How do you plan on pricing jobs in the future?
18 May, 2020
18 May, 2020
Social distancing and infection control is changing plenty of things surrounding the way jobs are completed and what they cost. First there is the purchase of additional PPE, disinfectants, hand washing stations and more. Schedules and staffing a job is also changing to allow for social distancing. At the same time, there are contractors out there lowering prices to secure work ... any work they can get their hands on. So what are some things that owners and estimators are taking into account while pricing of jobs? We asked that exact question.
Masks? We’ve got you covered
Chad Lyons, of Lyons Painting and Design in the Seattle area, is trying to hold the line on price as long as he can. He knows everyone’s in a crunch along with him, so he’s trying to absorb the cost of extra PPE and disinfectant as much as possible. But his estimates do build in extra time due to using smaller crews. “We just explain ahead of time, ‘Hey look, this might take a little longer than normal given the circumstances,’” he said.
He mainly does commercial work, and so far, he reports, nobody’s got all red faced and shouted him down that it’s gotta get done NOW no matter what. “On the whole, our general contractors are very good to work with,” he said. “We’re just trying not to push costs their direction at this point, with the understanding that there’s only so much we can absorb over the long term.”
Times like these may tempt you to lower your prices in order to get the job, but Lyons observes that a lot of painters who randomly toss out a lower price might not have their job costing under control to being with. “In a lot of those cases, people don’t know their hard costs on a project,” he said. “They don’t know how much it costs to put a team in the field per hour or per day, so they can put themselves in a bad spot during working sort of below their cost.”
Another estimate Lyons makes is anticipating that about 20% of his already booked work will be lost as clients have to make decisions on how they’ll move forward as well. “We’re changing our metrics for how many leads we need,” he said. “That’s a shot in the dark that we anticipate that kind of a pullback, but I don't want to be middle of August and not be able to keep the team that I have busy. So we need to pursue more leads than we would normally.”
The Price Is Usually Still Right
Eric Regan owns Mission Painting and Home Improvements in Overland Park, Kansas, on the west side of Kansas City, Missouri. He’s trying not to change pricing too terribly much while keeping safety protocol in place. During the shutdown they did all their estimates on Zoom, having clients walk them from room to room or even give a tour of their exterior pointing out known wood rot or other issues, but now that Kansas and Missouri are slowly opening up for business, he gives customers a choice between virtual and in-person appointments. He expressed a bit of surprise that only about 15% of estimates are requesting a virtual visit.
Production is more or less like always, just more fastidious, so he hasn’t seen a need to raise prices to compensate for the enhanced safety measures. “It’s easy for us to wear masks in the house and be conscious of what we touch,” he said. “We clean up after ourselves with disinfectant wipes after we paint interiors. If I’m painting your kitchen for example, we wipe down all the surfaces we touch, including counters and door handles etc. Evidence doesn't show that the foggers and things of that nature are effective against the virus.” Regan’s wife, a doctor currently involved in COVID research, tells him that soap and water is the easiest and most effective way to kill it. “We are just cleaning up after ourselves. We kind of already did anyway,” he said.
The main reason for Mission changing its pricing structure is due to other painters lowering theirs in order to get work during hard times – painters who don’t provide Mission’s level of service but can skew someone’s perception on how much a good paint job actually costs can ruin an accurate estimate. You can’t compete on price putting your top notch job up against the fly-by-night fella who’s going to do something cheaper, so Mission has come up with a good-better-best pricing structure and explain why “the same job” may cost less. For example, Mission builds a unique five-year warranty into its work, where they return to the home or jobsite on the anniversary of the project to perform maintenance and touchup for free, but for a lower price, customers get a one-year warranty without the return visits. “We’re not a ‘we’ll beat any price’ contractor, so we try to give people apples to apples comparisons.”
Eric’s advice for painters giving estimates is foremost, be prompt in returning communication – while that goes without saying, during COVID, if someone is reaching out, they are a serious buyer and you need to give them a lighting fast response. “We try to respond within 90 seconds of any requests,” he said. Second, respect people’s space – maintain your distance and wear a mask. “Even if you don’t agree, it shows respect and deference to those who might be immunocompromised or are sensitive to COVID safety measures in general. Wear booties inside, wear a mask. be conscious of what you might touch,” he said.
Tom Droste, president and CEO at Estimate Rocket, a digital estimation platform, has seen how contractors are changing to cope with COVID, but he also realizes that changing pricing structure isn’t something most painters want to do without some serious thought – and even then. The word he uses most is “communicate,” because everyone in the job chain needs to be aware of how things have changed due to COVID-19.
Most likely you’ll be putting smaller crews on a job, so while the job might not take longer in labor hours, those hours will be spread over a longer period. If you’re adding safety equipment and disinfectant plus the time it takes to use it, it might add some cost and time to your project, and contractors are faced with a decision of whether they should raise prices to cover those costs during an era where budgets are tighter and work may be hard to come by.
“In the push to get work as things open up, it’s important to be aware that it may cost you more, and to communicate that to the client,” Droste advised. The good news, he continues, is that clients will most likely be happy to know what measures you’re taking to be safe – for example, adhering to CDC guidelines – and they’ll be willing to invest a bit more into a painter they can trust. “Consumers really want to hear what you’re doing and they want you to explain to them how you’re doing it,” he said. Your extra efforts at safety may make them feel more accepting of any price increase to compensate your cost.
Time is as important in your estimate as money, so make sure your clients understand that the job will take longer than it might have back in those halcyon days of January and February. If you had planned to send a crew of four, and either due to social distancing you can now only send a crew of two, make sure they understand that before you begin.
Finally, said Droste, more and more estimates are being done remotely, with the understanding that once someone gets into the home, pricing might change. While painters will have to come into the house, most folks won’t want estimators from three different painting companies tramping through every hallway, bedroom and bathroom. Once you get used to this and incorporate it into your routine, it might save time in the future and even save money on estimating. “If you’re prepared for it, it becomes a good excuse not to spend hours a day driving from site to site,” said Droste. “You actually save some time and still accomplish your goals.”
In a poll conducted by APC on Facebook we found that 70% of contractors have increased prices, 22% of contractors have decreased prices and 8% showed no change.
Plenty of good takeaway advice, but the two indisputable tips:
1. Know your numbers so that you know where you can bend.
2. Communicate, communicate, communicate ... and do it fast.
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