Has this happened to you? - hb

heatboy

Are we talking net profits or gross margins? 12.5% net profit on a 40K job is OK, I think anyway. I just want to be sure we don't confuse anyone with terminology.

Warm Regards,

heatboy

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heatboy

Hypothetical question?

How would you handle a potential clients request to reduce the cost of your project. He tells you “I’ll give you the job if you can take of $500 of your bid.” He didn’t say anything about a redesign because he likes your ideas and just wants a lower price. Before you answer, think about the ramifications. If you don’t lower your price, you just might loose the project. If you do lower your price, what happens then? How will that effect your clients respect for you and more importantly, how does it, if it does, affect your self-respect? Could he/she be just testing your integrity by baiting you. Does this test your professionalism or is it just the way business is done? Do you stand your ground and not crack and possibly loose a profitable project? Should I stay or should I go……………?

Warm Regards,

heatboy

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hr

Meet him half way

He wins you win. Tell him you think your price is fair. Depends on how much you want/ need the work. Beat up your suppliers! (big grin)

Certainly you can shave a couple hours out of a bid. Unless of course the bid was $600.00

hot rod

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hr

Remember, too, being self employeed

sometimes means being unemployeed

hot rod

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Frank_5

It's ALWAYS too much

> How would you handle a potential clients request

> to reduce the cost of your project. He tells you

> “I’ll give you the job if you can take of $500 of

> your bid.” He didn’t say anything about a

> redesign because he likes your ideas and just

> wants a lower price. Before you answer, think

> about the ramifications. If you don’t lower your

> price, you just might loose the project. If you

> do lower your price, what happens then? How will

> that effect your clients respect for you and more

> importantly, how does it, if it does, affect your

> self-respect. Could he/she be just testing your

> integrity by baiting you. Does this test your

> professionalism or is it just the way business is

> done? Do you stand your ground and not crack and

> possibly loose a profitable project? Should I

> stay or should I go……………?

>

> Warm

> Regards,

>

> heatboy

>

> "Expert in Silent

> Warmth"™

>

> 610.250.9885

>

> _A

> HREF="http://www.heatinghelp.com/getListed.cfm?id=

> 103&Step=30"_To Learn More About This Contractor,

> Click Here to Visit Their Ad in "Find A

> Contractor"_/A_

don_9

ok

Dear Sir,I Had done my best to get within your budget.

I belived that I offer you the best equipment and material
that your budget's allowed.Yes sir I can reduce the price
another 500 but the cuts will come from some where in the
material or design.We are talking economics here I have
little control over this.
Jeff,Now in the back of my mind I thinking oh boy this guys telling me If I give him 500 dollars he will give me a job.
well if I had 500 dollars to give away every time, I would not be out here doing this.I am in it for the money.Sure this happen a lot around here but I know there other jobs
right around corner.So If we could not hash it out then see ya.don

Frank_5

It's ALWAYS too much

Shaving a price is something I never liked to do, but occasionally my fathers way of "taking home a half a loaf of bread is better than no loaf" convinced me to take a cut. Especially if I was slow. But I would never agree to the full request. Sort of a compromise. Haggeling is part of the American Way. Nobody pays the list price for a car or truck. Seems that tradesmens prices are in that catagory also. I used the verbage that I know what my time is worth, that I am in business to make a profit; and go one to explain the overhead costs ( not the actual figures ) of insurance, office staff, having to pay a good salary to keep the crews, vehicles, etc. and all that has to come from the customer. It's the cost of doing business. If you don't spend some time on this w/ the customer, and agree to the request, as the customer I would be thinking 'if he can take off this much, how much profit does he want to make on me?' A lot depends on the customer themselves. A working stiff deserves a break. The restuarant owner, stock broker,doctors and lawyers..never.
Let's face it......we labor for our customers, that's worth compensation. The crew labors for us, that's worth compensation. You wanna keep a good worker, you gotta pay him, or loose him. Then what? Here we are, the smartest guys in the profession, without field installers. It's a give and take business, and good relations w/ a customer keeps a customer for the future.

Mark Hunt

Don't lower your price and not take something out!!

If you had $500 in there that you could throw out, how much more do you have???

I'd send him/her a list of $500 items that he/she can choose from.

Good luck!

Mark H

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Mark J Strawcutter

either you

> Shaving a price is something I never liked to do,

> but occasionally my fathers way of "taking home a

> half a loaf of bread is better than no loaf"

> convinced me to take a cut. Especially if I was

> slow. But I would never agree to the full

> request. Sort of a compromise. Haggeling is

> part of the American Way. Nobody pays the list

> price for a car or truck. Seems that tradesmens

> prices are in that catagory also. I used the

> verbage that I know what my time is worth, that I

> am in business to make a profit; and go one to

> explain the overhead costs ( not the actual

> figures ) of insurance, office staff, having to

> pay a good salary to keep the crews, vehicles,

> etc. and all that has to come from the customer.

> It's the cost of doing business. If you don't

> spend some time on this w/ the customer, and

> agree to the request, as the customer I would be

> thinking 'if he can take off this much, how much

> profit does he want to make on me?' A lot depends

> on the customer themselves. A working stiff

> deserves a break. The restuarant owner, stock

> broker,doctors and lawyers..never. Let's face

> it......we labor for our customers, that's worth

> compensation. The crew labors for us, that's

> worth compensation. You wanna keep a good

> worker, you gotta pay him, or loose him. Then

> what? Here we are, the smartest guys in the

> profession, without field installers. It's a

> give and take business, and good relations w/ a

> customer keeps a customer for the future.

Mark J Strawcutter

either you're worth it or you're not

I fail to see what the occupation of the customer has to do with how much you have to charge to cover expenses and make a profit.

Mark

Bill Clinton

happens all the time

My approach is to be on the customer's side and agree to "see what I can do." I then come up with several alternates that cut the price by cutting my cost and present those to the customer, being as helpful as I can and openly struggling to get within his budget. (Assuming all the while that his motivation is to get the system in within his budget and never letting it enter my mind that he may simply be trying to squeeze me: If I believe that, pretty soon, he does too.)

Also, I'll suggest concessions on his part such as: My usual practice is to home run every zone to the boiler room; if he'll let me put a manifold in the back of his master bedroom closet and run four zones off that, I can meet his price. Or: "Mr. Jones, cash flow is critical in this business, and construction payments are slow. I can meet you half way on your request for a reduction if you can give me a down payment of x dollars and guarantee to make progress payments within 2 days of billing. I'll structure the billing per my quote, but give you an x% discount for each payment made on these terms."

On some of these negotiations, I've reduced the price and come out with a better margin than I had to begin with--which is only right, because of the extra hassle I had to go through.

Heatermon

Mr. Clinton's right

Always portray yourself on the customers' side and never reduce your price without compensation. I prefer to get favorable payment terms for a reduction in price, with the stipulation that if they miss a deadline, the deal is off. It just re-enforces the old addage "nothings free" - you got to give something to get something.

Heatermon

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Mad Dog

How bad do you need the job?????????

will always dictate how flexible you are. Also depends on your rapport with the client...one of my showcase jobs was won - albeit I was 30% higher than everyone else - due to ther guy liking me and me likin' him....I wanted the job and he wanted us to do it...it was a friendly bargain.....Everyone else was at 7500 and I was at 10,500...I dropped to 9,800.00 and everyone was still happy. In general though my rule is ...If i drop my price I must take something away too......or, they think you were just trying them on for size... Mad Dog

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Mike Kraft

Guess it all

boils down too how you figured I figure.Its funny.......I can price two totally different jobs at the same price.The T&M just seems to fall the same.And for reasons beyond my understanding or control I will hammer one out and the other I would be dying to have the 500.00 bucks or more that your talking about.

cheese

eleft_4

Builder budgets?

Was a budget discussed previous to the bid. If so did he give you the specs to bid on. If no budget or specs, who else could bid against you apples for apples?


If he did have a budget how did he figure out the price in the first place?


Have you ever wondered where builders get budget info from?


Do they use house numbers or license plate numbers they had just seen before they talk to you?



al

John@Reliable

Price

HB, I do alot of replacement systems. When this happens I tell customer only cost cutting I can do is old system removal. Which means we will cut out old system, parts and move out of our way in basement and they can get rid of it them self. This works 75% of the time and the other 25% price remains and we do remove.Our systems our old steam & fhw with out alot of the fancy stuff,so theres not much that can be cut and still have a system. Profit is not a dirty word and have told customers this in a nice way.I found out years ago the ones who beat you up are the ones that will never be happy with anything you do anyway,life is too short who needs the bs. John@Reliable

Terry H.

Here's a thought

If the job's big enough and there is room in the quote tell him you'll take the $500.00 off but only if he pays you in advance. It's probly worth the $500.00 to not have to chase him for payment after the job.

You'll have to decide if it's worth it. Example deducting $500.00 on a $25,000 project for payment in advance would be like borrowing money at 2% interest. On a job that size you should be able to make up the difference by the time it's done. Just be sure to watch for any deviations or change orders they're extra.

Just a thought

Terry H.

hr

I suspect this

customer has the money. I don't feel creative finacing is in order. He just wants to "play the game". Every single large purchase I make (trucks, motorcycles, large power tools) I do the same thing, ask for a deal. Around here it's expected

You don't get what you don't ask for. Rarely does a dealer walk away from a truck purchase for 500 bucks! Of course you haven't mentioned what the whole ticket is. 500 off a 5000 bid is a lot different than finding 500 in a 25,000 bid.

You like the guy? Want the job? Work with him. It's only money, there is plenty more out there.

hot rod

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PJO

How about...

asking for the HO to do some of the (basic) labor? If he is truly trying to meet a budget and not playing games, it may be worth it if he is willing AND able. I know you guys have mentioned this with customers before...they drill the joists and maybe pull the tubing, all based on your specs.

I agree with the other's thoughts on everyone's tendency to haggle over price, too. We all do it, and almost expect it with any major purchase.

Just my thoughts. Take care, PJO

Pat

Don't just give!

Offer lower cost materials:
5 year glass lined tank as opposed to limetime stainless tank, or more baseboard less radiant.
Offer a reduced warranty: currently 5 years offer 1 year.

Other approach is offer more. It will cost you, but you will not be going down in price. Offer something that really won't cost you the full $500, but can be sold for $500. Additional warranty, better t-stats, or brand that is perceived as higher value.

Good Luck.

Mark Bogel

I'm a doctor, one who's obviously is interested in radiant heat. I even bought one of Dan's books. I, too, own my own business and have to pay a lot of overhead. I, too, work very hard to support my family and provide quality service. I've spent hundreds of thousands of dollars on my training, and have spent eleven years of my life in training to do my work. I'm often up at night while the rest of the world sleeps, attending to sick patients. I treat all of my patients the same, regardless of what they do or how much money they make. I think I deserve every penny I make, because I work hard for it, just like every other "working stiff." I find your attitude quite repugnant, and I feel sorry for your customers, no matter what their occupation.

heatboy

Run the numbers?

Let's say the project is worth $40K, as an example. And let's suppose there is a net profit of 10%, which is the norm for a project this size. That's $4K in net profit. Not a huge amount, right? If I'm supposed to give $500 back, that represents 12.5% or so of the project's profit and I haven't even brought run-overs, etc. in to the mix yet. Since I'm the curious sort, I wouldn't mind hearing from homeowners as to what they think we turn as a profit on our projects. With all of the "negotiating" that seems to go on, the public must think we are robbing them blind. I am here to say, that I am always one of the high bidders on a project and I'm not getting filthy rich. What gives with you other guys?

Warm Regards,

heatboy

"Expert in Silent Warmth"™

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Al_3

Offers

I would like to ask Mr. Bogel how often he haggles out a price with a patient, do you leave out a stitch or two, skip a payment on the beemer to help out a friend. I may not have an 8 yr degree or a mass of wall plaques to hang on my trophy wall, but have spent the better part of my life learning this trade. Are you saying that my livelyhood and my family should be some kind of auction to the highest, or lowest bidder?

eleft_4

the numbers

hb,

I don't know if many companys net 12 1/2 %.


If I had to work for little or no profit, well charity begins at home.


Why take a job just so no one else gets it?


al

Gregg Jackson

another idea.......

I know that the bottom line is very improtant but it is important to also feel out your potential customer. You can usually tell the customers that want something for nothing. I know everybody will jump on me for saying it..... but 40 to $ 50,000 heating systems are still not the norm in our industry. We live in an age where Home Depot will always beat Lowe's price and Best Buy and Circuit City will send you a check if they charge you more than their competitors. It doesn't make it right but customers are accustomed to it. I have literally asked customers - what will it take to win your job? Some simply want $500 back as you stated in this case. I normally start with "value engineering" - remove some small parts that won't really effect the performance or look of the system. Next I would go to your supplier (as Hot Rod noted earlier) and "buy out " the job. This is the easiest place to find a few hundred bucks. They will give to get the buy-out - and don't feel bad your competitors do it all the time - and they get better at it each day! If you are really tight - I have found a "trick" that makes everyone involved happy. Take a portion of the equipment that is a large number item - like the boiler and indirect. Set it aside from your bid and offer for the customer to pay COD. This will decrease the amount of your project a bit but your net profit margin will not suffer - at times it may increase. Have your supplier credit the customers check and apply the 2% cash discount to your account.
This is an easy way to re-claim your $500.00 and make everyone happy. Your customer gets his $500, you get the job and no big payable due, your supplier gets his sale and his money. I wouldn't reccommend this all the time but it is a way to land a big project and not have to decrease your margin. Many ways to skin a cat.

Gregg

Mark J Strawcutter

you missed his point

I believe he was objecting (as did I) to the comment:

"A working stiff deserves a break. The restuarant owner, stock broker,doctors and lawyers..never."

Mark

Mike Kraft

Easy now!

Lets draw the line.My daughter needed 2 emergency surgeries one year ago.We thought we were going to lose her.Extremely humbling as far as putting ones priorities in an order.I do not have health insurance.The hospital and all involved took my family in and gave our daughter top shelf attention.

After my daughters recovery it was time for the dust to settle.We met with the offices (Kathy did:)) and discussed terms.ALL of the skilled professionals involved reduced their rates without one promt or asking from us.

Please dont assume or stereo type these people.They give up so much of themselves.Let's keep this thread in a perspective.

cheese

Mark Hunt

AGREE!!!

And when you figure out the "become a millionaire on a 40k job" trick, please e-mail me.

How many times do consumers try this move at the drive-thru window?

NEVER!! Let's see.... free estimates, 24 hr house calls, and FULL responsibility for the system regardless whether the other guys did their job right.
And all of the schools and seminars, guess they were free too. The books I buy, the personal time I sacrifice to learn more. No charge.

Nope!

Please don't bring a Yugo checkbook to a Cadillac dealer.


And "half way"? So I was only stealing $250?

Guess we could knock off a few bucks by sending the new $10/hr guy instead of the $25/hr experienced pro. Is that ok?

Maybe some folks expect to haggle. So what's to say I haven't raised my price by $500 or even a thousand?

The price I give is for EXACTLY what I quoted, nothing more and nothing less.

Mark H



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Mark Hunt

JOHN!!!!

Priceless!!!

Excellent!!

Mark H

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Mark Hunt

You do deserve every penny!!

You worked hard and sacrificed and continue to do so!

From one pro to another!!

Mark H

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Mark J Strawcutter

negotiating

> How many times do consumers try this move

> at the drive-thru window?


We've had the HVAC trade compared to everything from medical care to fast-food :-)

> Maybe some folks expect to haggle.


I think you've hit the nail on the head here. Folks
expect to haggle on some purchases (when was the last time
you accepted the first price quote from a car salesman?) but not on others.

The challenge is to change the perception that HVAC is in the same category as car sales. I doubt that the consumer will buy the argument that "we're just like brain surgeons".

Mark

steve gates

hey doc

wanna be our wall doctor? You are a life saver and like us a comfort giver. I love the ones I do business with, very humble very kind!!!!!!

corey

No shame in negotiating...

Getting back to the original question for a moment:
IMHO, negotiation is the very essence of a free-market economy.
Your integrity and self-respect should not be wrapped up in your price.

I doubt a client would lose respect for you for taking a lower price.
They would probably be just that much happier that you made a concession.
At the same time, you should not resent your client for asking for better terms.
There is no way he/she can know your profit margins, or how you arrived at your price.
In fact, a question such as "will you take $500 less" should probably be interpreted as "how exactly did you arrive at this price".
Unless the client is fluent in heating technology, they may not understand why your design costs a few dollars more than the next guy, that you and your staff are perhaps better trained, or even how much money your system can save them over time.
If you firmly believe your price is fair, it is your responsibility to explain all of this to them.
Focus on the benefits they are getting relative to the cost.
Once they are sold on YOU, $500 will seem less important to them.

What a world it would be if we could always name our price.
I work in software. Everything is negotiable. I ask for the labor rate I would like, but receive the rate I can negotiate. When the economy was good, and demand for my labor was high, I could negotiate better terms. In the post 'dot com' world, demand is very low, and I am forced to make tough concessions to get a job.

Does that mean we are both just 'faceless' commodities? Not at all.
Heating, at least at the residential level, is certainly not a commodity business(in most cases).
Reputation, professionalism, and rapport really do matter in the end.
Unfortunately, I also have to explain why I am the best guy for the job every time, and make them believe me.
As a technical person, selling myself does not come natural to me.
I doubt many heating contractors are born salespeople either.

While selling yourself can result in better terms, there is certainly no shame in negotiating.

Mad Dog

SO!!!!!!!

True cheese MD

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Mad Dog

Yes Jonny Boy

my sentiments exactly...Mad Dog

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Jackchips

I noticed in your original comment that you did not want to lose a profitable job. How profitable. Maybe he has a legitimate reason to request a discount. If it's at the number you want don't back down but don't cry after the fact if you lose it.

Mr. Bill

A similar case - How I won that one

A slightly different enviroment and product but the same issue.

Job: Local chocolate factory -
Product: Variable speed drives for ventillation system.

Details: Worked with consultant and owner for 3 to 4 months. Very critical application with unique requirements. Quoted $331,000.00 (equipment only).Owner called to say job was mine for $325,000.00.

My Response: Price quoted provides fair compensation for equipment, engineering and future service. I will not turn down this order for $5000.00 , however you should know that although we service all our customers to the best of our ability we do it with a lot more enthusiasm when we have been fairly compensated.

One hour later I got the order for the full price!