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Construction Programs & Results Inc

We Like to See The Good Guys Win!

Using Old Prices for a New Job

by Michael Stone

I received a note from a contractor recently. He had gotten a call from a potential client for a job he'd quoted 9 months earlier. They want to do the job he quoted them, but at the same price and now he'll lose money on it. What should he do?

First, you should only give out quotes if you have a commitment from an owner. Don't go to all the trouble and fuss of estimating a job and writing a proposal without having a verbal commitment (at least) that they intend to do the work.

When you quote a job, the price should only be good for 3 days. Be sure to tell them that. Are they going to do the job or not? Help them make a decision.

Now if they call you back at some point later in the game, the first thing you say is yes, you would be glad to come back out and discuss their project, but so there are no misunderstandings, material and labor prices have gone up and you will have to re-estimate the cost of the job. If they are okay with that, set the appointment.

If they trot out some of the tired old BS about the economy being bad and that all contractors should be cutting their prices if they want the job, and why aren’t you willing to work for free, then simply excuse yourself and find another potential client. If they wanted the lower priced job, they should have signed a contract when you first quoted the job. Tell me, does your grocery store sell you bread, milk or eggs at the prices they charged nine months ago?

This all boils down to running your business like a business and charging enough money for your work to cover your job costs, your overhead and make a reasonable net profit. If you are not willing to charge the prices you must charge to pay your bills, you'll have little or no chance of surviving financially.

Comments

Our contract states its good for 15 days. This way the client can't drag out an old proposal and expect it to remain that price. It gives us the choice to re-examine it and agree to that price or not.

Michael Stone /

John:

Thanks for a good post on the part of suppliers.

Remember to limit your outstanding credit to one and one half the average monthly sales to any given customer. In other words, once you know what a customers average monthly purchases are, you never let them get in arrears more than 1.5 times that amount. Follow that rule and you will seldom have collection problems.

Michael

I am in Lumber and building products sales and I get this all the time. People come to me with plans for budgeting and estimating weeks before permits are issued. If I don't make the terms clear a market swing can bite me both coming and going. In a rising market I stand to either take a loss or risk the developing relationship by bumping up prices mid way to lockup. In a falling market, I'm exposed to other vendors hawking in and clowning my numbers. Fortunately, this is a great opportunity for me to size up new clients. If they "don't get it" and walk then it's likely for the best.
-J

 

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