Where are you on the contractor highway?

Our freeways would be much safer without two classes of drivers - the speedsters and the slowpokes. A speedster is anyone who drives faster than you do. The slowpokes, on the other hand, are the drivers you have to dodge because they're slower than you are. Get rid of these mobile menaces and driving would be a pleasure. Naturally, once we purged the highways of these menaces, you or I would end up filling the role of one of these drivers. If I'm the slowpoke then, by default, you become the speedster.

Contracting might be much simpler if we could get rid of two classes of contractor - the high-priced rip-off artists and the low-ball parasites. The rip-off artist is defined by how much higher his rates are than yours. The low-ball parasites, on the other hand, charge less than you. If we could just get rid of these two classes of contractor, business would be fun because fixing things is just about all we'd have to think about.

Alas, we face the same problem we see on the interstate. If we get rid of everyone who charges more than you and less than you then in no time at all, someone will come along who'll either turn you into the rip-off or the parasite.

In case you haven't already figured it out, you're already a rip-off artist or parasite, depending upon whom you compare yourself to. After all, in every market there can only be one highest-priced and one lowest-priced contractor in town. Everyone else will charge more than some and less than others.

The Other Guys

"Randall," you're probably thinking, "this is a ridiculous premise because I don't consider someone that charges just a little more than I do to be a rip-off." So, how much more than you must a guy charge in order to fall into the "rip-off" category? Ten percent? Twenty? Thirty? Pick any percentage that makes sense to you, write it down on a piece of paper but keep it folded so I can't see it.

Now, let's decide who the low-ball parasite is in your market. There has to be someone cheaper than you, right? So how much cheaper is too low? Ten percent? Twenty? Thirty? Pick any percentage that makes sense to you, write it down on another piece of paper, making sure I can't see it either.

Using the numbers that you decided upon, let's do some quick calculating. Since I can't see your numbers, I'll make up some easy ones. Substitute your own numbers to see what you get.

For example, let's say you decided that the rip-off company is anybody that charges twice what you charge and the low-ball company is anyone who charges half what you charge. If you're charging $100, that means the rip-off guys are charging $200 and the low-ballers are charging $50.

Do you see the flip side of this example? In this example, the same logic used to define the rip-off contractor when compared to you makes you the low-ball contractor when compared to them. While being accused of being a low-ball parasite, you're also a rip-off when compared to the guy that we defined as a low-baller.

The point of this little exercise is to demonstrate that what "the other guys" charge has nothing to do with morals. If I charge twice what you charge, I'm no more or less wicked than you would be if you charged twice as much as me.

Let's take this another step. If you're among those who impugn the integrity of contractors who charge more or less than you do, then your definition of a "fair deal" is based upon moral relativity. Perhaps, if you're judging your competitors by the prices they charge, you're elevating money to a position it doesn't deserve. As the saying goes, "The love of money is the root of all kinds of evil." I hope you notice that this wise saying doesn't imply that having too much or too little is the problem. The problems come when money itself becomes the focal point.

Character, Not Price

"But Randall," you're probably thinking, "you're constantly harping about raising rates. And what about all those times you write about the parasites of our profession and things like that?" Good question. Here's the tough answer: Too often I see contractors who can't see past the money issue. Their businesses and employees - if they can keep any - suffer because of this lack of vision.

Just to make sure you understand, I'm not talking about high- or low-priced contractors, I'm talking about contractors who don't have enough vision to see past the money. A contractor with a vision to improve the lives of his employees, support his community and retire well will consider raising his rates as a tool in achieving his vision. A contractor who can't manage overhead and has no discipline in his shop may be forced to raise his rates just to survive.

This second scenario is sad but what if a contractor just doesn't have a vision for anything more than scratching out a living, believing that his lot in life is to charge as little as possible for everything he does? Which of these guys is evil? Does the price they charge have anything to do with your answer?

What about old-fashioned greed? Greed drives some contractors to higher prices but there are at least two ways greed can place a cap on what a contractor charges. One way is that he simply doesn't want to appear to be greedy so he keeps his prices too low. Another greed-related price cap is when a contractor refuses to invest in ways to improve service to his clientele as well as employees. I'm sure there are other thoughts about greed, so I'll be sure to check my e-mail when this column comes out.

What about contractors who lie and cheat in order to get higher prices? Lying and cheating are wrong. I know that some contractors encourage dishonesty in one way or another. There are also cheap contractors doing unpermitted, unlicensed, uninsured work, taking every shortcut they can to keep the price low. In either case, the character of the contractor, not the price, is the issue.

There are no "traffic cops" enforcing the "price limit." Nonetheless, prices are governed by the law of supply and demand. Your checkbook will tell you when your prices are too low. Your customers well let you know when prices are too high when they no longer see the value in your services.

Speaking of traffic, have you ever been stuck behind a slowpoke in the fast lane? Does he drive you crazy as he meanders down the highway, oblivious to his left turn signal that's been blinking for two miles? Pretty soon, this slowpoke will have a string of followers half a mile long. In the contracting business, you can be that slowpoke if you just leave out a few line items that legitimate businesses believe are necessities.

How fast is your company? Look at the following list. If your selling price was of no consequence for your company, which of these items would you change?

    Technical training
    Sales training
    Better trucks
    Apprentice training
    Retirement program
    Employee pay
    Medical insurance
    Community contributions
    Industry contributions
    Paid holidays
    Fast service
Is it worth it to raise prices in order to improve or add some of these items if they're not part of your business? Should you cut back on some of these in order to keep prices lower? Whatever speed you choose, just remember that no one likes being stuck in traffic behind a slowpoke.