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To the bottom!
Posted by pythagorean on October 28, 2023 at 2:00 pmI wonder if any other professions resort to tactics like slashing their prices by 25% when they’re desperate to bring in more work like my company did recently. What do you guys think?
holy-cow replied 10 months ago 12 Members · 17 Replies -
17 Replies
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There is a difference between “paying the bills” and “we must be charging too much”. The first item is a matter of finding some quick money. The second should be based on repeatedly not getting work because too many others have hit the “paying the bills” status.
I’ve reached a status where my “Give A Damn” is broken. I will gladly take on fewer projects to do my part in holding the status quo on what surveys should cost. I spent too many years in the “paying the bills” status. The challenge for most businesses is determing how much the owners are willing to give up from their share of the profits before cutting business expenses by financially injuring their employees.
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25% from what? A lot of outfits pumped up their rates in the last couple years to take advantage of a super-hot market. If things are cooling off a bit it might be appropriate to dial it back a bit. Need more information before passing judgment.
Dan Beardslee’s book contained a spreadsheet for determining just what rates should reasonably be. It need not be a guessing game.
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If work was steady in the recent past, and then all of a sudden it dropped off a cliff, I would first suspect reasons other than price.
The last time I saw that big of a cut all at once was circa 2007-2008. Either something major happened locally, or the firm is brand new (or just new to the area) and came out of the gate with way too high of prices.
Did they slash pay too? We would certainly not be able to sustain 25% cuts to price without doing so, and then we’d lose all of our (top) people, barring some sort of widespread market crash in the region.
“…people will come to love their oppression, to adore the technologies that undo their capacities to think.” -Neil Postman -
When I was young and foolish, I did on occasion try slashing my prices during slow times to try to get work to pay the bills. I don’t recall ever actually getting any new work this way. The only thing it accomplished was giving my regular clients (who would have hired me anyway) hefty discounts.
Low prices only attract low-quality clients.
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I think the public bidding process is the best indicator of prices. I haven’t bid one in three years and probably will never try for any again; but watching in the paper the “winners” and “losers’ gives me an idea of what is going on. Some of the winners are so low it’s breathtaking.
However, I’ll continue along raising prices slowly over time, trying to stay between the highest big overhead shops and the lowest out of the back of the truck shops.
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There are rates, there are prices, and there are costs. Not the same things. One of Dan Beardlee’s maxims is “if your aren’t getting work, it isn’t because you are charging too much“. Some people take this to mean that you can jack rates up to the roof and not have it affect your workload. This is obviously absurd. What I believe he means is that you can charge higher rates if you are providing your clients with good value for their money. Conversely, if you are not providing good service to your clients it doesn’t matter how low you push your rates.
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As everybody who has been in the career field long enough knows well, our work in a cyclical feast or famine situation that revolves around the state of the economy. We have been feasting at the table for 10 years now and it was a darn good run! The new housing market is on the verge of the 2008 stand still and so is the resale market with mortgage interest rates pushing buyers out of the market.
I have seen a drastic reduction in my workload over the past two to three months as interest rates creeped up. We have been investing heavily in technology and the phone isn’t ringing off the hook like it was four months ago. We are on course to see the same conditions that we saw when the market crashed in 2008 and it will last for at least a few rears until interest rates come down. It’s going to take time and smart political discissions before the economy corrects itself and inflation rates drastically reduce.
I don’t know how you are seeing things in your own locality but I am faced with difficult decisions now. I have 17 guys in the field and it’s a daily struggle to fill their schedules. I’m not going to lower my fees because of the investments we have made in vehicles and equipment so the hard choice is, how many people do I lay off and when do I do it?
I am fortunate enough to be a major component in a firm that offers more than just engineering and land surveying services, others are not. Most companies with a narrow scope of services will begin slashing rates in the near future, just to cover overhead and payroll to try and keep afloat during the famine cycle, and, like in 2008, others will be forced to shut down their operations and liquidate.
Housing starts are the number one indicator of the state of the economy and right now, they are tanking. I’m not too concerned about any firms that we compete with lowering rates because before we hit the scene 9 years ago, our core clients used our competitors for their work and experienced long delays with a lack of quality work and client servicing. Most among us who are in a decision making roll will be faced with tough decisions in the near future, whether it be giving away work to stay afloat or reducing staff, which is always hard to do from a human perspective.
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…so the hard choice is, how many people do I lay off and when do I do it?
You could take a pay cut to keep them working since they probably made the company a ton of money.
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@chris-bouffard We have a double whammy hitting us. I am just a low man but am keeping our shop going while the new boss is selected and or arrives. Of course i have a few LS that are remote helping keep me going. I had crews out the door early this morning and had caught all the work i could do by noon. I went off the clock by noon except staying available to the crews if they needed something. I am not in the role to bid or ho after work so my hands are tied as most of my connections to get work which i could is not what we do so the higher ups are not interested as it is just not in our business model. Which I understand just hard when i have several people wanting a survey and I can’t help and can’t send crews to do it. To much overhead for us is what i am told. I am learning and i see a way to make it profitable with my limited experience but not my call. I will have one crew sitting home unfortunately the next couple days as nothing for them until next week. You are correct on market for sure. I have been looking for land farm land since covid hit. The prices ran up high and still are. Now people are still trying to sale homes at those higher prices and not many can afford that. I might have got lucky on a piece someone needs out from under so we will probably buy it as it’s below market value pre covid and either way we should be fine but not everyone is in that position. I have a custom builder that is steady for houses in rural lots that needs site plans house foundation certs etc. A small solo guy could probably do well but no way our firm will go after that work. To small. Have some forestry connections same there a solo guy I reckon could do well doing those but we just can’t. I am trying my best to learn all of this for the future. I still have a ways to go though. I remember during the recession I was in GA at the time and it got bad fast. Those who made it adapted or folded. Lots of surveys for banks went on and some city wide projects. We might be heading to another one but hopefully something will give. Me I worry about young folks starting out have young kids trying to grow their careers. Now they are one missed paycheck from disaster. I will be spending a lot of time tomorrow just working on my application but how do I prepare a good group of young folks for what seems to be the storm coming. 17 folks you do have a tough decision. Good luck. Hopefully you will land some niche projects to carry you through.
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I understand the fear, but not every cycle ends in a 2008. Most end in a slight cooling and last months, not years.
Things are still cooking along hereabouts. The prices have maybe stopped rising and houses are staying on the market for at least a few days. But things are still moving. I’m optimistic that the landing will be a soft one around here.
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I Googled it for you:
Historically speaking, quality has been top of mind for consumers and was more important than price. In 2021, we conducted consumer research to temperature check market behavior, and consumers ranked the quality/value of a product (51%) higher than the price (30%)
You’re welcome…
I hope everyone has a great day; I know I will! -
From day one my solo business has been built on the (correct) assumption that there are clients who will pay for quality because they can’t afford to have things go wrong. I do not cater to price shoppers, period.
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The big difference between the looming economic downturn and the 2008 recession is the average age of PLSs. My guess is that the next recession, regardless of its severity, will cause a great deal of retirement age PLSs to call it quits. It’s possible that even with a severe recession, the lack of PLSs will keep us out of the race to bottom.
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It’s possible that even with a severe recession, the lack of PLSs will keep us out of the race to bottom.
I’m cautiously optimistic about this happening, but it’s dependent on remaining licensees holding the line.
At state conferences, I’d certainly like to not be the youngest surveyor in the room…at 40…
“…people will come to love their oppression, to adore the technologies that undo their capacities to think.” -Neil Postman -
I intend to do my best to help keep the “average” age just a wee bit higher for as long as I can.
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