Would you give a 5% price reduction to renew a contract?

Discussion in 'Business Operations' started by Toro 455, Jan 21, 2013.

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  1. yardguy28

    yardguy28 LawnSite Platinum Member
    Posts: 4,464

    considering the way I operate my business as regards to pricing, no I most likely wouldn't.

    when I give estimates and take on work I give the absolute lowest price that I can still turn the profit I need to make a living. I'm not in business to give my services away but I'm not in business to get rich either. so I personally don't mark up my prices crazy amounts or allow for any dickering of prices. my prices are what they are and if you don't like them your free to find someone else.

    now likes others have said if the account made up a large chunk of my income I probably would consider it. notice I said consider. it still wouldn't be a drop in the bucket desicion for me.
     
  2. Toro 455

    Toro 455 LawnSite Member
    Posts: 238

    Gee..This is back on top? Thanks for all the replies.

    To respond to some of the comments;

    #1, I am not running a business. I"m a solo operator. So I have a lot more flexibility than even a small business. And I figure this will blow over.

    #2, I don't bid jobs. I don't want to fight my way to the bottom of the food chain. I'm sure they have solicited other bids because I've seen competitors vehicles.

    I try to focus on keeping the clients I have. And they have problems other than how to keep the lawn mowed. I at least try to appear to be sensitive to their problems. And I don't make my problems their problems. I wouldn't complain to them about my overhead.
     
  3. weaver

    weaver LawnSite Bronze Member
    Posts: 1,294

    So you're gonna turn down a 20k job over 5%.. That 5% can easily be made back up somewhere else with them, that 20k job can't... just my opinion...
     
  4. Darryl G

    Darryl G LawnSite Fanatic
    Posts: 8,033

    I don't follow your line of thinking here. Time is money, even when it is your own.
     
  5. GaryBK

    GaryBK LawnSite Senior Member
    from Canada
    Posts: 253

    Yes I'm going to turn down that job. When I first started out, for several years I was held hostage by customers like that because some learn that they can bully you and you are so desperate for the work you will do anything to get the business. I then learned that I was a business and in business to make a profit. Time=money. I can't recreate time. When it it gone it is gone. I have to look out for my own retirement savings. There is lots of business out there and I will replace it with business that is worth my time. I often give a price and am told so and so will do it for x can you lower your price. I can tell that they are lying just saying that. (If the guys a real jerk I will tell him that's a good price and to sign up with x). I tell them no, that is my price. I will explain to them why it is my price and why I am better than my competitors and and I will often get the job after this at my price. The OP jumped on the reduction without even consulting with the customer. That was wrong and not professional. Costs are up 5% a year and with a 5% cost reduction he took a 10% hit. I'm not in business to make less every year. My customers get a 10% price increase every year. And they get used to it. Very very few complain about the price increase. They know everything goes up. The few that question the increase will get my explanation that we are labor intensive and dependent on fuel, insurance, vehicles etc that do go up by that amount a year. I used to, long ago, keep my prices steady year after year and then every few years make a big jump with a letter explaining why. That was a big mistake. I would lose customers with a 20% increase every 4 years or so. It is optics. Then I read a business book that said increase your prices every year and get your customers to expect it and you find it is better than a big increase ever so many years. And that book was right on. (From Dave Ramsey). If I cow-tow to a customer like that I lose my professionalism and they will lose respect for me. I am a professional. My trucks are washed every night, my employees are in clean uniforms and my trucks are dent and rust free and decaled. PS I don't want a customer like that. I want customers that make me money. You are not a businessperson if you say you can lose some on this job an make it up elsewhere. Wow what an attitude. No you make it everywhere! If you don't, then just go and get a 9 to 5 you will be better off.
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  6. GaryBK

    GaryBK LawnSite Senior Member
    from Canada
    Posts: 253

    If you do not make a profit, you do not have a business, you just have a self-employed job.
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  7. yardguy28

    yardguy28 LawnSite Platinum Member
    Posts: 4,464

    I actually disagree with this quite a bit.

    even as a solo operation you still run a business. I mention this disagreement because I am a solo operation myself and I hear way to often that I don't own a business because I'm solo or that I don't run a business because I'm solo.

    how can we change this view point if even some of the solo guys are going along with this mentality?

    if that 20k job wasn't a large amount of my income yes I would turn down the job over 5%. or as he said, if your not making a profit.

    personally I don't care how small of a loss it is, I'm not working for someone at a loss. doesn't matter if I can make it up elsewhere or not.

    I don't work, just to work. I don't stay busy just to stay busy. I would turn them down and fill that time with jobs that make me a profit.

    not to mention people talk. do you want word to get out that you dropped your price 5%? everyone will be asking you to lower your price because you did for them.
     
  8. weaver

    weaver LawnSite Bronze Member
    Posts: 1,294

    Ya but Gary you have emploees and sounds like a much bigger operation . You might be able to pass on a 20k job because of a 5% hit but some could not. Those kind of jobs might come easy to you but are difficult to find for others. I'm just saying that 20k is alot to make back up for someone especialy a solo op. I mean if he loses that job, that could very well be the end of his business. Now if he would be losing or in the doghouse i would agree to pass but none of us know what it cost him to operate his business neither..
     
  9. GreenGuysLC

    GreenGuysLC LawnSite Senior Member
    Posts: 325

    I guess the bigger unknown here is the amount of profit. A 20k contract isnt 20k in the pocket. If he is making 10k out of the 20....first off congrats..secondly...yeah..5% may not hurt. I really guess it is a personal decision based on knowing your business. I dont make cuts or deals. I price competitive from the start.
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  10. weaver

    weaver LawnSite Bronze Member
    Posts: 1,294

    I totally agree yardguy, i would'nt work for a loss either. I'm just saying AS A SOLO OPERATOR A 20K JOB IS ALOT TO REPLACE.. Maybe i'm just that small & 20k jobs come easily for you guys but not around here. But like i said none of us no his profit or cost on that job so we can all just sit around wondering..
     
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