ECN Forum
Posted By: A-Line Lowballer or Overcharger - 12/15/04 04:18 AM
When would you consider someone to be overcharging? When his prices are twice as high as yours?

When would you consider someone to be undercharging or a lowballer? When his prices are half of what yours are?

In this case the person you see as overcharging would from his perspective see you as undercharging or a lowballer.
The person who you see as undercharging or a lowballer would view you as overcharging.

My definition of someone who is overcharging is someone who has set his prices so high he cannot sell jobs and get repeat business.

My definition of someone who is undercharging or a lowballer would be someone who has set his prices so low that he cannot cover his expenses and make a profit for his business.

I think it was George Carlin who said:

Did you ever notice how the guy driving faster than you is a maniac and the guy driving slower than you is an idiot?

I have been told by some customers that I charge too much simply because they found someone that would do it for less.

[This message has been edited by A-Line (edited 12-14-2004).]

[This message has been edited by A-Line (edited 12-14-2004).]
Posted By: slumlordworker Re: Lowballer or Overcharger - 12/15/04 05:35 PM
over charging is just being a crook. after a decent profit is made and over head is covered that is it. we have some companies here that will try to suck customers dry. IE...ran an estimate for 60amp up grade to 100 and full re wire all walls are open and utility has allready removed over head lines. big name contractor bid this around 11000( over charge) local hack bid this (1600) low balling is doing work just to be doing it and not worring about profit or overhead or even keeping a roof over your head. I some times an accused of lowballing but I fill real comfortable with what I ask for jobs and on some profit is more than 50%
Posted By: A-Line Re: Lowballer or Overcharger - 12/15/04 05:38 PM
Slum,

Is that 50% gross profit or 50% net profit?
Posted By: slumlordworker Re: Lowballer or Overcharger - 12/15/04 05:48 PM
that is gross

on the Hvac side I average 24.3 % gross

but I do alot of new equipment installa
Posted By: A-Line Re: Lowballer or Overcharger - 12/15/04 06:01 PM
I think I've kept my prices low because it is easier to do that rather than raise my prices and have to learn to become a better salesman.
I think most people (myself included) starting out think they need to keep their prices low so they can get the jobs but I think the reality is that you need to become better at selling.
I really need to become a better salesman so I can raise my prices and still sell jobs.
I would like to have a net profit of over 10%
I think I read somewhere that the average electrical contractor's net profit is less than 5%
Does anyone have any statistics on this?
I don't think I would call anyone a crook no matter how high his price was. If he can sell that job at his price over mine than I would call him a better salesman.
On the other hand the low baller isn't using any sales skills to get the job. He is trying to get the job based on price alone.
I think some people want the absolute best job they can get and so whey pay the highest price assuming they will get the best job.
Others just want to get the job done as cheaply as possible so they go with the lowest price.
I would think that the majority would go with a price somewhere in the middle of the low and high price but I think how you present and sell it to the customer will be a big factor in this.
Posted By: A-Line Re: Lowballer or Overcharger - 12/15/04 06:06 PM
What is the %net profit others are shooting for?
I've heard that 15% to 20% is a good target.
Posted By: Dnkldorf Re: Lowballer or Overcharger - 12/15/04 10:05 PM
A-Line,
This is an example of what I call a crook.
No names here, but we all know who they are.

An elctrical contractor with multiple full page adds in the local directories who sole intention is to "prey" on the elderly. With sales tatics like "fire hazzard" and "this is an emergency that must be taken care of immediately". Then they "force" the unknowing to sign a work release, which is in fact a contract that allows them to place liens and collect attorneys fees against the consumer in case of cancelled payments.

Some may call them successful businessmen for making enormous profits. I call them slugs.

To me this is not being sucessful, this pratice is immoral.

That is my thing about building a successful company, you have to define to yourself what is successful.
Posted By: Electricmanscott Re: Lowballer or Overcharger - 12/16/04 12:13 AM
I prefer to work less and charge more rather than charge less and have to work more to make money. I am also an American(the kind that is for free enterprise, not income redistribution through government theivery)so I support a capitalist society. Short of just ripping off little old ladies I say charge as much as you can. Doctors do, lawyers do, auto mechanics do, and we all know plumbers do!
Posted By: A-Line Re: Lowballer or Overcharger - 12/16/04 01:15 AM
My definition of a crook is someone who makes unnecessary repairs such as telling a customer they have a bad switch when they don't. Replacing it or worse leaving the old one in and just say that they replaced it.
Or someone that collects a deposit upfront never to be heard from again.

Some little old ladies have more money then I will ever see in my lifetime.

The big software guy must be the biggest slug of them all.
Maybe there should be a cap on profit. If you make more profit than this cap you would be fined.
I want to make as much profit as possible in an honest manner. I don't consider me to be immoral for wanting that.


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[This message has been edited by A-Line (edited 12-15-2004).]

[This message has been edited by A-Line (edited 12-15-2004).]
Posted By: Electricmanscott Re: Lowballer or Overcharger - 12/16/04 01:31 AM
Cap on profit? Fined or sent to jail? I can only hope that you are joking or drunk.
Posted By: A-Line Re: Lowballer or Overcharger - 12/16/04 01:41 AM
Yes, I'm just kidding.
What would be considered too much profit?
I've heard a lot of the fast food industries are making 20% net profit. Is this considered too much. I think most electrical contractors make much less than this even the ones with the full page ads. And we're not clogging our customers arteries.

Ever gone to the movies and bought a bag of popcorn & a drink?
I think they even charge little old ladies these prices. The might give them a seniors discount though.

[This message has been edited by A-Line (edited 12-15-2004).]

[This message has been edited by A-Line (edited 12-15-2004).]
Posted By: Active 1 Re: Lowballer or Overcharger - 12/16/04 03:08 AM
It looks like we have differances in opinion of what a company should make. Maybe the differance is how some view their bisiness.

Some have a corprate view that the company is it's own entity who's goal is to generate a proffit for the investors after it pays the workers and bills. Others it seems that the bisiness is their job and the proffits are their income with almost nothing for the company.

A company that does not generate a reasonable proffit is not worth much more than accets at going out of business prices to an outsider, invester, or buyer. I would like to think that someday I will have something of value that can be sold for money twords retirement. A business for sale always has 3 numbers listed. Gross sales, net proffit, and assets.

A few corprate examples of proffit:
Ebay 81% gross 21.5% net
IBM 8.5% net
Home Depot 6.9% net
Abbot Labitories 15.9% net
Johnson and Johnson 19.9%
Nextel 24.4% net
Pepsi 13.8 net
Microsoft 21.4 net (5 year average 29.6%)
XCEL ENERGY (UTILITY) 10.4% NET
Dimler Chrysler 0.2% net (bad year)
You can find this about public tradded stocks at MSN Money.

Why would someone want to invest in a business that makes less than secured investments at a bank?

Here is an example of a job for sale:
ELECTRIC, PLUMBING & HVAC CONTRACTOR #601

OH
Listing Price $130,000
Annual Gross Sales $129,970

Business Description
If you are tired of working for someone else's future, or have been looking for a great opportunity to expand an existing business, we recommend taking a close look at this business. This company specializes in residential and light commercial contracting services that include heating, air conditioning, plumbing and electrical. One of the great advantages of this business is its almost unlimited amount of growth potential. The business is located within 25 miles of much larger cities, with a total population of over 1,000,000. Gross sales of $129,970 with an adjusted cash flow of $52,487. Total Asset Value of $34,000. Located in West Central Ohio. Ask for portfolio number 601.

Sounds to me like the owner is getting $52,400 gross a year and the biz makes $0.

Another one:
ELECTRICAL CONTRACTOR #550

MN
Listing Price $2,400,000
Annual Gross Sales $1,491,053
Franchise Distributorship Independent Business YES

Business Description
This business is for the serious buyer who wants an above average income, a company that will pay for itself, and still has a considerable amount of potential. Their focus is in electrical contracting, servicing, and repair. In addition, this business is located in an ideal area of the United States. They concentrate on the agricultural community of electrical needs. Their forte is grain elevators, feed mills and other related farm needs. The current owners founded this business in 1983, and they have decided to sell so they can slow down. However, they would like to stay on as employees for the next five years. With their 1/2 acre of land and a 4,000 sq.ft. building, there is ample room for expansion and additional sales and profits. Adjusted Cash Flow of $421,868. Total Asset Value of $374,701. Located in West Central Minnesota.

The listing price seems high but at least it shows a proffit on paper.

A lowballer bids out less then the job can be done correctly with a proffit after paying overhead, reasonable emploiee wadges, and overhead including legal requirements like permits, insurance, and taxes.

The only time I would say a customer was overcharged is when the work is sub standard.

Tom
Posted By: Electric Eagle Re: Lowballer or Overcharger - 12/16/04 03:29 AM
Tom,
I used to be the type that viewed my company as a job and actually maded sure the company had no net profit to avoid corporate taxes.

Now I pay myself a fixed salary that is included as overhead and I work hard to make sure the company has a profit. I pay much of that profit to myself, put it's there.

Now I run a business that I hope to sell. It's hard to sell a job.



[This message has been edited by Electric Eagle (edited 12-15-2004).]
Posted By: Pat@Amber Re: Lowballer or Overcharger - 12/16/04 12:42 PM
I think the average net profit for electrical contractors is about 2.8%. Not very good! The big contractor mentioned targets young housewives, not little old ladies. They are the ones making the household decisions while their husbands are busy at work.
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