What are your experiences with negotiating?

Many years ago a guy talked me out of 10% (at the end) that I didn't really want to give him. The next day I went to the library to get a book on negotiating. It's been better ever since.

Dave

We give our customers a fair estimate. If they don't like our price, we welcome them to get other estimates. If they find a lower price for the same work and want to use them instead, good for them, but we aren't going down (well maybe 1% or 2%). We usually present the estimate in a way that makes them feel like they're getting a really good deal, so no need to bargain. Our technique is to estimate each item individually, then offer a discount if we do all or most of the work at the same time. The discount is built in, if they do all the work, they get a package deal, if not, we make a little more on the individual items.

Never had a problem.I would never do it.Gives the customer the impression your picking numbers out or the air.Negotiating?A price for a job?No Way.
Give the customer an honest price and if he doesn't like it have him call someone else.Unless of course you negotiate your mortgage and truck payment every month.10% at the end of job?I would've took him to court.IMO

It was only a $750 job, so I only lost $75, but at the time that may have been three hours work. I was upset because I felt like I listened to his BS for three minutes & paid him $75 for three minutes of BS. Not exactly worth a trip to the courthouse.

It worked out in the end. He called asking for a favor a few months later and I was SO sorry I couldn't help him.

Now I give discounts to people, or even better do additional work without an additional charge. The customers feel good, refer other work to me and I save thousands in advertising cost.

Dave

I think of it as a bad business practice. Why drop your price?

We never negotiate price. I'll give them a fair estimate,if they find someone cheaper,that's fine too.

In the past,I've had builders who wanted a break on price "just to help me out" and "there'll be a LOT more work later"Spec builders are the WORST for this.

I gave them the little over break-even price..and they never call again. The 3 main builders we work for now seldom ask for a price,they call and say "It's ready"

We do elec and plumbing both and can shave a bit off if we get both on the same job,but not much.


Russell

I also do not normally negotiate.

I get $75/hour at a 2 hour minimum service rate. If someone has a bit of work or if they are just more comfortable with it, I give them a lump sum price. That price is always higher than if it was T & M (because I have to cover my arse).

I just got this Kennel job for a little less than $8,000.00
I wasn't the lowest price. But they liked my thoroughness in my proposal, the extras I added (like Surge Protection) and the fact that I went back a second time to MAKE SURE I wasn't missing anything. Oh, and also that the BBB had nothing on me.

I can probably do this job in about 50 man hours and parts/permit costing >$1,000.00...
That's a good profit isin't it?
That's $140.00 per hour if it takes 50 hours. I bet I could do it alone in 40 if I really get on it!

Any negotiation always works out in my favor. They sign a contract with me and everything is then legal.

The people I have problems with are GC's (What a surprise)!
I've been fortunate to have a steady one who is just cool as anything (because he can charge extra if I do) and I do custom homes usually as a PRIME not a sub. I can charge more per sq. ft. because there is no builder marking my costs up.

The "bread & butter" jobs are the RAC's and the houses, but I'll tell ya, man, the service calls are runnin' neck & neck with the bread and butter stuff!
The Kennel is considered a service call in my mind (though it really isin't) because it is above and beyond our regular work.

I average about 70 calls a month from a particular yellow pages market and it costs me $245.00/month. It is a good position to be in. I can afford to pick and choose because I currently am not maned-up enough to do them all and I really don't care at this point. You wouldn't get them all anyway... but, what I mean is that I can just about quote whatever price I want not really caring if I get it or not because we are already busy enough.

I charge $75/hr. and that's that. That is the minimum. Quoted jobs I get more.

I can't afford to give away anything. Between taxes, insurance(s), gas, and other overhead, I can't afford to give away anything I'm already counting on.

This is a great trade to be self employed in. But you got to find your niche. And you've GOT TO deliver quality and on time. If you do, people are willing to pay for it. I've been doing this stuff since '81...I hope I've got my act together by now!

But, ya know, you hit some people harder than others and some people you do it at cost. What comes around really does go around.

I have a wife and 4 kids. 2 will soon be college bound. Wifey stays at home. That's all the motivation I need right there. To give anything away is to take it from my family. Ya know what I mean?

My vehicles (4) are all paid for and things are going alright.
The only negotiating I do is how much they'll give me up front and when they want it done by and that they KNOW and have signed that I get the remainder due UPON COMPLETION.
I wouldn't think twice about taking someone to court if I had to. And I have had to and they always lose because I have what I need in writing --- ALWAYS. It usually doesn't get to court because those who play games learn quickly that I'm not playing.
And, to be honest, usually there are no problems like that. Probably because I dot every "i" and cross every "t".

Anyway, there's my dime's worth.
:~)

Out here, some of my best customers are Legal brothels. I asked one girl: How do you deal with a customer you'ld rather not have to deal with?

Her answer has served me well: "I charge more. It's amazing how much aggravation an extra $20 covers!"

When a customer tries to negotiate a price, you learn a bit about him - he doesn't know what price is fair, and he has a percentage that he is looking for. If he beats you once and calls you to do more work, he is also a fool. Increase your price to cover your first loss, the second negotiation, and give yourself a big bonus for landing on 'Go'.

This is a great topic. It just makes it all that easier to keep my head up and firm on my price. I've only been negotiated out of money one time, and it was the stupidest thing I ever did. He needed the job done now, and I was the only one at his house willing to do the job now. That was just after I got my license, so it was my first contract job. I ended up taking WAY longer than what I thought I could do it in, so the burn was worse at the end of the night. Never again.

I think you might be missing out on the fine art of negotiating, guys. You've all got parts of it. Of course if you don't really want the job, you're not going to budge, or if they're going to be a pain in the patootie you're going to make them pay for it.

The part I'm talking about also is when you want the job, but also negotiate with them. You get the job and the money, they talked you out of a little, and everybody's happy.

If you're interested, you should really check out some books on it. I'll bash at it a bit to give you an idea.

First, it's a contract, so they don't know what portion is labor and what's materials. If they're negotiating they'll probable ask you to break it down for them. It's called unbundling. Don't unbundle. They supposedly know the material cost by walking down the eisles of Home Depot. I may say something like "I didn't figure it at T&M, but at per outlet" & "All outlets are a different rate, depending on the type", or sometimes "I figured the materials at cost & labor at a discount".

There are a lot of things to say other than "That's my price, take it or leave it". A recent example is a job that I figured up and the guy called and asked for a few hundred off the price AND some extra outlets. He's a very nice guy and I wanted the job, and now I knew we were negotiating.

I said something like "Gee guy, I figured this pretty close, and those extra outlets are going to require an additional circuit, I'll refigure it." Now since we were negotiating I figure the extra plus a little for the next negotiation. He asked for several hundred off the new price and I gave him a few hundred off the price. We had a change and I got it back. I also gave him some extra work without a change order & repeatedly told him I wanted him happy with the job. If he'd been a jerk I probably would have limited any comments like that.

I gave a little without giving away the profit and also got the job, which is the point after all. Also as a new customer, it's always good to give them something. If they're nice people they'll know you gave it to them , or just say, "I thought it needed an extra outlet there, but I'm not charging you for it". That gets references and repeat business. The repeat business is where you can get that money back, if you want to. I get most of this work without competative bids. With a lot of people price isn't the most important issue, it's that they trust me to be there on time, do a good job and not try to gouge them in the middle of it.

Dave

[This message has been edited by Dave55 (edited 09-18-2004).]

Sounds like he must have been a car salesman.
I would explain that in this line of work,its time and materials. He is paying for your " years " of experience as a professional.You do quality work. He can be assured that he can sleep at night knowing that his house wont burn down.
Would he want to negotiate on his brain surgeon?

From talking to our PMs I think we negotiate all our jobs.

By the same token I have seen us negotiate the stock purchases.

A PM had a Square D guy in one conference room and a GE guy in another, he had them battling each other to get the lowest price for all the panels and transformers.

They do the same for lighting, cable, fire alarm systems.

That's different though....
AFTER you have the job (which was NOT negotiated) you then negotiate your costs with different suppliers. But even then you aren't really "negotiating" it, you're just price shopping. It the same thing customers do.

Negotiated jobs are somewhat seldom done. We do some with a major U.S. chain but it is the only "negotiated" work we do. In other words, these stores don't go out for bids; we do all of them (they're retrofits). We tell them a price and then they usually take it. Sometimes I find I was too low because I don't get to go out to all of them so then I make it up on the next one and they fully understand and are happy to pay. That is "negotiated" work.
I have 2 guys who do nothing but these stores. They travel the state and stay in hotel rooms. We Over-night their checks every other week to wherever they are. The GC pays for the room and it is the GC we negotiate our price with.
They fax me the amount of work to be done at the particular store and I just sort of throw a figure at it based upon the 50+ we have already done. If I find (through my guys) that we were too low, I tell Clay (the GC) and we make it up on the next one by charging more extra's. This way Clay has an EC for all of his stores and I get a steady cash flow from Clay.
No bids, no competition, no headaches.
They pay 50% deposit/expenses and the balance due upon completion (so he can get a signed lien release so he can get paid). It's a beautiful thing.
This is the only truly "negotiated" work we do. Everything else is either Bid, Quoted, or T&M.

:~)

I would guess it depends on local practices and the size of the jobs.

From what I have been told our PMs and VPs sit down at a table with the GC and negotiate price and scope.

Items like cutting, patching, excavation we try to negotiate out of our scope. Temp lighting and power we try to negotiate to T&M. Most times we end up doing the basic temps under the contract but maintaining and adding to them is T&M.

Bob

That's pretty interesting...

On some bigger work I guess it may be standard practice but not usual (to my experience anyway).

If the job is a "BID", you cannot negotiate anything with anyone; that is illegal! It's called Bid-rigging. But, I suppose once you have the job you could try to work out deals with your GC...or maybe it never went out for bids on AGC or Dodge but was instead just given to you guys (that happens).

The biggest job I have ever been on was a 26 Million dollar (electrical!) hospital on Fort Bragg in North Carolina. We were subs under Centex. I was one of three Electrical Superintendants responsible for my parts of the project and my subs (we subed out alot of the work like the fire alarm, the nurse call, lightning protection, etc.).

We got the job by being low bidder. BUT ----afterwards you negotiate extra's and other aspects as well (the PM's usually do).
I was one of only 5 licensed electrican's on that job (LOL, believe it or not!) and we had over 100 people doing electrical work on that hospital! That's the way it is in North Carolina. It's a "right-to-work" state.

My present company is much smaller than the one I describe above (it's just me and 5 others in the field and 2 office girls). I am the only license holder and I am the only one required to be in the state of North Carolina. It is MUCH DIFFERENT than my Boston, Mass. days where I first started in this trade.

But, anyway, I guess we could say that some aspects are always negotiated in a way, BUT, a BID or a QUOTE is seldom subject to change except of course if they add more work.

:~)

One thing I don't think I've seen throughout this thread but is common on almost any job: change orders.

Regardless of whether you've quoted, bid, or negotiated a custom deal on a job, you should always have a section which deals with change orders. The changes requested after the 'final' design and contract are in place, even on government jobs where profit caps are in place, is often the most highly profitable part of the total job.

I'd say 1.5 x your regular rate for construction phase changes is a reasonable start. Having a good 'change control' process:

1) documenting any request (date it was requested, by whom, scope of change noting what was originally designed, etc.);

2) quote for cost of change

3) schedule of change. Even if it doesn't change your schedule, include a comment stating that it won't impact the schedule. Be careful though, if you're taking time out to do doc prep, design modifications, or such, you could be impacting your schedule. Many, many contractors avoid liquidated damages based on the change orders impacting the schedule and it's perfectly legitimate.

3) Submit the change request you've documented, the cost quote and the modified schedule to the person or office that has the authority to authorize the change. Do not do any work until it's signed and added officially to your scope of work or you could be giving the additional T&M away.

This is valid for small jobs as well as large jobs and even if you 'give' the additional work away as a favor or to garner repeat business or referrals, it's might be a good idea to document that change and document it as an "n/c" item, either in your own file or with the customer's statement.

You might end up being surprised at how much you're giving away if you begin to track the changes which occur.

Dave,
You should have gotten a 10% BONUS/TIP for doing such a small job..

If the electricians out there would stick to their guns, maybe we could make a buck or two. It is possible to lose a bid over $75.

Bid the job so you can make a PROFIT. If you don't then why are you contracting?

If your client doesnt accept your proposal...your better off because if you go down or cut your wages you are short changing yourself..DO NOT LET GUILT RUN YOUR BUSINESS.

Set an hourly rate for each type of work...have a trip charge fee, make 10-15% off parts...YOUR TIME IS WHOW YOU GET PAID!

-regards

Mustang

[This message has been edited by mustangelectric (edited 09-19-2004).]

My previous employer ran into a problem with change orders. The superintendant of the construction company that hired us, the man on the jobsite running the whole rodeo, had NO problem signing all of our change orders. He would sign his name and then write " Verified work only " He said that is the way his employer wanted him to sign tickets.

After the project was complete and everyone sat down to figure out add-ons, deletions, etc. the owner of the construction company said, " The superintendant in the field is NOT authorized to sign change orders, therefore, we are not liable to pay them. "

Well, he then offered to settle for pennies on the dollar. I don't know the exact figures but I do know my employer was very unhappy. Still do not know what the final outcome was....



[This message has been edited by sparky 134 (edited 09-19-2004).]

Sparky:
That's when you take 'em to court!
And you will get your money and then some! They do not have a legal leg to stand on! A verbal contract is almost as good as a written one in court and what the hell did they think you were doing it for; to suck up to them!? LOL!
I must say though that sometimes employers will spin the truth to let you think that they're getting screwed so you don't ask for that raise or expect a bonus or anything....(EC's are known to cry poor-mouth every now and again)....

If it's a bid job that is it a bid.
If you are discussing a job with a customer, it is ok to haggle a little just know your costs and do not give anything away that cannot be made up later.
For those jerks that want to play games and ripp you off after the work is done see them in court. Also get to know your states lien laws. I always file liens on slow pay and those who argue about price. Also make sure that the final payment is due upon final electrical inspection not completion of job. Some owners/Gcs use there punch lists to demand extra work and as an excuse not to pay on time.

hi,
on your proposal or contract put a space for a name of the person or persons authorized to make changes.

i remember one time the formeman on the job did not know his name was the only person authorized to make a change..he agreed with the owner to do some extra work...the foremans company was P.O.'ed because they forgot they wrote his name in...the foreman never told the boss about the changes..they tried to balk but my lawyer convinced them to pay as agreed...

get it in writng my friend..at least you will have that..a businessman always gets it in writing..

mustang

I don't negotiate with individual customers. I had a customer who I gave an estimate for a 200A upgrade try to beat me down. He called me a pirate and a thief among other things and tore up my estimate. I didn't budge. He called me back at the end of the week after getting 3 more estimates and said he had decided I wasn't so out of line after all. I told him I was sorry but I just wouldn't be comfortable working for someone who would deal with a pirate and a thief. I do negotiate with a GC I do a lot of work for. I do some new homes for him but mostly commercial new construction. I cut my price on a new house for him this summer by 15% if he paid 80% of the total job up front. Having the extra cash up front allowed me to buy 3/4 EMT for his next commercial job before it went up 22%. I didn't have to use my creditline, pay any interest on borrowed money, and I saved more on the early conduit purchase than I gave him on the house discount. Borrowing &10,000.00 for 90 days would cost me $300.00 in interest and fees. I will negotiate with a GC by giving discounts for cash up front if I can recover it and then some by operating on his money. We do this a lot on large jobs like churches and other commercial buildings. So does his plumber and HVAC guy. Money up front allows you to buy materials in quantity and when the fluctuating pipe and wire market is down a little. I am fortunate to have a place to warehouse the materials. He wins because he can hold his price over 4-8 months when other GCs have to build in cost increases from their subs on materials. He called me early last spring when 12-2 went down to $105.00 per 1000' and offered to advace me $2500.00 for romex if I would give him a good price on 3 houses this summer. Can't beat that!

"I average about 70 calls a month from a particular yellow pages market and it costs me $245.00/month."

CJS...If you don't mind, what size/type add does the $245 get you? (I'm currently researching yellow book adds myself....)

BUMP.

Is that allowed here? Sorry; I'm new.

... You'd think after 3 years of owning my own business,I'd learn a thing or two...I can thank God tho',business is great,but I do get the occasional haggling customer,and reduce my invoice totals.They try (and sometimes succeed) to tug at your heart-strings by telling you all of their financial woes and tribulations..I give breaks here and there,because I usually get subsequent referral work from them,and as I don't advertise,this work keeps me afloat.
What I may lose on one job,I make up on the next..it usually evens out for me... still, tho',..I wish I could show more assertiveness,and to quote Nancy Reagan, ..."Just Say No"...
Russ