I read an article about different pricing structures used by contractors. It was written “tongue in cheek” about how some contractors are always the lowest bidder and never lose a job because of price.
It was stated that the low bidder keeps his labor costs down by never paying his employees very much. His attitude was that they were not going to stay very long, so why train and over pay them. They are just going to leave anyways. As far as health insurance, if they want it, they can buy it. When it came to holiday, personal, and vacation time off, his attitude was if they don’t work, they should not get paid.
As far as materials, he uses the cheapest products he can buy. His thinking is that you are just paying for the name and that since most people move after a couple of years, who cares if it breaks. He will never recommend anything that would be considered “good” since it would cost too much and take too long to learn and install. Duct tape was invented to seal ducts so why not use a bunch of it. It cost less to just cover everything with tape than to have custom built fitting made in his own shop or a supply house. Another way to save money is to reuse piping, wiring, duct, parts, etc. that he has removed from other jobs. Most of the time the customer never knows that the parts are used and if they find out he simply gives them a small discount.
Trucks and tools: what a waste. When driving down the street looking at his competitors, he laughs at their shinny truck, ladders, and uniformed employees. So what if one day a week he is late getting to a job because the truck broke down, and so what if the customer has to take another day off from work, look at all the money they are saving. Most of the time, people don’t mind if he borrow there ladders, saws, extension cords, and tools. It is only happened a couple of time where his men were turned away because of how they looked.
He works out of his brother-in-law’s garage and has all his calls go to an answering machine. He checks it a couple of time a week or when he does not have any work. For the prices he charges, the customer can wait. Since he does not do any service, customers just give up and get someone else to repair or replace his systems. He does not have any job files or database. Why should he care what size filter or humidifier the customer has, he is never going back.
He thinks that insurance, licenses, and permits are a big waste of money so he doesn’t have or do any. Customer should appreciate how much money they can save if they don’t have to pay for all these intangibles.
Since he is so cheap, he gets work from some of the free internet sites. He hears other companies talk about referrals from happy customers but he never gets these and wonders why. Some day he may buy a computer and a web site but with no extra money, how could he.
As most educated consumers know, it costs money to deliver exceptional product, people and service. If using cheap labor and materials worked, most quality contractors would do it.
“It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money – that’s all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.” – John Ruskin
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