I'm so proud of me....

[StreamlineGT]

I went over to a house to do a service upgrade estimate, and I gave him my price....

100 to 200 amp, underground, cut and dry, water pipe close by, but there is direct burial entrance conductors, so I said I would either have to dig them up, or splice in the can. I gave him a price of $2200 which included a GE 40 ckt with a transfer bracket.

He said he already got another price of $1600, but without the transfer bracket. I thought that was a little low, but I insisted that he take it.

I told him that I simply do not compete for work. I insisted to him that my customers hire me because of the timely impeccable service, quality of materials provided, and knowledge of the trade.

I did happen to give him my card anyway, just in case the other contractor didn't work out.

How did I do??

[growler]

I told him that I simply do not compete for work. I insisted to him that my customers hire me because of the timely impeccable service, quality of materials provided, and knowledge of the trade.

I think you did great except for the part about telling the customer that you don't compete for work.

Try telling the cusomer that you think your prices are very competitive for a top quality install and you don't really understand how anyone can do a job so cheap. Act surprised, "you go that price from a local company". They may even tell you who gave the cheap price. If his price is from a "side jobber" then try to sell them on the fact that you provide a one year warranty.

Many people have a slight fear of the cheap job quote and there is nothing wrong with feeding the fear just a little.

I'm not talking about lying, I really don't see how the can do a quality install for $1600. ( unless they can do it in 4 hours). :grin:

[emahler]

like growler said, you're 1/2 way there...you didn't cave, but you didn't sell...while you never want to sell on price, that doesn't mean you don't sell...you just have to sell them on you, then on your project, then on your experience, then on everything else...then on price...if you do your job right, price doesn't matter...they are sold on you and buying from you before they even know the price....this won't happen 100% of the time, but so what...if it happens 50% of the time you are in great shape...

this is the guy (http://www.mattsmithmedia.com/) to learn from....there is no one better at this time to selling resi/lt commercial trade services...make the investment, follow the program, and your ROI will be astronomical...

[StreamlineGT]

I think you did great except for the part about telling the customer that you don't compete for work.



Well, I really don't. People who hire me are 99% word of mouth, so I never get into bidding wars. The referral source trusts me to do great work, and the new customer never questions it. Unlike some, I would rather not do the job, than charge too little. The funny thing is, I an not that busy, but busy enough to get by right now. I think I did ok. This is the first time since being in business I had to try to compete for work. But that is what Yellow Book gets you. :D

[76nemo]

Well, I really don't. People who hire me are 99% word of mouth, so I never get into bidding wars. The referral source trusts me to do great work, and the new customer never questions it. Unlike some, I would rather not do the job, than charge too little. The funny thing is, I an not that busy, but busy enough to get by right now. I think I did ok. This is the first time since being in business I had to try to compete for work. But that is what Yellow Book gets you. :D


I have to back you SL and I am sure to get bashed for it, but here it is. I give you a estimate, maybe a quote. If someone wants to go far lower than me, all the power to the customer who's paying. I stand strongly by my work and will quote you for what I deserve and call for. Again, we all do different types of work.
Here is my point, bottom line.

You want this, this, and this done.

I'll do it like this, this, and this, and this is what it will cost you.

"Well, Frank from ****** said he would do it for $235 less." Fine, no problem, no hard feelings, call Frank. 95% of customers want to pay for an overall job to be done, they don't want to pay for what might possibly could be a much higher quality of work standard done compared to the lowest bid.

Did I word that right?

[StreamlineGT]

I have to back you SL and I am sure to get bashed for it, but here it is. I give you a estimate, maybe a quote. If someone wants to go far lower than me, all the power to the customer who's paying. I stand strongly by my work and will quote you for what I deserve and call for. Again, we all do different types of work.
Here is my point, bottom line.

You want this, this, and this done.

I'll do it like this, this, and this, and this is what it will cost you.

"Well, Frank from ****** said he would do it for $235 less." Fine, no problem, no hard feelings, call Frank. 95% of customers want to pay for an overall job to be done, they don't want to pay for what might possibly could be a much higher quality of work standard done compared to the lowest bid.

Did I word that right?

Crystal clear Nemo.

Best part of the conversation was the price he wanted for the generator hookup, which I haven't gone into yet, but will now.

How much to make it generator compliant. I said around $500, which included a short run of 10/3 to a PB 30 on the outside of the house, and a made up 10 foot cord for the generator.

"REALLY??" he said. The other guy said it would be $2000. Apparently he was using a GenTran add on panel to his newly changed service.

"Why would he do that?" I thought to myself.

Anyway, I said $2800 for the turn-key operation. He had the sack to tell me he would have the other guy change the service, and myself come back to do the generator....... haha, good luck.

[quogueelectric]

I sell a nicely painted backboard all new breakers and copper wire if I have to. Your roof wont leak if I have to go through it Im not gonna wreck your siding and I will take you on a trip around the block and show you what it WONT look like and many times the inspectors even say in front of the customers "Wow this guy did a nice job". Material around here is every bit of 1000 bucks for a 200 upgrade.

[romexking]

I have to back you SL and I am sure to get bashed for it, but here it is. I give you a estimate, maybe a quote. If someone wants to go far lower than me, all the power to the customer who's paying. I stand strongly by my work and will quote you for what I deserve and call for. Again, we all do different types of work.
Here is my point, bottom line.

You want this, this, and this done.

I'll do it like this, this, and this, and this is what it will cost you.

"Well, Frank from ****** said he would do it for $235 less." Fine, no problem, no hard feelings, call Frank. 95% of customers want to pay for an overall job to be done, they don't want to pay for what might possibly could be a much higher quality of work standard done compared to the lowest bid.

Did I word that right?

Most people aren't aware that there is a difference between contractors. They think that everyone will do exactly the same install with the same material. If you don't want to bust your butt for (hopefully) a 2% profit, you will need to make the customer aware of the possible differences. But in doing so, you must be actually offering something different, be it your timely service, your warranty, your top of the line material, friendly electricans, or whatever. But it must be something that makes your service seem more valuable to the customer.

There will always be people that are, let's say frugal, but you can make your services valuable to them also. Try offering financing to these customers. It might make your company more valuable to them than a company that doesn't. A little story...I was called by my answering service at 11 pm on a stormy night. A woman had water leaking into her meter and panel, which was causing a "sizzling" sound" When I spoke to the woman, she agreed to have us come out that night, but said she didn't have any money to pay us. So I asked "you don't have any money tonight, or at all?" she said at all, but could get some from an annuity in several weeks. Well for her safety and not expecting to be paid, I sent a technician out to make her panel safe for the time being. As it turned out, she neeed a service change. Our price was around $3200, which was about 10% of the cost of the home. She would never had been able to afford anyone else let alone us if it weren't for our financing options. Although it took jumping through hoops to get her approved, it turned her into a happy (and profitable) customer. The point is, we were different from others in many ways, which made our price palatable to her.

[e57]

Reminds me of yesturday....

Guy walks into the supply house - which is across the street from the building dept. with a notice that he, and a dozen other addresses are being required to do underground POCO conversion by such n such a date. He then asks the guy at the counter - "Do you know who does this type of work?" The counter guy looks at me.... And I hang my head and say, "Just give him Jimmies number..." - He's probably waiting for him at home right now anyway..."

So the guy asks... "Who's Jimmie?"

Me and the counter guy in stereo - "Jimmie the underground conversion King!"

FYI - I do not know anyone who has ever beaten Jimmies price - EVER!

How does he do it?


He buys bulk - Panels conduit and termination cans factory direct. Cheaper than my supply house can get them!!!! By the truck load!
He already got the same letter this guy got (from his inside man) and has his sales guys on them right away... If you get there first, you might get it - then again, odds are over 2-1 you might get a call to cancel. (Legal 3 day right which he'll tell them all about) Not kidding!
He has huge crews of indentured servants who work for room and board (well - piece work - really cheap pieces!!!)
They show up and do whole city blocks in a day or two - then they're gone. Get inspections all at the same time and walk house to house... Single street use permit by the POCO doing thier side and the close the whole street - and Jimmie and his mingion are there on their heels.Sure you can try to snake one of these jobs out from under his grimey hand - but whats the point?????? You give a price of $2K, he shows up with a flat-rate that wont even cover the cost of you doing the estimate. Seriosly something worth $2k to anyone else is $500 Jimmie priced... You'll only starve yourself trying to compete - and everyone knows it.... The only way to compete with him on this type of work is to get in early and sell work he won't do - and he wont do a lot... Then again you might be in there after him - as I usually am - and get to see his shotty work. But odds are your customer is getting nailed by the poco to do a conversion as cheap as possible and thats their only focus since they got the nasty-gram to do it.

[SmithBuilt]

I've never heard of anyone being forced to install underground. Who is requiring this the POCO?

[Rewire]

Reminds me of yesturday....

Guy walks into the supply house - which is across the street from the building dept. with a notice that he, and a dozen other addresses are being required to do underground POCO conversion by such n such a date. He then asks the guy at the counter - "Do you know who does this type of work?" The counter guy looks at me.... And I hang my head and say, "Just give him Jimmies number..." - He's probably waiting for him at home right now anyway..."

So the guy asks... "Who's Jimmie?"

Me and the counter guy in stereo - "Jimmie the underground conversion King!"

FYI - I do not know anyone who has ever beaten Jimmies price - EVER!

How does he do it?


He buys bulk - Panels conduit and termination cans factory direct. Cheaper than my supply house can get them!!!! By the truck load!
He already got the same letter this guy got (from his inside man) and has his sales guys on them right away... If you get there first, you might get it - then again, odds are over 2-1 you might get a call to cancel. (Legal 3 day right which he'll tell them all about) Not kidding!
He has huge crews of indentured servants who work for room and board (well - piece work - really cheap pieces!!!)
They show up and do whole city blocks in a day or two - then they're gone. Get inspections all at the same time and walk house to house... Single street use permit by the POCO doing thier side and the close the whole street - and Jimmie and his mingion are there on their heels.Sure you can try to snake one of these jobs out from under his grimey hand - but whats the point?????? You give a price of $2K, he shows up with a flat-rate that wont even cover the cost of you doing the estimate. Seriosly something worth $2k to anyone else is $500 Jimmie priced... You'll only starve yourself trying to compete - and everyone knows it.... The only way to compete with him on this type of work is to get in early and sell work he won't do - and he wont do a lot... Then again you might be in there after him - as I usually am - and get to see his shotty work. But odds are your customer is getting nailed by the poco to do a conversion as cheap as possible and thats their only focus since they got the nasty-gram to do it.
Jimmie has a business model that is working for him and I would say it probably is making him money.Its called volume sales and as a one man show you cannot compete.You do one service a day at $2000.00 and he does 20 at $500 thats your $2000.00 a day against his $10,000.00 a day.To compete against the Jimmie's of the trade you have two options ,one follow his business model and go head to head or two adjust your business model.You are on the right track when you are looking at what jimmie does not do and focus on those things. Jr Samples has one car on his lot and it is priced at $100,000,000.00 when asked why he ha only the one car priced at $100,000,00.00 he responded I only have to sell one. Of course Jimmie thinkws make a dollar on each one but sell a million.

[macmikeman]

Jimmy probably has to sell two million to make a profit, cause the corrupt inside guy at the poco wants his buck for each one Jimmy does also.

[emahler]

Jimmy probably has to sell two million to make a profit, cause the corrupt inside guy at the poco wants his buck for each one Jimmy does also.

we lose money on every service change, but we make it up in volume:D

do enough volume, and you can always rob peter to pay paul

[Rewire]

we lose money on every service change, but we make it up in volume:D

do enough volume, and you can always rob peter to pay paul
Why is it that everyone assumes a lower price means you are loosing money?Lowes has romex much cheaper than the local supply house is Lowes loosing money? If you buy one meterbase and I buy 1000 who do you think will get the better price which then allows me to undersell your resale price and still be at a profit.

[emahler]

Why is it that everyone assumes a lower price means you are loosing money?Lowes has romex much cheaper than the local supply house is Lowes loosing money? If you buy one meterbase and I buy 1000 who do you think will get the better price which then allows me to undersell your resale price and still be at a profit.

rewire, don't take this the wrong way, but i grew up in the contracting industry...the law of averages are on the side of losing money at low rates...i'm not one to argue against the odds...are there exceptions? of course...are they common? of course not...

[Rewire]

rewire, don't take this the wrong way, but i grew up in the contracting industry...the law of averages are on the side of losing money at low rates...i'm not one to argue against the odds...are there exceptions? of course...are they common? of course not...
Don't take this the wrong way but I grew up on military bases and it did not make me an expert in combat tactics.I also had a course in Statistics and Probabilities but I am no odds maker.Loosing money is directly tied to your profit margin.The oil companies made millions in profit but very few people know what their profit margin was.

[c2500]

Rewire,

Lowes may very well be losing money on the romex. I know the big boxes use certain loss leaders to get people in the door. Romex is cheap. But the coupling for that piece of conduit is 50% higher than the supply house. For what it is worth my supply house buys their romex at HD. I was razzing the counter guy when I saw him buying it there. He said he can't buy and have it shipped for the price he can buy locally at HD.

On the flip side, I can buy mouldings for a minimum 1/2 of what HD or Lowes charge by going to my local lumber yard. Just for fun I make them price match every know and then.

c2500

[emahler]

Don't take this the wrong way but I grew up on military bases and it did not make me an expert in combat tactics.I also had a course in Statistics and Probabilities but I am no odds maker.Loosing money is directly tied to your profit margin.The oil companies made millions in profit but very few people know what their profit margin was.

had you studied combat tactics while living on the base, you'd be pretty confident in your knowledge...i'll stick to my story...

[Rewire]

had you studied combat tactics while living on the base, you'd be pretty confident in your knowledge...i'll stick to my story...
I can just picture you at 8 years old reading Management By Objectives,we did play Army our friend Sammy had a realistic M_16 the rest of us used cap guns or sticks.I guess someone should warn Wal-Mart that they are headed for failure right behind Dollar General Stores and every Dollar Tree,Dollar Days as well as Micky D's how can they survive with a dollar menu.

[e57]

Why is it that everyone assumes a lower price means you are loosing money?Lowes has romex much cheaper than the local supply house is Lowes loosing money? If you buy one meterbase and I buy 1000 who do you think will get the better price which then allows me to undersell your resale price and still be at a profit.

Exactly! Like I said this guy gets just about all of his materials factory direct at a better price than most supply houses in the area have gotten. This allows him to price a job total for what my material costs will be - not kidding.... He had 40' trailers of material on each street he did. And a few years back there was a shortage of B-line Termination Cans that fit the POCO spec - because Jimmie bough ALL OF THEM IN THE WHOLE STATE! All at the same time for a fraction of regular cost.... The Owners of the supply house I was at know him very well as a cut-throat negotiator...

Fortunately, Jimmies days are numbered.... The list of properties I was referring to are mandatory underground utility conversions that have been going on for the last ten years or so around the city and was funded in part with public money as well as POCO money and each property owner only need to get their service 12" past the property line. The public funds dried up, and the POCO was forced to do it through legislation so long as the public money was available. The list I saw was the last "hold outs" of this, and the guy was coming from a public hearing - which Jimmie has made the time to attend every one of.... But these are the last of them..... With the money gone - I assume he will retire to his Castle in China soon - and get there on his yaught. He's already laid off most of his slaves....

[emahler]

I can just picture you at 8 years old reading Management By Objectives,we did play Army our friend Sammy had a realistic M_16 the rest of us used cap guns or sticks.I guess someone should warn Wal-Mart that they are headed for failure right behind Dollar General Stores and every Dollar Tree,Dollar Days as well as Micky D's how can they survive with a dollar menu.

do some research on those companies and "loss leaders"...tell me the average contractor doing a service upgrade for $1000 is using it for a loss leader...do you know the average margins for those companies? do you know that McDonalds operates on a 22% NET profit? after paying the owner of the location approx $250,000 annual salary? Do you know that Dollar Tree purchases most of their items for less than 10% of their selling price? I'll take a 90% gross margin...

so, when you explain to me how a small 1-3 man EC can use a service upgrade as a loss leader, i'll be all ears...

[emahler]

i know guys like Jimmy...some of them actually make money...some of them only transfer money...I know of EC's who buy product directly from China, at a fraction of what you or I pay at the supply house...but I know that they are the exception not the rule...the rule is the guy who doesn't know any better, who is standing next to us at the counter buying material at the same price we do, and trying to compete on price with Jimmy...that guy, the rule, is doomed...

[Rewire]

Rewire,

Lowes may very well be losing money on the romex. I know the big boxes use certain loss leaders to get people in the door. Romex is cheap. But the coupling for that piece of conduit is 50% higher than the supply house. For what it is worth my supply house buys their romex at HD. I was razzing the counter guy when I saw him buying it there. He said he can't buy and have it shipped for the price he can buy locally at HD.

On the flip side, I can buy mouldings for a minimum 1/2 of what HD or Lowes charge by going to my local lumber yard. Just for fun I make them price match every know and then.

c2500
It is buying power,when Wal-Mart buys it buys for every store at once everything goes to the distribution center so wholesales ship to just one place which keeps cost down and allows them so sell at a lower unit price.

[emahler]

It is buying power,when Wal-Mart buys it buys for every store at once everything goes to the distribution center so wholesales ship to just one place which keeps cost down and allows them so sell at a lower unit price.

doesn't it cost Wal-Mart to then ship if from the CDC to each store? don't they now have increased costs for handling the material an extra time or 2?

but how does this compare to a small 1-3 man EC who doesn't even know all his overhead costs?

edit to add - when I say cost Wal-mart more, I am referring to the additional costs it incurs after the cost of having the product shipped to their CDC....not compared to drop-shipping directly to the stores...

[Rewire]

do some research on those companies and "loss leaders"...tell me the average contractor doing a service upgrade for $1000 is using it for a loss leader...do you know the average margins for those companies? do you know that McDonalds operates on a 22% NET profit? after paying the owner of the location approx $250,000 annual salary? Do you know that Dollar Tree purchases most of their items for less than 10% of their selling price? I'll take a 90% gross margin...

so, when you explain to me how a small 1-3 man EC can use a service upgrade as a loss leader, i'll be all ears...
I have as I am invested in all of them ,Once again it is Profit margin,not net profit, or gross margin.You need to know what a profit margin is to understand how it applies,as for a loss leader or selling at cost or below a loss leader introduces new customers to a service or product in the hope of building a customer base and securing future recurring revenue.Selling a service at a lower profit is not a loss leader at all because you are not at or below cost.

[e57]

doesn't it cost Wal-Mart to then ship if from the CDC to each store? don't they now have increased costs for handling the material an extra time or 2?

but how does this compare to a small 1-3 man EC who doesn't even know all his overhead costs?

Wal-mart has their own distribution centers, trucks, drivers ware house workers etc. reviled only by UPS and Fed Ex.... By owning the 'services' that 'would' serve them - they profit on that too. Not unique to any major multi-national company mentioned here. (Like McD's etc.) What isn't deliver to them by their own company is delivered free for the 'privilege' of even doing the volume of business with them...

[emahler]

Wal-mart has their own distribution centers, trucks, drivers ware house workers etc. reviled only by UPS and Fed Ex.... By owning the 'services' that 'would' serve them - they profit on that too. Not unique to any major multi-national company mentioned here. (Like McD's etc.) What isn't deliver to them by their own company is delivered free for the 'privilege' of even doing the volume of business with them...

Mark, i honestly fully understand how it works...I also understand that a small EC is not Wal-Mart...doesn't have the buying power of Wal-Mart....doesn't have the infrastructure of Wal-Mart...etc...

In addition, take away the control factor (being able to get the right product in the right location at the right time) wouldn't it be cheaper to have the product drop shipped to each location? instead of having a transfer station?

But since we are talking about Wal-Mart...read this (http://www.fastcompany.com/magazine/77/walmart.html), do some more research on it, and tell me it's a good model for the public as a whole...

[emahler]

I have as I am invested in all of them ,Once again it is Profit margin,not net profit, or gross margin.You need to know what a profit margin is to understand how it applies,as for a loss leader or selling at cost or below a loss leader introduces new customers to a service or product in the hope of building a customer base and securing future recurring revenue.Selling a service at a lower profit is not a loss leader at all because you are not at or below cost.

here is the difference...

I am McDonalds...I offer a cheeseburger for $1...I can sell you 200 of those cheeseburgers over the next year without batting an eye...

I'm a small EC, I offer you a service upgrade for $1500...how many times are you going to pay me to upgrade that service?

you are comparing product to service...material to time...we as a trade service have a finite amount of time to sell...when we sell all our time, we have to buy time wholesale from other people (employees) and sell it retail (to customers)

all of these companies sell product...and they can sell the same product thousands of times in the time it takes us to sell one service upgrade.

I don't think you and I are really on different pages...the difference is you work under the assumption that the average small EC actually knows and covers his costs...I work under the assumption that they don't...

[Rewire]

here is the difference...

I am McDonalds...I offer a cheeseburger for $1...I can sell you 200 of those cheeseburgers over the next year without batting an eye...

I'm a small EC, I offer you a service upgrade for $1500...how many times are you going to pay me to upgrade that service?

you are comparing product to service...material to time...we as a trade service have a finite amount of time to sell...when we sell all our time, we have to buy time wholesale from other people (employees) and sell it retail (to customers)

all of these companies sell product...and they can sell the same product thousands of times in the time it takes us to sell one service upgrade.

I don't think you and I are really on different pages...the difference is you work under the assumption that the average small EC actually knows and covers his costs...I work under the assumption that they don't...
You are right in that most small Ecs have no clue but they complain when a Jimmy shows up (who probably knows his costs) and undercuts them because he is using a business model that allows for the infinite sale of time by having low cost employees and a small profit margin enhanced by volume sales.What they need to do is look at their business model and improve it.

[emahler]

You are right in that most small Ecs have no clue but they complain when a Jimmy shows up (who probably knows his costs) and undercuts them because he is using a business model that allows for the infinite sale of time by having low cost employees and a small profit margin enhanced by volume sales.What they need to do is look at their business model and improve it.

let me say this...my comment that started all this "lose money on every job....." wasn't even direct at Jimmy...it's a general statement that reflects our industry...:D

[emahler]

I have as I am invested in all of them ,Once again it is Profit margin,not net profit, or gross margin.You need to know what a profit margin is to understand how it applies,as for a loss leader or selling at cost or below a loss leader introduces new customers to a service or product in the hope of building a customer base and securing future recurring revenue.Selling a service at a lower profit is not a loss leader at all because you are not at or below cost.

Profit margin is derived by the Net Profit...it's simply taking the Net Profit in dollars (or any other currency) and turning it into a % of sales...so, i'm not really following you here...

[Rewire]

let me say this...my comment that started all this "lose money on every job....." wasn't even direct at Jimmy...it's a general statement that reflects our industry...:D
The idea is if you stay with a lower cost and a lower profit then you must rely on a higher volume.

[Rewire]

Profit margin is derived by the Net Profit...it's simply taking the Net Profit in dollars (or any other currency) and turning it into a % of sales...so, i'm not really following you here...
Imagine a company has a net income of $10 million from sales of $100 million, giving it a profit margin of 10% ($10 million/$100 million). If in the next year net income rose to $15 million on sales of $200 million, its profit margin would fall to 7.5%. So while the company increased its net income, it has done so with diminishing profit margins.

[emahler]

The idea is if you stay with a lower cost and a lower profit then you must rely on a higher volume.

which is a great business plan if you are selling a product...not so great if you are selling your time...

a customer of mine is an industrial supply company...they have 3 locations, do approximately $90mil/yr in gross sales...have 35 full time employees and between 18 and 30 part time employees...Their profit margin (:D) runs about 15% after the owner, his father, and son take approximately $1.5mil in total compensation...

you show me an electrical contractor that can do $90mil/yr with 60 full and part time employees, take that type of compensation and still have that type of profit margin....and i'll come work for you at apprentice wages...

the reason they can do it is simple...they sell product...1 employee can just as easily sell a customer $50,000 in 1 hr as they can $50....

as EC's who sell our time, we don't have that luxury...so we have to make every minute that we can sell count...

[emahler]

Imagine a company has a net income of $10 million from sales of $100 million, giving it a profit margin of 10% ($10 million/$100 million). If in the next year net income rose to $15 million on sales of $200 million, its profit margin would fall to 7.5%. So while the company increased its net income, it has done so with diminishing profit margins.

agreed...honestly i automatically put everything into percentages...my bad for taking it for granted...

[emahler]

The idea is if you stay with a lower cost and a lower profit then you must rely on a higher volume.

in addition, if I buy a widget for $1 total cost and know that I will sell it for $3, I know that I will make $2 on that widget...

however in contracting, I know I will sell this installation for $100, and I know I will pay my labor $30/hr...what I don't know is really how long my labor will take to accomplish the install...I know the average length...i know the estimated length...but I don't know the actual length, until that particular install is done...

so in the first scenerio, I know if I sell 200 widgets, I will Gross $400 after my cost of buying the widget...this is before my OH (which is known)

in scenerio two, I know if I sell 200 installs I will Gross $2000...however I have no idea what my true Gross Margin will be until the work is done (unless I pay my labor piecework, but that's a different story)...if each install averages 2 hrs labor, I make $800 Gross Margin...if each install averages 3 hrs, I make $200 gross margin...now if I need $500 to cover my other overhead...one way I make $300 profit, the other I lose $300....

I have much lower risk if i'm selling a product...

[e57]

Mark, i honestly fully understand how it works...I also understand that a small EC is not Wal-Mart...doesn't have the buying power of Wal-Mart....doesn't have the infrastructure of Wal-Mart...etc...

In addition, take away the control factor (being able to get the right product in the right location at the right time) wouldn't it be cheaper to have the product drop shipped to each location? instead of having a transfer station?

But since we are talking about Wal-Mart...read this (http://www.fastcompany.com/magazine/77/walmart.html), do some more research on it, and tell me it's a good model for the public as a whole...

Wasn't saying you didn't get it - just an example....:roll:

Second paragraph.... No it would be more expensive to have more people in more locations to handle multiple trucks in an undependable supply chain - when you can have one driver unload one truck in an hour and get what you want when you want it. This I say from experiance as I was formerly a Materials Manager for a large hospital, (MGH in Boston) at that point you have 30 to 40 deliveries a day to each point, and the shipper is sending one to each. Much cheaper (cost being passed in price) to ship a truck load of wicket "A" to some giant ware house, and have your own people sort how many of wicket "A" got to your many stores.... Much like the way I used to get sheets for several hospitals and clinics by the bale (GrossXGross) annually in 4 conex boxes direct from the manufacturer, store and distribute throughout the year. One large purchase - and multiple draws on that purchase from various departments over time at the high volume / low price.... Wal-mart is getting an entire ships full of wicket "A" for an entire season, storing and redistributing at that volume cost. If they want drop shipments to each store - then they pay much more for that.... Because that price would not be possible.

This is where companies like Baxter (http://www.baxter.com/) have made millions selling the false idea of "Stock-less" inventory - Originally they were only a distributer. They have the Stock and the buying power and you then PAY them for the convience of no inventory past your par levels, They then have fewer people handling stock, and have fewer purchacing agents making bigger better deals.... Then negotiating sole provider non-competion deals with the end-user. Even went so far as to manufacture thier own stock - skipping more middlemen... Of which they sew the profit of, at every point.... Currently they supply most health care facilities in the country - wish I bought stock in them 20 years ago.... :wink:

[emahler]

Cardinal as well....same deal

[e57]

Both of which are resposible for the rising cost of heath care and the loss of jobs that they have supposedly streamlined - out of existance.... The balance of they have pocketed IMO. Lower costs for them and same or higher prices to the end-user... The sick and dying... :mad: