On being competitive

In Mike's "Will it fit" post he mentions the cost of labor and being competitive and it gets me wondering. It's a constant problem that I am sure we all deal with to some extent. Whatever the size of your company you have to bring in enough work to keep the workers busy, whether it's a one man band or a 10 crew company. I am finding that there seems to be a fine line to pricing so that I can make what I need to cover the cost of having employees and the costs of taxes and insurance and overhead. Too high and the amount of sold jobs drops. Too low and we're busy but there is no profit in the work. The two things that help the most are a good reputation and a steady stream of quality leads. With those two things going for you it allows one to be less concerned about the competition.

Every spring I know that I am competing with companies that are bidding low to get some work going and to get some quick money flowing in. At this time of year I never quite feel secure in the amount of work that I have booked and am always worried about selling enough work to keep a good backlog. I only need to keep one crew and a repair person busy. I figure I need about 10 tearoffs and 25 repairs per month to keep everybody working. Not sure where I'm trying to go with this thread, just thinking out loud. What are your thoughts and ideas on being competitive?

(I am basing my observations on the northern regions where a long winter kills the cash flow, not sure how things work in the south. Maybe that's a big part of the reason that prices seem to be so much lower in the south.) Another interesting subject.

Well said Mike. If you think about it...it's the manufacturers jobs to go after 100% share of the market, not ours B)

Yes Mike, that's about the way it goes.....Doesn't sound all that bad as you put it.

Maybe I should have said; After 30yrs of it, I'm growing tired of untangling all the misinformation the "competitors" spew forth.

Even if they choose to go with another, I feel obligated somehow to make certain the prospective client is as educated as the situation allows me to enlighten him/her. Over the years, there have been several jobs we didn't land, that the owner has called on us for help, to ensure the contractor they hired performed satisfactory.

Generally speaking, Residential & commercial are vastly different, in so many ways. We've always done both. I lump gov't into commercial, & we used to do a lot of gov't.

I suppose a commercial building owner can be somewhat similar to a homeowner, in that they have a direct connection/responsibility to the structure, whereas gov't does not.

The biggest differences with comm vs res is the fact comm. bldg. owners are generally much more savvy so-to-speak, making for a much more professional/factual arrangement than the typical homeowner who is easily swayed by the silver-tongue salesman. Comm. is far - far easier/less-stressful than residential, IMHO.

I would say, a good roofing businessman, is both a good roofer, as well as a good businessman. You must be both, to be a good contractor.

TomB Said: I suppose Im just getting lazy, but its tiring always having to sell yourself.

Interesting... that's what I enjoy most about it, in my 30th year in the biz.

Had a guy that I educated and did a roof for 7 years ago. Big property manager for some high-equity families. Out of the blue he calls this year and says "ya know that roof you did 7 years ago still looks great, and all the other things you told me are starting to show up in some other properties. I'd like you come down and quote some work for me." He's 2 hours away.

After several tit-for-tat go arounds on the quote, and me standing my ground on the original price, only offering him some price breaks by lowering the specification, he goes with the original proposal, for which all the reasons for doing it were well documented.

As we are saying "good bye" he says, "And I just wanted to remind you that I'm paying you $9,401.00 more dollars than the competition" (it's a $58,000 job), and without a moments hesitation I said back to him, "And I just want to remind you that we are worth every penny, and I think I know you well enough to say that if you didn't already know that, we wouldn't have the job".

Long (at least it seemed loooong) period of silence, long enough for me to start to think "oh crap..." when he bursts into uproarious laughter, 10-15 seconds worth, the just says "I know you'll do me a good job. I don't want to do this one again."

Had another recent one where after giving the guy a good educational talk, told him it would ballpark around $82,000. He says "Holy crap, I have two bids under $50k"

I said "Well, I'm sure you do, and I could give you that kind of number too if I didn't care about being honest and giving you a good product. Who are they from?"

He tells me, and amazingly, both quotes are from ex-HRI people.

I ask if I can have one with the price blocked out?

He gives me one.

That week, I write my quote for the system he should do, which is a total tear, at least 40 squares of metal deck replacement, 2 layers of ISO in an R-21 configuration and a Fibertite roof. I include 50 squares of deck in my price and give him the unit price deduct if we do not use it all. The price is $81K

Then I proceed to quote exactly what the "competitor" quoted. I was at $48K, with unit prices for tear off, new insul and deck replacement.

Then I deconstruct that proposal, pointing out that you can't replace deck without tearing off the roof. You don't have rotted deck without wet roofs.... and start adding the unit prices back into it.

The "competitions" price, with unit prices added into it ends up being $85,000 with a substandard waterproofing material.

I wrote, "You can buy the other system in the HOPE that it will be cheaper, but the simple fact is that I'm being honest up front about the cost, and someone else is just back-dooring their way into your pocket, or they are not going to do the things that really need to be done, and you'll repeat this whole process much sooner than you want to."

It was a very satisfying call I got a week later.

Yeppers, I love this stuff.

It's trying to beat those other guys to the bottom of the crap pile that I would find horribly tiring, so I avoid it by saying in an email to this customer, "so while I've certainly proven that our price is not only competitive in the market, it's the lowest and best value, which is a rare combination in today's marketplace, however should you decide that the "cheap" system is the way you want to go, I'd like to decline the opportunity right now. That lowest dollar price was provided for your comparison purposes only. We'll wait this one out and do it for you next time."

People say that "residential is different", but I know people that prove otherwise. Like twill said, it's a smaller piece of the market, but focusing on that piece of it will pay off. I do very little government work, and I've found that business owners are very much a reflection of the public in general when it comes to spending money on a roof they can't see. They will replace carpet every 10 years without blinking an eye, and spend twice as much as they would on a roof, but spending money on a roof that will protect that carpet for 30 years.... it's like pulling teeth in the hospital maternity ward. Pretty darn tough to find one to pull.

I would also like to say that being a good businessman, and being a good roofer are not mutually exclusive terms to one another. You can be both. It just sort of depends on how you define "good business man".

"And the type of houses they are building- it is either a McMansion that is so complicated they can't pay me enough to do, or on the other end of the scale- the "affordable housing" that is so cheap I don't care to do."

Exactly. What surprises me about the McMansion owners is that many times they are aware that their house was built with sub-par standards. Then they nickel and dime the roofers.

"The worst part was people who were looking specifically for me on the internet and knew nothing of service magic, were directed to service magic."

I'd never thought about that possibility. That's tough.

twill59 Said: Then the internet just brought in a sense of disconnect.

Yep. Thats it, in a nutshell.Disconnect. AL. BBB. Home Advisor (people sometimes think that THEY ARE the contractor!)

That is so true. I signed up with service magic/home advisor for a couple of months about 4 years ago. They sent me dozens of leads for roof repairs. The problem was they sent those same leads to several other roofers. It was first come first serve wins. Most of those "repairs" really needed new roofs that insurance would probably pay. Some had nothing to do with the roof. I tried to develop a rapport with the property owners for future work, but they only saw me as "some guy from service magic". Only a couple of those leads ever turned into work for me. The worst part was people who were looking specifically for me on the internet and knew nothing of service magic, were directed to service magic.

I guess those marketing people really know their stuff. I hear a lot of "branding" going around. HA!

"Then the internet just brought in a sense of disconnect."

Yep. That's it, in a nutshell.Disconnect. AL. BBB. Home Advisor (people sometimes think that THEY ARE the contractor!)

clover83 Said:

Word of mouth has been good us,

Word of mouth has just about died around here in the DFW area. That used to be the my only source of business back in the '80s- and I did well. Since 1990, the population in this area has double- from 3 million to over 6 million. That's alot of people and alot of new housing units. They also brought in a lot of guest workers to do all of that work.

Then the internet just brought in a sense of disconnect. It is no wonder why the stormers and carpetbaggers have taken over.

And the type of houses they are building- it is either a McMansion that is so complicated they can't pay me enough to do, or on the other end of the scale- the "affordable housing" that is so cheap I don't care to do.

The best competitor is usually the best liar.

It's just hard to sell "I'm the best" when the other guys are a better salesman and say the same thing(I guess?), but they are 10-30% lower than my bid.

Word of mouth has been good us, I thank my Dad for that one.

It is a mistake to label those who bid low as disorganized and lesser businessmen."

I agree. I am finding out that it is I who is the lesser businessman.

But I am a much, much, better roofer

Our pricing model has evolved over the years. We used to sell price but no longer do.

It is a mistake to label those who bid low as disorganized and lesser businessmen. I'm sure Kresge's CEO thought Sam Walton was a low baller.

Back in the day we worked very hard to maintain a hefty cost advantage over the competition. We did that, not by offer corner-cutting low quality roofs, but by doing these things:

* We had our own 6,000 semi tanker and tractor and bought in bulk for $1.37/gal when others were paying $2.50 in drums.

* We bought polyester fabric by the truckload for $2 when everyone else was paying $10.

* We bought granules by the railcar for $5/bag when others paid $10.

We were charging $85/SQR to install a polyester fabric and granule roof over gravel BUR, and making more profit (per day, not per SQR) than the guy charging $200 to install mod bit (this was in the 80's).

We have moved away from that model by adding SPF to our systems offered. In a city of 230,000, probably 50 roofers do TPO and mod bit, and maybe 4 do SPF. SPF has allowed us to stop selling price so much.

twill59: "#1 what the homeowners are hearing is 1 day roofing."

Once again, it's funny you should say that. :laugh: I used to work for a guy who's company slogan was "One Day Roofing". I subbed from him for about a year. We didn't always do the jobs in one day either. ;)

One thing is key to being "competitive": Do the roof in one day. When Willie sez that all roofing companies are the same, #1 what the homeowners are hearing is 1 day roofing.

#2 of course, they all have almost the exact same price. Prolly due to the fact that all of these companies use alot of the same people and...fast is faaaast. So not much variance on any "tolerances" or "specifications" ..... (maybe they will cut out for that ridge vent, and maybe they won't) :laugh:

Twill59: "To get out of the "competitive" arena and simply desire to do excellent work for a fair price requires the right customer. What is that share of the market 10-20%? And shrinking."

Funny you said that. When things slow down, I'm always telling the wife that it only takes ONE call. The RIGHT ONE! Concerning replacing roofs the right customer is maybe 5% around here. Most of them just assume everyone is the same and the only thing that's different is the price. With repairs it's more like 75%. Of course those numbers are general because it depends on the source of the call how high the percentage will be on average.

For replacing roofs, I don't have the answer either. I could give some fancy answer that might sound good and all that but I really don't have a good one because more shopping goes on with roof replacements than at the local Wal-Mart Supercenter. With repairs, I just take advantage of what the companies that play the sub-game can't do since most of them are not really roofers to begin with, just business men. I sell ME and the fact that I will NOT be subbing out the work but doing it myself using my 30 years of experience to correct what their sub's screwed up.

"Nobody ever went broke underestimating the American public's intelligence"-Someone

To get out of the "competitive" arena and simply desire to do excellent work for a fair price requires the right customer. What is that share of the market 10-20%? And shrinking.

Wal-Mart competes-- with your tax $'s-- quite well of course serving the other 80-90%... Mostly those that believe in the free lunch program and the Tooth Fairy.

It is amazing to me now even, that the goal for most is to simply apply a "free" roof until the next Ins. Claim for another "free" roof. That seems to be where the "competition" is, and where I ain't.

Again I am attempting to serve maybe 20% of the residential roofing market. At most. How do I market for that???? That is my burning question. My Homework to be done

I have no answers, only observation. Additional rambling thoughts