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Customer wants price dropped

Discussion in 'Business Fundamentals' started by QuadPlower, Jun 17, 2009.

  1. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    Here is a long story, but what do you snow guys have to do this time of year, but read PS?

    I bid and received the contract to mow the "common areas" for a set price. And the empty lots at a set price for 30' of frontage and a set price for mowing from the 30' mark back to the property line. And some model homes yards at a set price.

    This is for a home builder that has a development with over 200 lots, a swimming pool, soccer field, pond, trails, etc.

    After a month of mowing, I rode around with the manager and he said "I want all these lot frontages mowed every week and the back mowed every other week." (The contract reads the front 30 every other week and the back every month) I told him "yes sir."

    Two weeks of mowing I sent him an invoice every week so he knew the price difference. I got a call from him saying he wants to meet and talk about the price. "I don't have this much in the budget for mowing out here" he said. and wants me to work on a lower price.

    I billed him as the contract states at $10 for the 30' frontage on each lot and $10 for the back portion. The problem/issue for him is that there are 140 empty lots that we did this for. The invoice went from around $400 to $3,000 a week for mowing.

    He said, "When I asked for a per lot price he meant it to be if I had to drive to the development, unload, mow, load up and leave." I told him I get $40 a yard to mow residentials and there is no way I would have bid it at $10 if that were the case.

    Here is my problem. This is one of the largest builders in the area. They have a reputation for being cheap. This can't be the first time someone has billed them in this manner. Is the manager just dumb and made a mistake or is he playing me? He has been with this company for at least 5 years. I'm not the one that wrote the bid. They did.

    It costs me around 35-40 man hours to do this work. I'm actually loosing money on the common areas because it is SO rough that my mowers can't do the speed that they are capable of thereby increasing the amount of time it takes verses what I bid it at. I didn't come to him and say I needed more money. I am a firm believer that a contract is a contract. But on the other hand, if I did that, this would be my last year working for them. Let me also say that I got the bid because I was the lowest bidder (& i have a good reputation for quality work)

    I sent him an email yesterday saying I would like to be paid every 15 days instead of every 45 and I would like a 3 year contract if I lower my prices. Waiting to hear back.

    Let me put it in snow terms.
    You bid a HOA and the streets were $300 and each driveway is $20. The problem is that each driveway has a light pole on either side, they are gravel, random cement curbs are placed in just about every other space and there is no where to push the snow. (the lots are VERY rough and there are electric, water, trees, lights, & markers EVERYWHERE)

    You would normally get $40 to plow a driveway and they are easier than what is here. But there are 140 of them in a row so you decreased your price.

    You got the contract and now they want to decrease the price after billing them.

    What do you do?
     
  2. Bossman 92

    Bossman 92 PlowSite.com Addict
    Messages: 1,771

    I think it all depends on how bad you need the work.

    I may be misunderstanding something, but you said you are billing out $3000 for 35 to 40 hours of work. If that is the case, I would say you could probably lower the price by a few bucks.

    Let us know, Bossman
     
  3. exmark1

    exmark1 PlowSite.com Addict
    Messages: 1,321

    35 to 40 hours is that one guy or numerous? I would say a contract is a contract however if you want to keep the job and can afford to adjust the price, I know I would if I could in that situation!
     
  4. Bossman 92

    Bossman 92 PlowSite.com Addict
    Messages: 1,771

    "It costs me around 35-40 man hours to do this work." The invoice went from around $400 to $3,000 a week for mowing.


    Sounds like good money to me!

    Bossman
     
  5. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    I normally have 3 guys on it and I bill them out at $30/hour and that is $90/ actual hour. I'm invoiceing $100 / actual hour.
     
  6. cet

    cet PlowSite Fanatic
    Messages: 7,202

    When I tell someone it is 35-40 man hours that means any number of guys you put on a job, the hours they spend add up to 35-40.

    Sounds like 3 men are there for 35-40 which is 105-120 man hours.
     
  7. FordFisherman

    FordFisherman PlowSite.com Addict
    from 06611
    Messages: 1,594

    Business is all about negotiation. Sit down face to face and come to an agreement, put it in writing. In this economy adjusting your price to keep a paying customer while still making a profit is fine IMO. Again, just make sure you get it in writing. I've built a few sub-divisions and can tell you from experience that the units are more likely to sell when the grounds are well manicured. I'm sure the PM knows this as well.
     
  8. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    I got an email back and they can't pay me every 15 days and they can't offer a 3 year deal. I got paid today for the past invoices. I will tell them on monday that I can't lower my price. I will see what happens.
     
  9. plowmaster07

    plowmaster07 Senior Member
    Messages: 438

    I agree with saying that a contract is a contract. Yet I would be a little on the aware side with their payment cycles, and also with the fact that the PM may be trying to mess with you. And he may be not messing around at all.

    Good luck to you!
    Aaron
     
  10. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    Last week took us 44 man hours to mow what was suppose to be done. I got paid on Friday to make them current. I am going to send out an email today to them.
     
  11. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    WE got a lot of home developers this year to do their rough cut mowing (we don't do "lawns"), but all the empty lots went crazy with weeds (and they get fined by the city)

    ALL of them were serious slow pays, all of them were a pain. I expect most of them are seriously hurting, but that's really not my fault.

    do NOT lower your price.

    Let someone else beat up their equipment for a money losing price.

    If they didn't want it done all the time, it wouldn't be so expensive, would it? Sounds like it's their problem, not yours.
     
  12. JD Dave

    JD Dave PlowSite Fanatic
    Messages: 11,046

    If I'm reading this correctly, it took you 44 man hours for 3k which works out to $68/hour for a guy and a lawnmower. If this is true I think you can trim abit, alot of guys would jump at those prices. JMO
     
  13. Bajak

    Bajak Senior Member
    Messages: 999

    I'm not near as smart as JD and I could sacrifice myself for $50.00/ hour.


    P.S. the backhoe will sit at home.
     
  14. terrapro

    terrapro PlowSite Veteran
    from MI
    Messages: 3,878

    That is the way I read it also.

    You are in Michigan man, you are lucky to have work and get payed at all. It sounds like good money and constant. If you don't want it I am sure someone else would be glad to get $68 per guy to take care of it. Hell I would do it for $50perhr just to have constant work.
     
  15. Dubliner

    Dubliner Senior Member
    Messages: 130

    If I read this correctly, you have three men and machines there for a day and a half, I'd take the job for half the money. LOL:D
     
  16. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    It is good money. I have stuck to the contract as far as price and frequency. It has probably cost me the ability bid on it for next year. However, I'm okay with that because of the money I made this year.

    Every time I think about lowering the price, I go over there and mow it. And my equipment gets broke because of the roughness, my workers shoot rocks through the siding of a house or it rains and I'm there on Saturday.
     
  17. big acres

    big acres Senior Member
    Messages: 653

    I had a national builder offer the same deal here. You gotta remember that they are dead in the water for revenue, and job sups have been cut... those left are running multiple projects. The deal he asked is similar pricing to what I've seen -to cheap for my blood, but as other stated, what you are charging is fair in good times.

    Work with them a bit now and they'll work with you when good times return.
     
  18. paradise1229

    paradise1229 Senior Member
    Messages: 308

    I believe this to work. Lower the price a little. In return when the economy turns arround, you might be able to raise your rates a little to level out in the long run and getting more work.
     
  19. Burkartsplow

    Burkartsplow PlowSite Veteran
    Messages: 3,245

    I do cutting similar to what you are talking about for a couple of developers in my area to help keep the weeds down and manicured. They have a lot or properties up for sale with no buyers. I would not lower my price for any of them. I am a lot cheaper then what the city is going to bill them per hour($150 per man hour) to cut down the lawns and I tell them that when they see my price. It beats on your equipment and takes sometimes 3 times as long to make it look decent. We come in and do a great job and keep all the properties within city specs and the builders dont have to worry about getting notices from the city. They have other things to worry about. That alone is a valuable service to them. Having the piece of mind that there properties are taken care of all summer long. Stick to your guns and ride out the contract and when next year comes around see if they sign up again. In most cases they will since you do a good job, that has been the case when I have ran into situations like this.
     
  20. procut1

    procut1 Senior Member
    Messages: 380

    for 4g a week....The builder is going to now get Julio, buy him a mower and set him loose to do it himself for a couple hundred bucks in payroll