Thoughts & Opinions... low baller? Found the secret sauce? Living in a van down by the river?


#1

The blurb below is from some marketing material of one of my competitor’s. Mainly storefront although they have started to get into residential recently. They do good work from what I can tell (on the storefront side) but are consistently about 25% lower than my prices. I’m not one to overly care about this sort of thing but it got me thinking.

They have a nice website, uniforms, even advertise in a few places. Has this company figured out something that I haven’t? Are they paying their employees less? Are the owner(s) happy making less money? I bolded the thing in the copy that caught my eye. Bugs me because the more this company grows then the more storefronts will think they should be paying ABC prices.

ABC Window Cleaning was created by ABC long ago. Previously working for local window cleaning companies, ABC built up experience and customer trust needed to open his own company. Seeing the pricing for this service increase over the years, ABC knew he could offer the same or better service for highly affordable rates. This commitment to affordability persists with the family business today.

Thoughts and comments appreciated.


Makes me sad
#2
  1. no

  2. likely

  3. likely

There was an outfit in our area that grew and grew and grew, trucks all over, lots of PM work and retail centers and storefront

the owner had to BK twice, had a gambling habit

turns out also owed mega back taxes
didn’t have work comp, subbed out
didn’t pay employee taxes and got dinged, I think he had a mix of employee and subs

may not be the case with the guy in your area, but one never knows what’s “under the hood”

the most common things are:
subbing and 1099’ing
paying minimum wage
no work comp
etc, etc

companies can run for a long time before the wheels fall off

if it isn’t anything like this, the money has to be pulled from somewhere, if not from the above, then owner salary and business profit

assuming the biz isn’t getting cash infusions from elsewhere
sometimes people have pensions (firemen etc) so that can save too

I look forward to hearing what others come up with too


#3

Thanks for the reply @Bruce. They are by no means huge. Typical storefront company; 2-3 guys work out of their cars, no logo’d vehicles; standard equipment; hand-written invoices; etc. Whenever I speak with a customer of their’s the customer is happy and the glass looks great.

I didn’t think about the 1099’ing, I guess that could be a possibility.

Their website has a few bullet points that are interesting.

Reliability & flexible scheduling
Guaranteed low pricing
Family owned – NOT a franchise


#4

I would never put on my website … guaranteed low pricing. That is crazy!

Keep us posted on everything.


#5

I think you know that, while not a fan of franchises from the owner view, I’m NOT a Fish hater. However, don’t you have overhead and fees that are directly caused by being a franchisee? If so, that could account for that pricing.

Personally, I can undercut fish all day long and usually make out just fine. That check that the franchisee mails could be the difference.

Just one thought.


#6

David don’t let other companies or solo guys fill the brain space with “What if.”

Your business and his are completely different in design and setup you haven’t missed anything.


#7

Aside from what already has been mentioned and along the lines of what Bruce wrote, I would have to say unless you live in a small town, the likelihood of a business model like theirs growing enough to dominate your market is unlikely. There are too many costs that go with growing a larger company, so it’s likely they wouldn’t be able to generate the cash flow to do so, or if they did grow it would be unsustainable. Don’t let it get in your head. If you do quality work and charge appropriately, you will always be able to find work, it’s just a matter of finding those customers if the market shifts. In my mind, when you compete on quality more than price, then everyone wins more than if you compete mainly on price.


#8

Thanks for the reply @TexasRich. Yes there are costs I have because I am a franchisee. But many of those costs are also present in a non-franchised business. Just under a different label. I can understand a 10% or 15% difference in our bids. But them consistently being 25% lower is strange.

@wcs thank you for the positive mojo. They certainly are no threat at this time; my company is about 6-7 times larger than they are. But I do check out my competition once a month and have noticed them… so that’s what got me thinking.

The main thing that bothers me is that they may be lowering the market prices. It didn’t matter too much when he was a 1-man show because he could only clean so many storefronts in a day. But now that there are employees (or subs) that changes things. There really is not an unlimited amount of glass when it comes to storefront. I will continue to keep an eye on them.


#9

if they’re doing “saturation” marketing with a low price and are just 2-3 people it will probably take awhile before the economic constraints of scaling kick in, or they’ll just stay at a sweet spot because those constraints will always kick them back down, (or they’ll go to dubious methods)

so many in service businesses think they can go low on price to get work and figure they’ll make it up on volume
that may work for manufactured products sitting on a shelf getting dusty but it doesn’t work for labor, I don’t know why it takes people so long to figure it out

I did a comprehensive ‘what if’ spreadsheet years ago, how much work, trucks, people would I need to make X amount if I charged half like the “other guy”

it only took minutes to see it’s a losing proposition real quick

it exponentially changes, ridiculous, like instead of 5 guys I’d need 20, and ended up costing money to be in business!

the revenue per employee starts to get so low, and you need trucks, work comp, liability, admin/office support per employee, operations managers, etc that it just doesn’t work

look at this article: 250k - 1.8m revenue per employee!

and we’re scratching around for 120-150k ultra tops per employee?

and then to Half it to 60k per employee?? ridiculous!

the typical average revenue per employee is 190k - 210k per year, so we’re already way behind the 8-ball as it were and then to do a third of that?? ugh!


#10

David, I’ve been tossing this around for a bit, the only things I believe it could be is lower “accepted” owner pay and no to little net profit for the company.
Taking into consideration if all other business expenses are the same.

Correct me if I’m wrong @dgalkin or @Bruce or anyone else.


#11

Steve, you sound like you are on the right trail. Likely this guy isn’t building a business as much as he has some wonky income stream.

If this is the case, sooner or later something will happen (some sort of big expense) and he’ll be out of business. In all likelihood, this guy is paying his guys as I.C’s. This way he can set his labor costs on the job, and just take his share of the invoice. Like Bruce said, if he is, it will catch up to him sooner or later.

It’s too bad one of his employees couldn’t be approached to see what’s really going on. My bet is, this competitor isn’t doing everything like he should, and his house of cards will fall on him at some point.


#12

Thanks for all the replies. Great discussion. My final thought is that the owner probably “doesn’t feel right” making a profit or making more money than an employee. This type of thinking seems to be pervasive among small service company owners.


#13

Can he be in that sweet spot for the market area ? Maybe hes 25% lower cause the market you in you are 25% over. Also Ive seen a few companies in my area lower then me and some higher. Both making money and been around for years. Just because my overhead is lower then lets say a Franchise don’t mean im charging less. Im charging what the market will allow and that I feel I want to make.

Lets take a Pack of Cigs ( just cause they are crazy priced here in NY) Here they charge $15.00+ down south its like $6.00 or something like that. Same pack same product but the market dictates the price. Can you imagine a person used to paying $6.00 All of a sudden get charged $15.00 - Shit you can bet the will go to the $6.00 store.

Just because a person is priced lower don’t mean hes not 100% legit and dont make him a lowballer. It could be that he found that spot.


#14

Cigarettes are a poor example. The price swing is dictated by state and federal tax on it.

I think if he were 25% higher, he couldn’t grow to the point of having multiple crews and trucks. You are able to sell yourself in residential on your values, but with commercial and storefront, budgets dictate what someone/a company will spend.

Fact is, we know people low ball because they think they will get rich on volume. I believe that’s what is happening in this situation.

A solo operator does have lower expenses generally, but when you add employees, costs go up pretty high.


#15

I think people under price because they dont value the service as the customer does.

Push the limit, see where your range is and what your market will allow.

Many price based on what they made as an employee or what they would be willing to pay, wrong thinking.


#16

I used Cigs as a base - NY prices for window cleaning will not fly in other states.Even different parts of NY the rates I charge wont fly. He even having multiple crew can still have found a sweet spot that makes his monthly expense and makes his profit in residential. Not getting into number I make my monthly expense including payroll on my route work ( im in the middle of my area as price goes) and my Residential is profit (minus added expense per job).

He might be doing the same. Not knowing the area in question and what the market will allow makes it hard to nail it down. But just cause a person is lower don’t automatically mean he’s low balling he just might be in the right spot. The market in question the OP might be over priced ( not a bad thing if the works coming in) just don’t know.


#17

Rob that is an interesting way to structure your business.


#18

irritatingly pervasive

marketing and business 101 should be mandatory schooling before graduation

since hes just a couple guys he could be thinking he has his bills paid with his full schedule and mistakenly sets the guys up similar and figures getting a % off that (but we all know other expenses come into play like marketing etc)

someone’s doing the admin, I bet his wife is doing it all . . . for “free”

admin, payroll, bookkeeping, HR, safety, etc etc, someone’s gotta be doing it

Labor doesn’t scale, labor doesn’t scale, labor doesn’t scale . . . lol


#19

awesome quote, I’m remembering this phrase lol!


#20

Wow

Those employees need a raise :joy: