lowering prices during slow months

[huggytree]

I have always kept my prices the same during slow/busy times...im constant.

i noticed again this year (jan/feb) that i cant win a bid if my life depended on it.....i may be 1 out of 20 right now....im losing all my referral jobs..the latest one said i was 20% high and i did lower the price for him slightly....i wanted that job...he e-mailed me saying how impressed they were with me but 20% less is the winner.

i am assuming that my competition is bidding lower to keep going, while i bid the same and sit around the house....

do you lower your prices during the slow season? how common is this?

i dont believe in it...Walmart and Pick N Save dont lower their prices in the winter months...is it just a small business thing?

[billbenson]

Well, Walmart has different pricing structures store to store. I have one 5 minutes from me and one 30 minutes from me. They have very different clienteles and market accordingly.

I read somewhere recently that it is very common in recessions to fire workers, only to rehire them at a lower salary later. This includes college educated professionals.

I would think if you did lower prices, you need to make it very clear that if things pick up you will go back to your regular rate. People know things are slow so I would think they can accept that they are getting a deal by doing the work now while rates are low.

[thx4yrtym]

It is clear that either you start competing or you sit on the sidelines or go work for someone else.
You might refigure a couple of quotes and see how much markup on materials you need to take out of the quotes without cutting your hourly labor. Maybe it's a bit easier to swallow that way. At least you get paid for your time. We are all being very careful how we spend our money right now. That means devoting more time to getting competitive bids on many things that we may not have in the past.

I wish you the very best of luck and hang in there, as things improve so can your margins.

Regards,

[huggytree]

if i lower my prices for my builders im afraid they will say 'whats happening' when i raise them in spring....they know what i charge for particular projects...also they are not getting the jobs either...so lowering my prices for them may help alittle, but they are all being outbid too...

i thought of doing it for my homeowner projects.....i really dont want to, but im just wasting soooo much time bidding.....

this problem isnt as much a recession problem as it is just how construction is in Feb.

im actually 22% ahead of last year right now.

[Spider]

Planning your bidding is essential if you want to make the most profit - not just in plumbing, but any business that calls for competitive bids. In a nutshell, that means reducing your margins - to zero if necessary - to get work to achieve a predetermined minimum workload. Then raise margins on other bids depending on when the work will be carried out.

Some work, like plumbing, calls for a bid now for work that must be carried out in several stages into the future. By scheduling each stage, you know which time periods have work. Other bids that fill the gaps between those stages will also be at low margin. Bids for work that will be done during the same time period as already allocated can be priced at higher margins. As your workload schedule fills, you keep raising your margins at each bid.

Obviously, you will win fewer of the high margin bids, but that's okay because you have work for those periods. If you win any of these high margin bids, that's extra profit.

If you pursue this plan rigourously, bidding for everything available but priced according to this plan you will eventually find that all your bids are at high margins because you keep filling your work shedule further and further into the future.

This will maximise your profit.

[Steve B]

If you lower your prices for the builders - I would do it in a way that they know up front that it is temporary. That's really the idea behind a coupon - you are temporarily lowering the price with the option to raise it back. You don't have to call it a coupon since that doesn't fit in your industry, just call special winter pricing.

Or, if you are happy with being 20% over last year, but just don't like wasting your time on all the bidding. I would ask them up front how important price is to their decision. If they say it's important, tell them you don't wish to bid because chances are you will be a bit higher because of your adherence to quality. This may have a positive result as it gives you a chance to tell them how important quality is to you and it makes you seem more desirable to them since you don't seem so eager to bid on the job. Kind of like playing hard to get in the dating world.

[huggytree]

Steve, do you agree with lowing your prices during the typical slow months?

thanks for the advice with the builders..i just think its bad business for any movement on prices...they want things stable, so they can plan...im worried about any up/down movement which would affect my being a 'stable' sub.....if you give them a price reduction they will say 'if you can make money at that level, why not stay there'....the whole nature of home builders is about cheapness....i think ill keep my prices on their work the same....i dont raise it in good times or lower it in the bad times....stable prices..

i am considering lowering it on homeowner work though...i always get the jobs done early and lowing my prices 20% would still make me some profit....im really not getting much homeowner work right now...when i hire employees someday ill have no choice...ill have to give them 40 hours somehow during the slow months.

[CraigFLA]

The market sets the prices and it changes drastically especially during these hard times. We are in a economic time of significant deflation. If you don't find ways to lower your prices and keep up with this, it just means you will have a smaller share of the market. Many competitors are in a survival mode that marks down to a very minimal profit margin just allowing them keep the lights on. These are unusal times and businesses know that pricing now will change as soon as demand pushes higher again.

[Steve B]

If you're only getting 1 in 20 jobs per quote given, and the only reason you are hearing is that it is about price, then, yes I would think lowing your prices makes sense.

I think your strict adherence to that book that tells you how long a job should take has put you in a mindset to make some ill-advised decisions. You own your own business, you are allowed to price jobs based on your actual time. I personally think you're ready for an employee and should be bidding more aggresively so you get maybe 1 in 4 jobs.

I trust your judgement on the way you price for contractors - my comments probably apply more to homeowners.

We all beat you up pretty good in the beginning (on the old forum) about being too worried about being the lowest price. Now, I sense you may have swung too far the other way. Of course, these are just my opinions. It sounds like your business is growing just fine and it's a very valid decision to effectively turn down work by bidding fairly high if you would rather use the time for other things (family, hobbies, etc.).

[thx4yrtym]

If you had gotten 10 of those 20 jobs you quoted because you cut the price sufficiently and had completed them, what would the profit have been and how much would that have increased the balance on your checking account? How many referrals might you have gotten from those jobs? What's the value of that work?

If someone called you today and said I've I've got a project for you that should take three days and I'll pay you $45 / hr plus materials(wholesale cost ), would you take it or stay home?

Just curious.

regards,