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The industry changed (lowballers included)

Discussion in 'Commercial Snow Removal' started by procut1, Feb 13, 2011.

  1. procut1

    procut1 Senior Member
    Messages: 380

    I wrote another post about how Im finally leaving the snow business and Im happy about it.

    Just some observations.

    Ive noticed in both this and the landscape business that the industry as a whole has changed. Everyday you see the same 2 threads pop up. "New to the business, asked to bid HUGE commercial job, how do I do it?" and "Dam lowballers took my huge commercial job.

    Lowballing by definition is not what we experience. We are not dealing with lowballers.
    Lowballing is a strategic planned manuever that a company does for a specific purpose.

    Example. I knew in a year that a municipality was going to sealcoat (my main business) six figures worth of blacktop and I wanted the bid. One of the requirements for the bid was to already have experience with municipal work. Did not have to be sealcoating. You just had to be an experienced municipal contractor.

    Well, I wasnt a municipal contractor. However the neighboring town had bids out for mowing work that year. That would make me a municipal contractor.
    I knew the price for the mowing since its public information.

    I intentially bid that job low, break even or a small loss, and won the bid.

    That bid, a small loss, got me the municipal certification, and then I was able to bid and win the job I wanted at a very nice profit.

    To the lawn guy that did it before, I was a "lowballer" and I was. But it was a strategic move done on purpose.

    What we are seeing is 2 things. One, guys that have no clue how to bid. If you have to come online and ask how to bid, you dont know what you are doing. And guys who do know what they are doing but need cashflow, and need to make payments, and HAVE to get work to keep the lights on, even if in the end its only prolonging the loss.

    Years ago when I started you had 2 types of contractors. The driveway guys, who did their residential and maybe a small lot or two. Then you had your big contractors that did the condo complexes and big lots.

    It took a long time and it was a slow process to get your business to the point where the big places would ALLOW you to submit a bid. And if you did, you had to be ready to PROVE that you had the experience and ability. I remember days that the management company would come to your shop to see your equipment. Actually call your references, and want a detailed snow management plan.

    The commercial market was a closed club. You had your handful of contractors that did them all.

    If someone came in and bid cheap, they werent even considered.

    Over the years it has changed.

    Property managers are under intense pressure to cut costs everywhere.

    One thing they did was start entertaining bids from contractors that before would not be allowed to bid. Some of these guys can handle the work, some cant.
    Condo board members started seeing bids from these new guys and decided to take a shot.

    They had been paying 50k a year for snow for the last 10 years and now a bunch of new companies are offering to do it for 30. For 20k they took the shot.
    Some companies pulled off the work, and did a good job. Others not so well.
    When it came time for bids again. Managers and boards, if they were not happy, now had in their mind their property was not a 50k property. The target price was 30.

    So if they were not happy with the service, they didnt go back to the big guys at 50, they searched out a new guy who could hopefully do the job at 30.

    Many contractors, who before, plowing a big condo or box store was just a dream, were now getting the opportunity to bid those jobs. Many wet their pants at the prosepect of becoming one of the "big boys" and the money became secondary. They just wanted the job to be able to say they had it. Some had no clue if they were making money or losing. Some knew it was cheap or a loss and didnt care, figuring taking this job, even at a loss, would open up more big jobs to them.

    Now more and more guys enter the business, and its now a business without the barriers.

    The big boys have to lower their price to get work at all

    The customers are used to paying less every year and are not going to go back to the old prices.

    Everytime a new guy hears the price of a property, and he goes in "Just $1000 less than the guy last year, he brings the price of that job down. 10 years of guys doing that brought that job down 10,000 and the customer now is used to it.

    Enter USM and the other nationals. They realized this. They know that there are thousands of guys out there with a plow and a dream of being bigtime plowing their local walmart.

    They find this whole market of contractors that dont care about the money nearly as much as they care about being able to say they have the job.

    The nationals live on these contractors. Their customers are saving piles of money, and their only standard to a "good job" is whether or not the store is losing sales.

    The nationals know that most of these new contractors, may be in over their head, but manage to do enough of a job, so as to not affect their customers sales. Appearance, quality, doesnt matter as long as that car pulling into walmart, makes it in the store and doesnt turn around.

    The nationals write their contracts in such a way that they and their customer are 100% protected. These are contracts that nobody who is very experienced in the business would sign. Send one to a lawyer and he would tell you, you are nuts to sign it.

    They hire you. You sign a contract that gives up all your collection rights, that guarentees that you and your insurance company will take on 100% liability, and will pay for USM and Walmarts lawyers should they be sued also.

    The contract is 100% in their favor, and you go to work just on the HOPE that you will get paid.

    So what just happened?

    The customer gets the job done for 25% what it should cost and has no risk or liability.
    The contractor signs the contract because he wants the job that bad
    In most cases the contractor does enough of a job to not affect the store sales
    Whether or not he is making money is secondary

    By the time he realizes he cant cover costs at that price, the season is over, he made it through, the customer is happy. USM made a boatload, Walmart saved a boatload.

    Next year, there will be a whole new group of guys right behind you wetting their pants to take that job.

    The whole standard of the industry has changed.

    The stress of the work has changed.

    Years ago, you knew you were charging a premium and the customer had high expectations. The stress was providing the premium service to justify the premium price you were charging. In the end, you were well rewarded for your hard work at the end of the season.

    Now the stress is how to pull of the job and cover the costs. How to make payroll and pay for $4.00 a gallon fuel with one blizzard after another.

    Customers that no longer treat you like a respected contractor, but as a bottom feeder.
    Customers that have the attitude that you should feel lucky they chose you out of hundreds. And there are hundreds standing in line to take the job. Thats their new attitude.

    Its easy to vent and complain. But the truth is, I dont believe the times we are having now will change. I dont think the tactic of "wait it out, they'll go out of business" will work.

    In the end, that 50k job will never again be a 50k job. The expectations have been lowered. The barriers to entry gone. And its a new market that you will either have to figure out how to compete at the new standards, or find another line of work.
  2. NW Snow Removal

    NW Snow Removal Senior Member
    Messages: 533

    good post. Client education, excellent service, and relationships are about the only way to fend them off. Good luck to all of the snow removers providing good service, at a fair price. the one's that don't understand their true costs and are small outfits can be beaten, or they will beat themself.
  3. procut1

    procut1 Senior Member
    Messages: 380

    Yep. My point is to recognize it and be prepared. The pressure will be on the good guys to figure out how to compete and profit.
  4. Steiner

    Steiner Junior Member
    Messages: 2

    It is happening everywhere......

    Enter USM and the other nationals. They realized this. They know that there are thousands of guys out there with a plow and a dream of being bigtime plowing their local walmart.

    This is exactly what happening in the food production industry/farming. Large companies are monopolizing the exchange between the customers lot and the contractor.
  5. KEC Maintaince

    KEC Maintaince Senior Member
    from N.J.
    Messages: 265

    Procut please dont take this post as a bash but you said it your self you lowballed to get something even tho you might have broke even or lost money and you did it on purpose.
    So you lowered the bar in that area to secure your self something else now so instead of the town also paying more you now set the standard there .
    isnt that how it starts one guy does it and he seems to think its ok so now every one must pay.
    the new guys who i have seen come on these forums are bashed first by experienced people instead of helped.
    guys tore me up because of what i do. i dont do big commercial ( dont want to ) i do resi and next yr doing a few small churches and DR offices .
    these jobs im bidding on i know all the people and they want me to do it and yes they want a break on the price.
    i will look at the old contracts and decide for myself if the prices are fair i can tell you right now some are crazy high but i will not be any lower i might add some services and do a better job .
    trust me im not about to lowball
    Every industry has changed if you think landscape and snow removal is bad construction is worse.
    what were looking at here is the clientel has also changed they are more bidder friendly and just like any industry
    You get what you pay for.
  6. procut1

    procut1 Senior Member
    Messages: 380

    You're right. I put the lowballer part in there because its a term that's misused on these boards.

    Lowballing implies that the contractor knows how to bid in the first place and intentionally submits a low price for a specific purpose.

    That's rare.

    Bidding and pricing is by far the easiest part of the business. Yet it seems to be such a mystery to so many.

    I can't even imagine trying to take on a big job if you can't figure out the most basic part of it.

    Guys come on here and want someone to tell them how much to charge when its impossible.

    Unless they want to include their tax return and business books for us to look at.

    Its frustrating because the competition has changed. Years ago you bid against other experienced qualified companies and numbers were somewhat close. Then the best salesman won.

    Now the guy with a fleet, established, experienced, proven is put up against a rookie who doesn't have a clue how he came up with his price. Somebody online told him to charge a dollar a minute.

    Years ago that guy would have been told to go back, learn the business, and come back when you're ready to be taken seriously.

    But now the customers view both as equals. Instead of the rookie figuring out how to compete with the experienced guys, its the other way around.

    Brickman is being asked to compete with Tommy's roofing, siding, auto repair, dog walking, and lawn mowing .

    The market is what it is. Nobody is the bad guy so to speak.

    I just think many are sitting back waiting for the good ol days to come back. And I don't see that as happening.
  7. lilweeds

    lilweeds PlowSite.com Addict
    Messages: 1,178

    Procut, you make some valid point and some that are way off.

    USM is the one winning with Walmart, even though I know for a fact Walmart is dropping them after this season. They aren't saving Walmart much, but some paperwork. Yes people are doing them for 25%, but USM is making the other 75%. Either way it doesn't matter the end result is the same.

    I do believe that prices will come back, but it isn't going to be next year. It's going to be several years from now and I know many of us aren't going to hold out that long. In my area prices haven't fallen as much on the commercial side. People around here are still paying a premium and I guess that's a good thing. That being said we don't use the equipment 14 days in a row like some other areas of the country.

    All in all everyone needs to look at their costs. We all had to start somewhere, but everyone needs to make money on every job. By not doing so hurts the industry, which will in turn hurt ourselves.
  8. RLM

    RLM PlowSite.com Addict
    Messages: 1,270

    You make some good points... that said there is still money out there, but you have to find the right clients, be efficient, have the right staff in place. You are correct about the big box, big lots, etc, pricing is down on them. If you think outside the box, you can do OK though, that said Im just about done with mowing, unless somthing happens, pricing hasnt moved in almost 10 years, mower prices are up 25%, fuel is up 300 % (was about $ 1/gal, back then). It has become a loss for us, just do to make money off the other added on services.
  9. bhmjwp

    bhmjwp Senior Member
    from kcmo
    Messages: 309

    Excellent post! I have never bid on box stores or w/the Nationals. I have been forwarded contracts for consideration from nationals-forwarded to my insurance company, and have been rejected. With the notation that if I elect to accept, I would have to write a policy with another company. This is with both my W/C and General Liability Co's.

    Makes me always wonder how many sub's really have coverage, whether they think so or not. Call me faint hearted-but I have never signed a contract not reviewed by my Insurance providers.
  10. REAPER

    REAPER 2000 Club Member
    from 60050
    Messages: 2,230

    Not many and even less will admit that!

    Also my definition of a lowballer is.......... One who goes in to bid a job. Asks what the lowest bid is and then cut that without doing any other looksie at what is needed to do the job.

    It happens in roofing, lawn work, home repair and most other labor intensive markets.

    I had my floors replaced with wood throughout the entire house and had the windows replaced. 5 guys that came to bid that was the 1st thing they asked, "What are the others charging" without even asking what kind of flooring or windows I wanted. They were shown the door and I waited until a professional that did not ask one question about other companies bid on what I wanted.

    It may have cost me more, but I got what I wanted with no problems and he has since returned to check his work 3 times without me asking. If I have any other work done it will probably be with him again.

    Same goes with the mechanic I use for jobs I can not do myself on the truck. He charges a higher hourly rate then most, but, the work is done correctly the 1st time and the small extras he does without even telling me sometimes makes it worth it plus I can trust him 100%.
    Last edited: Feb 13, 2011
  11. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    excellent post. totally agree

    Prices are not coming back
  12. RichG53

    RichG53 PlowSite.com Addict
    Messages: 1,135

    We are dealing with rough times ..

    Prices will come back...They will have to, not many will be left to do bidding..
  13. procut1

    procut1 Senior Member
    Messages: 380

    I do agree. At some point they will level out. I dont think they will ever get back where they were but they wont go to zero either.
  14. cold_and_tired

    cold_and_tired PlowSite.com Addict
    Messages: 1,247

    I don't think they will. Idiots and bad business practices do not come in waves. When one goes out of business, there will be another to take his/her place.

    I know my costs. If someone wants to do it cheaper, they can have it. I would rather go broke sitting on a beach than plowing snow.
  15. nor'easter1

    nor'easter1 Senior Member
    Messages: 143

    pro cut, congragulations you just got your life back and I think you know it. When I started out 18 years ago I loved the plowing part and could do it every day. As time goes on you just get worn out in all aspects menatally and physically. Realiticaslly snow plowing/ice control to me know is a way to bill customers to pay my bills and not a lot more. Great profit customers are now temporary and every contractor on this forum or not should realize all it takes is a phone call from your top customers to send you over the "cliff". For those of you that don't believe that you will it is fact. I would give a lot to go back to that feeling 18 years ago when I bought my first plow and loved every minute of snow and how proud I felt to be a plower!
  16. snowplowpro

    snowplowpro Senior Member
    from NJ
    Messages: 926

    i hope im not changing the subject here but you guys talk about how there cutting costs but were i am i hear alot about these places making there one set price for the season and thats supposed to include everything or just plowing .
    a friend of mine was asked to bid on a church and he went and look at the lot .
    he talked to the manger or person in charge and that person said well we only pay 3000 for the season thats are set price.

    so what i am getting at here is that supposed to include salting ,plowing ,shoveling sidewalks,and machine work god for bid we get a winter like we had this year you need to move piles back further i cant belive this stuff any more.
  17. xtreem3d

    xtreem3d PlowSite.com Addict
    Messages: 1,548

    just curious how you know and what have you heard about the walmart contracts?
  18. Bigfoot Brent

    Bigfoot Brent Senior Member
    Messages: 202


    I think you hit the nail on the head with that post. The trucking industry is pretty much the same now too unfortunately.
  19. PowersTree

    PowersTree Senior Member
    Messages: 586

    I get called a low baller all the time.

    Im new to running my own business, but not doing the work. Doing the work is the easy part. Figuring costs, how to bid, and all the paperwork end of it is the headache to me.

    I can get the jobs done, as good or better than the big guy. I am still learning how to bid. We ask on here for advise, and then either get bashed, or get poor info, and then they ***** we "Lowballed" the job. Well instead of telling me I lowballed it, why dont ya teach me what the "going rate" is in my area, and then I wont be so low next time.

    Not sure where I was going with that, but thats how some of us small, newer guys feel about it.
  20. Turf Commando

    Turf Commando Senior Member
    Messages: 567

    It's a fools paradise outhere, many willing to work for little... My pricing is higher then most, I'd rather have 10 jobs paying well, then 30 paying less...

    The secret to survival is maintaing a good relationship with clients and good rep around ...