Pricing Work?

[steve fleischmann]

I may have an opportunity to take over making the mailboxes for the development we live in. They're all the same, 4x4 cedar post, two wooden sides next to a metal box which have the house number routed, and a 5"diamater ring with a sandhill crane carved in it. The current source(also a resident) is charging the HOA $600 each. On avg we need to replace 6 boxes a year. How should I go about determining a fair price?

Thanks,
Steve

[Mike Null]

Is $600 fair to you?

[James Phillips]

If you are doing it for fun I would undercut him pretty good, if you are doing it for profit I would undercut him $50 to make sure I got the work.

[Rick Gooden]

It is not about being cheaper, it is about being better. What is the cost of materials? How many hours will it take. I would mark up the materials 30% and charge a reasonable hourly rate. Let the numbers dictate the price. Do excellent work and you will stay busy. I never worry about what the competition charges.

[Richard Wolf]

Well, there seems to be an ethics question here. It is unfair for the HOA to just shop around someone else's price and see if anyone can beat it. The HOA should put the mail boxes up for rebid allowing the current builder to resubmit a new bid if he would like.
Blinding undercutting him by $50 may prove determental to everyone.
I know this may seem a little off topic, but the HOA is heading down a rough road and not the way to conduct business.

To come up with a price, carefully add up your materials, estimate your time and operating expenses, add in your profit. Take the bottom line and multiply by x2 to x3 to come up to a real world price. Remember, it always cost more, it always takes you longer and there are always problems.

Richard

[Dave Ray]

Well said, Richard. I really like the way you think. Besides being a true craftsman, you are more than fair, in a business sense. It's men/women like you that not only make SMC such a good site, but also bring a world of class to all woodworkers and business in general. Thank you.

[Brad Naylor]

To come up with a price, carefully add up your materials, estimate your time and operating expenses, add in your profit. Take the bottom line and multiply by x2 to x3 to come up to a real world price. Remember, it always cost more, it always takes you longer and there are always problems.

Richard

This is the correct way to do it.

However after a few years most people do it like this;


1. How much do I think I can get away with?

2. Do I really want the job?

If Yes, knock a bit off.

If No, stick a bit on.

Cheers
Brad

[Chris Barton]

Ditto what Dave said! The "Stairmaster" is da-man!

[Todd Jensen]

Another 'ditto' to Richard's post, and I agree there are some jobs that aren't worth it to me at any price, but I'll typically find another way out of those as opposed to a crazy high bid as it seems this doesn't always deter people.:p I would definitely stick with the current price of $600 or go higher; there is no sense in underbidding or cutting yourself short in this situation. Even on jobs where I thought I might be a little high, it seems in the end it never works out that way. In other words, I've never regretted a big number, but have definitely regretted coming in too low. The thing about money is VALUE. Use Richard's math or something similar to price your work, and then create value for that price by building solid with attention to detail.

[Chuck Lenz]

I'd have to disagree with Richard. First of all, we don't have a picture to go by, just a vague descrption of what needs to be made. Second, estimateing your time is a receipt for disaster. Until you actually do one, you don't really know. And third, never sell yourself short. Get what you can, it's your time and it's your machinery your wearing out, and it's your health. Sawdust isn't good for you and neither is dangerous machinery.

[Todd Jensen]

Chuck, you bring up some good points and reasons to price your work high, but don't offer an alternative. I agree with Richard's methodology(or something similar) because it includes the important aspects of properly pricing work - covering your labor and operating time, reimbursement+ for materials, and profit. You've brought up really good points, Chuck, that many guys forget - health and safety supplies, tool wear, new tools bought for efficiency, blades, etc et al. but I don't see where you disagree with Richard as you've offered no different pricing solution.
I also have to say that I COMPLETELY disagree with James advice; I've never underbid to get a job. I just don't need work that badly and don't view the other guys as competition. My value = my price + my quality. Underbidding hurts the market, hurts your long term profitability, and undersells your skills. My clients want to pay for the package that I offer, and those that don't, aren't my clients. If this was a production job, where you were building thousands of these mailboxes, the logic would be different, but this isn't the case. You are just one guy, offering YOUR work, not a company that can set up machines to automate the process and sublet the work overseas.

[Greg Funk]

I'd have to disagree with Richard. First of all, we don't have a picture to go by, just a vague descrption of what needs to be made. Second, estimateing your time is a receipt for disaster. Until you actually do one, you don't really know. And third, never sell yourself short. Get what you can, it's your time and it's your machinery your wearing out, and it's your health. Sawdust isn't good for you and neither is dangerous machinery.
I think Richard took all of the above points into account in addition to the newbie factor when he suggested doubling or tripling whatever careful estimate you come up with...

[dan moran]

a suggestion:

buy the materials and build one on your own money and time before you submit a bid.

that way you can know what youre getting into..

divide the cost (time+ matls) for the first one by 6-10 and add that to your bid.

and dont forget to pay yourself.

[Mike Null]

I have to go back to my original point. The price of $600 was established.

Based on a brief description the materials are less than $100. So you are looking at time for acquisition of material, for fabrication and for installation.

I doubt the customer would pay more and don't see a reason to reduce it. The formulas are great and I would use them to calculate the cost and profit but the price is $600.

[Dan Oliphant]

As another "woodworker" who works for profit, Richards, input is spot on. Any time one goes after work, the need to submit a bid (or estimate) is mandatory, this pricing is based simply on the factors Richard mentioned.

And yes the HOA is very unethical IF they are responsible for letting the current suppliers price/unit out as a benchmark. That would be called unfair bidding practices and may leave them open for legal action if the current supplier wishes. This input is based on 30 years of working with Supply Management and Material Contracts departments for defense contractors. The same laws apply to all.

[Russ Buddle]

Unless I am reading too much into the original post, the person currently making the posts for $600 is offering the OP to take over the job. There is no bidding or undercutting involved. However, I may be wrong, it has happened before....

[Henry Cavanaugh]

A variation of some of the above is to make an offer the homeowners association cant refuse. Do ONE for $400.00 with the clear understanding that you will use this to find your true cost for future costing. At that point you may be glad that you didnt commit to 6 because your true cost is $800 and can now walk away from it.

[James Ayars]

I'm trying to picture what these mailboxes look like and, beyond the 4x4 post, I'm having no luck. "Two wooden sides next to a metal box" has me lost.

Is the current box builder working under written contract or did someone from the HOA simply say "We'll pay you $600 to make mailboxes for us."?

[David DeCristoforo]

Richard is right on. What the customer is doing is completely unethical and should be illegal. Someone can always "beat" a price by $50 or $500 or whatever, just to get the job. But what's to stop the customer from taking your price on the road and finding another guy who's just a bit hungrier than you. Pretty soon, the only one who's making any money is the developer (which is what he wants in the first place). What's worse is the fact that this process causes a perpetual downward spiral of pricing across the board and, in the end, hurts everyone who is trying to make a living doing this kind of work.

[Henry Cavanaugh]

David I have to disagree. I am in sales of large woodworking stuff done on CNC's etc. I often know the price that a customer is now paying but dont influence my price with the information. Lets say a customer was paying $500 per unit. If my cost to manufacture is $300 then thats what I sell for. If I tried to be greedy and charge $400 or 450 Then some one will come behind me and take the business away from me at $300. On the other side if I know they are paying 500 and my cost is $550.00 then thats what I quote. If your getting 100% of the business you go after then your prices are to low. Its okay to walk away from business. Many times I have walked away and had customers come back because there source went out of business or raised there price after finding there true cost.

[David DeCristoforo]

You can disagree all you want. Anytime someone comes to me and says "Here's my bid from so and so, can you do better?" I throw them out of my shop. Why? Because I know damn well that they are going to take my bid to the next guy down the line and see if they can get him to cut it even more. And I never do this with my vendors either because I know that although I may end up paying less, ultimately I'm going to suffer because the vendor may be cutting his own throat to get the work. When I come back because I need service or something is not just right, how do you thing this guy is going to feel? He is going to wish I would drop off a short pier because he isn't making enough in the first place. Please don't bother replying with exceptions. I'm talking about the big picture here and I will never condone this manner of "doing business". Competition is a good thing but unfair competition is not and that's what we are really talking about here.

[Michael Gibbons]

Did I read $600 EACH? So for 6 mailboxes every year, that's $3600 smackaroonies. Seems kinda high even for the "get all you can" group. Must have some kickbacks or fraud involved in there somewhere. Everyone knows that they get easier to make over time if you make more than one.

[Ted Jay]

As another "woodworker" who works for profit, Richards, input is spot on. Any time one goes after work, the need to submit a bid (or estimate) is mandatory, this pricing is based simply on the factors Richard mentioned.

And yes the HOA is very unethical IF they are responsible for letting the current suppliers price/unit out as a benchmark. That would be called unfair bidding practices and may leave them open for legal action if the current supplier wishes. This input is based on 30 years of working with Supply Management and Material Contracts departments for defense contractors. The same laws apply to all.

Steve, you could go outside and take a picture of your mailbox and post it, to give us all an idea of what your "working with" here.;) You did say you live in the same neighborhood?.....

Dan,
Most homeowners associations meetings and decisions are a matter of public record. It would not be out of line to ask, as a homeowner, what the current price is being charged for the mailboxes. During HOA meetings the price is usually voted on and agreed to by the majority vote, in my experience.

The questions to ask are:
1. Is the HOA looking for someone to make them cheaper because they believe the price too high?
B. Is the previous woodworker going to stop making the mailboxes and they need someone to step up to the task?

There is no such thing as "unfair bidding practices" as far as HOA's are concerned, IMHO. It is up to the members of the board to vote on who gets the job. I could be based on a number of things, it doesn't have to be low bidder wins. It has nothing to do with bidding practices, they answer to the homeowners. Unless the matter came up as to why the budget was so high for making mailboxes. Of course it could be "because they look sooooo cute......"
...but then again, that's just my opinion.

*****************

I say if it is question 1, then put a bid out for it, and tell the original woodworker a new bid is needed. Also go out buy the materials as suggested, and build one to see if you want to take on the task. You never know, it might be a $600 mailbox
If it's question B charge the $600... majority vote wins!!!:D

Later,
Ted

[Greg Funk]

You can disagree all you want. Anytime someone comes to me and says "Here's my bid from so and so, can you do better?" I throw them out of my shop. Why? Because I know damn well that they are going to take my bid to the next guy down the line and see if they can get him to cut it even more. And I never do this with my vendors either because I know that although I may end up paying less, ultimately I'm going to suffer because the vendor may be cutting his own throat to get the work. When I come back because I need service or something is not just right, how do you thing this guy is going to feel? He is going to wish I would drop off a short pier because he isn't making enough in the first place. Please don't bother replying with exceptions. I'm talking about the big picture here and I will never condone this manner of "doing business". Competition is a good thing but unfair competition is not and that's what we are really talking about here.
David,
There is really nothing unethical or unfair about the scenario you have described. If you don't want the details of your bid shared with other vendors you can simply ask the potential buyer to sign a non-disclosure agreement. All large successful companies pressure their suppliers to lower their prices. The good suppliers adapt and become more efficient.

Greg

[James Biddle]

I'm president of our HOA and we've been in this very situation. We asked for bids from 3 outside professionals for our mailboxes. We then asked if any of the 2 or 3 woodworkers in the sub at the time would like to have the job at the lowest bid price. There is something to be said for keeping the money and work "in-house", so to say. However, we would not allow a homeowner to charge more than the lowest cost we could contract for on the outside. Also, all board members were excluded from doing the work to prevent potential conflict. As it turned out, none of the homeowners wanted to do the job at the lowest bidder price, so the contract was placed outside (to the second lowest priced contractor).

Once the installation was complete, we decided that repairs and maintenance of the mailboxes would be handled within the sub. We created a price list and spec sheet of individual parts and a complete mailbox and allow any homeowner to buy a part from any of the woodworkers in the sub at the price list cost, or to build or contract it themself to the specs. We require all repairs to mailboxes not caused by a HOA contractor to be funded by the homeowner. If the repair is not executed in a timely manner, the HOA contracts one of the woodworkers to execute the repair and the costs are passed on to the homeowner.

IMHO, although it doesn't sound as if our mailboxes are as detailed as yours, $600 seems WAY out of line and contracting anyone to build them for anywhere near this price smells of something unethical going on.

[David DeCristoforo]

There is a fine line here. Asking someone to do a job for $X is one thing. Shopping for the lowest price is fine and sensible especially if your main concern is not getting the best work but simply getting the job done as cheaply as possible. Offering work at a "set" price is also perfectly legitimate. But giving one bidder another's bid and asking him to "beat it" is something else again.

When work is put out to bid, there is an implication that the bids will be held in confidence. Each bidder is free to work out his price as he sees fit. If a bidder wants to "low ball" the job, that's his choice. But playing one off against the other by revealing the bids to the other bidders? I can't see how anyone could fail to understand that this is unfair.

[Art Mann]

I just think this thread has gotten so far off topic that it is unrelated to the OP's request. All he wants is advice on pricing the mailboxes. The vendor has already been chosen.

The situation described by the OP and the HOA seems like the situation between myself and the guy I hire to do all the home improvement jobs I don't want to do. I have known him a long time. He does good work, although I am certain he isn't the cheapest I could hire. I go to him again and again because I trust hime to do the job right for a reasonable profit and he trusts me to pay him cash the moment the job is done. That seems like the relationship between the OP and the HOA.

If we want to start a new thread on the ethics of both buyer and seller in the quote process, that would probably produce some interesting conversation and might open the eyes of some people.

[Steve Rowe]

David,
There is really nothing unethical or unfair about the scenario you have described. If you don't want the details of your bid shared with other vendors you can simply ask the potential buyer to sign a non-disclosure agreement. All large successful companies pressure their suppliers to lower their prices. The good suppliers adapt and become more efficient.

Greg
I agree with David on this one. There is a difference between companies pressuring suppliers to keep their prices low and extorting them to do so with bid information from another supplier. What you describe is paramount to price fixing in reverse. We have competitive bidding to keep companies honest on pricing. I don't think you will find successful companies participating in this practice at all because it is unethical, unfair, and subjects companies to legal liabilities. I deal with contracts and competitive bidding all the time in my job. NEVER, NEVER, NEVER is a competitors bid, details of that bid, or the bid amount ever released to another competitor.
Steve

[David DeCristoforo]

"I just think this thread has gotten so far off topic that it is unrelated to the OP's request."

You are correct. So...to the OP:

1) Figure out the cost of the materials and add 20-30%
2) Make your best estimate of the time it will take you to make the project. Double that and add 20%. Multiply that by your hourly shop rate.
3) Add the results together and tack on your profit.

If the result is substantially less than six hundred, offer to do the job for $550 each (there is nothing wrong with making some money and if the customer is happy, you have done your job).

After you have made one or two, you will have a much better idea of what they will actually cost you to make and you can adjust your pricing accordingly If you need (or want) to.

[Richard Niemiec]

Gee, I dunno. This hole HOA thing to me sound like something I want to avoid, when I sell my house and retire somewhere I will remember this thread. Standardized mailboxes?? I thought communism had died when the Berlin Wall came down. Geeze, you gotta go before the Politburo to fix your mailbox??? My goodness, what have we come to. I always thought NJ was bad with regulations. I know, the HOA comes with the territory in planned developments and all,and if you buy in the development you have to agree... but you know, the HOA boards can change the rules and amend the master documents to eliminate such idiocy. You're supposed to be free in America. Anyway, that's my own self-indulgent opinion.

The only standardization we have in my neck of the woods is the folks that buy those $900 cast metal boxes from the Design Expo (a unit of Home Despot). Mine is white cedar painted black, has raised panels, fluted columns and a nice turned top that is sort of pineapplely except with beads, and of course looks the best in the whole neighborhood.....

As someone else once said, its time to throw the damned tea in the harbor again. RN

[Art Mann]

I agree with David on this one. There is a difference between companies pressuring suppliers to keep their prices low and extorting them to do so with bid information from another supplier. What you describe is paramount to price fixing in reverse. We have competitive bidding to keep companies honest on pricing. I don't think you will find successful companies participating in this practice at all because it is unethical, unfair, and subjects companies to legal liabilities. I deal with contracts and competitive bidding all the time in my job. NEVER, NEVER, NEVER is a competitors bid, details of that bid, or the bid amount ever released to another competitor.
Steve

Steve,

Unfortunately, your company may be in the minority. I work for one of the largest companies on earth. The division I work for manufactures electronic assemblies. My plant delivers almost a billion dollars worth a year. The individual components that go into these assemblies are sometimes purchased by playing individual manufacturers against each other in the fashion described here. It is nothing more than buying stuff where the bids aren't sealed. Their methods are effective but lead to the sourcing of Chinese and other low cost suppliers at the expense of quality. That is just the way the world is. :(

[dan moran]

actually, the OP said its a 600 dollar job. he detailed (although vaguely) the work and wanted the forum to tell him if he should do it or not..

or..

the question might have been how someone arrived at that price.

im not too sure..

[Gary Keedwell]

I may have an opportunity to take over making the mailboxes for the development we live in. They're all the same, 4x4 cedar post, two wooden sides next to a metal box which have the house number routed, and a 5"diamater ring with a sandhill crane carved in it. The current source(also a resident) is charging the HOA $600 each. On avg we need to replace 6 boxes a year. How should I go about determining a fair price?

Thanks,
Steve
You say you might have the opportunity to take over making them? What do you mean? Are people happy with the ones being made now? Does the current guy still want to make them? Sounds like alot of politics going on.:o I live in a place like you describe.....I would tread lightly.;)
If it was me, I would make one myself and see how much time and materials involved, and then make an offer?
Gary K.

[Brad Naylor]

You say you might have the opportunity to take over making them? What do you mean? Are people happy with the ones being made now? Does the current guy still want to make them? Sounds like alot of politics going on.:o I live in a place like you describe.....I would tread lightly.;)
If it was me, I would make one myself and see how much time and materials involved, and then make an offer?
Gary K.

Me, I'd go and see the other guy, suggest we get our heads together and both submit a revised bid of $700!

Then share the work between us.

[Gary Keedwell]

Me, I'd go and see the other guy, suggest we get our heads together and both submit a revised bid of $700!

Then share the work between us.

LOL I was thinking it but.....:eek: .:D

Gary K.