hardworkingstiff
Senior Member
- Location
- Wilmington, NC
I'm with you Mule. YOU have the right approach! Listen you yourself.
rates, winter, and the economy
- Thread starter Mule
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I'm with you Mule. YOU have the right approach! Listen you yourself.
- Location
- Massachusetts
Emahler....To be fair, I have to totaly agree with you in reguard to customers not having respect to the overall picture as you put it. They have no idea of the overhead cost of running a business, and how it relates to your rates.........you are right on the money with that statement brother IMO..
Now would all of you please reread my entire post, especially the little part about "the overall picture"
Hourly rates are a useless way to compare prices. So to simply request a reduction in an hourly rate is myopic and shortsighted.
Wanna compare total prices, based on a defined SOW? Go for it. Want me to drop my hourly rate so you feel good, or look good to you bean counter? Well, I stand by my statements.
Hourly rates are a useless way to compare prices. So to simply request a reduction in an hourly rate is myopic and shortsighted.
Wanna compare total prices, based on a defined SOW? Go for it. Want me to drop my hourly rate so you feel good, or look good to you bean counter? Well, I stand by my statements.
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I have a lawyer and accountant who have vast experience to help me with my business. They aren't the cheapest lawyer and accountant I could get. If I called around I could find cheaper lawyers and accountants.On the basis of shopping around would it show integrity to question their prices?
I prefer finding qualified professionals and paying their rates. I'd like paying less for these professionals, but feel it would insult their integrity to ask them to lower their rate to save me some money. Likewise when someone asks me to lower my rate.
The main issue IMO is keeping an eye on the net profit. It may not sound too bad to get a big job in exchange for a 10% discount. However, if your net profit is 5% you just paid for a losing job AND you may have to pass up a profitable job because you're busy with the losing job.
I hear you...a man is worth his wages....remember it wasnt me that was asked to lower my rates...
electricmanscott
Senior Member
- Location
- Boston, MA
Unfortunately in these times you are in the minority. People want deals or to feel like they are getting a deal. As mentioned, do you pay full sticker for a car? If you do it does not mean you have more integrity it means you are a fool. Also do you look to see if an item is on sale when you are buying it?
Is 0% profit and paying the bills better than not getting the job and not paying the bills?
hardworkingstiff
Senior Member
- Location
- Wilmington, NC
Very well said Scott! These are indeed difficult times.
For all of you that want to pay more for stuff, I've got some BAC stock I'll sell you for $25/share. That's discounted over 50% from what it was a year ago. :smile:
don't equate what we provide (a service) to purchasing a car (a product)....there are no variables in building that car...it takes the robots the exact same amount of time for each vehicle, the same amount of material, etc...and the Honda Accord at dealer A is the exact same Honda Accord being sold by dealer B (assuming the same specs)
You will take a different amount of time than I will take to run 200' of EMT, pull wire and install a receptacle. You will pay a different price for your material than I will...so there is no way to compare our costs based on an hourly rate...
if you are making 0% profit, and just paying bills, go work for someone and not have the headaches of running a business....take you existing work to a contractor who runs a business, and take a job running the work in exchange for a paycheck....you will be better off...
hardworkingstiff
Senior Member
- Location
- Wilmington, NC
I think a point that was mentioned should be mentioned again. This is a supply/demand issue. There is a serious reduction in demand for electrical services. Those that supply to the demand are now fighting for the privilege of being the supplier to the diminished demand. I know in the recent years (prior to mid-2008) I could almost name my price. I was not afraid to be one of the highest priced electricians out there.
Because I live modestly, have no debt, saved during the good times, I can work 10 hours a week and get by right now. This allows me to hold the line on my pricing. Most people are not in this position. Those that have the monthly overhead have serious choices. Selling a job to pay 90% of your overhead instead of none of your overhead while you wait out difficult times is a valid business strategy. Of course it will only last as long as the business has the resources to cover the other 10%. That other 10% is the cost of staying in business during difficult times.
One of the biggest problems we have now is too many people did not save enough during the roaring 2000's (kind of like the roaring 20's) and this pull back will shake out the weakest players. We must go through it. You can fold up shop and come back when it gets better, or you can take jobs at the price the market sets and figure out how to cope.
It seems some on this board actually believe the contractor sets the price. That's an illusion. The market sets the price it's willing to pay. The contractor has to try to find out what the highest price the market is willing to pay and be $.01 lower than that. I'm not talking about government bid work as much as I'm talking about private work.
The market could care less if you can pay your bills or not. That's your job to know what level you can work at.
When you have contractors needing $10,000,000.00 worth of business and only $3,000,000.00 is available......... well let's just say you better be all 3, good, fast and cheap.
Because I live modestly, have no debt, saved during the good times, I can work 10 hours a week and get by right now. This allows me to hold the line on my pricing. Most people are not in this position. Those that have the monthly overhead have serious choices. Selling a job to pay 90% of your overhead instead of none of your overhead while you wait out difficult times is a valid business strategy. Of course it will only last as long as the business has the resources to cover the other 10%. That other 10% is the cost of staying in business during difficult times.
One of the biggest problems we have now is too many people did not save enough during the roaring 2000's (kind of like the roaring 20's) and this pull back will shake out the weakest players. We must go through it. You can fold up shop and come back when it gets better, or you can take jobs at the price the market sets and figure out how to cope.
It seems some on this board actually believe the contractor sets the price. That's an illusion. The market sets the price it's willing to pay. The contractor has to try to find out what the highest price the market is willing to pay and be $.01 lower than that. I'm not talking about government bid work as much as I'm talking about private work.
The market could care less if you can pay your bills or not. That's your job to know what level you can work at.
When you have contractors needing $10,000,000.00 worth of business and only $3,000,000.00 is available......... well let's just say you better be all 3, good, fast and cheap.
wouldn't we be better off doing 90% as much work at 100% of our pricing, rather than 100% of the work at 90% of our pricing?
and how does the market set the price?
they base it on the prices they receive from contractors...so we do set the price...
customer wants a project done...contractors 1-15 all price that project at $5000....if the customer wants to do the work, it will cost them $5000...the market price...
then contractor 16 comes along and prices it at $2500....suddenly, the market price is 1/2 of what it should be...
the customer didn't set the price, the contractor did...
We are in a simular situation, as we have some debt but not a lot. Our local market is such that we havent had to start lowering prices yet, but you can see the incoming calls diminishing. As things slow down you can see the supply and demand structure taking a new shape.
There are a couple of local contractors that are hurting, but the other contractors tell me its because they are stubborn and unwilling to go with the flow of things.
So we have a slow unpredictable economy plus is winter time and is normally slow to boot.
My wife and I are starting now working on contingency plans on how to cope if things get bad.
I think anyone that doesnt see the writing on the wall, frankly is in for trouble and need to wise up. Not trying to be rude at all, just trying say what needs to be said to help somebody.
Its my hope and prayer that spring time will bring back a bit of the work, and the stimulus package (although I disagree in theory) does help the economy.
There are a couple of local contractors that are hurting, but the other contractors tell me its because they are stubborn and unwilling to go with the flow of things.
So we have a slow unpredictable economy plus is winter time and is normally slow to boot.
My wife and I are starting now working on contingency plans on how to cope if things get bad.
I think anyone that doesnt see the writing on the wall, frankly is in for trouble and need to wise up. Not trying to be rude at all, just trying say what needs to be said to help somebody.
Its my hope and prayer that spring time will bring back a bit of the work, and the stimulus package (although I disagree in theory) does help the economy.
hardworkingstiff
Senior Member
- Location
- Wilmington, NC
Of course you would and if you wanted to keep the same % of profit, you would need to cut 10% out of your overhead/workforce.
All of the customers and the contractors make up the market. The low ball contractor is part of the market. A single contractor does not set the price.
Emahler, do you see the paradigm you are projecting? You are treating this as us (ECs) against them (customers). Mule's approach is one of being a team member. Helping the customer attain their goals while meeting ours. It may only be my perception, but that's the attitude I read into your posts. If I'm wrong and you are insulted, I apologize.
electricmanscott
Senior Member
- Location
- Boston, MA
That may make sense in your mind but the customer does not give a crap, they want to pay the lowest price right now and that is just the way it is. Sure there are execeptions but ......
A significant percentage of contractors have gone out of business in the past year for various reasons. Many because GCs have less work or go bankrupt owing their subs. Another reason is in line with this thread.
There is less work so it becomes urgent for some contractors to be the low bid. Without checking the profitability of every job it's common for the low bid to be below cost. Bidding projects below cost isn't a business strategy that can be used by a small contractor. It can't be used long-term by any contractor. Losing money on work will last until you run out of money, or your suppliers cut off your credit. As an example, if you have $20k cash and lose $2k/job you'll do 10 jobs, plus a few more to max out your credit, then you're out of business.
It seems like it's working because you're still getting work and still making deposits. It turns into a slow bleeding to death and kills many businesses because they don't know their true cost of doing business and they don't track the profitability of their projects.
There is less work so it becomes urgent for some contractors to be the low bid. Without checking the profitability of every job it's common for the low bid to be below cost. Bidding projects below cost isn't a business strategy that can be used by a small contractor. It can't be used long-term by any contractor. Losing money on work will last until you run out of money, or your suppliers cut off your credit. As an example, if you have $20k cash and lose $2k/job you'll do 10 jobs, plus a few more to max out your credit, then you're out of business.
It seems like it's working because you're still getting work and still making deposits. It turns into a slow bleeding to death and kills many businesses because they don't know their true cost of doing business and they don't track the profitability of their projects.
electricmanscott
Senior Member
- Location
- Boston, MA
After 15 years of doing this I know what I'm doing. I also know that we have not seen such an economic situation like this.
It's ugly and that is a FACT.
I will do whatever I have to do to stay alive, pay my bills, and stay in business. If that means I have to go do a service upgrade for $1800.00 that I'd normally do for $2500.00 then that is what I will do. I don't like it but it isn't really about what I like.
There is no way in hell I am going to work for someone at this point in my life. Unle$$$$.....
We were in a similar situation in 1989-1991. We wew also here in 1973-1975. And you may remember a little thing called the great depression. So, we've been here before.
The big problem with doing a service for $1800 right now is this: it took you 2 months of hard times to drop $700 off your price, but it will take you 2 years to add it back. Happens every cycle.
And Lou, you are incorrect, but I'm not offended. This is an esoteric discussion. More about what we should too, but human nature dictates what we will do.
The big problem with doing a service for $1800 right now is this: it took you 2 months of hard times to drop $700 off your price, but it will take you 2 years to add it back. Happens every cycle.
And Lou, you are incorrect, but I'm not offended. This is an esoteric discussion. More about what we should too, but human nature dictates what we will do.
hardworkingstiff
Senior Member
- Location
- Wilmington, NC
I'm assuming about how I perceive your posts?
I'm glad about that. :smile:
hardworkingstiff
Senior Member
- Location
- Wilmington, NC
IMO, we are in a much more dire condition than we were in 73-75 or 89-91. I'm hoping it doesn't get as bad as that little thing we call the great depression, but in my moments of melancholy I fear the possibility is more than any of us want to believe.
My personal experience is the late 70's and early 80's were not so good either. Interest rates for home mortages went over 14%. I believe that will be showing up again in a few years.
So, how do we personaly survive? We must be the best. We must be fair, honest, a regular boy scout. Spend less, save more. The problem with this is it will contribute to a greater economic downturn.
We've been inflating ourselves out of economic problems since the 1st banking crisis circa 1913. It got bad in the 30's. Congress and President Reagan kicked it into high gear and no one has stopped it yet.
I for one will take work at prices I can afford to work for (just like Scott). I will be here on the other side of this downturn (just like Scott). I'm not going to work for someone else (just like Scott). I wanna be like Scott! :grin:
electricmanscott
Senior Member
- Location
- Boston, MA
I'll start working on some rules for "Scott club"
This is going to be awesome!
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