How much? Are you crazy?

BY RICHARD P. DiTOMA,
contributing writer

Mr. Jones calls you to his home or business to address his plumbing, heating or cooling need. You arrive and assess the situation. You give him a price to make a repair or perform an installation and he blurts out in a sarcastic manner, “How much? Are you crazy?”

You reiterate your price apprehensively, because he has accomplished the first part of his negotiating tactics. He made you feel uneasy about your price. Then he throws his second punch by saying, “That part can’t cost more than $50!”

I’m sure you have heard this more than once. What do you do? You obviously have a price buyer rather than a value buyer on your hands. He doesn’t know or care about the cost you incur to serve his need. He only wants to get the best job, but at the lowest price, as he sees it.

Matters to consider

Setting aside not-for-profit and non-profit entities, there is only one reason that business exists. That is, to earn a profit. You have a financial responsibility to your company, family, employees, creditors and clientele to do the best job while you recover your cost and maximize your profit so you can continue to afford to deliver excellence to consumers.

Doing “the best job” for the consumer requires you to first address the consumers’ needs and questions in an honest, logical and intelligent manner. Then you must perform the task excellently. But it doesn’t end there! You must also have the financial strength to stand behind your workmanship after the job is done.

To do the best job and earn the reward you deserve for the delivery of excellence to consumers, it is imperative that you know your true cost of operation and your value to society. Sadly, most contractors don’t! That’s the root cause of all contractor problems. Without knowing your true cost you cannot possibly know if you are selling your services at, below or above your true cost. Even if you think you are pricing properly, you cannot be positive that you are correct.

Since most contractors don’t know their true cost of operation, it stands to reason that business pricing procedures in our noble industry are flawed. On average, through the 20+ years I have been coaching contractors on business procedures, I have observed that many contractors shortchange themselves by ay least $50,000 per tech annually. Over the years that adds up to a mountain of money not earned.
Contractors who shortchange themselves and sell their services below their true cost cannot possibly deliver the best job to their clientele. Their lowest price forces them to cut corners. In turn, they cannot afford to perform the best job the consumer was seeking in the first place. It also means that those contractors are moving money rather than making money. Therefore, there is no true profit. Simply put, they won’t have the financial ability, motive or desire to do the best job. Everyone loses.

Ignorant contractors who turn their ignorance into stupidity by quoting prices without being certain of their true cost are a disgrace to and a blight on our noble industry. They are the problem. The foundation of all your prices should always be the true cost you incur in serving your clientele. Since you are entitled to make a profit and since you want to be part of the solution, you must be certain of your true cost and your value to society before establishing any selling price.

How to address Mr. Jones

Fair is a two way street. Since consumers are doing the consuming, they are responsible for paying for your costs as they pertain to their request. They are also responsible to pay the profit you are entitled to for the delivery of excellence to them. First, it’s your responsibility to quote prices that are truly profitable. Then it’s your duty to deliver excellence to consumers.

When Mr. Jones harshly asked, “How much? Are you crazy?” he was attempting to show you that he knows more than you know about your business. If you understand the aforementioned matters to consider, you will know how to address Mr. Jones’s manipulative manner.

The “How much?” and “Are you crazy?” questions can easily be dealt with by explaining that your prices are arrived at by factoring your costs for each task as they pertain to that task. Smart consumers will understand. Silly, ignorant and inconsiderate consumers who don’t want to pay for the costs they incur aren’t worth being your client.

Mr. Jones made the “But, that part can’t cost more than $50!” statement to make you feel like there is a direct correlation between the cost of the part and the cost of the labor and overhead to install the part. He doesn’t care if you make a profit. That type of thinking on Mr. Jones’s part is absolutely absurd. Some tasks are labor intensive, while others are laden with material costs.

Should the installation of a gold plated faucet cost more than that of the same model of faucet that is only chrome plated? What would Mr. Jones think the price should be if he supplied all the material? Would he want you to charge nothing because there was no cost to you for material? Or would he want you to pay him for the privilege of installing the material he purchased?

Tackle his ridiculous statement diplomatically. Explain to Mr. Jones with an analogy that makes his statement appear as foolish to him as it is to you. You could tell him “The Egg Story.” Two eggs purchased at the supermarket cost him about 32 cents. He can have breakfast at home after he prepares the eggs, uses his fuel and utensils for cooking and cleans up after his meal. Those same two eggs prepared and served to him at the local diner will cost him about $5 plus tip, even though the eggs only cost 32 cents.

If you want me to show you how to: address the questions and remarks made by consumers, set up a winning business game plan, arrive at your true cost of operation, earn the reward you deserve, develop profitable selling prices, increase sales or tackle business problems, give me a call at 845/639-5050. As always, I wish you good health and much wealth.

Richard P. DiToma is a contracting business consultant and active PHC contractor with over 40 years of experience in the PHC industry. To receive more info about his Contracting Business, Coaching, Consultations, Business Books, Seminars with Solutions, Customized Price Guides, Customized Business Forms, contact Richard by phone at 845/639-5050, via email at richardditoma@verizon.net, by FAX at 845/639-6791 or mail to R&G Profit-Ability Inc., P.O. Box 282,West Nyack, NY 10994.