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Getting undercut

Discussion in 'Business Fundamentals' started by RdTeK, Oct 15, 2012.

  1. RdTeK

    RdTeK Member
    Messages: 71

    It finally happened. I just started getting calls from my resi customers about a guy cleaning driveways for $50 less than what I charge; apparently insured.
    My prices have been where they are for years, only actually started getting them to where they should be in the last couple. A double drive contracted for winter $330. Not sure how this compares to your area, but it's in the ballpark here.
    He uses a small 35hp John Deere w/6' blower; I use a 100hp John Deere w/7'6 blower.It's really comparing apples to oranges IMHO........any thoughts?
  2. leolkfrm

    leolkfrm PlowSite.com Addict
    Messages: 1,978

    pray for a couple of major storms....some people learn the hard way
  3. potskie

    potskie Senior Member
    from Ontario
    Messages: 769

    Exactly that. After every light winter we loose a bunch to smaller companies undercutting with smaller less capable equipment. Then we get a real winter and by the second decent storm all those customers are calling begging for us to service them and bail them out because the cheaper company couldn't hack it.
  4. RdTeK

    RdTeK Member
    Messages: 71

    Thanks for your replies guys. It's been slack for snow here in eastern Canada the last couple of years....we're due for some heavy snowfalls for sure.
  5. born2farm

    born2farm 2000 Club Member
    Messages: 2,310

    Every year we deal with the same thing. Around me its usually uninsured people looking for beer money, but sometimes ill get out bid by a legit company. When this happens it makes me take a good look at my operational finances to see where they are able to beat me on price. Just because they bid a job cheaper than me does not make them a lowballer or a hack. I have come to face that a lot of companies operate with less overhead then I do and are able to out-price me by 10%. Often times when you cant compete on price you have to compete on a quality level. Granted it is a little harder to make someone appreciate a better job vs. a cheaper job, but it is possible. We are right in the middle of the pricing structure around me and I'm comfortable being there. We pick up work year in and year out based on the level of quality we provide. With that being said I'm thankfull for the guys that are above me in the pricing structure because it helps keep the average up.

    To the OP. I'm not here to start a war or tell you that your competitors company is more efficient because he can work for a little cheaper. I just think that there are a lot of people who throw the word "lowballer" or "hack" around when they were simply out bid on a job.
  6. Wilnip

    Wilnip Senior Member
    Messages: 592

    That makes sense and got me thinking. When I bid a job, I bit it at what I feel is the best price I can do it for. I have no idea what Joe Blow's Plowing bid it at. But if Im to high, I dont get the work. I
  7. RdTeK

    RdTeK Member
    Messages: 71

    I agree, when a guy starts losing business, pricing is certainly first and foremost to look at. I generally adjust prices as fuel costs rise. This year I increased 5% for the first time in 2 years, and that is still not close to match how fuel has been rising.
  8. Herm Witte

    Herm Witte Senior Member
    Messages: 595

    You are not alone in this scenario. Hold your ground and provide a quality honorable service.
  9. cet

    cet PlowSite Fanatic
    Messages: 7,257

    This is happening all over the place. Someone here just got a lot of work at a low price. They must be full now because the last 2 bids they have been more then double the lowest price. This type of logic makes no sense to me.

    There is another bid tomorrow, a real small one. It will be interesting to see where prices are for this one.
  10. Advantage

    Advantage Senior Member
    Messages: 766

    I was underbid by half recently. Was told it was a "legitimate company that has been around for a long time". That is lowballing. If it were 5 or 10% that's one thing, but half is just ridiculous.

    The saving grace is that we retained the contract. With some discussion about how happy this client has been and our quality of service and relationship; they signed back on. This proves that not everyone is thinking "low bid is best bid". As an above poster said: Stick to your guns.
  11. kmamark2000

    kmamark2000 Senior Member
    Messages: 101

    This may not fit here, but your stories reminded me of a situation that just happened to me. For the past two years I have been plowing an apartment complex with excellent results. Last week I sent them a renewal agreement. only to find out they signed on with another company last month. They said they couldn't get a hold of me and thought I went out of business. The manager showed me the number she called and it wasn't mine. Found out the winner of the plow contract was some out of town company and their bid was about 25% higher than mine. I agree with the statements above, when we get nailed this year, they will be calling me back. (I HOPE).
  12. hlntoiz

    hlntoiz Senior Member
    from NW, CT
    Messages: 588

    Get used to it. It isnt' going to get any better, that is why i am looking at different options for the wintertime.
  13. MahonLawnCare

    MahonLawnCare Senior Member
    from Ohio
    Messages: 852

    I agree with most of what you said. The fact is the word lowballer and hack coincide with low pricing. Most guys don't know their costs and smaller one man shows can work cheaper than a guy like me who has 4 trucks. But a company like Envroscapes can work cheaper than me because Todd has 70 trucks. You can't get mad about it getting underbid because its going to happen from the big boys and the small guys. Being mid sized is tough but you have to find contract that appreciate what you do and find your niche. I could care less what Smiths Plowing bids a lot at, I bid everything with my overhead in mind and my net profit% built it. If I don't get it, so what. The only time I ever get mad about things is when someone purposely undercuts my pricing to "steal work".
  14. John143

    John143 Senior Member
    from NEPA PA
    Messages: 254


    IDOCTORTREES Senior Member
    from MONTANA
    Messages: 792

    They won't do it for long..
  16. dfd9

    dfd9 PlowSite.com Addict
    Messages: 1,475

    Is it undercutting or are your expenses higher?

    It sucks that services are now seen as a commodity, but it is what it is.

    We can all thank John Allin for starting this mess.
  17. RdTeK

    RdTeK Member
    Messages: 71

    I hear what you're saying. My expenses should be higher since I use a 100hp tractor vs a 35 hp one.....bigger gear, bigger costs.:)
  18. dfd9

    dfd9 PlowSite.com Addict
    Messages: 1,475

    Better service during bigger storms.
  19. basher

    basher PlowSite Fanatic
    from 19707
    Messages: 8,993

    But greater efficiency, so you should be able to do more in the same time frame negating the higher operating costs. Particularly (as dfd9 stated) in heavier storms.

    So basically either

    1) You're over-priced

    2) His over-all expenses are lower i.e. he works out of his garage, he stole the tractor.

    3) He is willing to make a lower net and lives a less costly lifestyle.

    4) He's has no clue and will be broke before winter is out.

    5) He just wants to subsidize the payments on his tractor and pay for the snowblower he uses for his driveway and around his "gentleman's farm" and makes all his money doing something else.

    Am I suppose to be screaming lowball if some is selling plows cheaper than I am. Are you going spend more money buying a plow then you have to?;)
  20. RdTeK

    RdTeK Member
    Messages: 71

    Hehe....I would go with options 2 and 5. My pricing is inline with others in the area, within $10. We're not in dire straits here by any means; I will just have to expand my area a little more to take up the slack. He stays in a 1/2 mile radius of his home, so he limits himself to where he goes. It's a sub-division setting so homes are close together.:)