PLUMBING
problem, in my opinion?” In the February 2011 issue of phc news, based on the answers to those questions by Tom Duff, a plumbing and heating contractor from Long Island, N.Y., I addressed the problem Tom thought was the greatest, the “not so free” free estimate. Please answer these questions and e-mail your answers
to me at
richardditoma@verizon.net with your name, business name and address, the number of years in business and the type of services you provide. I’ll incorporate your opinions into future articles. Sharing your opinions can give you the opportunity to help improve our noble industry and your business.
50
Problem In this issue I address the problem as C.C. Cole of Cole
Plumbing Inc., who has provided plumbing repairs to the Montgomery, Alabama, area for 33 years, sees it. C.C. states that the problem is: Slugs that do not know what it cost them to run their businesses yet are quick to condemn those that do. The going rate is not the answer. Some of it can be attributed to customers that are willing to accept something less than professional service work.
C.C.’S solution C.C.’s solution is “to provide an open forum for all local
PHC companies to regularly discuss common business practices so that we can educate ourselves about good and bad pricing methods. If all companies in the area are charging the correct price, we will all enjoy better profits.”
My thoughts C.C. has hit on the biggest problem in the industry,
incorrect pricing. It leads to all the other problems. Prices that do not allow you to recover your true operational costs and earn the reward you deserve for the value you deliver to consumers put you on the proverbial slippery slope, which leads to bad business practices, much stress and frustration, poor performance and, eventually, failure. I disagree with C.C.’s thought that some of the
problem can be attributed to consumers. This problem falls solely at the feet of contractors who do not employ proper business practices and pricing protocols. If a consumer buys services based on low prices rather than top quality workmanship, that consumer deserves exactly what he/she gets. Nevertheless, it is the responsibility of the contractor to deliver excellence to consumers in all instances and to price their services intelligently and profitably. Contractors make their prices, not consumers. Regarding C.C.’s reference to “the correct price,” I must
clarify the issue. I have spoken with C.C. many times. He means “the correct price” based on the true costs and goals of each business. He is not suggesting that prices should be fixed. Whenever contractors call me for assistance, I ask certain questions that give me a perception of their business
PLUMBING BUSINESS A
BY RICHARD DI TOMA CONTRIBUTING WRITER
sk yourself, “What do I consider to be the biggest problem the PHC industry has faced in the last ten years? and “What is the solution to the
Solving Business Problems, Part 2
operation. This allows me to understand their circumstances. Whether they charge by the hour or by the job, contractors utilize time in their pricing calculations. One of the questions I ask is “How much do you charge for one technician hour?” Most have the answer on the tip of their tongue. But more than 90% do not know the correct answer to the question, “How much does that hour cost you for labor and overhead?” And that’s the problem! Aside from pure luck, no one can arrive at a correct
and profitable selling price without knowing their true cost. It is also necessary to be aware of all the possible
“what ifs” that can pop up in a fiscal year to affect operational costs. It is imperative to be aware that true cost is not calculated just on that which is spent in dollars. Intangible items such as callbacks and unapplied labor contribute to true cost. The “slugs” of which C.C. speaks are a blemish on, and
disgrace to, our noble industry. Their ignorance leads them to charge at least $30 per tech hour less than it costs them. That means that there is a minimum annual shortfall of over $50,000 per technician. In turn, their ability to deliver excellence to the consumer for the dollars paid to them is lowered. They don’t get to recover all their costs. There is no reward (profit) for the service provided. The consumer gets mediocre value for the dollars spent. An artificial “going rate” is created, which lowers the industry as a whole. Everybody loses. C.C.’s solution is education. I totally agree to that, but I
wouldn’t be me if I didn’t add caveats. First, the “open forums” of which C.C. speaks must not fix prices. That’s against the law. “Open forums” can show contractors proper
business fundamentals. An open forum, however, must have a facilitator who is well versed in the subject matter to control the flow of information. Academic instructors who know theory but not practicality are problematic since they have never encountered the trials and tribulations that contractors face every day.
Aside from pure luck, no one can arrive at a correct and profitable selling price without knowing their true cost. It is imperative to be aware that true cost is not calculated just on that which is spent in dollars. Intangible items such as callbacks and unapplied labor contribute to true cost.
e Turn to PLUMBING BUSINESS on p 55
phc march 2011
www.phcnews.com
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