thing a business can have other than reputation.


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## Tiger Tom (Jul 4, 2014)

Jaws said:


> I agree 100%. Cash reserves are built by that ethic.
> 
> Our overhead is a lot higher than it was when we started, but it could be dropped back to a shoestring very easily.
> 
> Cash in the bank is the most important thing a business can have other than reputation.


I always say that to people telling me to guy buy a truck. Cash is king. I grossed in the 5 digits last month and I own a plate compactor, demo saw, and some hand tools. Just saying its possible. I plan on buying a truck by the end of this year.


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## barry1219 (Oct 8, 2011)

Saw this happen myself on a job I am working..homeowner is on 5 acres..I am working an addition on the main house 1000+sf CBS to house built in 2006. He just finished a steel 40'x80' building..decides he needs about 10+ yds of concrete to lead up to the rear door...asks me to quote..I did..at about the same rates you quote..nothing less than 4" and minimum 3500psi + fiber..he told me he has another guy at almost my cost..I said no problem I have enough here just wanted to give you quote..
3 days later guys show up to frame..about 4 of them..couple of hours later they leave...this was Thursday..on Monday they pour..bring 5 guys..no buggy..no pump..two trucks arrive and these guys pour all day with wheelbarrows until the truck chute can reach..next day they show up and break off the form boards and leave..
I do the math...15yds...about $16-1800 in concrete..average of 4 guys for 2 days..even super cheap pay is $75 per day..so about $600 in labor..all in for about $2500..on a job I bid for $3600...and I was beaten by more than 30%!!..

The kicker you ask..the homeowner asks me if its ok to drive his tractor on the new slab Wednesday..lol..I don't care how much these guys did it for and I lost the bid..I said give it a week minimum..I can't be that harsh..


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