On being competitive

In Mike's "Will it fit" post he mentions the cost of labor and being competitive and it gets me wondering. It's a constant problem that I am sure we all deal with to some extent. Whatever the size of your company you have to bring in enough work to keep the workers busy, whether it's a one man band or a 10 crew company. I am finding that there seems to be a fine line to pricing so that I can make what I need to cover the cost of having employees and the costs of taxes and insurance and overhead. Too high and the amount of sold jobs drops. Too low and we're busy but there is no profit in the work. The two things that help the most are a good reputation and a steady stream of quality leads. With those two things going for you it allows one to be less concerned about the competition.

Every spring I know that I am competing with companies that are bidding low to get some work going and to get some quick money flowing in. At this time of year I never quite feel secure in the amount of work that I have booked and am always worried about selling enough work to keep a good backlog. I only need to keep one crew and a repair person busy. I figure I need about 10 tearoffs and 25 repairs per month to keep everybody working. Not sure where I'm trying to go with this thread, just thinking out loud. What are your thoughts and ideas on being competitive?

(I am basing my observations on the northern regions where a long winter kills the cash flow, not sure how things work in the south. Maybe that's a big part of the reason that prices seem to be so much lower in the south.) Another interesting subject.

This is my Forum post of the week.

I gave up on being competitive about 5 years ago after 25 years of roofing. It got so bad here that I was having to bid on 10-15 roof jobs in order to get just ONE job because I refused to give them away at break even prices. In order to achieve this, I had to be willing to use that 25 years of hands on experience to my advantage and be willing to go backwards and perform the physical work again, myself. After having 3 salesmen, two secretaries and 8 sub-crews at the highest point. On average, I had one salesman and myself, one secretary and 2 crews but like I said that was the highest point. The lowest point was sitting at the shop, the phone not ringing with no jobs on the board and ZERO people working.

Repair work is nowhere near as competitive as installing roofs. However, to survive doing it and not have lots of problems, you need a LOT of experience. Not just in doing the work either but in all phases from running a business to advanced selling ( I don't mean flashy lights, bells and whistles). The problems have to be properly diagnosed and the correct solution came up with and then a profitable price given. Notice I said a PROFITABLE price and not a COMPETITIVE price. Scheduling and speed of service becomes top priority if you want to succeed.

I chose to specialize in this kind of work because I spent 25 years watching the roofing trade go down the tubes and every Tom, Dick and Harry start a "Roofing" business when they couldn't even replace a loose shingle correctly if their life depended on it. A large majority of the home owners just think everyone is the same when it's time to replace the roof but when the roof is less than 10 yrs old and having problems they realize that cheap price wasn't so great after all and now want an actual real live roofer believe it or not. Then there are the insurance models. I'm trying to be nice today so that's all I will say about them for now.

I'm sure this will sound very brazen and bold but there is indeed a lot to COMPETE with concerning replacing roofs but I chose my current business model because 99 out of 100 other "roofing businesses" can only dream of providing the level of quality and service that I provide today. I could not do it when I had my other full service roofing business either because it was set up like so many others in order to try and "COMPETE".

I don't price gouge people. However, I know what I have to get in order to stay in business and make a reasonable profit and that is what I charge. It has absolutely NOTHING to do with what anyone else is charging and is the farthest from "by the square" as you can get.

I'm with Chuck on this. Besides, it's great fun to analyze specific issues on a roof. Beats pounding shingles which is boring. :)

This topic involves endless dynamics. We can each comment/reflect on our own particular situation; Be it geographic locale', licensing environment, financial demographics, etc.

In my 30 yrs as a contractor, (both roofing & GC) - I can make some comments "on being competitive".....

California; - We did primarily commercial & gov't BUR. - Value/price was king; There are always flakes/crooks, but, for the most part, your competing w/like companies and the customer understands that. Relatively speaking; Strict licensing laws. So it's all about proficiency. Extremely price-competitive. Virtually no salesmanship - Merit system - You must be on your game - very good at what you do, to succeed.

Colorado; - We dabbled in commercial. It was very difficult to break into, (on a significant level, that is). Suppose it's the industry's way of self-correcting itself due to no licensing. I remember I couldn't get one commercial roofing manufacture to add us to their "approved applicator programs", even though we'd been successfully providing commercial BUR throughout California's military installations for years.

- We ended-up developing the concrete tile roofing market during the 90's housing boom, and were very successful. I hated tile, but recognized an opportunity and ran w/it. They were getting $300/sq for tile when I just got in off the turnip truck from CA, where the typical residential tract pricing was under $100/sq at that time. We kicked-but for several years, until, of course, the regional/locale' "competitors" caught-on and utilizing the ever-popular "sub-game", eventually priced us out.

- Very sales-driven in Colo. as apposed to merit. I suppose I'm just getting lazy, but it's tiring always having to "sell yourself".

This is getting long - I'll cut it there, for now.

Very true Tom. As a sub, I had many GC contracts/projects/relationships cancelled and our ways parted because 'We found somebody cheaper'. Never mind their prices weren't dropping to be more competitive. It seems each instance was always self serving for the GC only. On the commercial side, I saw the same issues, but I preferred residential work so I stuck with that. I eventually evolved, devolved maybe?, to where I am today, along with a few others on this board. :)

"Nobody ever went broke underestimating the American public's intelligence"-Someone

To get out of the "competitive" arena and simply desire to do excellent work for a fair price requires the right customer. What is that share of the market 10-20%? And shrinking.

Wal-Mart competes-- with your tax $'s-- quite well of course serving the other 80-90%... Mostly those that believe in the free lunch program and the Tooth Fairy.

It is amazing to me now even, that the goal for most is to simply apply a "free" roof until the next Ins. Claim for another "free" roof. That seems to be where the "competition" is, and where I ain't.

Again I am attempting to serve maybe 20% of the residential roofing market. At most. How do I market for that???? That is my burning question. My Homework to be done

I have no answers, only observation. Additional rambling thoughts

Twill59: "To get out of the "competitive" arena and simply desire to do excellent work for a fair price requires the right customer. What is that share of the market 10-20%? And shrinking."

Funny you said that. When things slow down, I'm always telling the wife that it only takes ONE call. The RIGHT ONE! Concerning replacing roofs the right customer is maybe 5% around here. Most of them just assume everyone is the same and the only thing that's different is the price. With repairs it's more like 75%. Of course those numbers are general because it depends on the source of the call how high the percentage will be on average.

For replacing roofs, I don't have the answer either. I could give some fancy answer that might sound good and all that but I really don't have a good one because more shopping goes on with roof replacements than at the local Wal-Mart Supercenter. With repairs, I just take advantage of what the companies that play the sub-game can't do since most of them are not really roofers to begin with, just business men. I sell ME and the fact that I will NOT be subbing out the work but doing it myself using my 30 years of experience to correct what their sub's screwed up.

One thing is key to being "competitive": Do the roof in one day. When Willie sez that all roofing companies are the same, #1 what the homeowners are hearing is 1 day roofing.

#2 of course, they all have almost the exact same price. Prolly due to the fact that all of these companies use alot of the same people and...fast is faaaast. So not much variance on any "tolerances" or "specifications" ..... (maybe they will cut out for that ridge vent, and maybe they won't) :laugh:

twill59: "#1 what the homeowners are hearing is 1 day roofing."

Once again, it's funny you should say that. :laugh: I used to work for a guy who's company slogan was "One Day Roofing". I subbed from him for about a year. We didn't always do the jobs in one day either. ;)

Our pricing model has evolved over the years. We used to sell price but no longer do.

It is a mistake to label those who bid low as disorganized and lesser businessmen. I'm sure Kresge's CEO thought Sam Walton was a low baller.

Back in the day we worked very hard to maintain a hefty cost advantage over the competition. We did that, not by offer corner-cutting low quality roofs, but by doing these things:

* We had our own 6,000 semi tanker and tractor and bought in bulk for $1.37/gal when others were paying $2.50 in drums.

* We bought polyester fabric by the truckload for $2 when everyone else was paying $10.

* We bought granules by the railcar for $5/bag when others paid $10.

We were charging $85/SQR to install a polyester fabric and granule roof over gravel BUR, and making more profit (per day, not per SQR) than the guy charging $200 to install mod bit (this was in the 80's).

We have moved away from that model by adding SPF to our systems offered. In a city of 230,000, probably 50 roofers do TPO and mod bit, and maybe 4 do SPF. SPF has allowed us to stop selling price so much.

It is a mistake to label those who bid low as disorganized and lesser businessmen."

I agree. I am finding out that it is I who is the lesser businessman.

But I am a much, much, better roofer

It's just hard to sell "I'm the best" when the other guys are a better salesman and say the same thing(I guess?), but they are 10-30% lower than my bid.

Word of mouth has been good us, I thank my Dad for that one.

The best competitor is usually the best liar.

clover83 Said:

Word of mouth has been good us,

Word of mouth has just about died around here in the DFW area. That used to be the my only source of business back in the '80s- and I did well. Since 1990, the population in this area has double- from 3 million to over 6 million. That's alot of people and alot of new housing units. They also brought in a lot of guest workers to do all of that work.

Then the internet just brought in a sense of disconnect. It is no wonder why the stormers and carpetbaggers have taken over.

And the type of houses they are building- it is either a McMansion that is so complicated they can't pay me enough to do, or on the other end of the scale- the "affordable housing" that is so cheap I don't care to do.

"Then the internet just brought in a sense of disconnect."

Yep. That's it, in a nutshell.Disconnect. AL. BBB. Home Advisor (people sometimes think that THEY ARE the contractor!)