We have not done any across-the-board cuts or raises. We base any changes on supply and demand and make adjustments on a case-by-case basis. Right now we are busy overall, and this time of year is busy for us, so we are not backing off our prices.
However, to secure a project to fill our schedule for February or March, we might provide a lower number. I think part of it is mental. If your pipeline is full and you have a solid schedule, you feel more secure in asking for more money.
If you are not busy, it’s a whole other mindset. If we weren’t busy, we might consider going lower. However, you have to remember that if you sell one job at a lower markup, you may fill a slot for a project where you could have gotten the full markup.
We never had to change our margins or pricing. We either got the jobs or we didn’t. However, if I have to negotiate, I will. But I will work to protect our margin during the negotiations. The purpose of being in business is to make money. It does not make sense to do a job where you are not making money.
Newmyer Distinctive Remodeling
Walled Lake, Mich.
I will not change my margins. If you do that, you end up not being able to pay your bills or your vendors. You must maintain your margin. Especially in today’s market where you can’t make it up in volume.
However, we have noticed that our bids are lower because they reflect the fact that material and labor prices are coming down — by about 30%. Subcontractors are working for less and we sub practically everything.
I recently worked on a bid that a year ago would have cost $165 to $180 per square foot, but now costs $120 per square foot.
I’m getting more small jobs in this economy. My prices are up on these under-$100,000 jobs because, though they are smaller, I have the same overhead. I have lowered my prices on larger jobs, those $250,000 and up, because there is more competition for these jobs. But I will only lower my price by a maximum of 3% because the company still has to survive and sustain itself.
I find a lot of new-home builders trying to get into the remodeling business. Their prices are so low, I’m not sure how they can do the job. Some are pricing 30% below my bids — there is going to be a problem with that job.
Gary Naugle Sr.
Gary Naugle Co.
We recently raised prices across the board. We knew our prices were too low because our margin dropped. I have a new price book now. I expect that, with the adjustment, margins will be back to what they should be. However, I believe you can’t raise or lower prices based on the economy or you’ll go out of business.