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plainpainter

Do we really care about the cost of gas?

Question

I was talking to another contractor and then reading a thread about vehicle choice here - and the same thing pops up, people are sensitive to mileage. Then it got me thinking - should we really care about mileage or the costs of gas? If we are professionals - shouldn't we just factor in the extra cost of gas and pass it on to the homeowner? More than ever, guys running around with $99 house washes are the ones that will truly suffer. If I charge $350 for a minimum house wash last year - what do I really need to mark that up to take into account extra gas costs? $360 or $370? Is the cost of gas the only thing between success and abject failure? I ran a pressure washer for like 3 or so hours on one gallon of gas - so instead of a buck it's 4 bucks - on a $2,400 deck resto - who cares?

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Like I said - we're all in the same boat - business is business, and passing on those costs is exactly what we are suppose to do as businessmen.
I couldnt disagree more. Eventually (if you get big enough) you will price yourself out of business. Ive become leaner, more streamlined, more productive, more efficient. If after all your efforts you need to raise your prices THATS when you do it. Even with all the increase in fuel, plastic, chemicals, my per job cost has not changed much from last year. When I raise my prices I make more money, I dont just catch up.

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Ask your customers what they think about the cost of gas. Raising your prices is elementary. Duh... But how are consumers reacting? Well, I think it depends on the consumer. There are some who will take a chance on a lowballer, who would not have before, or they will just skip service this year. Worse, they will do it themselves.... This is not the year to ignore economic indicators.

Beth

Beth, I'm not saying don't watch your costs, thats more of a given "duh".

Economic indicators will tell you nothing about your lead and/or close rates. Your real world actual lead/close rates are the only things that tell you your story. As per certain indicators, the economy is down yet I will have my best April ever. I keep raising prices, minimum job, etc.. people still won't stop saying yes. So I do nothing but continue the path of what my budget dictates in terms of advertising and purchases. "Indicators" haven't told me anything. We're selling barbecues and curb appeal not SUV's or real estate.

It still comes down to raising prices.. period. If my close ratio starts to fall because I cross a pricing threshold, I just increase my advertising to compensate. I know what it costs to acquire a customer and have accurate ROI projections on very method of marketing I use. One can equalize economic downturns and stay profitable.

This type of economy is a blessing to business owners. It forces us to become like Roger mentioned.. much more streamlined and efficient. Keep in mind there is a diminishing return on that path. There is only so much slashing of project time and material cost you can perform before you plateau. Then what? Everything is going up.. why should we try to hold prices? Things cost what they cost.

Choose your customers wisely by performing target marketing, sell benefits and customer experience over a pressure washing job and you don't have to worry about the economy other than streamlining your internal operation (which one should be always be doing anyway).

Fuel costs are at most 2% of my gross sales. If they rise 50% this year, my operational expense rises by 1%. I'll raise my prices 2% to keep my margins constant. I'm not going to lose any customers over a raise of $20. My customer database is not going to balk or have to cancel family vacations or eat Ramen noodles because I am taking $20 more from them. They are not going to cancel their service or hire a lowballer. I took 3 jobs from my competitors (Rolling Suds, Mr Powerwash and Gallagher's PW) yesterday and I was at least 30% higher than their estimates. People don't shop on price anywhere near as much as many business owners would have you believe.

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Economic indicators will tell you nothing about your lead and/or close rates.

:lol: ...well, we'll just have to agree to disagree... :lol:

As for target marketing, well that should be something you do anyway, from day one. DUH.

Beth :seeya:

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:lol: ...well, we'll just have to agree to disagree... :lol:

As for target marketing, well that should be something you do anyway, from day one. DUH.

Beth :seeya:

I have absolutely no idea what the above nonsense means? Do you understand the terms lead, customer acquisition cost, indicators? .. if so.. great. Most people, do not. (not sure why you highlighted lead in red???) If you know how to target market and actually do it, cool, you can share some of your secrets.. again most people, do not.

I'm not seeing where anything is "duh". I'm not your friend, I'm not your employee, and I'm certainly not family. Keep that level of familiarity and lack of respect to the above mentioned. Lets try to follow your own creedo and avoid the juvenile stuff. People are allowed to disagree with you, Beth. Coming back at a person's posts with a follow up of "duh" is the ultimate in unprofessional behavior from a purported industry leader. If you got it all figured out Beth, we're all happy for you.

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KEN it sounds like you've positioned yerself real well on the inexhaustable gravy train..good for ya.. :)

To me much of what ya said makes sense. I do think the leads/closing rates will start to suffer if inflation snowballs. The topic of inflation is what many are really talking and tossing about and concerned with. I've mentioned a time or two recently of hearing about an economist view on how the current gas thing not equaling or turning into inflation across the board but I'll be danged if I can't put a finger on it and refind the info. If anyone here is able to describe it. All I can confirm was that it was so simple to understand and convey that I done forgot it..lol. Often is the case on brilliant invention or reason.. ah well easy come easy go.

So far I would have to say I don't see inflation across the board yet. Perhaps we won't... I feel some key ingredient of inflationary times are being missed in this discussion..

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I'm not seeing where anything is "duh". I'm not your friend, I'm not your employee, and I'm certainly not family. Keep that level of familiarity and lack of respect to the above mentioned. Lets try to follow your own creedo and avoid the juvenile stuff. People are allowed to disagree with you, Beth. Coming back at a person's posts with a follow up of "duh" is the ultimate in unprofessional behavior from a purported industry leader. If you got it all figured out Beth, we're all happy for you.

Beth, I think that was to say that one 'duh' labeled an act unrelated to a person and another 'duh' labeled the lack of an act at a personal level... aka-a personal insult implying no brain activity...

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I have absolutely no idea what the above nonsense means? Do you understand the terms lead, customer acquisition cost, indicators? .. if so.. great. Most people, do not. (not sure why you highlighted lead in red???) If you know how to target market and actually do it, cool, you can share some of your secrets.. again most people, do not.

I'm not seeing where anything is "duh". I'm not your friend, I'm not your employee, and I'm certainly not family. Keep that level of familiarity and lack of respect to the above mentioned. Lets try to follow your own creedo and avoid the juvenile stuff. People are allowed to disagree with you, Beth. Coming back at a person's posts with a follow up of "duh" is the ultimate in unprofessional behavior from a purported industry leader. If you got it all figured out Beth, we're all happy for you.

Ken,

Yes, I do. I understand the terms mentioned quite well. As for duh, it simply illustrates what I believe to be obvious. Nothing unprofessional about it.

In fact....

duh - Definition from the Merriam-Webster Online Dictionary

Main Entry:duh audio.gifPronunciation: \ˈdə, usually with prolonged ə\ Function:interjection Date:1966

1 —used to express actual or feigned ignorance or stupidity

2 —used derisively to indicate that something just stated is all too obvious or self-evident

So now that we have that cleared up...I don't have to agree with your opinion. And of course there is a difference between fact, and opinion. One is absolute and the other isn't.

Beth

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am I going to have to send you both to neutral corners? :D

Anyway, this is a good thread. Good info Kenner, I would love to fine tune my customer acquisition costs. I can't figure out how to get them exact like I want for the different target marketing pieces I have out and send every week along with internet. I have a general cost per customer, but they are not broken down as specific as your might be I'm guessing. How do I fine tune them?

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I wasn't trying to sound insulting. I'm pretty sure Ken didn't mean to sound condescending either, or to imply I was stupid. ;)

Not saying either that I totally disagree, just don't fully agree. And it really is okay. At least, it is for me.... :lol:

Beth

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Rod you bring up a good point about estimates being where the money spent on fuel is not as easy to recover, but, coming from Dan's perspective.. it is. You have to raise prices across the board. Giving estimates is a part of doing business so you either charge for them (which I may start doing to slow things down some) or you factor them into your operational expenses.

I used to think that way but in doing so, it is as another person said that they were pricing themselves out of business.

By raising prices across the board, you are in actuality specifically making those people who do accept your business to pay for the gas that was spent going to other prospects.

Now, there is a better way to deal with it other than charging for estimates which we all know is not going to be accepted in an industry filled with fly-by-niters. The stigma is too great. Plus, the majority of various service contractors in the market do not charge at all for estimates. It has become a lure to get the phone to ring brought on by the low-ballers who in the effort of trying to get business removed the charge causing others to follow suit.

Get your calculators out people and start figuring out how to stream line your business and keep your costs low while providing the best service possible and still be profitable.
In tough times, smart business people learn to streamline and furthermore, they learn to qualify callers to make sure they are going to take the time to be at the appointment. As I mentioned, life has obligations and circumstances that come into play and don't always allow them to be there. Unfortunately, these are usually the ones that fall through the cracks and don't call you back. It is the risk we take in business.

Defining a service area is a start, this way one can calculate the fuel costs better within the parameters. Outside them, there will be extended costs that can be figured into the estimate itself and not everyone else's which is basically inflating. Target the pricing towards the customer in specific this way one can get an accurate figure without punishing everyone else in the hopes of regaining the initial expenditures from non-committing prospects.

Advertising your service area and that the estimates conducted in that area are free will be an incentive for those within it to call. for those outside the area, having a nominal fee will keep people from calling... but ... if the ad states that the fee will be deducted from the estimate if they accept your proposal, it increases the likely hood that if you do get a call from them, they are serious. Here is another revelation, it also lets you know how well accepted the competition is in that area as well.

We get calls from a neighboring state because they do not care for the service providers in their own state or cannot find anyone qualified to do the work. There are other variables that come into play but these are a good enough example.

We may charge for the estimate but it actually raises the close rate for long distance service.

All of this may be relevant to the cost of fuel a business expends but the main point I was trying to make is the impact prices can have on businesses due to the customers losing their expendable income as a result.

Streamlining is the next step in a slow (poor) economy. Major corporations call it downsizing in some aspects where they cut their labor force in order to increase capital buffers. In our industry, it means examining our processes and the way we do things and looking for a more economical way to do it...cross training employees to increase their abilities to conduct the services...teaching them how to take measurements and pictures to supply you with the information that makes the trip a productive one and allowing you to make the estimate by snail or email. This is a fine example of streamlining. Making the most use of the resources you already have. This is my point to all and I hope it is received well as it is only meant to help.

Rod!~

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My responses are in blue:

Economic indicators will tell you nothing about your lead and/or close rates.

That tells me that you are not as up on the snuff as people might think. One cannot turn a blind eye to the economic indicators because they give insight into the trends of buying and selling. Your real world actual lead/close rates are the only things that tell you your story.

This is true but not the only story. Did you do your forecasts for this quarter? or, let me ask you this...how many of your reminders cards came back marked "VACANT"? How many new customers are you getting vs repeat business? Did you notice a spike in the beginning of April as people started getting their income taxes completed? As per certain indicators, the economy is down yet I will have my best April ever. I keep raising prices, minimum job, etc.. people still won't stop saying yes. So I do nothing but continue the path of what my budget dictates in terms of advertising and purchases. "Indicators" haven't told me anything. We're selling barbecues and curb appeal not SUV's or real estate.

That may be your angle, but ours is helping to maintain the value of the investment or in some cases keep it from depreciating as fast as it would otherwise. This is an important issue to homeowners who see property values dropping as it becomes a 'buyers market' and selling their homes is one of the few alternatives to debt relief for those who have the equity to do so. Too many already have a 2nd mortgage and the equity is used up. The money is there to spend now, but will it be in the future? Depends on the savings, the 401k, the IRA's and other investments they made.

People are more likely to use these for debt reduction than home improvement unless it is absolutely necessary.

It still comes down to raising prices.. period. If my close ratio starts to fall because I cross a pricing threshold, I just increase my advertising to compensate. I know what it costs to acquire a customer and have accurate ROI projections on very method of marketing I use. One can equalize economic downturns and stay profitable.

Increasing advertising doesn't work everywhere. You may be in an area that is more prolific or affluent than others so this kind of advice to those in suburban areas may not work as well. Demographics and economic conditions must be observed. What works for one may be a boon to another.

Choose your customers wisely by performing target marketing, sell benefits and customer experience over a pressure washing job and you don't have to worry about the economy other than streamlining your internal operation (which one should be always be doing anyway).

Ken, Ken, Ken...did you do this when your business was growing? Keep it real.

People don't shop on price anywhere near as much as many business owners would have you believe.

I find that a reckless statement and here is why; There aren't as many affluent homeowners today as there were in the 80's and late 90's. Foreclosures are at an all time high with 'no downs' and credit abuse being to blame, and now many banks rescinding or not offering equity lines of credit and the trend is spreading. This is a BIG indicator. Just because one does not feel the impact right away doesn't mean it isn't real. We are so used to instant gratification that we equate it with everything and unless it is slapping us in the face, it must not exist or be worth our time to acknowledge.

People are looking to maintain their properties but have less to do it with and with ole 'W' buying our votes for the elephant party with his little economic stimulus rebates which by the way we are going to have smaller returns in the next year as well because of, but are dealing with an integral factor gouging into their wallet even further... gas prices are a pre-indicator because of the domino effect it can have on an economy.

How much are any of you paying for a gallon of milk? 4.39 here. How much did you pay a year ago? 3.49 here. Bread here went from .69 to 1.29 in the last year. All these increases add up and cut into disposable income. I could go on, but I think it is clear, prices are going up and with wages not following suit, we are heading for a recession. I don't even think that raising wages is the answer either because of the hardship that will place on businesses that are already reactive to the economic inflation and throw into that pot failing trade and imports that are directly linked to the price of fuel.

This April things have really picked up for a lot of people and the main reason is that most are using their tax refunds to do it with. Ok, let's look at that scenario. What will this mean in the coming summer months when the tax return spenders are finished and what are left will be those people who are trying to decide on whether to fix up the house, go on a vacation or start nest egging? We saw it last year when August came and the phones stopped ringing and people were on TGS complaining about how slow it was. This was the first year it happened and was so widespread. This is an economic indicator based upon trends of the past where it may have slowed down during this period but it stayed busy for the most part. The fall was weak for most and we saw a number of people lose their businesses to the drought in the south.

Indicators are quite prominent and I would not be as quick to dismiss them as my business depends on how well I interpret them and make decisions based upon the outcome to stay healthy. We are not a board only comprised of contractors fortunate enough to live in wealthy, growing neighborhoods next to golf courses with mercedes, bmw's and lincoln navigators parked in the 3 car garages. Many of us live in areas that don't have neighbors for blocks or even miles and have to travel into areas where the populations are to get work. I take that into account. This is marketing with an open eye beyond the horizon and at 60,000 feet. It is quite diverse.

Rod!~

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I spoke to a friend yesterday here in Md, her daughter has a home on a small street in a neighborhood of single family homes. On that street, 3 houses have been to foreclosure, 4 are for sale, and besides hers, ONE is inhabited. It's a nice neighborhood.

It's a sign of the times.

Beth

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Beth - as a painter, I have seen the 'tax rebate' effect for over ten years - it's nothing new, and does't seem to have anything to do with economic cycles. I do agree alot with you on economic forecasts - we're not immune as a buisness. But then again - the more higher end homes we target, the less we will be affected. I live in neighborhoods with no evidence of foreclosures. I just don't know if $4/gallon gas is really an indicator of a recession. I think as Americans we have taken for granted cheap gas for far too long - the price we pay, is still nowhere compared to the average european payed 20 years ago. And their economies have had their ups and downs during that time, with no real correlation to the price of gas. If gas was more like $10/gallon - then that would be a problem. But your gallon of milk - over the course of a year, how much does that really add up to? You only need a core salary of 50-60 grand to pay for all the 'core' essentials in life, and everything you make over that is just gravy imo - that allows you to buy unnecessary itmes such as luxury cars, homes exceeding 3,000 sq.ft., swimming pools, vacations to the caribbean - all nice things, but not necessary for living.

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Well, let's just kick that high end home thing around for a minute. If other consumers in middle income housing begin to spend less, or to make choices between home improvement projects, selecting one of say 4 or 5 projects instead of 2 or 3, you are competing with other types of contractors....landscapers, driveway pavers, siding and window companies, kitchen and bath remodeling, painting, whatever. So maybe you focus on the high end neighborhoods, along with everyone else who feels the pinch. So now you have increased competition in those markets too, and hey - they are only going to spend to get the deck done one time a year, right?

Look, I totally agree with with strengthening your market position. I also totally agree with the need for a very focused campaign aimed at a specific market segment. Totally get it. Been doing it for years. But I think in this economy you have to expect that your competition is not just power washing companies. It's companies that do other things. In this economy, I suggest (strongly I might add) making sure your customers are aware of all the services you offer, not just one or two. It's a great time to see if there are other good fits for what you do, and to tap into them. I have seen lots of companies doing just that! General contractors doing decks? YES! House washes? YES! Landscapers - heck they have for years, so have painters. Everyone thinks it is easy to do.

Can you replace deck boards? Rail caps? Can you add a coy pond? Deck lights? How about installing under decking? Porch rescreening? Trim painting on the house? Garage organizing or cleaning? Garage floor resurfacing? There are tons of things you can do.

I'll get off my soap box. But before I do, I'll say again that:

discretionary income

Definition

The amount of an individual's income available for spending after the essentials (such as food, clothing, and shelter) have been taken care of.

If fuel, food etc. continue to rise, and the pay rates do not increase at the same rate (they don't) you have less discretionary income to spend. How each company will address this, should be specific to their area and to the demographics they have. Not all areas in the country are the same and not all business owners will be able to do the same thing and have it work.

Beth

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Discretionary income indeed seems important Beth.. Would call it most important actually.

Dan, do you recognize how different delivery systems or economic systems can be as far as size go?. Is America at all suited to immedietly turn into small compact economic lifeboats where an individual areas existance does not depend on others thousands of miles away?... I say NO.. Our country can't handle much higher gas prices without seeing major sacrafices to growth if not actual health and welfare..

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We just recently did a sports facility here that was about $5000 to Power wash it and when we finished my Diesel/propane bill was over $700. So with that in mind Gas prices will affect on what I have to do to keep my company far enough in the black to keep me somewhat comfortable.

There also a few other things I am doing that have a "positive effect" on my business such as doing alot more estimates over the phone and also making people wait a few more days where I have a few estimates in there area so they can all be done at the same time frame with less traveling.

Spending wise for my company I also shop around more to get some better deals. Example of this was to use my local Printing company to print some new business cards, Envelopes,Estimate sheets and then using Keith from KBK Graphx - Brochures who resides in Texas to do my Brochures and Post Cards.

On my typical $300 house wash I tell my customers that I am "Only adding $25" to last year to cover all the increases this past year on gas etc. Some of my customers cry the blues about this because they are feeling the pinch with the recession where in so I let them slide but most are paying the increase and an increase around 8% which is that $25 is higher then my typically past increases of 5% yearly.

These are just some of the things I am doing to stay ahead of these trying times.............

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Towards the end of last year, I started giving phone quotes. I determined that my prices have been averaging .10 sq ft, so that became my price. Average house wash is $225 to $250 - two of those, plus a deck today. I explain that by not having to come out for an estimate, I can pass the savings on to them. (Added benefit of saving time!) Customers appreciate getting an instant quote and most schedule the work. In fact, I am now booked about 3 weeks out - more than usual. Decks and roofs usually require a visit, but even those can many times be estimated.

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This is not in any way an attack on anyone here but I am going to say what I have to say.

Ken Fenner, I have seen your post over time here, I don't know you personally but I do know Beth and Rod personally, they are friends of mine even though we are on opposite sides of the USA.

Beth is not one to knock others, she has been known to go out of her way to help people even one or two she might not even like, Rod has been known to do that too but she is not known to inject comments about others families in a negative way here.

I personally found your remarks more flame then a nice reply.

I also think you know well what she meant but took it the wrong way.

I say lighten up, relax some, take what she and others say not as competitors but as friends who want to help others in the industry.

Excluding low ballers and week-end warriors.

DUH is not a negative word the way Beth used it. Surely you have used too.

Now go ahead and pounce on me but leave the lady out of it.

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My responses in blue:

If gas was more like $10/gallon - then that would be a problem. But your gallon of milk - over the course of a year, how much does that really add up to?

The gallon of milk is just but one of the many items people buy that add up. I see you are taking what I post minimally in terms of scope. Take the costs that I used to reflect the price of milk and add that to each other item one buys at the grocery store and compare that to a year ago. I guarantee you that it is significantly higher.

You only need a core salary of 50-60 grand to pay for all the 'core' essentials in life, and everything you make over that is just gravy imo - that allows you to buy unnecessary itmes such as luxury cars, homes exceeding 3,000 sq.ft., swimming pools, vacations to the caribbean - all nice things, but not necessary for living.

Wouldn't it be nice if we all had at least that much income??? Do you think that is a reality for the majority of the population? Not all is as rosy as you paint it in that scenario because I think it lacks any real life complications that befall people everyday.

How does your core salary figure paying for the college tuition to earn such a salary? Along with the other bills that come along with your suggestions for affordable purchases?

Now, how does all that affect being able to pay someone for maintenance when the bulk of it is used up? yes??? Just trying to be realistic.

Rod!~

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"Do we really care about the cost of gas?"

... of course!!!!

I understand that price can/could/should be passed onto the end user or consumer, but anything that affects my price, costs & margins - I care and care in a big way!

From my perspective, I am focused on growing my PW business and gas prices make a difference... why?

1) Client Acquisition

I need exposure and face to face contact with potential clients to develop my brand and sell the benefits of my service. yes this can be done through marketing materials and phone/email, but probably would not be as effective as face to face and a handshake, which involves driving to various locations... therefore I care about the cost of gas

2) Cost of Jobs

Initially, jobs are taking longer - partly due to a need to develop more efficient practices which will come with experience and partly due to taking extra time to ensure job is more than satisfactory (which is currently the case according to client feedback!!!:))

this means I am using more gas... therefore I care about the cost of gas

3) Economic conditions

As has already been mentioned, the gas price increases have affected things we buy for the household and business - requiring us to make more money to continue to get by. In my situation, in the early stages of this business, making more money costs more money (being a 'mobile contract cleaner' means more gas)... therefore I care about the cost of gas.

Don't get me wrong, I would not use the cost of gas as an excuse for poor business performance, but I would be foolish to say that I didn't care.

I am giving my perspective as a new entrant in the PW industry.

I also run a Swimming Pool Service Company - how many accounts have I lost in the last 6 months...45!!!... no, it wasn't due to poor service or overpricing. 40 of the accounts belonged to a management company who decided to take services in-house to reduce their costs and 5 private accounts, again, who were very happy with their service had to cut their household expenses.

Just my input from a different perspective...

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Thank you Steven, that helps a great deal and the perspective is what really hits home.

What I have been trying to say all along and your last paragraph hit it on the head. They are having to cut expenses.

We can't just raise our prices to compensate, we have to find ways to trim down our expenditures in order to stay competitive otherwise, we lose those who are already strapped for cash.

Rod!~

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