Prices too cheap

[agg221]

Hi Hodge,

 

I am not in arb - I am in a totally unrelated field (contract R&D) but I am highly familiar with being undercut, mostly in my field by one man band consultants who typically purport to offer the same service until it all goes wrong because they can't provide the depth and breadth of knowledge to correctly identify alternative approaches. It's a reasonable sized company (700 people) and probably has the highest hourly rate in the field. I run a group of about 20 split over two sites, being responsible for my own group's P&L as a self-sufficient cost centre with centrally dictated overheads. I am responsible for turnover of about £3m annually.

 

I entirely recognise the difference between what I described above and the fully insured professional company which you are operating. However, my point was that the only real additional costs here are depreciation on PPE and depreciation on training costs and the annualised division of insurance. I'm sure a professional company would take a different approach, but it would probably be quicker, which would offset costs. As such, it is very difficult to justify the price difference in this particular job, since even allowing for 50% utilisation you would still be presuming added costs of over £125k annually, which is not realistic.

 

The other point I was making was that if this discrepancy in costs remains so large, jobs will go to the grey market on pure cost grounds - how many people can raise £900 to have a tree removed rather than £350, and how many are going to do so when they have a choice?

 

Also, for the record, none of it ended up dumped roadside due to connections of the people doing the job - all disposed of legitimately, at cost.

 

Alec

Edited January 2, 2013 by agg221

[agg221]

I'd say in that example the £900-00 was way over priced.... I bet if the customer had got a few more quotes he'd have had a couple around £300-00 to £350-00 all in and done by a pro 2 man team.

 

I think that's highly probable, but if quotes were being skewed by the nature of the cars on the drive this could be a significant factor. How, as a client, do you know which people will quote you based on your supposed income and which will quote you based on their actual costs? Also, as a potential client, how do you know which companies will be 2-man bands and which will be large companies with high overheads?

 

It's relevant, because coming at it from the client perspective, you want a simple solution to a problem. You don't want to wait around for half a dozen people to turn up (or not) possibly taking time off work to do so. You want a quick and simple solution.

 

Interestingly, it was left entirely at the client's discretion how much they chose to pay, and they paid something (including stump removal) pretty much on the money which, to me at least, suggests that not all potential clients are out to rip off all potential service providers, but as per the origins of this thread, the amount of money to be earned has to be considered realistically.

 

Alec

[Hodge]

As rob has said £900 for the tree mentioned seems far to much. When I price a tree I price it to be fair like most people on this site would, cover my costs and make a bit for myself, that sounds like half a day for 2 men and the waste £350 ish. I agree with your bit about the Bentley thing and that is wrong.

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That would attract more 'have a go merchants'.

 

Also, pros wouldn't make good entertaining viewing. Have you ever seen S&S Aqua loggers? Holy cow.

[Ty Korrigan]

I admit, if its a job any Good Ole Boy could do with a ladder and a top handle then I'll drop my price.

In summer though, when burning is disallowed with heavy fines I make the point we have a chipper and can remove the waste easily.

If its a tough nut of a tree then I name my price, some I win, some I lose.

I also know just who works for what price and so drop my rate accordingly.

Over the year its all swings and roundabouts, so long as I cover my costs and make a profit on a couple of days its all good.

But I won't work for a loss if I can help it...I'd rather stay home.

My grinder makes up for any dud days or trees prices close to the lower margin. Its an earner!

Ty