Right now, we have a thread going (The Scandalous California Contractors' Board) that is drifting into "so guy is cheaper than me."

I submit that "cheap" is not a business plan; it's a bankruptcy plan. "Cheap" can only have value when one is comparing bushels of apples; that is, when you are no different than another guy.

Sure, you can take steps to minimize overhead .... to a point. You can live in a tent, flout laws, take shortcuts ... only so far.

The 'key' is to differentiate yourself from the rest of the pack. Here are some ways I've seen it done:
- How you present yourself matters. A professional appearance will, in many cases, eliminate any desires a customer might have to hire some guy who looks like a bum;
- Niche marketing. Doing something someone else might not do very often, or have to hire a sub to do for him. (Do you have asbestos certification?);
- A single outstanding characteristic the customer identifies with your firm. For example, being 'fast,' or causing minimal business disruption, or sticking with a job until it works- or no charge; and,
- Scheduling flexibility.

You have to communicate your strengths to the customer. A name like "911 Sparky", for example, will suggest that you are available at odd hours for critical work. Or, a simple claim that hits home with the customer, like "The only guys with their own brooms."

What you want to do is limit the customers' tendency to consider alternatives to hiring you. You want him to think "sure, I can hire XYZ, but then I'll have to wait six months ... while YOU are ready now."

This is not idle chat. I have one customer ... a governmental body ... that sometimes has to hire someone other than me. I manage to keep 90% of their business, though, because the other guy always manages to look poor when compared to me. I "shine" by knowing the building, and fixing the stuff the other guy either flubs, or gets wrong. While he's arguing over the punch list and change orders, I'm setting things right. By the time the dust settles, the customer is thinking 'I really wish we had Reno do the job.'

I call it the Wal-Mart factor, it’s the same principle that has made Wal-Mart the giant it is while gutting Mom and Pop shops all over the country. Who would you rather deal with for buying a fishing license or a new shotgun? The mom and pop gun shop on Main Street, who by the standards you rightfully promote in your post are a very valuable commodity, or is saving $20 more important even if you have to deal with that booger eating moron in the blue vest?

Sure if you are courting a client then marketing is a powerful tool, but I have somehow cornered myself in a market that only cares about price, manpower and performance, and by performance I mean can you get a performance bond.

John, define cheap....

(this should get interesting)

Sure, Dink ... though a basic mastery of the English language ought to have made my meanings clear .... I can think of at least one Rhodes scholar who had trouble with the meaning of the word "is" .

"Cheap" is the business model of simply having a lower price than the other guy. The focus is on price alone.

John Ruskin cautioned that there was no product, no service that could not be done a little worse, a little cheaper ... and that the customer who considered price alone was that man's lawful prey.

If you allow yourself to become a commodity, no different from anyone else, then price alone will separate you from them.

You don't sell 'price.' You sell 'value.' It is your job to make sure the customer knows he will get the most value from you. Often the 'value' you add is an intangible, something not found on the balance sheet.

There are various franchise operations around; a look at their web sites will show this focus on value. Quite often, these operations are among the most expensive operations in town ... and the most successful.

For every "Wal-mart" story, there are dozens of "7-11" success stories. Indeed, merchants whose focus was on value have continued to prosper .... Macy's has no fears!

There is a reason this site has so many pictures of the failed attempts of incompetent electrical work. The reason is: we get called after all the 'cheap' guys have tried, and failed. This is our chance to shine, to prove that we are worth more than the handy-hack on the street corner.

Or, look at it this way: When have you ever heard someone brag about how cheap their doctor or lawyer was?

Definition of Cheap - Anyone who charges less than you

Conversely, Definition of Overpriced - Anyone who charges more than you

I value respect and loyalty. If someone calls looking for a cheap electrician, I get insulted and give them to the competition. If they're looking for someone they can trust, I'm interested in doing business with them.

One of my favorite clients is someone who's had a previous experience with a bad contractor.

Dave

They may have no fears, but I know from experience that when you bid one of their stores if you aren’t “cheap” you won’t do the work.

Try selling value to Wal-mart, Petsmart, Homedepot, Lowes, HEB, Frys, Best Buy, Bed Bath and Beyond, or any other big box retailer and see how far that gets you. Been there done them, and the only thing they want is “cheap”. Sure they want high end gear and fixtures, they see value in that, but they don’t want high end labor.

We all value loyalty and on bid jobs your quality and ability to complete may keep you on the bidders list, but that's about all the loyalty I see in this end of the business.

There is more than one market here, and yes there is a market you can sell value but it’s not the hard bid market. We are not doctors or lawyers, and people do brag about how “cheap” they can get their construction services.

John, Ito.

What about the thing know as "percieved value"

All of us use it, so how do you get around it?

80% of my jobs are hard bid, so I mostly get judged by my number, which seems to define the perceived value when its juxtaposed against everyone else’s number. When work is good and labor is short the price goes up, but when there is not much work and guys like me get hungry the price goes down. I am not really getting around the perceived value, I am just aware that it fluctuates and there is a sweet spot between the floor and the ceiling that I constantly try to work and hit.

The problem with playing the market like this is new contractors, and hacks who come along and lowball. Granted if a contractor comes along and does the work for less money then he redefines the perceived value, but what happens when he does this and in the process puts himself out of business?

Remember going belly up does not always happen on one job, it may take an inexperienced contractor several bad jobs to exhaust his resources or he may be able to cash flow his way into trouble over a 6 month period, then go out of business. So what does all that mean to the first client who got his project done for less than cost? Not a damn thing, he only remembers that he got it wired for $5 a square foot, and damn was that a great electrician.

Keep in mind I am not taking about bidding service calls, I am taking about hard bid commercial jobs $5k and up. I do not work the residential or service market.

This topic holds alot of meaning right now in our trade. Out here in Cali, there are a lot of problems being caused by the Wal-Mart mentality.

In a good portion of my business these days, I'm dealing with property managers, who are basically expected by the property owners to deliver everything with the bottom line being the predominant factor.

At the same time, crap-quality lighting and "electrical" contractors are coming along, hiring unqualified workers at slave wages, and turning out sub-standard and, at times, down right dangerous garbage, but charging way less than I can even consider charging without losing money on the job.

The result? Some of my work is going elsewhere simply because they undercut my price. As it currently stands, I'm starting to see some clients return to me because the jobs they've gotten done for cheap have failed, but it's a slow process. And, worse, some business does not come back to me because even unqualified people can accidently get a job right sometimes.

What I offer to my clients, that keeps me in business, is professionalism. All the way, in every aspect, I dedicate myself to acheiving quality - show up on time, return phone calls, work quick and clean, go the extra mile to make sure the client is happy, and providing ongoing support for my work.

Also, talking to clients with a genuine interest in what they need and an apparent concern that they are happy goes a long way.

"Also, talking to clients with a genuine interest in what they need and an apparent concern that they are happy goes a long way."

The guy working for the bottom line property manager, we have a saying about them I have seen them come and I have seen them go, well today another bottom line EC bit the dust, I was at the gas station and seen his vans there, I said to the owner why is he getting all the trucks serviced at once, he said he's not, they were towed in by the repo company, He spent 8 years low bidding his way out of business.
The problem is, these I got a lot of work guys, just create a false price, over the years, that makes a ligit price look bad to the customers.

we've become a society where we believe everything is interchangable...want to find a new dishwasher, go online and compare prices...want to find a new car, go online and shop prices...why not look for electrician's the same way? I mean, there is only 1 code, and we should all follow it, right? So, all of us should do the same job, why not shop for the lowest price?

The "car" comparison is appropriate. If you're comparing identical cars, price can easily become the prime consideration. This even applies, to a lesser extent, between similar cars.

Yet, few folks ever consider a minivan and a convertible at the same time. Rather, they get an idea of what they want, then seek out those who might have that item. They will pay little attention to those who don't look promising.

If you were looking for a sporty little convertible, would you visit "Joe's Work Trucks?" Would you expect much service after the sale, from a guy who does business in the Wal-Mart parking lot?

The trick is to NOT become just another ad in the phone book. I've had lots of business develop from casual contacts with customers' employees. The simple fact that their boss hired me is all the recommendation they need, and sets me apart from all the other 'unknowns.' Or, I've had several pump jobs develop after a plumbing company found that they could rely on me.

While everyone says "price is important," I think price only enters the question when the customer has no other way to separate "the sheep from the goats."

NEVER lat the customer see you as just one of the crowd.

how would you go about that?

there are contractors on this very board who believe that price is the key selling point.

if we can not convince our own industry, how can we convince someone who doesn't have a clue what it takes to do what we do?

what are your thoughts?

I had a guy call me that needed his basement wired. He said he had three other electrical contractors coming out to give him an estimate and if I could beat their price by 10% I could have the job.

When I asked him if low price was his only concern and was he not concerned about the quality of the work, he replied "If you're all licensed your work should all be the same."

I then asked if he felt all doctors and attorneys were the same or did he believe some were better than others. If you're having heart surgery would you be trying to find someone who will beat everyone elses price by 10%?

He replied, "That's a different technology. Electrical work is not the same thing."

You're right electrical work is not the same thing. If the heart surgeon screws up you might die. If the electrician screws up you're house could burn down and your whole family could die.

I had another customer that was a welder. When I asked him if he felt all welders were the same or did he feel some welders did a better job than others he understood my point and agreed that all electricians are not going to be the same. Some will be better than others and picking one based on price alone is not a good idea.

so...did you get the job? or did you only beat them by 9% and lose it?

Unlike some contractors I keep my overhead very low so I was able to beat these other guys by not just %10 but %20.

I don't have fancy expnensive vehicles.
I don't have high gasoline expenses.

An energy bar and some chain lube is all I need.

I offer 8-hour emergency response service. I guarantee I'll make it out to their emergency in 8-hours. Unless of course I get a flat or throw a chain.

Here's a picture of me heading out to an emergency service call.


This is me taking the client out to lunch after the repair. I'm working on enclosing the back so I can add my name and logo to the sides.


This is me heading out to a larger commercial job.

Is the triple tandem legal?

OK, I give up .... where in the world do you find either the bike, or the trailers?

As long as you don't exceed the speed limit.
This requires two energy bars. Unless going down hill.


http://www.rhoadescar.com/lobby.htm
http://www.bikesatwork.com/bike-trailers/

A-Line,

LMAO...you got all the angles figured out.
Good job
Please continue to peddel your wares.

Sales is a funny thing, and there are many ways to do it. While not an expert, there are a few things I have a hard time selling, and fear is one of them. The whole comparing yourself to a doctor and your house is going to burn down is a losing proposition and at best you come across as more arrogant than professional.

If you want to sell something and be a commodity then in my opinion you would be better off selling yourself, as a clean, professional, licensed, bonded electrician with references and experience, who can get the job done correctly and on time.

Part of the problem with the residential market and working directly for home owners is that they are not big repeat customers, and they don’t understand that while there is always a cheaper price out there, that there is really only one right price to do it correctly. If you can sell that, with your professionalism then it’s a win win deal, they feel good about your services and you get work for a fair price.

I am not saying I know how to do this well, its just that if a deal falls through you need to be able to leave the door open in such a way the client feels good about calling you back if they realize you were right. The whole “your house is going to burn down” angle may have left a bad taste in their mouth and people don’t like to admit they were wrong.

Just something to think about.

I completely agree. I don't generally say things like this but this was the third time this guy called. The last time he called he had quite an attitude and was talking all cocky about how I was going to have to beat these other guys by 10% if I was even going to be considered for the job.

The first time he called the office he was told we have a dispatch fee to come out and give an estimate.

The second time he called I answered the phone and he said he wasn't going to pay a dispatch fee but was willing to let me come out and give him an estimate.

I told him we charge a dispatch fee for this and he hung up on me.

The third time he called he copped an attitude and told me I could have the job if I beat the other guys by 10%.

I'll admit by this time I was getting a little irritated by this guy and started in with the doctor comparison. I wasn't at all worried about not getting this job. I didn't want this job.

I had a feeling this guy would have been a royal pain.

LOL... Yeah he sounds like a real tool. You probably would not want to work for somebody like that; they end up nickel and diming you to death.

In the past I have just walked away from guys like that with no regrets, because the last time I did not walk away it cost me.

I did a job one time for this guy that told me it was his job to make sure I did not make any money on the project, and refused to pay for changes. He held my draws for 90 days and then held my retainage for another 90, and only paid after a lien notice. Then warranty called me to death and threaten to sue me if I did not extend my warranty.

Sometimes it’s just better to walk away and let the guys who like to lowball take jobs like that.

Thanks for that tid bit, we need to stick together if we are going to protect our nest eggs.
By the way I'm a new contractor.

my condolences cook...apparently you aren't any smarter than the rest of us

Problem with Trunk Slammers?

Sorry, guilty here... I apprenticed for a trunk slammer for a year, and he was far from unsophisticated. His hands moved so fast they smoked. He could do trigonometry in his head. Everything he touched looked crisp and tight. His office was a single bedroom house which one of the guys lived in. Now he lives in a 1.5MM mansion.

He taught me well, but living on two Rockstars a day wasn't my thing. I also learned its better to work somewhere that provides health benefits and a good pension.
All in all it was great to learn what it really meant to: 'slam&jam' 'hang&bang' 'hack&slash' and so on.

ok...so he made out well on the backs of his employees...



doesn't sound good to me. congrats to him for success at the expense of others. Not my goal.

mahlere-
I have a similar situation to steven76 but I also understand your point(I think)
I was trained buy a contractor who had me show up for work in the morning at his house. He too had hands faster than the eye. He literally had to slow down so I could see how he was making up a box. He also led by example. When my foreman looked at an attic crawl that both he and I thought was too tight, the boss, quite rightfully disgusted, came up and wriggled through it like it was nothing. I followed and to this day that has been a lasting impression on me. But only one of many. This guy knew what it took to get the job done and wasn't afraid to do it, know matter how hard it was or how long it took.
Yes I worked long and hard for what most would consider low wages. I took a significant pay cut to change from a go nowhere career to electrical.
Yes, his raises were small at first, but they came often and got larger later. He expressed gratitude in xmas bonuses as well. They were pretty decent. If I really needed money he would loan or give it to me.
And most important of all he would talk to me about code, business, the sleazyness of some homeowners and most GCs.
His example of what a motivated individual can do if he wants to, and his sharing of the ins and outs of what he had learned in business made my the free contractor that I am today and I will always remember that.

Now as far as surfing on the backs of others.
No I do not want to do that as employer and that's probably the main reason that I'm not an employer now. I would want to pay my employees so well and demand so little that that I would be inundated with people who would drive me out of business in no time at all.
Yes, I did resent knowing that 15%-20% of my annual income was based on bonuses that I couldn't necessarily plan around year to year.
And yes, I did resent the back breaking pace and complete dedication to "The Schedule" that was the central if not only the focus of my life at that time. But it helped forge me into a man that "get it done" "deal with it" or "whatever" not only in my professional life but my personal life as well. In hindsight I think I got the deal there.

Are you an employer and if so how do you make it all balance? I would like to know.
Vince

Chico,

The balance is hard. I tend to overpay and that's just the way it is. I talk to local contractors who think that paying their guys $40k a year is a lot of money. And it is when their pricing only allows them to bill out $120k a year for that man.

But in my area, try buying a house for under $300k. If a guy can't realistically make $60k+ (plus benefits) he can't afford to live around here. And I would even say that that is low.

But with burden, that guys is going to cost you at least $72,000 (roughly 20% burden) if you supply health benefits, add on another $6-$10k depending on what you offer.

So suddenly that guy is costing you $80k/yr.

Now, guys like your old boss, and cooks old boss, I'm not sure they understand this...or if they do, i'm not sure that they care. Cooks old boss didn't pay his help much, demanded a lot, and was able to purchase a nice house for it.

I'm not saying "power to the people", I firmly believe that if you take the risks everyday to own a company, and employ people, you should reap the rewards.

I just firmly believe that the best way to reach all of your goals, is to help others achieve theirs.