im noticing the 'price cutters' have raised their prices

[huggytree]

I was losing jobs by $1,500 mid year...i couldnt understand how they could be so low when i was down to 5% profit on a new house...they were well below costs...

Well i kept my price the same and basically gave up on the idea of winning a house again for years. I have kept bidding anyways....i have all of the sudden become the lowest bid against those same price cutters a few times in a row...i figure they realized they had to raise the price or go under....its been too many times to be a fluke...

bad news is i still didnt win those houses because the homeowners all found friends/side jobbers to plumb their houses...3 in a row

[vangogh]

Maybe it's time to raise prices. If you're lower than all the price cutters then people will expect your service to be less than theirs. Not much you can do about friends hiring friends though.

[huggytree]

by the time i realize im not pricing myself in the pack its usually 4 months late...because im still not winning bids ill keep my new home prices where they are until spring or early summer.....or if i get busy again...

since my business is well known my pricing being too low shouldnt lose me any jobs..it can only help.

[vangogh]

Oh, I hadn't realized how long it would be till you find out. Hard to compete directly against the price in that case. Still no reason why you can't raise your rates though. If you aren't getting chosen as the low bid then there's not much reason to be the low bid.

Do you think you the "price cutters" are just reacting to being too low in the past or is this a sign that the economy is coming back it bit where you are and people are willing to pay more?

[orion_joel]

HT i think that the margin you are often looking at on your bids may seem low to you. And maybe 5 % is a low margin to work with. However I know from what you have said before, you set your labor rate based on the union rate taking into account insurance and all. This is not something that all the other plumbers will be doing. While your cost on one hours labor may be $70, someone else may be willing to pay a basic wage to a laborer $20/hr for anything but the stuff they have to do themselves by law. It is quite amazing sometimes how much you can work the figures.

The other thing how many of these price cutters are 1 person businesses?

[huggytree]

the price cutters i talk about are large companies...they pay the exact same union rate as i do...exact same benefits.....the advantages they have over me are apprentices, 2% lower parts, $12 office workers....my advantage is i can get the jobs done quicker than the average plumber... i have lowered my hours bid on jobs to a more realistic(for me) hour amount...i still get them done early, but not too much..just enough to be safe.

i usually dont worry about the other small 1 man shops...many of the new ones can kick my butt pricewise...but they are not well known and not trusted....when i bid its with the big boys typically...the only ones using those new guys are low end contractors. i go after high end or percieved high end.

the new 1 man shops are paying themselves $20 per hour...they dont know any better and i dont blame them...thats what they are doing to survive...compete on price alone..work 80 hours to make 40 hours pay....union controls 90% of my area..so prices are set by the unions.

when i say i have a 5% profit margin that means 5% profit...all expenses are paid for before that 5%....many contractors are 25-50% profit, but they take expenses out of that 25-50%, so in reality they are 15-30% real profit...5% is great if your Walmart(im sure they are even less), but for a small business its giving your work away.. im just glad to see the market rising back to realistic $'s again.....i would have rather seen these guys go under, but i suppose someone else would just take their place anyways.

[huggytree]

Vangoh, the economy is not coming back around here at all...its getting worse in my opinion...i figure they raised their prices because they cannot survive long bidding 10% under costs....maybe they thought the economy would turn around quickly and they wanted to hold onto their good guys...i think thats alot of it...not that its obvious that its not coming back anytime soon maybe they went back to a normal profit margin.

Ill keep my prices at 5% until i start winning a few new houses again. i can survive at 0% profit if i have to, so why not leave it at 5% for a few months....there arent many new homes being awarded right now anyways.....homeowners are getting 5 bids from contractors, contractors are getting 5 bids from sub contractors...it ends up 15-25 plumbers are bidding on 1 house.....sometimes i have 2 contractors bidding on the same house...its funny to see the same plan coming in the mail...makes bidding easier

[phanio]

In times like these - it is good to play with your prices to see what will stick.

Here are couple of reasons -
1) you have time - if something does not work - you can always go back before your season really ramps up.
2) The new economy (and we are seeing signs of improvement) will be different from what we just left or what was before the decline. Thus, your 5% may not fly in the new economy - you might have to charge more as all your costs will go up (rising economy, rising prices) - don't want to be stuck with static revenue when inflation hits.
and 3) maybe the new economy will not be so focused on price but on quality. And, many businesses that price too low - regardless of their actual quality - are seen as cheap (not cost wise either).

I think all businesses can riase their prices as long as 1) they deliver on what they promise and 2) create great marketing to show why your product or service is better, thus the higher price.

If you have time - play around with it and see what sticks.

[huggytree]

when i get more than 1 call a week ill consider raising my prices...until then ill keep my prices the same and pray....(a good day is 6 calls)

thanks for the advice though...i like your positive attitude.

[vangogh]

Dave from what you describe people aren't hiring you based on price. If you're currently one of the lower bids and not getting hired then it was certainly more than price that entered into the decision.

Odds are the same is true of the people who are hiring you. They're probably making their decision based on your reputation or a recommendation or something other than price. If they'll hire you at $xx they'll likely also hire you at $xx + 10%

You don't lose a sale. You just make 10% more for each sale you're going to make anyone. And you have 10% of your price to play with if a customer does seem hesitant to hire you based on the price.

You know your business better than I do of course. Just something to consider.