rates, winter, and the economy

[iwire]

Myself I have found that the higher the quality the higher the cost,of course you will always have that 1%.In all things someone is the lowest and someone is the highest I would rather be selling my time as the highest.

I should first make clear that I am not an owner.

That said, which one is (or was) growing in your area?

1. The older stores with long term employees, personalized service and quality merchandise?
   
2. The big box stores with their hard to find zombies, low prices and junk?

 

[peter d]

I am currently vacationing in Florida. I have been all over the state- top to bottom and east to west. All over Florida I have seen developments that have been carved out but no houses - just roads with house lots overgrown with weeds. I saw the same thing on my vacation to California last year.

The housing boom is clearly over.

 

[Mule]

So Tell Me....Why are products "on sale at 25% off" at MikeHolt.com? Just for grins? I dont think so......Less electricians working,.... dont sell as many products?.... hello???

I apreciate everyones vigor towards keeping your rates at a profitable level, I really do.....but IMO having a "ace in hole" is a smart thing, besides its just one client....It's just my way of being leveraged...call it what you want

On the contrary, I actually got some good news today, as our town hired a firm to do a economic study for 2009. The study was on the front page of the paper yesterday, and claims that our towns outlook for 2009 will actually be flat to a 1.8% increase with oil and gas related businesses being soft (which we don't due much of).....That was encouraging to me, as I listen to much to the "gloom and doom news", and perhaps on these forums..:smile:.

I think staying diversified is key here guys, and cinching up one of my clients will be part of that diversitiy..

So Im going to run the sale for 45 days...done deal.

 

[bradleyelectric]

just curious, why did you ask?

 

[Mule]

just curious, why did you ask?

That's a fair question, but If you read my first post, the question is about the time line not the discount.....but everyones brain goes right to the money IMO, and that's ok, Im glad to talk about that too...

By the way that's a pretty good looking old ford tractor.....!!

 

[macmikeman]

I am currently vacationing in Florida. I have been all over the state- top to bottom and east to west. All over Florida I have seen developments that have been carved out but no houses - just roads with house lots overgrown with weeds. I saw the same thing on my vacation to California last year.

The housing boom is clearly over.

Peter, some of those road carvings have been around since the dawn of early man. Parts of Cape Coral for instance have been like that for my whole lifetime. Another one I can think of is Golden Gate Estates. Both in Florida.

 

[boboelectric]

If they don't squawk at your prices,I wouldn't negotiate.Otherwise put me in the bidding war.......

 

[boboelectric]

Kinda like a homeowner calling today saying "My furnace is broke! How much You would charge to come over?"

 

[Rewire]

I should first make clear that I am not an owner.

That said, which one is (or was) growing in your area?

1. The older stores with long term employees, personalized service and quality merchandise?
   
2. The big box stores with their hard to find zombies, low prices and junk?

we have had growth in all areas untill the last few months.Yesterday I needed a splice box the box store is $2.00 cheaper but the supply house will bring it to my shop who do you think I purchased from?

 

[bradleyelectric]

If they don't squawk at your prices,I wouldn't negotiate.Otherwise put me in the bidding war.......

So, the OP said that he doesn't have much in the bank account to tie him through a slow time. People posted they thought he was to low when he originally posted on here inquiring about his rates when he first came to this board to which he replied he wanted to keep his rates low. A customer throughs a hairy eyebrow and the answer is to further drop rates on a bidding war to not make much in the first place. Got it.

 

[iwire]

we have had growth in all areas untill the last few months.

Really? Even the small stores downtown where growing?

Yesterday I needed a splice box the box store is $2.00 cheaper but the supply house will bring it to my shop who do you think I purchased from?

I was not asking about how you choose to purchase items. I was pointing out that we now live in a Walmart world and that the majority of consumers are shopping by price not value. The death of the Mom and Pop shops and the success of the giants is proof of that.

But it is easy for me, I am not trying to run a business in this economy.

 

[Rewire]

Really? Even the small stores downtown where growing?




I was not asking about how you choose to purchase items. I was pointing out that we now live in a Walmart world and that the majority of consumers are shopping by price not value. The death of the Mom and Pop shops and the success of the giants is proof of that.

But it is easy for me, I am not trying to run a business in this economy.

Our jobs this year jncluded a family owned restaurant,a family owned appliance store,a family owned gift shop all new buildings.This is along with many remodels from beauty shops to gyms to office space.Trying to compete in a walmart world by trying to be walmart is a formula for failure.The way to compete in a walmart world is not to try and be walmart but strive to be what they are not.

 

[Pierre C Belarge]

Last night I went out to buy pizza. I went to a different place than normal, as my wife had pizza there and enjoyed it.

I recognized the owner, he is from another place in a different town. We talked a little, and he really surprised me with his business model. He has been buying up the small pizza places and deli stores around a few towns where I live. He told me he is getting them at basement bargain prices and is hedging that the market return for him will be very profitable.

 

[iwire]

Trying to compete in a walmart world by trying to be walmart is a formula for failure.The way to compete in a walmart world is not to try and be walmart but strive to be what they are not.

Niche marketing, I understand the concept and if you can make it work that is great for you.

I think it is unlikely that the majority of contractors can find a niche and will have to adjust to our wonderful new world economy or be run over by it.

 

[Pierre C Belarge]

Niche marketing, I understand the concept and if you can make it work that is great for you.

I think it is unlikely that the majority of contractors can find a niche and will have to adjust to our wonderful new world economy or be run over by it.

Funny you should mention niche markets...it stirred up a memory of a show I watched a couple of years ago about businesses and the modern world we live in and how to deal with a niche marketing plan.


The fellow was in construction, that is what first caught my attention.
He developed his company all around a nich market plan. What he stated was the reasib for his real success in this method was to pay attention to the market in general, and know when his niche portion was no longer as profitable, and move on to the new niche market that would be profitable for the foreseeable future. He mentioned it took some time to work this out, but has not seen a bad day at work since adhering to his plan.


I also believe niche marketing is in our industry's future, if not already positioned by some companies. I thought his stategy was very unique

 

[Rewire]

Niche marketing, I understand the concept and if you can make it work that is great for you.

I think it is unlikely that the majority of contractors can find a niche and will have to adjust to our wonderful new world economy or be run over by it.

actually it has more to do with positioning. Niche marketing can be be good if their is a need but if your niche was track homes you may be in trouble.Positioning is more about promoting yourself in the market for the electrician this might be offering 24hr service or same day service or small job expert.The big problem with making any adjustment is the reward phase can be many months away.

 

[aline]

So Tell Me....Why are products "on sale at 25% off" at MikeHolt.com? Just for grins? I dont think so......Less electricians working,.... dont sell as many products?.... hello???

So Im going to run the sale for 45 days...done deal.

I may be wrong but I believe you're talking about T&M jobs and lowering your hourly rate that the customer sees. It's one thing to lower your hourly rate for bidding jobs where the customer doesn't see the hourly rate and another thing to lower your hourly rate for T&M jobs.

For flat rate jobs or fixed bid jobs you can bid a job today at lower hourly rate and bid a different job tomorrow at a higher hourly rate without the customer knowing. If you're doing the job T&M and you charge the customer a lower hourly rate today and then charge a higher hourly rate tomorrow what do you think they're going to say? Why are you charging me more today than you were yesterday?

I would think it would be difficult to lower your hourly rate for T&M jobs and then 45 days later raise them back up again. Wouldn't the customer think if you were able to work for this lower hourly rate last week why can't you work for this lower hourly rate this week?

What happens in 45 days when your sale ends and they find another electrician who has a normal hourly rate that's as low as your sale rate?

What happens when you decide to have this 45 day sale so your hourly rate will match the other guys hourly rate but then he decides to have a sale too, only his sale is for 90 days?

I would really hope my customers see enough value in my services that just that fact I'm not increasing my hourly rate will keep them coming back to me instead of trying to find someone cheaper.

There's a big difference between buying a product and buying a service.
My customer's can go to Home Depot and buy a receptacle for 45 cents.
I'm not selling them a receptacle and they're not buying a receptacle.
I'm selling them my services and they are buying the benefits of using my services verses using someone elses. How well I provide this service will determine the value to the customer.

Getting a discount of 25% and saving money when you buy a power tool that's exactly the same whether you paid full price for it or not is one thing. Trying to find someone to provide a service for 25% less than someone else so you can save money is entirely different. You may receive better service, you may recieve the same service or you may recieve poor service. You just don't know and you may end up not saving anything.

Comparison shopping works when comparing the same product. Hopefully your product is your service and hopefully it's better than the other guys not the same. Rather than lower my rates I'm always trying to figure out how I can improve my services and provide better service to my customers.

 

[bradleyelectric]

As far as Wal Mart pricing they arrive at pricing they can sell things at ways other than opening up a small store and setting a price lower than anyone else. They do enough volume that they strong arm suppliers to the point they have put some out of business and totally changed they way other do business.

Employees compensation is so poor that some states have passed labor laws in direct response to Wal Mart business practices and in rural areas there is often a legal movement to keep Wal Mart out.

Unless you are willing to follow Wal Mart's business model other than setting the lowest price might not want to use them as an example. Educate prospective clients about the benefits of using you if there are any. Let them know what your mission statement is about. If you don't have 1, make 1.

 

[sfav8r]

Trying to be proactive, stay busy, and trying to think ahead here. We're currently busy but, I have one or two T/M clients that provide alot of work for us. Im considering dropping my rates to ensure that I stay somewhat busy through the remainder of the winter....Im considering this because there's been a management change and I just have a hunch that I need to do this, due to some politics among the management......

Question is, If I cut the rates, it needs to have a closure date where it reverts back to the previous rates....Kinda like a "winter sale" ...

Do most of you think that our market will recover "some what" during the spring reguardless of the economy, or not? like April or the middle of march? what time typically in the spring do things break loose? I dont expect things to pop back to normal due to the economy, but at least the spring pop back?

and comments apreciated.......

Mule,

Forgive me if I'm a bit repetitive, I didn't have time to read all the posts.

The original post wasn't clear exactly what you heard or why you have a hunch that you should lower your prices, but I would offer the following:

If you have annual sales of $1,000,000 and are taking home $150,000 in profits, when you lower your prices 15% you will have zero profit.

In your situation, I would arrange a meeting with the client (the new management) and tell them that you have built a successful business by being responsive to customer needs. I would ask them what their plans are for the next 12 months and ask them what your company can do to facilitate them meeting those goals. I would start off by asking questions about ,quality, scheduling, responsiveness, and finally cash flow management...not price. This should get a dialogue going that may lead to you having a better understanding of what their needs are. The end result may be that they ask for lower prices, but I have had this exact conversation with a client where it turned out that what they really needed was different terms. I also had a client tell me in a similar conversation (this is one that still bothers me) that they were dissatisfied with our service and had been talking with other ECs. I had been telling my guys to do the minimum work necessary on service calls for this client because I perceived that they were a little anxious about prior bills. I was trying to keep the billing lower. It turns out that what they really wanted was for us to suggest longer-term solutions that would allow them to budget for repairs on their properties and make their cash flow predictable. I think we would have lost the client if we hadn't had the conversation. It can be really difficult to guess what a client needs. Sometimes we overlook the obvious which is to just ask them. If it turns out that the new managment has an electrician they have worked for or is someone's Brother in Law, you can't do much about that anyway.:grin:

 

[boboelectric]

Pittsburgh 24 -17