keep getting undercut

[nhfire77]

I don't think it is callous at all. But if you do not care what the customer thinks the price "should" be, why should you feel that he ought to think the price you want is what it "should" be?

The way it works is if the price you are offering exceeds what a customer is willing to pay, he will pass on it. he may come back and ask you to rethink it some, or take something out to make it affordable, or the whole project may just go away. or the project might well go to someone who bid more in line with what he wants to pay, or can afford to pay.

I would not be so quick to assume that just because another business bid less than you did that it was below their cost. There are some people who have whittled out every nickle from their cost structure and are very lean. They would not have managed to survive this long into a sucky business climate if they were losing money on these jobs every time. Somehow they are making enough money to stay in business.

I am one of those lean guys. Its a critical to understand true worth of money and what value is. It would be understandable to think just blurting out "its below cost,' is uneducated guess. I'm stating the obvious but, business is all about relationships. Its important to have relationships that get you the kind of information that allow that kind of statement to be valid. The customer should see the value you can offer value, and understand what a profit is. Allowing yourself to be beat down, bid shopped and/or finagled into no profit is foolish.

Every business transaction made must have value, or its not business. You can successfully argue that losing a few to win the bid ones is valuable. This is not the case most of the time in electrical work. I spend a lot of time micromanaging expenses/costs (not people), and developing relationships. Customers set the market price. They have found a way to pay less, taking advantage of ignorance. That ignorance of business cuts us all, even if just a small amount. Seems you have found a way to take advantage of that ignorance as well being a lean guy. I do not mean that in a derogatory way. Do you feel you are the exception not the rule?

 

[SalixKetuur]

Same Experience

Same Experience

In Canada, I've had a similar experience. Our O/H is being re-evaluated presently. Hopefully it moves in the correct direction. I can understand why I've been beaten by 20-30% on some of the smaller commercial work. But what really gets me is how we can be undercut by 50% on some of the supply tenders we bid on. I supply a variety of electrical apparatus and have good access to it and have done well with this side of our company. But in the last little while this aspect has changed...

 

[growler]

I would not be so quick to assume that just because another business bid less than you did that it was below their cost.

I have worked on a couple of very big jobs that were bid below cost ( years ago ). This can be a last effort of a company to stay in the game and many times it doesn't work.

 

[petersonra]

I am one of those lean guys. Its a critical to understand true worth of money and what value is. It would be understandable to think just blurting out "its below cost,' is uneducated guess. I'm stating the obvious but, business is all about relationships. Its important to have relationships that get you the kind of information that allow that kind of statement to be valid. The customer should see the value you can offer value, and understand what a profit is. Allowing yourself to be beat down, bid shopped and/or finagled into no profit is foolish.

Every business transaction made must have value, or its not business. You can successfully argue that losing a few to win the bid ones is valuable. This is not the case most of the time in electrical work. I spend a lot of time micromanaging expenses/costs (not people), and developing relationships. Customers set the market price. They have found a way to pay less, taking advantage of ignorance. That ignorance of business cuts us all, even if just a small amount. Seems you have found a way to take advantage of that ignorance as well being a lean guy. I do not mean that in a derogatory way. Do you feel you are the exception not the rule?

I think any business that is still operating right now after the last decade or so is probably pretty lean, and has figured out what niches to go after.

Most of our business is with Fortune 500 companies or their suppliers - maybe 75% of it. They are not ignorant by any stretch of the imagination. Over time we have figured out what it takes to be competitive. The fact we are still around suggests the owners of the place have figured it out pretty well.

Customers have always set the market price. That has not changed at all since they have always had the final say on whether you end up getting a PO or not.

I do not see it as ignorance at all, but understanding of basic economics. You cannot force any customer to buy from you at the price you want to have them pay. They are the ones who get to decide what they are willing (and able) to pay.

One thing that has benefitted both us and our customers is the near abandonment of the traditional bidding system. Virtually all of our business these days is negotiated rather than bid, even if in some cases there is some pretext of a bid, but often we are the only bidder.

 

[growler]

I think any business that is still operating right now after the last decade or so is probably pretty lean, and has figured out what niches to go after.

I agree with that statement but that also means that if anyone tries to undercut any of these companies by as much as 50% that are really taking a risk.

A lot of these cut throats haven't been around for a decade and won't be around for a decade. Some folks think there is no bottom price but there is.


There is an Old Arab proverb about a man who tries to cut cost by feeding his Ox a little less each day to save on the animal's food bill. Things worked out great until the Ox died.

 

[goldstar]

Customers have always set the market price. That has not changed at all since they have always had the final say on whether you end up getting a PO or not.

I do not see it as ignorance at all, but understanding of basic economics. You cannot force any customer to buy from you at the price you want to have them pay. They are the ones who get to decide what they are willing (and able) to pay.

I agree with you to some extent. I have no problem with potential customers going out and getting say 3 bids on a job. However, you may not want to believe this but there are still some people out there who will go down the list of EC's in the phone book hoping to find someone to do a $2000 job for $25. The last sentence cited above is correct. We can't "force" a customer to pay the price that we want for the job. But, by the same token, that customer can't dictate what the job is actually worth based on what he is willing to pay. If the material you have to purchase for a specific job is $X and the Labor required to do the job is $Y, the only true variable is the labor. Unless you're buying your materials from a third world country it can't be that much different from one supply house to another.

I'm not looking to bash anyone here. If your company is in dire straights and you have to take a job at cost just to get by and feed your families - God be with you. But you really have to take a close look at the job and be properly competitive. If you want to beat your competition by 5 or 10% and you've found a way to do that - God bless you. I just can't figure out why someone would bid 50% below the lowest price and leave all the money on the table.:?

 

[kwired]

How does one take a job at cost to feed the family? At cost means there is no profit to buy food for the family with.

 

[nhfire77]

You cannot force any customer to buy from you at the price you want to have them pay. They are the ones who get to decide what they are willing (and able) to pay.

One thing that has benefitted both us and our customers is the near abandonment of the traditional bidding system. Virtually all of our business these days is negotiated rather than bid, even if in some cases there is some pretext of a bid, but often we are the only bidder.

Not sure if I sounded like I wanted to force them, If I did that was unintentional. The point of my posts is that EC's are cutting their own throats and affecting everyone else. Hey, that's life, I mention it because its become apparent, customers are taking advantage of it, and EC's are not learning anything. Like some kind of self effacing Shakespearean tragedy. :slaphead:

Traditional bidding sucks for reasons mentioned above, and yes negotiated work is better. Its all about those relationships with others, personal and professional that allow long term, prosperous and profitable ventures.

 

[nhfire77]

How does one take a job at cost to feed the family? At cost means there is no profit to buy food for the family with.

Seems like he meant no profit, after wages assuming you pay yourself. (That is a whole other thread about guys that dont pay themselves) Im especially interested in the ones that really do a job at actual cost and pay to do the work.

 

[Sierrasparky]

the workplace is changing. one is left with two choices....

1. bemoan the sad state of affairs

2. adapt to it

adaptation seems to be more advantageous. there is work available,
that can be done at a profit, but from my limited perspective, it's not the
traditional pipe, wire, and lights, job walk, four bidders dance. people
are getting slaughtered doing that. i have a friend who's a VP for
a pretty large contractor here... 40-50 man shop, been around a long time.
good guys to work for, know how to bid and do a good job. mostly
targeting jobs in the 200k~500k range.

they are bidding 15k jobs now, just trying to keep doors open, waiting
for better times.

GC's, i approach as if they are a farmer with terminal cancer, trying to
borrow money on next years crop.

property management firms, from what i have seen, have time to talk
endlessly about not much at all, but when time comes to cut a PO, it's
"we shall have to see what the customer wants." and that is the end of
it.

i'm fortunate that i have minimal overhead. vehicle, tools, stock, etc.
is all paid for, and in good condition. i need three billable hours a week
to cover recurring expenses. i don't bid that way, but that fact is the
only reason i'm still in business. work has been unbelievably tight the
last 4 years.

and unfortunately, that is what everyone is bidding against any more.
someone who is willing to do something, for nothing. or less than
nothing.

i've found however, that there are customers who want things done
correctly, and are willing and able to pay to have that done. there
just aren't a lot of them.

i had a quickie bid come up, at LAX. emt, boxes, and pull strings.
a saturdays work, maybe 200' of 3/4". the contractor on the job
wouldn't bother to bid it, and my client said come give me a number.

on a saturday, zero notice, has to be done in one day, $1,400. figured
i'd get it.

me walking around with a notepad woke up the sleeping contractor.
he bid it at $800. two guys, for a day, and material, $800.

i just laughed, and told my client that he owed me a cheeseburger for
scaring the contractor so badly he did it for free.

i'm still bidding and getting work for that client, 'cause he knows i give
an honest bid, and do a good job.

the other shop, that "stole" my job? it's a union shop, paying LA wages
and benefits.

$800? steal all the chain you can swim with, sunshine.... :?

I would think that being LAX it should be prevailing wages. Maybe not if under 1k.

 

[goldstar]

Seems like he meant no profit, after wages assuming you pay yourself.

That's what I meant. I'm sure there are others here that also know what I meant. But, thanks to those who didn't know what I meant and are keeping me in check. It's an age related thing. I'm not as good as I once was.

 

[kwired]

Not sure if I sounded like I wanted to force them, If I did that was unintentional. The point of my posts is that EC's are cutting their own throats and affecting everyone else. Hey, that's life, I mention it because its become apparent, customers are taking advantage of it, and EC's are not learning anything. Like some kind of self effacing Shakespearean tragedy. :slaphead:

Traditional bidding sucks for reasons mentioned above, and yes negotiated work is better. Its all about those relationships with others, personal and professional that allow long term, prosperous and profitable ventures.

Don't think the electrical trade is the only place where people are cutting each others throats. That is exactly what Wal Mart does, low prices will mean less profit per item sold, but they have decided to sell so many more items to make up for it, and not every item is at same profit margin either. They lure customers in the door with low prices on necessities and do make more profit on other items that are bought on impulse.

 

[kwired]

Seems like he meant no profit, after wages assuming you pay yourself. (That is a whole other thread about guys that dont pay themselves) Im especially interested in the ones that really do a job at actual cost and pay to do the work.

When it gets to the point where buying food for the family is the concern, then they likely are not paying themselves - at least not as much as they would normally want to.

 

[petersonra]

Don't think the electrical trade is the only place where people are cutting each others throats. That is exactly what Wal Mart does, low prices will mean less profit per item sold, but they have decided to sell so many more items to make up for it, and not every item is at same profit margin either. They lure customers in the door with low prices on necessities and do make more profit on other items that are bought on impulse.

Walmart has figured out something that works. It is not a lot different than virtually every other retailer, they are just better at it. WM though has figured it out to the last penny (or even tenths of pennies) on every product.

 

[kwired]

Walmart has figured out something that works. It is not a lot different than virtually every other retailer, they are just better at it. WM though has figured it out to the last penny (or even tenths of pennies) on every product.

Yes, and if WM decides to cut the price of a particular item by just 5%, customers think great deal, competitors are thinking "how do we compete with that?"

Not a whole lot different then all the EC's complaining about being undercut by others, that is just a way of saying welcome to business management. You have to decide which is more important your price or the quality of goods and services you provide - or some kind of balance of both.

 

[nhfire77]

Walmart has figured out something that works. It is not a lot different than virtually every other retailer, they are just better at it. WM though has figured it out to the last penny (or even tenths of pennies) on every product.

Walmart is the largest retailer in the world. Walmart is the most corrupt retailer in the world, as well. They do it by cheating and ignoring laws, rules. Including rules that cost money, IE building codes, osha, etc.

Mexico: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&ved=0CD8QFjAB&url=http%3A%2F%2Fwww.nytimes.com%2F2012%2F04%2F22%2Fbusiness%2Fat-wal-mart-in-mexico-a-bribe-inquiry-silenced.html%3Fpagewanted%3Dall&ei=cURjUZb8Dcjy0wGii4Eg&usg=AFQjCNHa1JnxpyWaEXr3Z2q1conHvvVZXg&sig2=tPJ0WaRfYIDUj5govy5-Kw&bvm=bv.44770516,d.dmQ

India: http://articles.economictimes.indiatimes.com/2013-01-15/news/36353277_1_bharti-walmart-anti-corruption-law-india-story

They don't do it better than anyone else, since (most) are not this corrupt and morally bankrupt, its no longer a level playing field. This is not a anti new world order globalization post, I'm only talking about wallyworld


"Don't think the electrical trade is the only place where people are cutting each others throats."

The comparison to Electrical Contracting and Wal-Mart does not feel relevant here. They are not putting themselves in financial peril by losing money on some items. The lowly EC taking it on the chin half the year to barely make laborready wages is more an acute problem, but a chronic problem for the trade. Wallyworld has neither problem. They are successful in eliminating competition, they have never posted a loss. If even the one man shop actually ran their electrical business and followed accounting standards, they lose money after paying themselves a sub median wage. I do understand you have the right to do that, just don't understand how you can be so ignorant of the trade. If you want to get a 'raise' and keep up with the cost of living, you'd make a profit, losing money would be your enemy and you would fight it. Like walmart does, even if its just a tenth of a penny.

 

[kwired]

The comparison to Electrical Contracting and Wal-Mart does not feel relevant here. They are not putting themselves in financial peril by losing money on some items. The lowly EC taking it on the chin half the year to barely make laborready wages is more an acute problem, but a chronic problem for the trade. Wallyworld has neither problem. They are successful in eliminating competition, they have never posted a loss. If even the one man shop actually ran their electrical business and followed accounting standards, they lose money after paying themselves a sub median wage. I do understand you have the right to do that, just don't understand how you can be so ignorant of the trade. If you want to get a 'raise' and keep up with the cost of living, you'd make a profit, losing money would be your enemy and you would fight it. Like walmart does, even if its just a tenth of a penny.

Larger EC's can't do similar to smaller EC's? Taking on smaller projects that the smaller EC's have resources for handling but at little or no profit just to have something to do sure sounds like a similar scenario to me. Their only intention may be to keep key employees instead of having to lay them off, just having work for them to do may be worth taking little or no profit for a short time. When things pick up again they will start to ignore those types of jobs again.

 

[nhfire77]

Larger EC's can't do similar to smaller EC's? Taking on smaller projects that the smaller EC's have resources for handling but at little or no profit just to have something to do sure sounds like a similar scenario to me. Their only intention may be to keep key employees instead of having to lay them off, just having work for them to do may be worth taking little or no profit for a short time. When things pick up again they will start to ignore those types of jobs again.

Allow me to clarify my point: Walmart doesn't keep their margins so low they lose money year over year. Small EC's do. Keeping work flowing to employ key employees is a good idea in lean times. Losing money to keep key employees year after year is spending good money on a losing proposition.

 

[kwired]

Allow me to clarify my point: Walmart doesn't keep their margins so low they lose money year over year. Small EC's do. Keeping work flowing to employ key employees is a good idea in lean times. Losing money to keep key employees year after year is spending good money on a losing proposition.

And the small contractor finds out over the years that he did all that work and has little to show for it, if he made little profit. By then it may be too late and he will end up needing to work after reaching retirement age just to continue living at certain standards, and that is if he is lucky enough to still be in good health.

No Wal Mart doesn't keep all profit low. They do keep profit low on high volume items, this is one thing that people come there for, they then purchase other items while there that have a higher profit margin. They also can have lower prices and still profit because they purchase in large enough volume to get better pricing from their vendors. They have more than just one scheme involved in determining their prices.

 

[nhfire77]

And the small contractor finds out over the years that he did all that work and has little to show for it, if he made little profit. By then it may be too late and he will end up needing to work after reaching retirement age just to continue living at certain standards, and that is if he is lucky enough to still be in good health.

No Wal Mart doesn't keep all profit low. They do keep profit low on high volume items, this is one thing that people come there for, they then purchase other items while there that have a higher profit margin. They also can have lower prices and still profit because they purchase in large enough volume to get better pricing from their vendors. They have more than just one scheme involved in determining their prices.

So you agree with me its detrimental to work like that?

I understand walmart doesnt keep all profit low, if fact they are very profitable as a whole. Yes many schemes, the point I was making is walmart is corrupt and doesn't play by the rules. Unlike the EC you speak of, he plays by the rules, loses money anyway, and that drags us all down. This is not blaming the individual, he needs to eat now, do what you gotta do. Its the concept that this model EC is following I find offensive, not his need to get by. There is a better way, you know?