pricing in business

**randyt** · 09-26-2013, 10:05 PM

I'm a plumbing and heating contractor in a rural economically depressed area. I've been pushing into another area and recently bid a job in that area. I put the bid together and mentioned to a sales rep at the supply house that I was 20 percent higher on that bid than what I would be in my area. Anyhoo the builder called and asked some questions and wanted to make sure I covered everything, they had two other bids that were double what my bid is. It's hard to believe that the demographics change that much in just forty miles. With prices like that business could be fun again. It has been a twice the work for half the money situation for some time now.

**welderguy** · 09-26-2013, 10:08 PM

Glad to hear things are looking better for ya.

**randyt** · 09-26-2013, 10:14 PM

thanks WG, it has been a tough run. All in the same day I may be working on the shores of lake michigan and then on the shores of lake huron. Talk about run, run, run. Not complaining, if that is what it takes to turn things around.

**welderguy** · 09-26-2013, 10:20 PM

Originally Posted by randyt

thanks WG, it has been a tough run. All in the same day I may be working on the shores of lake michigan and then on the shores of lake huron. Talk about run, run, run. Not complaining, if that is what it takes to turn things around.

I understand!! I had done the same thing!

**JPGreco** · 09-26-2013, 10:29 PM

I do residential construction and know what you mean. Some of the price variations are amazing. We bid town jobs for community development programs and some of the bids are all over the place. I'm glad you found some work. If you can keep your prices a little lower than the local companies and provide quality work, you'll start getting word of mouth work. We do a lot of jobs that way, which allow us to be a little higher than some of the bids our customers get because we've earned it, but even then it costs us some jobs.

**Rick** · 09-26-2013, 10:35 PM

Randy - There are several indicators that you could look at in your surrounding area to determine pricing or at least give you some ideas at what pricing should be. These are just some things off the top of my head but I would certainly be looking at them if I were in your situation.

1. Demographics - Whether we like it or not some folks just make more money than others on average. If the population of a given area is white, middle aged and male the income will tend to be higher unless there are some specific outlyers like residences of sports players or something like that. There are a lot of ways to look at demographics but the US Census 2010 would be one place to start.

2. Average income - This is often split into county by county and city by city.

3. Building permits - This should be public information and available through the county and/or city.

4. Government solicitation for bids - Make certain you are on the list of fed/state/county/city.

Triggers that let you know where the building is going stronger and who is doing the building should help with pricing. It's about what the market will bear and not about what your profit margin is. Although you certainly have to know the latter.

In any case, I'm glad your work is picking up. Building is full speed ahead around here and most contractors and trades folks are into December at the moment.

**randyt** · 09-26-2013, 10:52 PM

thanks for the comments fellas.

I hear what you're saying Rick. I operate out of a small town that is known as a bedroom community. Most of our work came from retirees and weekend warriors coming from the south. After the auto industry faltered they quit coming north for the most part. I was left with the guys making 10 dollars an hour at the local sawmill. I still work for these folks but the truth is they don't have the income for many extras. It's a challenge for me to turn profits on bare bone service work.

Some other challenges is good help. I recently let my service guy of ten years go. Michigan recently legalized a substance for medicinal use and that caused my service guy to go from a decent tech to not worth a darn, I was saddened by this but I can't have this in my company. the main challenge has been the up and downs in work volume. We'll be busy and do fairly well and then be slow to dead for a period of time and there isn't enough profit from the busy times to carry us through to the next busy time. It's difficult to keep good people under those conditions too. hopefully things are turning around.

**Rick** · 09-26-2013, 11:14 PM

I seem to remember you were near Traverse City. Maybe close enough for jobs? Anyway, here's some info on their building permits and a listing of Townships if it helps.

http://www.co.grand-traverse.mi.us/d...it_process.htm

**randyt** · 09-27-2013, 07:04 AM

Ahh yes, The lucrative traverse area, that area is a bit to far. My area is north east michigan, tip of the mitt. The area I'm focusing on is emmet county. I live on the east side of I-75. Strangely it is two different worlds from one side of the interstate to the other especially since the economy tanked.