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  • Capitalism?

    If company A charges $500.00/hr. rate to cover all expenses and company B charges $125.00/hr. rate and is able to cover the same expenses for the same job in the same area....Which company is right?

    Both?
    Even if both companies stay busy?
    Should one increase prices or the other increase efficiency?
    Should a company pass on the savings for its efficiency if they don't have too?

    Wondering.

    J.C.

  • #2
    Re: Capitalism?

    Both but chances are the 125 business will stay in business longer and be more successful with all things being equal. Just because you charge more doesn't mean you keep more.
    Buy cheap, buy twice.

    Comment


    • #3
      Re: Capitalism?

      I can't speak for plumbing (if your question is pointed in that direction), but I'd say that company A needs to get its act together, or company B will be "taking its lunch" before too long.

      This of course would be quickly evident if the market is competitive. If on the other hand, there's more demand than either company can handle, than I guess you can "get what the market will bear". (Or your conscience allows!)

      The latter is much like the commercial art business (Ad Agencies). In that market, you can do a job for one customer for a price that may well be significantly more than what you might charge another customer... and get away with it! (The perception all too often being that the more you charge, the better you are.)

      Myself, I prefer to figure out what I need to live on, cover the expenses, how much clear profit I need to bank (for those rainy days, growth, security, etc.); then, I set my hourly rate based on the sum of the all that. In my business, I also need to take into account that I don't get paid for sales calls, RFQ's, and other such things. Likewise when I do work for industry, there's no up front fees, no pre-pay for materials, and invoices are rendered only on full completion of the job.... then I usually have to wait 60 to 90 days after invoice before I get paid. But, all things considered, I've done quite well and when I was in business for myself, I very rarely had a day when I wasn't up to my eyebrows in work. (For me, the amount of "repeat business" was the measure of success.)

      Reading one of the other threads, I look at the example set and wonder what the fellow is thinking. It's almost like going out and building your empire first and then charging your clients an absurd price in hope that you will cover the secretary, office, company vehicle, insurances, and an abundance of down time, as well as a large amount of non-productive activity. While you may well have a large number of creditors if you're General Motors... Joe's Garage probably wouldn't survive too long on the same business model.

      Comment


      • #4
        Re: Capitalism?

        Does it really cost that much more to build a BMW M3 then a Ford Focus?

        Company A may focus more on customer service, maybe they guarantee service in an hour, and company B has an nswering machine and will get your Friday P.M. emergency call monday morning? Maybe company A will give you $100 if they are late for a scheduled service call and company B tells you they will be there "sometime on Tuesday". There are way too many variables to even start considering the difference.

        Comment


        • #5
          Re: Capitalism?

          Originally posted by Masterplumb View Post
          Does it really cost that much more to build a BMW M3 then a Ford Focus?

          Company A may focus more on customer service, maybe they guarantee service in an hour, and company B has an nswering machine and will get your Friday P.M. emergency call monday morning? Maybe company A will give you $100 if they are late for a scheduled service call and company B tells you they will be there "sometime on Tuesday". There are way too many variables to even start considering the difference.
          Understand what you're saying. But my original question is for the exact same service. Maybe I should have stated it better.

          J.C.

          Comment


          • #6
            Re: Capitalism?

            I think milk should be $79 a gallon.



            I mean, comon. All the motions from breeding a cow to have a calf, to raise and nurture that calf to an adult cow to make it produce milk,


            feed it, give it shots and lets not forget steroids! to bring that cow to a full producer.


            Then think about all the steps to get that milk out of the udder to the plant to formulate it and hell I forgot about the guys who have to make those darn plastic jugs.


            Let's see......we got a cow, some milk, and a bunch of transporters that bring it to your shelf.


            I was wrong.



            I say around $273 should cover a gallon of milk.
            Northern Kentucky Plumbers Twitter Feed | Plumbing Videos

            Comment


            • #7
              Re: Capitalism?

              Chance are company A does not disclose the hourly rate which makes it tough for the customer to make an informed decision. Many years ago (20+) I was working in a senior housing area and an old woman (90s)came out and asked me to look at a job she just had done. The bill was over $750 to install a 4" PP center set with pop up, two new supplies and a maintenance cleaning of the lav drain. At the time I was paying about $27 for the faucet and pop up. I told her sadly it was about $150 job and asked her why she agreed to such a high price. She told me the plumber told her she had to decide right away and he would apply the $39 trip charge to the job.

              Mark
              "Somewhere a Village is Missing Twelve Idiots!" - Casey Anthony

              I never lost a cent on the jobs I didn't get!

              Comment


              • #8
                Re: Capitalism?

                Originally posted by ToUtahNow View Post
                Chance are company A does not disclose the hourly rate which makes it tough for the customer to make an informed decision. Many years ago (20+) I was working in a senior housing area and an old woman (90s)came out and asked me to look at a job she just had done. The bill was over $750 to install a 4" PP center set with pop up, two new supplies and a maintenance cleaning of the lav drain. At the time I was paying about $27 for the faucet and pop up. I told her sadly it was about $150 job and asked her why she agreed to such a high price. She told me the plumber told her she had to decide right away and he would apply the $39 trip charge to the job.

                Mark
                Sad story to me. But some people in business apparently don't think so. I'm curious as to the ethical point where non emotional capitalism and what's right or enough meet for the majority of business owners.

                Still wondering.

                J.C.

                Comment


                • #9
                  Re: Capitalism?

                  Chances are the lower cost company has their tools paid off and may be just a specialty company. So of course the overhead should be less, thus they don't need to charge an over whelming price. Specialty companies only need so many tools, where as a company who ventures into many areas are constantly buying a tools to do one job, maybe two jobs and all the customers have to pay for those tools and equipments.

                  All my tools are paid for and I can beat the bids of most contractors in my area. If only more of the H.O.s would get more then 1 bid around here, I would be swamped big time. My Insurance is also probably cheaper then most others. I have never had a claim against me and I have been paying for many years. I think you guys would be shocked if I ever told you how much I pay per year.

                  So the cheaper bid, can say that this company has been in business for a while. But for some reason, H.O.s will shy away from this, I wonder why (the cheapest bid does not always mean its from a hack). I look at Ricks response about the charges you Plumbers are always talking about. The way he charges is a lot like me and we keep getting past customers coming back to us.

                  Should I ever venture into excavation and when it gets slow, I still have to pay for those heavy equipments that are sitting around, where as then all the customers will be paying for my equipments. So I stick to my expertise of building and remodeling, which keeps my price down and I don't have to invest into more new tools and toys. Its also easier to sub and hire, then it is to get behind on payments for something you never should have went into..
                  Great Link for a Construction Owner/Tradesmen, and just say Garager sent you....

                  http://www.contractorspub.com

                  A good climbing rope will last you 3 to 5 years, a bad climbing rope will last you a life time !!!

                  Comment


                  • #10
                    Re: Capitalism?

                    Originally posted by JCsPlumbing View Post
                    Sad story to me. But some people in business apparently don't think so. I'm curious as to the ethical point where non emotional capitalism and what's right or enough meet for the majority of business owners.

                    Still wondering.

                    J.C.
                    This kind of goes with another thread you started earlier but I had a 18-year old helper who after a year or so into the trade decided he wanted out. I suggested since he likes flowers perhaps he should become a florist. That was enough to convince him to stick it out and 27-years later I sold my shop to him. Now 9-years later he is still running my old shop although it ends up he was a better plumber than an owner but he is also working for third generation customers. He calls me all the time to tell me he worked for the son/daughter of the son/daughter of Mr/Mrs Whomever.

                    Mark
                    "Somewhere a Village is Missing Twelve Idiots!" - Casey Anthony

                    I never lost a cent on the jobs I didn't get!

                    Comment


                    • #11
                      Re: Capitalism?

                      Never, never, base your price on what the competition is charging. In fact you would be far far better off not having any clue as to what they charge. You must know your bottom line before you can make any adjustment to your price. Stop thinking that if a guy charges $ 500.00 and hour he is ripping the public off. When last I checked the public still has plenty of choices. No one is forcing them to pay 500 bucks an hour. It is their choice, there's plenty of plumbers in the world.
                      Seems like Leonard opened a big can of worms on the other thread and this one is a continuation. Here's what I don't understand. Why do other plumbers get all riled up when they think someone is over charging the public? We've had the same dissention over flat rate vs T & M pricing. What is so threatning here? If a guy is supposedly ripping off the public, don't you think it will catch up with him in the long run. Especially if his work sucks. The market always tends to weed out the weak in the long run. I have seen so many plumbers come and go over the last 36 years that I can't even remember half of them anymore.
                      sigpic

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                      • #12
                        Re: Capitalism?

                        Capitalism is simply the balancing act of supply and demand. Charge as much as you can, but not so much that nobody wants to do business with you!!!

                        If I could get $10,000/hour and people paid it with a smile I would start charging it immediately. A business though, can only charge so much before they price themselves out of existence in this competitive economy of ours.
                        Water Heater Reviews & Water Heater Information

                        Comment


                        • #13
                          Re: Capitalism?

                          Originally posted by NHMaster3015 View Post
                          Never, never, base your price on what the competition is charging. In fact you would be far far better off not having any clue as to what they charge. You must know your bottom line before you can make any adjustment to your price. Stop thinking that if a guy charges $ 500.00 and hour he is ripping the public off. When last I checked the public still has plenty of choices. No one is forcing them to pay 500 bucks an hour. It is their choice, there's plenty of plumbers in the world.
                          Seems like Leonard opened a big can of worms on the other thread and this one is a continuation. Here's what I don't understand. Why do other plumbers get all riled up when they think someone is over charging the public? We've had the same dissention over flat rate vs T & M pricing. What is so threatning here? If a guy is supposedly ripping off the public, don't you think it will catch up with him in the long run. Especially if his work sucks. The market always tends to weed out the weak in the long run. I have seen so many plumbers come and go over the last 36 years that I can't even remember half of them anymore.
                          Pretty much agree. I've stated on the forum before I don't care what you charge and it's none of my business. I'm concentrating on what I charge and improving myself only.

                          Just curious as to others opinion on Capitalism Theory.

                          With that, let's let the talk on it die for awhile.

                          J.C.

                          Comment


                          • #14
                            Re: Capitalism?

                            What?


                            Nobody likes my high priced milk?




                            It tastes better..................I promise!
                            Northern Kentucky Plumbers Twitter Feed | Plumbing Videos

                            Comment


                            • #15
                              Re: Capitalism?

                              Originally posted by DUNBAR View Post
                              What?


                              Nobody likes my high priced milk?




                              It tastes better..................I promise!
                              And, if you can convince several thousand people that it does, you will be a rich man.
                              sigpic

                              Comment

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