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?

[CCPC 26]

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?

If you read my definition carfully it reads: "They sell quantity over quality" I did'nt say that all lowballers do poor quality work. I said, it seems that they sell there services based on offering the cheapest price.

.

[Mike Williamson 198]

If you read my definition carfully it reads: "They sell quantity over quality" I did'nt say that all lowballers do poor quality work. I said, it seems that they sell there services based on offering the cheapest price.

.

So where is the "lowballer" threshhold? How much lower than you does a guy doing equal quality work have to be in order to be a lowballer?

[Paul B. 523]

One definition of a low-baller (business) is the one that claims they will beat any competitor's price by "X" percent.

A large percentage of businesses "low-ball" at certain times or on certain products. For example, you've most likely heard the terms "door busters" or "loss leaders" which is one method of attracting customers. Introductory pricing which is lower than the standard would also be considered low-balling (Super Cuts offers $4 hair cuts during their first couple months after opening, after which they raise prices to $12). Sears, HH Greg, Circuit City and others that sell electronics have a policy to meet or beat their competitions prices.

In most businesses one can be a low baller without sacrificing quality.

Low balling may be an essential business strategy for certain businesses.

However, once you sacrifice quality, you become something less than a low-baller.

-

[PressurePros 248]

Lowballer, leads on price..period. Not, "I'll do the best job", "I pay careful attention to details", "we are professional, courteous and neat".. just splash and dash, slam bam thank you ma'am, hooked up, spray water and be gone before customer can even blink. Can they be efficient and do a good job? Sometimes. But I'm telling you, if I saw a guy hook up and leave in an hour's time, I would be looking for stuff that is wrong and when I found it, I would kick myself for getting exactly what I paid for.

I can buy three $1000 machines, bag the insurance, pay some college kids $9 an hour and send them all over SE PA doing $100 housewashes. I guarantee I can make alot of money doing it and probably not even have to work myself. I'd be a lowballer. I wouldn't even keep a customer database as I wouldn't expect repeat business.

Mike asked what the threshold of lowballing is. Here is my formula.. all legitimate business owners know what it costs per job to turn the key on their trucks. If a guy is selling jobs for that price or pennies over it, he is shortcutting insurance and integrity and is a lowballer. Staying on track with the original topic of the thread.. New guys have to pick where they want to be in the marketplace. If 10 hour days, 6 back breaking days a week are something you don't mind, then by all means go after a huge customer base with cheap pricing. Herein lies the problem.. a guy that does this has no time to manage the paperwork, the sales, labor, growth, have a family or even enjoy quality of life. Not my business model... thats just buying a job. I'll pass and enjoy managed growth with a loyal customer base.

I can always go down in price if the market dictates it. What chance do you have of raising prices if price was your number one selling point to begin with ??

[Celeste 341]

So where is the "lowballer" threshhold? How much lower than you does a guy doing equal quality work have to be in order to be a lowballer?

I think this is where the pain begins....when you have someone who is not full time but is a quality part-timer....they don't have to support their family with the pressure washing therefore, they can do good work, carry their insurance, use the proper stuff, yet do the occasional housewash for $75.00 and be tickled with the check.

So, I guess there is actually a dual definition of low-baller:

1) The useless intentional one (no insurance, splash & dash, for beer bucks kind) {Which incidentally causes business for us "serious" ones 'cause they leave a mess!}

2) The part timer unintentional ones that have no clue that they are eating into the supporting full timers market.....

Well, I guess the third kind may be what this post was actually getting at:

3) The newbie who will take anything to get their name out and gain experience on other's folks' property :)

Celeste

[CCPC 26]

"To underestimate or understate (a cost) deliberately:"

(or somtimes not deliberately)

it has nothing to do with how their rates compared to mine it has to do with their sales approach and how it affects their own bottom line. An example would be a 'lowballer" is giving an estimate on a exterior house wash. He estimates that IDEALY he would like to quote $200 for the house wash to cover his expenses etc. and make an average profit, but instead he quotes $125. This can be due to many other reasons than just trying to out bid the competition, some of which are listed above: lack of confidence in their sales ability or skills, fear of lossing the job, stupidity, slow times, future job prospects, etc. The point is, it has more to do with lowballing thier own profit margins, not mine. I've lowballed myself on an occasion or two when things were slow. Better to make a little somthing to keep the business runing than to sit at home and twiddle my thumbs.

[Celeste 341]

"I've lowballed myself on an occasion or two when things were slow. Better to make a little somthing to keep the business runing than to sit at home and twiddle my thumbs.

Guilty here as well, as I indicated above. Sometimes the end result justifies the decrease, in which case, how can you possibly consider that low-balling? Maybe keeping the business running by doing a discount job (which by the way, I personally have decided to call it when you are a legitimate business person) will advance your company anyway. At that point, it's not "lowballing", it's advertisement.

Celeste

[PressurePros 248]

I understand the point you are trying to make that work done at a discount is better than no work at all. But is it really? If you are undercapitalized and cannot ride out slow times, you propbably shouldn't have ventured into your own business to begin with. (not you personally, Celest, just a general statement) You have to setup your business plan from Jump Street. If you are going to enter the market as high volume, low margin thats fine. But the high volume doesn't come right away so that business plan, unless you are well funded, is dubious. You say its merely advertising but I question if you want to advertise your company as low price or high quality? In most situations you cannot be both. So you do an account for 60% of what you would normally make...what kind of business is that going to generate except more people looking for the same deal? If it came down to feeding my children or holding out for a few extar bucks I would obviously hustle for peanuts. But, and this is just my opinion, if that is the case, I should be working FOR someone, not trying to run my own business.

[Barry M 73]

What's to happen if people keep popping up with cheap pressure washers, wand in hand, lowballing the heck out of everyone? PW companies will be on every corner charging next to nothing and our industry will be down the crapper. That's why I think there should be apprentice and journeymen programs for this industry. Once a person made it through the program he would be educated and know what his service is worth. That would weed out the lowballers. Customers would also realize the years of education and the skill involved in PW, and would be more willing to pay for quality work. When a person calls an Electrician, they know it may not be cheap but they are hiring an educated man who is skilled in his industry. I think it's up to us to do something about it, and keep out the lowballers before they take over!

[Beth n Rod 1,279]

You all are amazing in the different ways you look at things.

This is great posting.

Rod~

[Henry B. 4]

I agree with the apprentice thing and also what Celeste said earlier. But, let me approach this from another angle.

When I started out my company, I had no business plan, marketing strategies and all the other stuff many of you have mentioned. I started out with under $50 and a ladder that I borrowed from a buddy. I had no idea about running a company the only thing I knew was attention to detail (navy) I just plain busted my butt for the first three years and did everything I could think of for my clients. I did handyman work, plumbing and many other things. Slowly I gained more skills in marketing and being able to read people and used those skills to sell jobs. I used my simple high school education and I never went to college. The only non high school training I had was learning how to blow up things and people. (navy again) I gained my customers respect and loyalty by doing a great job for a fair price.

My pricing structure was based on what the market would pay and how good and fast I was at doing things. Was I a low baller? well in some cases I might have been but I did what I had to do in order to survive and pay my bills.

It would be nice to be able to sit here and say I never low balled anything but it's not true, you do what you have to just to get by and you learn from your mistakes so it doesn't happen again. I spent quite a few winters getting a part time job or working for peanuts to do that all over again. As you gain knowledge and experience your prices go up and the time it takes you to do the job goes down.

When I was busy, my prices went up a bit until the work slowed down to a point that I could handle it.

If work is slow because another low baller has started up I can match his prices and beat his quality of work and upsell on other things if I want to. The difference is I'm faster, my quality is much better and I'm a one stop shop. Plus I'm also one hell of a salesman.

My clients use us for a variety of services, not just power washing and in today's market and weird climate changes you have to be adaptable.

I can compete with the local low baller doing decks for $200 bucks easily if I want to and probably run them out of business. If you think about it the biggest difference between a low baller and a non lowballer is the quality of their sealer when doing decks. The more knowledgable contractor does the job better using chemicals and less pressure or hard work. If you educate the customer on what will happen with the thompsons sealer they are planning to use. Then tell them about your sealers that usually sells the job for you. But, if the customer wants the cheaper sealer it's their choice and their money to maintain it more often. I simply won't use thompsons but there are other low priced sealers out there that clients prefer. Then it just becomes a matter of doing the job better and faster than the lowballer and outperforming by volume. How do you I that? Were twice as fast at what we do and I've gained so much hands on experience from doing such a variety of things. Most of the lowballers don't have the knowledge to get the quality we can and their equipment is substandard so it takes them twice as long.

I can make a spray on rinse off house wash agent to do an entire house easily in under 2 hours and still make money if I drop my prices in the lowball range of 150-250 bucks for it. The lowballers are using strait pressure instead of being smart and using the proper chemicals so it takes them almost an entire day. I can do three or four houses in that amount of time and so can almost anyone that has the knowledge. I'd rather have a price fight and make $800 a day working smarter instead of sit on my butt and say how I'm too good to do that. Do I like doing jobs that cheap? Hell no! But, sometimes you just have to do what it takes to keep your guys working. In winter my guys are out there working instead of sitting in the unemployment office looking for another job. They know to keep their eyes open for extra work so they can have work to do and make a commission for the sale.

Everything my company does we do faster because we work smarter, not just harder. I don't drop my prices down to meet the lowball and win the job but I know that I can do it and still outlast them all if I have to.

To me that's a successful business doing what it has to do in todays market but of course everyone has their own opinion. Some people want to get rich and make millions. Being in business for over 15 years I've made millions, just not all at once..

I prefer to keep my life the way it is, I'm not rich but if I want something, I have the money to buy it. Does that make me a low baller? If so thats fine, I'm a happy low baller and I made over 10 grand in gross sales this week and its winter here!

I also know that I took care of my customers and didn't overcharge anyone just because I could. (I'm not saying anyone on this thread does)

Most of the lowball I've meet get every dime they can. We may have a different class of lowballers here or perhaps they should just be called scam artists that charge far more than they should for the lousy job they do. Some of them charge more than a legit company would and get it, they just do a lousy job. Most, just lack the knowledge to do it properly and they tend to work harder instead of smarter. I think the DC area is just strange after all, who would vote a crack addict into public office twice?

Owning your own company is the American dream after all, but most people don't understand how much work is involved in it!

[newlook 265]

Okay, so let's assume our industry creates a journeyman and/or apprentice program that "raises the standards" and ultimately weeds out the "lowballers".

You have a customer that has 3 proposals in front of them for power washing their house. The 3 companies that are bidding on this job have all the same credentials and are recognized by the industry as a "professional" because they got this certificate from the ACME School of Power Washing saying they are professionals. All 3 carry insurance and all their references check out.

The only difference with the proposals is the price:

Company 1 says they can do the job at $590.00

Company 2 says they can do the job at $500.00

Company 3 says they can do the job at $485.00

You tell me who the customer is going to give the contract to? Is Company 3 considered a lowballer? Having some kind of certificate will not eliminate what one considers to be a lowballer.

[Henry B. 4]

Hey Carlos, your right, having a certificate won't change pricing variations between companies. But, it will show that the person has the training and experiance to do the job properly. That's what counts in the end result. No I would not consider any of them to be lowballers. They are charging what they feel their service is worth considering their overhead. Now, why is the cheapest guy charging less if he has all the same expenses and overhead.. Maybe he thinks that's a fair price? Maybe he thinks why should I charge more just because the customer "might" pay it? I've seen prices like that before in this area, usually in the heavy season then it comes out to what the market will pay. Maybe the lowest guy is booked for 3 weeks of work and the others are booked for 4 weeks. When the jobs start flying in faster than you can do them everyones prices usually go up. Most homeowners won't wait 4 weeks for a housewash so they end up paying more for it than they would in during the slow season. It's all a balancing act really when your in season, do each job the best you can but also as fast as you can and move to the next one. Another thing to consider is do I bid the job fairly so they will become my client in the future everytime they need powerwashing or do I bid it high and let it fly?

[newlook 265]

Henry,

I am ex Navy also and use to be a firefighter until I lost me hearing in one ear.

[Celeste 341]

Let me toss another angle into this......owning your own successful company is a goal - meeting goals takes hard work and compromise. If you have the luxury of funding the opening of an instantly successful business (my definition of successful is being in the black and in demand), very good for you. This is not generally the case. I'm willing to bet that most all of us that started in this business were undercapitalized. I'll put that one right next to being able to afford to have a baby. There's never a right time, just maybe a better one. It's all relative. You do what you can to make your business work. If at some point, offering a discounted price to get a job that will reap you benefits in the long run, the pros outweigh the cons - SO LONG AS YOU DO NOT LOSE MONEY OR DROP THE QUALITY OF YOUR WORK. Further, when that client sees the job that you have done, the next time they will understand why the price increased if you need it to and probably hire you despite it.

Celeste

[Henry B. 4]

That's what I was trying to say in that 15 page post of mine..lol

One of these days I'll get better at putting out what I'm trying to say in print. I can do it fine in person but on a computer I suddenly have a problem!~

Thanks Celeste!

[John Doherty 126]

I started at the other end of the spectrum I was a HIGH baller. I bought my biz existing, it had 2 accounts w/ home builders and was part time. One builder was custom home, 30-40 homes a year, the other is the largest in the state and it was for one project of $700k+ homes. My idea was to go after the larger homes and offer lots of service (cleaning materials out of the garage etc). I was getting $150 per home, for the flatwork only.

I found that the semi and custom builders don't seem to be able to pay their bills, and in mid 2002 the market for anything over $300k completely tanked. I needed to completely rethink my strategy!

Now I still do flatwork and the key is volume. I get a bit more than half what I used to, but manage it with a limited scope of work.

I know a guy who started out planning to do house washes, did tons of research which was great but the internet is global, there is NO market for that type of work in his part of the country, he's smart so he adapted. Now his main focus is on decks, which is huge where he is, and he's on track to a great 2005.

I guess my point is you may start out with a pricing strategy or one type of service in mind, but as they say, 'men plan and God laughs' if you can't stay nimble you will be out of business. If you come in by price you will probably go out by price.

I keep very close track of my unit cost to do a job and know exactly where my price points are, my service quality stays very high, and my guys don't want to go with anyone else. If someone comes in and offers say $10 lower per house, the quality and reliability is going to save me, $15 or more lower and they may go for it, but I know I'd be back because there's no way to make any money that low.

I know the type of work I do gives me a more level playing field, you must be insured or you're gone, and my audience is smaller, selling to a few guys for the work as opposed to 1000s of homeowners, but I think the principle remains the same.

Just my .48 cents worth,

JD

[Henry B. 4]

I keep very close track of my unit cost to do a job and know exactly where my price points are, my service quality stays very high, and my guys don't want to go with anyone else. If someone comes in and offers say $10 lower per house, the quality and reliability is going to save me, $15 or more lower and they may go for it, but I know I'd be back because there's no way to make any money that low.

JD,

Are you saying if you lowered your price by $20 or $30 bucks you wouldn't make any money?? I could drop my prices by a $100 and still make a profit after all expenses and overhead. You must live in one tough area man! My chemical, labor and fuel cost for each house is around $50 at most.

[PressurePros 248]

Some good stuff here, this is one of the best posts I have read in awhile. I think everyone that posts on this board has a solid head for business. Someone mentioned adaptability. Its pretty obvious you need to be flexible with your business plan. Markets change, economies change, customer needs change... just don't lose sight of the original thread.. Does EVERYONE start out as a lowballer... A $199.00 housewash in my area would be very low. A guy that has expectations to make $699.00 on the same housewash may or may not get it based upon experience and reputation. I can charge 3-5 times what almost any other company will charge for a splash and dash job. Its also easy for me to sell because what I do and what the average powerwasher do are different beasts. I am prepared to adapt in 2005 with levels of cleaning service based upon customer desires. It allows me to draw larger invoices from customers looking for more comprehensive cleaning yet still offer a lower priced counterpart as to not bid myself out of the market. It may be a pipe dream, but I think its the best of all worlds.

My definition of lowballer is different than alot of what I have read. Lowballers use inferior tools, and sell solely on price. They are hacks and I doubt any of them read this message board. They are the curse of this business and they are why, when someone asks what I do for a living, I want to reply "I am an exterior cleaning contractor" versus saying "I run a pressure washing business"

[John Doherty 126]

Henry,

Let me clarify, I do new home flatwork for home builders, price is per home, contracted for say 500-1000 homes a yr. (hope to do 2000-3000 next yr., contracted for 1700 right now). Every job is virtualy identcal, no chemicals, hot water only, jobs are 45mins.-1 hr. (if you spend more than an hr. something is seriously wrong and additional hourly billing applies).

The margin is tight, but the work is steady, easy to train, less dangerous (no chems), advertising expense is nill (I really don't advertise at all, no # on my rig, no yellow pages or mailers). My expenses are fuel, equiment, time and insurance (not in that order). These guys pay every 2 weeks so my net is 15-30 days max. They have me on automated pay systems so I don't even have to invoice, just track payment so none get missed. Most of the guys schedule a month in advance.

One of the things I really like are the expectations of my customers, these guys know what can and can't be done, so no crazy requests and no complaints to deal with. I also really like that it is daytime and year round, with some slow down in Jan. and Feb. but with the #s these guys push in December (15% of the year's volume), I need and can afford the slow down.

For 2005 I want to capture a greater % of the construction market (3800 would be 10% of the projected market in CO), for 2006 I would love to broaden to more commercial and industrial work with construction paying all the bills and the other stuff making some real money.

I'm happy to suffer the margin for now!

By the way this is an excellent thread!!

[Mathew Johnson 123]

My definition of lowballer is different than alot of what I have read. Lowballers use inferior tools, and sell solely on price. They are hacks and I doubt any of them read this message board. They are the curse of this business and they are why, when someone asks what I do for a living, I want to reply "I am an exterior cleaning contractor" versus saying "I run a pressure washing business"

Well said... Your delivery of the product you offer sets the stage for the price you can ask... Car Dealers don't sell "used cars" anymore, they sell "pre-owned certified cars"

I often reference that I don't have competition in my area... This can work for and against me. I charge a good price and the results have to be awsom. Well really I have a guy named Ralph in my area doing pressure washing but he isnt my competition. He owns a nice pickup. This summer I ran across Ralph at the local convience store getting fuel, on the back of his pickup he had a 20 foot extension ladder, a small pressure washer, 100 foot of garden hose and 50 Pressure hose. He saw my enclosed trailer and asked if I was busy cleaning, I told him no not really. He couldn't believe how busy he was. He did and I will quote "7 houses in the last two weeks and got $80 per house. He told me that he felt like he had washed all of Cobleskill (small village about 40 miles from where we both live). I asked him how long it took and he said with travel he could do one a day and be home by 2:30 or 3:00.

I didn't have the heart to tell Ralph I had just finished a funeral home and crematory and made 575.00 by noon. I guess you could call him competition but I have been called to clean a property that he couldn't get clean. Ralph is more of a neusance than a competitor. He will not be in business long. He has no insurance, he cant get a commercial job (they all require cert of ins.) here, And yes,,, He is a low baller... I will clean a property free for the PR (ie our American Legion) before I low ball a job.

That is not a definent,, The reality is I have to stay in business. My nursing job will cover my living expenses but it wont cover my business expenses. I still think I would find it difficult to fire up the pressure washer for an 80 dollar house wash.

[Henry B. 4]

Hey Newheights,

I'm sorry about that, now that you mention it I recall you saying you did new construction. Your right, there is a LOT tighter market and pricing in those situations. I've got a buddy of mine that works for a construction company and he told me what they were paying the company they have. I think he charges 100 a house including the garage and all flat surfaces. There's money in it and it's year round so it's not a bad deal if you like it. I just wasn't interested since the development he runs is in Virginia, about 90 minutes away.

[Henry B. 4]

Hey Mathew,

If you got together with Ralph sometime you could probably teach him a few tricks and between the two of you, you could raise the bar a bit in your area and that would probably drive the prices up a bit also!

[COOPER 14]

I am glad I dont have enough time to wine about who is a "lowballer or not. Yall need to worry about getting out and getting more business instead

of staying on here all the time wining (sp)

[Mike Williamson 198]

I am glad I dont have enough time to wine about who is a "lowballer or not. Yall need to worry about getting out and getting more business instead

of staying on here all the time wining (sp)

Or, you could spend your time coming here whining about what you perceive as whining. :lgsad:

As far as being so busy that you don't have enough time to come here to read and post, I never want to be there. I never want to sacrifice my relaxation and family time for the sake of money. :lgmoneyey I'm making enough now to pay the bills and set a decent portion aside. More money is usually a good thing, but not at the expense of things that really matter (and no, money really doesn't...)

I do agree with part of your post, as far as not worrying about "lowballers." It may take a bit longer to build up a client base because of those who undercut price and sacrifice quality, but in the long run, the quality of your work will speak for itself. It's satisfying to be called to re-do what some fly-by-nighter screwed up.