I'm so proud of me....

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Rewire said:
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.
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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 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...
 
c2500 said:
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
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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.
 
Rewire said:
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.
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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...
 
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emahler said:
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...
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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.
 
emahler said:
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?
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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...
 
e57 said:
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...
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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, do some more research on it, and tell me it's a good model for the public as a whole...
 
Rewire said:
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.
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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...
 
emahler said:
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...
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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.
 
Rewire said:
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.
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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
 
Rewire said:
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.
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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...
 
emahler said:
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
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The idea is if you stay with a lower cost and a lower profit then you must rely on a higher volume.
 
emahler said:
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...
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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.
 
Rewire said:
The idea is if you stay with a lower cost and a lower profit then you must rely on a higher volume.
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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...
 
Rewire said:
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.
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agreed...honestly i automatically put everything into percentages...my bad for taking it for granted...
 
Rewire said:
The idea is if you stay with a lower cost and a lower profit then you must rely on a higher volume.
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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...
 
emahler said:
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, do some more research on it, and tell me it's a good model for the public as a whole...
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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 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:
 
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:
 
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