Does everybody start out as a "lowballer"?

[Beth n Rod 1,279]

Is it unavoidable? Does everyone start out as a lowballer when entering the industry? Why? What do new business owners have to do to avoid this early on?

[John Orr 206]

When I started 5 years ago, I set my prices based on what I thought my work was worth. It turned out that I was just about right - approx $1 per sq ft. Which means that if the house is 1000 sq ft, my price is $100 and if the house is 10,000 sq ft, my price is $1000. If the customer does not know their home's sq footage, I guesstimate.

When I started, I was making about $20/hour because it took me all day to wash a house. The same houses I now wash in 2 hours and make $100/hour.

The other day I washed a house ($225) that had a "$69 House Wash" sign on the telephone pole on the corner of their yard. The customer's comment to me was that "they would not trust their house to anyone who was obviously charging too little." People assume that the $69 guy is doing it for beer money, won't be licensed, won't be insured, and probably won't do a good job.

So, everyone doesn't have to start out as a low baller, but if you're doing it for the suds $$, then why not? If you know that the quality of your work will be sub-standard, charge accordingly.

Think about it, there is always a line at the expensive car washes.

[Beth n Rod 1,279]

It seems to me, that priot to all the BBS's on the net, it might have been harder to avoid than it is today perhaps. More and more people are turning to the internet as a means of research. However there are alot of people who never go onto the internet. Those are the folks that have the most trouble determining what price to charge to be in the ballpark of others (in my opinion). If you have no idea of what others are charging, and you are a new startup with lower entry costs, it can be hard to know what to charge. Also I have heard people comment on the need for work and that they were new and didn't have the confidence to charge more, due to a lack of experience.

Beth

[PressurePros 249]

No reason whatsoever you have to be a lowballer unless you commit the fatal mistakes of starting any business.

1) No business plan

2) Under Capitalized

3) No long term dedication

4) Lack of sales/marketing ability

If you don't set realistic income goals short and long term, you may be shocked. I added up my residential work for the past year that wasn't already an existing commercial account for me. In other words, jobs I had to hustle for via advertising..the total gross? 33 grand. Minus my expenses that would have netted me about $13 grand. Can a guy that has a wife at home, a couple kids, a mortgage and all the misc payments live on that? You need capitilization or alternate income to get you through the very lean first years.

If I did not have restaurants to keep me busy, I would have been sitting around 2-3 days a week with nothing to do but worrying about how I was going to make payroll. The first logical instinct of course is to drum up more business. So you plaster signs all over God's country for $99 housewashes. Now you bought yourself alot of hardwork for the same end result. In my opinion, there is nowhere for that plan to go but down the drain.

John, good post especially the last line. There will always be customers that shop solely on price. They go to Walmart and Home Depot and are fine with mediocre products and results. These people I don't need because if I drop my pants on price I lose money and the next guy that comes along and underbids me by ten dollars gets their business. Both business philosophies work or Walmart and Macy's wouldn't stay in business. For me it comes to a simplified plan..work smart not hard.

[Bob Gates 14]

Hey John.....

I am "under the weather" right now taking some powerful antibiotics and pain medication....so am kinda loopy:lgsick: ....You did mean 10 CENTS per sq foot not 1 dollar? Right.?

[charlie 14]

No, lack of experience on running a service business.

Charlie

[James 625]

I didn't have to because I was in the residential window cleaning market. To land my first big condo cleaing project I did. But I made 85 dollars an hour and gained what I needed (experiance). Right from the begining I was the highest priced for decks .

[John Orr 206]

Bob,

If you're the one on meds, then why was I the one to miss that? lol (But wouldn't $1/sq ft be nice?)

[beyoungsr 14]

Both business philosophies work or Walmart and Macy's wouldn't stay in business. For me it comes to a simplified plan..work smart not hard.

It would appear that WALMART'S philosophy of a 28% margin works much better. They are the biggest retailer in the WORLD!

The way they see it, it is better to get a little from a lot instead of a lot from a few.

[Beth n Rod 1,279]

Exactly. Lack of experience is a factor in it for sure.

Beth

[PressurePros 249]

It would appear that WALMART'S philosophy of a 28% margin works much better. They are the biggest retailer in the WORLD!

The way they see it, it is better to get a little from a lot instead of a lot from a few.

yes and thats the definition of working hard NOT smart.

BeYoung, you're missing the big picture here. In the nineties I was a sales trainer for Tweeter. Tweeter is a nationwide retailer that sells high end audio video but they also sell your basic Sony and Mitsubishi TV's. Now you're familiar with BestBuys right? Little company that sells TV's, phones, computers etc. How about if I told you Tweeter with 1/20 th of the locations and and 1/50 of the sales volume made just about the same amount of profit in 1997? Working SMART not HARD.

So Walmart is the biggest retailer in the world? I'm not impressed. I don't need the ego of walking around saying I do the most volume. Unless your volume is growing exponentially against your shrinking profit margin, you're going out of business. So far Walmart is pulling it off, and that is admirable, but trust me, I don't think there are too many Sam Walton's in this business. Its a huge gamble. I'd rather have a smaller, tight and LOYAL customer base that I service again and again.. Increasing my customer count gradually with higher end customers. This takes sales skill and customer service. I realize some people don't like selling service and would rather be just "busy". Great, in fact I need more of that kind around here. Makes my business plan all the more viable as "the new standard in pressure washing"

A little PS for Walmart fanatics: ..trust me on this.. walmart does NOT operate on a 28% profit margin. Walmart operates on a 19% gross and 2.8% net profit margin. Their wages are pitiful and they make health benefits out of reach to their employees by charging a high percentage of salary to have them. Let me go get my flag and wave it for the "biggest retailer in the WORLD !" ::big rasberry:::

[beyoungsr 14]

Hey in 1997 the economy was still booming. What did Tweeter do in 03 vs Best Buy.

Think people are still spending as much at Macie's these days?

I admire WALMART's success in such a short time. Over all I think they appeal to the masses.

Why did you leave Tweeter if things were so profitable there? Surely they were sharing the wealth.

[PressurePros 249]

Don't know, I left them for a better position with a financial consulting firm in 1998.

Macy's would not be in business otherwise.

Walmart opened in 1962. They now answer to Wall Street with expected 20% annual growth. Not exactly appealing to the masses, manipulating the masses might be more accurate.

[Aplus 525]

When I started part time in 1996, there were no bbs like this available to me. Research was much more difficult.

I found some basic pricing from phoning competitors and getting prices from them. I didn't have to worry about overhead, because I didn't really have any.

Like some in this business, I started out looking to make a few extra dollars. I had a good paying day job, that left plenty of time for other work. I'm not one to half-ass anything, so even in the very beginning, I knew I wanted to do every job to the best of my ability. I went to pressure washing shops, and paint stores, asking questions, and finding out as much as I could.

Back then it was learn as you go, and of course, get burned on many jobs because it took alot longer to do the work than I thought it would. But since I didn't depend on the money for a living, I was generally happy with whatever I made.

I don't think I was a low-baller, but I know I was cheaper priced than most of my competitors at the time.

I'm not sure if the term low-baller carries an implication of poor workmanship, or a guarantee of getting sub-standard work, but that's something I never even considered.

By about my fourth year, I had ideas that I was on to something good, and really focused on improving all aspects of the business and making more money.

So the question is: What is the definition of a low-baller?

[RyanH 14]

I worked for Best Buy in 1997...company sucked. Still does. The only pleasant experience you will receive is to get someone who has just started working there and has not yet experienced the beaurocracy of the corporate structure and inept management. Just thought I'd throw that out there.

[ROBERT MCLAUTHLIN 14]

a lowballer to me is someone who knows what the job costs and cuts the price and does lousy work b/c they arent making what they should. For example there is a chain restaraunts that I was doing their daily cleaning. We had a hood company charge them $575 to do their hoods. This spanish cook that works for the company in a different store went around and started to cut the hood companies price by $125. Needless to say it was a disaster. First day he came out to my store he blew out the fan. He shot a bunch of water inside of the electric motor. He showed up with a dinky pw and his cook pants. He left a huge mess all over the floor that i had to clean up. He didnt wrap up all the kitchen equipment that well and his greasy water went in all the food. To me that is a lowballer and the sad thing is that the managers of the restaraunt gets a bonus based on money saved at the end of each quarter so this guy fits in great. Just as long as they get a sticker on their hoods.

[Celeste 341]

We've been in business for just over a year now - the bbs were going strong when we started up and we researched on them prior to formally going into business.

I think that Tony has a valid question with "what exactly is a lowballer".

Roger & I have been very fortunate in that we walked into this business with clients. Roger quickly gained a reputation for knowing his business and getting the job done right (whether it be the first time or, as in our deck fiasco last summer - fixing the mfg failure). We always return phone calls, we never miss appointments, we don't overbook ourselves so that we have to decrease the level of service in order to complete everything. BUT - we have reduced our price once or twice to get a job. Not to the point that we lose money but been down there - however, we take into consideration the other "perks" of getting that job, ie, exposure on main roads, word of mouth, long term contracts. Our prices for those jobs may get us lumped in with the "lowballers" because we didn't make $1.65/sq ft for a deck stain.

A lowballer to me is one who does a $50 splash & dash housewash with dish soap & bleach, no insurance and if he sees the customer's number on his phone 2 days later, won't answer the call.

Is a lowballer one who doesn't feel like he can charge top dollar for a deck strip because he personally knows that he may not be up to par with the big boys because he's only done 2 decks in his whole career?

Maybe before we try to determine if everyone has been or needs to be a lowballer, we should clarify exactly what a lowballer is :)

Good question Tony,

Celeste

[Mike 64]

About Wal-mart.. They must be making money as we have supercenters popping up all over the place because the ones that are currently open you can even find a parking space in. I can speak on a personal note for a second about them, I can go and buy the same amount of groceries that I get from other grocery stores and always spend at least $40.00 less. They price match every other competitier of theirs, but most of the time thier cheaper anyways. Does a box of corn flakes from wal-mart taste different then a box of corn flakes from kroger? NOPE! They are not lowballers, they are pricing competitively.

So whats a lowballer then? A lowballer to me is someone that cuts corners every single place they can. No liability insurance, no chemicals, poor eqiupment and education, cutting cost everywhere so they can charge $50.00 to wash a house.

But..... if a guy has insurance, has the correct chemicals, has the right equipment and education, operates his business legally and can afford to charge $75.00-$100.00 for washing a house and pay his bills, he;s not a lowballer, he's your competiter and a little competition is healthy for business.

This BB has members from all over the country participating.. a gallon of milk cost more in California then it does here in Indiana, does that mean Indiana grocery stores are lowballing milk?

[PATZPW 14]

But..... if a guy has insurance, has the correct chemicals, has the right equipment and education, operates his business legally and can afford to charge $75.00-$100.00 for washing a house and pay his bills, he;s not a lowballer, he's your competiter and a little competition is healthy for business.

This BB has members from all over the country participating.. a gallon of milk cost more in California then it does here in Indiana, does that mean Indiana grocery stores are lowballing milk?-----------------------------------------------------------------------------

I would be considered the above competition. I give good prices with great service, that's what kind of person I am. Besides it's not my bread and butter so things are sometimes different for the lone washer. :sunshine:

[PressurePros 249]

You're right, Mike.. if someone is playing on level ground and has the same overheads but has refined his business for maximum efficiency and can offer the $99 housewash and make money... great. But the original thread is about new businesses. Liken it to me starting a small retail operation and trying to match Walmart's prices. Would I last long?

3 percent profit margin is not alot, but when you consider Walmart does $9,000,000,000 a year in sales.. 270 million is not a bad net profit

Ryan, I agree about Best Buys and all these corporate supercenter outlets. By setting themselves up with low margins they need to resort to unscrupulous tactics.. Walmarts earnings are up... know why? They just increased their foreign goods import ratio. I find it ironic that there are a ton of people ignorant to the realities of business structure that say "Buy American"! on one hand and then go to Walmart to buy goods. Hypocrisy at its best. Ok let me step down from my pulpit.

[Mike Williamson 198]

I'm in the same boat with Roger and Celeste...I'm just finishing up my first year doing this full time. I spent a year before that doing research, obtaining equipment, and doing side jobs for the property management company where I was working.

I've done it right, meaning I got my insurance, I've learned how to do things right, I use the right chems and equipment, and I strive to do the best job possible. I don't cut corners anywhere...if anything, I add a few.

Have my prices this year been a bit lower than other established, professional contractors in this area? Very likely. The reason is, I couldn't afford to lose the job prospects that I had. If only 5 people call me in a given week, I need to try to close all 5 jobs...that means pricing things at a level that I'm fairly cerain the homeowner will like. If I'm getting 25 calls in a given week, I can afford to raise my prices and lost a few of those calls. There was no phone book ad this year, and no repeat customers. Keep in mind, my average hourly rate was still above $50.00/hour, which isn't bad for Florida.

I would rather wash 10 houses/week at $150.00 than 2 houses/week at $250.00. Ideally, I'd wash 10 or 15 houses/week at $250.00, but we're not quite there yet.

Another thing to keep in mind with new guys just starting out is that they often lack experience and confidence. Not all of us are natural born salesmen...I remember feeling very awkward trying to sell a job to someone when I first started out. Lacking that sales experience and confidence made it harder to sell a higher price to a customer. To compensate, I'd do as Beth has mentioned, lead with price.

My first phone book ad hit about a month ago, and the 2nd hits after the first of the year. The phone has been ringing quite a bit, and I have raised my rates accordingly, with fairly good results. I've lost a few, but my closure rate is still pretty good. If the 2nd ad has the same results as the first, and this trend continues, I'll be able to keep my prices up closer to $75-100/hour.

[Mathew Johnson 123]

Walmart also has a twist on the industry other large retailers do not have. Many of the products in thier stores have not been paid for by Walmart. The pay the supplier for the item after the item is sold... To have 15 million in inventory to sell that you haven't laid out the cash for is a definent plus.

I too have just finished my first full year... My first house last year took a day and a half. I charged 225.00. With research, experience and beating these BBS for advise and info, I can clean the same size house in less than two hours and do a better job. Had I started out with the lowballin housewash, I would be out of business.

I don't get many calls a week... But I can almost always close the deal if I get onto your property for an estimate, If I couldn't... I guess I would lower prices to keep a float in the short term but then what... Your phone rings and you hear "Mr. Smith told me that you washed his house for 99.00. Would you please come do mine?"

Uuggh!!

[CCPC 26]

A lowballer is a person who sells quantity over quality, end of story. There are a ton of pressure washers in this area and I have yet to see one that "lowballs" without substituting quality in some way.

low-ball or low·ball (lbôl)

tr.v. Slang low-·balled, low-·bal·ling, low-·balls

To underestimate or understate (a cost) deliberately: “He often took illegal cash payments from developers in return for... low-balling the cost of construction and renovation work” (Boston Globe).

[Mike Williamson 198]

A lowballer is a person who sells quantity over quality, end of story. There are a ton of pressure washers in this area and I have yet to see one that "lowballs" without substituting quality in some way.

low-ball or low·ball (lbôl)

tr.v. Slang low-·balled, low-·bal·ling, low-·balls

To underestimate or understate (a cost) deliberately: “He often took illegal cash payments from developers in return for... low-balling the cost of construction and renovation work” (Boston Globe).

So someone who is a bit cheaper, but doesn't sacrifice quality isn't a lowballer, based on your definition. What is the threshhold for a "lowball" price? If you charge $250.00 for a particular housewash, and the next guy charges $200.00, is he lowballing? $225? $175.00?

The other factor many often forget, or ignore, is efficiency. If I can wash a house in 2 hours that would take another contractor 3 hours to do, I can easily cut the cost by between 1/4 and 1/3 and still make just as much money per hour. By using the right chems, the right tools and equipment, and the proper methods, I should be able to do the exact same job a good bit faster than the guy who is out there who has never heard of an Xjet, who uses tide and clorox through their downstreamer, and who wastes their time dragging their portable washer around, dragging hoses, coiling hoses, etc etc. I can be set up and ready to soap down a house 10 minutes after I pull up. It may take someone else 20 minutes. The same thing goes for finishing up once I'm done.

[Ron Musgraves 240]

http://www.powerwashnetwork.com/showthread.php?s=&postid=30238#post30238

This is a funny thread. great photos

Not to take away from this thread

[Ron Musgraves 240]

Low-baller (definition By Ron **********) this is a person that runs his or her jobs at a loss. Someone that doesn’t know or understand there cost to operate. They repeatedly take job after job making no money until there 401K or loan money runs out. ( these people actually pay the customer to pressure wash)

http://www.pressurewashinginstitute.com/board/upload/showthread.php?t=2673&highlight=lowball

another one