Something I seem to run into, more and more frequently lately, is customers wanting my contractor pricing. They will say something like "you pick it up - you can get it cheaper than me".

They fail to realize that I purchase my goods wholesale, and re-sell those goods retail.

How many of you have run into this?

Many times. The sad thing is I see a homeowner off the street get within about 3% of my price. Unless it's over a few hundred the differance would not even pay for the gas to the supply house. Not to speak of the time and overhead. Next time maybe I should say they would save money by picking it up in their little SUV cuase it gets way better gas milege then my big truck. But I don't want them to supply anything but fixtures and fans.

Tom

I agree, Les. But the markup isn't the only thing here....there are certain products I prefer to use. For instance, some of those cheap recessed cans take a lot longer to install, so adding to the price makes sense.

Something to consider as well, even if secodary, is why are you getting this obstacle to arrise with any frequency. I'm not implying that your approach is wrong, but it is possible that there is something you are doing or saying that might be the root cause of this. Not everyone has to drive up in the newest van wearing the crispist uniform, and deliver the best presentation; however appearance, demeanor, and especially body language say a lot to a prospective customer before you even say a word. For example; I would never ask our new car dealer if they bought the new break pads for my wife's car, could they purchase them cheaper and then pass the savings on to me. Other car repair shops might even advertise or promote that feature. I'm not saying that our businesses are exactly like a car business, or that anyone here operates like a shade tree mechanic. I'm just saying that if I started getting difficult resistance from my customers that wasn't usual or unexpected, I would look inside our business for the answer first.

Wilkie, the questions come up not because of what I drive, my clothing, or how it is presented. It's mainly because they haven't done their own homework and used unrealistically low budgets.

Usually it's a simple question like "how much would it be if I supplied the receptacles", or "would it be cheaper if I drilled the holes?". Everyone wants the best bang for their buck, but if the customer is going to "cheap out" to that extent, I would rather them just hire someone else as it's usually an indication that there will be problems getting payment down the road.

I think a lot of this is caused by the popularity of the home improvement shows. People are constantly being pumped up on the idea of "sweat equity" - doing as much of the work themselves as they can. While I can understand the desire to save money, I think most people are misled by the t.v. shows into having an unrealistic expectation of how long it will take to complete a project (after all, it only takes 1/2 to 1 hour on t.v.!), as well as an unrealistic idea of what it is like to coordinate work with contractors. Consequently, people get pretty upset when the job takes longer than they expect - not to mention when you tell them it won't save them any money to drill the holes themselves or provide the receptacles. My approach is to this problem is to ATTEMPT to educate the owner a bit. Example:

HOMEOWNER: Can I save some money by drilling the holes myself?
CONTRACTOR: I can appreciate your wanting to save some money by doing some of the work yourself, but in all honesty it won't save you any money. Actually, it could end up costing you extra. While it certainly doesn't take a rocket scientist to drill a hole, you do have to know what size holes to drill in different areas, where the holes need to be drilled for proper routing, and more. This would require my going a long list of Code rules with you, and then verifying that you are doing it correctly. Considering that I get paid by the hour, you would actually be paying me to teach you how to drill holes. :-) So, you really wouldn't be coming out ahead by doing this. BUT, we could give you a discount if you would be interested in cleaning up the scrap wire and debris and sweeping up the sawdust and stuff behind us. This would allow us to focus our efforts exclusively on the wiring and speed up our work. Would you be interested in doing that?

Having spent a good portion of my life in sales jobs, I can tell you that the best thing you can do is come up with a script of how to answer these type of questions. Always sound sincere, always empathize with the customer, and always try to give them an alternative. Most people are tight on money and just looking to save whereever possible. When they see that you are trying to work with them, it generally wins them over and gains you a long-term customer.

Just my opinion.

Kevin

When we did residential work and the HO started with that "I'll supply the materials" or, "I'll help you." We know at that point to walk away as it is already a lost cause.

There's more than one way to skin a cat.

Now, I realise that buying, stroing, and transporting parts have costs associated with them that, one way or another, have to be paid.
That said, you can't help but make a poor impression on your customer when you charge $10 for something they can get across the street for $1.

Indeed, the carrying costs of inventory are behind both the "just in time" practices in manufacturing, and the Reno-area's largest industry- Warehousing.
(Surpassing gambling in bot dollard generated, and number of employees, warehouseing succeeds here because of various quirks of doing business in California- that drive up costs).

This is why my material markup is minimal- just enough to 'round off' the price after allowing for taxes. As an example, a $100 total material bill will be passed on as maybe $110. Freight is included in this price, where applicable.
Quite simply, I am not in the business of competing with either Wal-Mart or Graybar.

I think what the customer is saying when he asks for "contractor pricing" is a reassurance that you're not gong to milk him.

Now, you still have your business expenses to cover; those rightly are part of your basic rate.

The best way to do a job is to quote a total price, without any breakdown. It's neither relevant, nor anyone's business, just what you paid for something. Figure your price, ignoring any comments from the customer, and present it.
If he says "but Joe can do it for less"- you're probably better off assuring him that he will be quite happy with Joe.
If he wants to change the terms- well, that's a different deal altogether! Maybe the guy is capable of digging a ditch 24" deep. If he wants to supply the parts- fine, give him a list of what you want, let him get them, and agree to deduct that from your price (see receipts!)

My self and another contractor worked T&M for a smart Homeowner/builder a while back who provided us with a "gopher" who went to the store to buy materials when we ran out, bought us lunch, water bottles, cleaned up everything, helped us pull wire, etc. This owner showed up with ALL the light fixtures placed in the chosen locations when we started the finish electrical. We were working by the hour and he paid us every day. He got the job done under budget.

Ther is a sign on the wall at the garage where we get our vans repaired. It says - Labor - $65/Hr If you supply your own parts - $95/Hr. If we go to the GMC dealer for repairs it is $85/Hr and they do not allow customers to supply parts.

I usually tell my clients that the parts they're supplying don't cost very much & that I won't provide a warranty on anything that I don't supply. That's usually the end of the conversation.

When they consider switches and outlets at less than $1 each, the warranty can be seen as much more valuable.

This is one time that flat rate pricing will save negotiations. With switches & outlets the materials are less than 10% of the installed price. It's not worth their effort to buy materials.

Dave

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[This message has been edited by Tiger (edited 03-26-2006).]