What will it take for wall and ceiling contractors to feel safe and sure enough to raise their prices so that their margins won’t be so razor thin?
Quality! I believe if you put out a superior product than your competitors, in time the customer/GC will be willing to pay a little more to have it done right. We have taken over several projects from other drywall companies we were high on, and every time the same thing is said, "We should have just hired you and next time we will just hire you.”
—Chris Estrada, Extreme Drywall Concepts, extremedrywallconcepts.com, Glendale, AZ
We have been through five years of the hardest business climate we can remember. What do we have to lose by not raising our numbers? Just raise your number and say no when the GC tells you to lower your number to get the job. You will get the job!
There would have to be much more enforcement against illegal contractors (i.e., those paying their workers cash and not paying taxes/workers’ comp/etc.). We lose so much work to contractors not playing by the rules.
More work. Supply and demand being what it is, the demand just hasn’t come back. We have tons of competition and nowhere near enough jobs to support everyone. I still have GCs beat me up even when I’m low. They win the job with my number and then ask for a break so they can make something as they are taking jobs so low as well. Crazy on the left coast.
Maybe once we have a winter or two where we are not virtually unemployed for weeks at a time, we will feel a bit more confident about raising prices come spring 2015 and beyond. But when you have very little work and anyone who has lost their job feels like they can buy drywall tools and become a "drywall contractor” and work for ca$h, well, let’s just say the climate is not yet conducive for price raising. We are fortunate to have been in business for many years and we have a solid base of repeat customers and good referrals. But things are still very tight and look to stay that way a while.
We will never be able to work on the margins we did in the past. The only thing you can do is adjust overhead and train your people in sales in lieu of just putting new estimators on the street that just know how to "bid.” Welcome to the future.
—Pete Dittemore, Sierra Insulation Contractors, Ontario, CA
Time!! And backlogs to build up!
—Mike Taylor, Executive Vice President, Liddle Brothers Contractors, Nashville, TN
D E M A N D
—Chris Justi, Owner, Chris Justi Drywall, San Jose, CA
Everyone has to raise their prices and hold them. The builders are not going to raise them as long as someone will do it cheaper. You have to be willing to walk and do it if they refuse. When they realize they can’t get it cheaper somewhere else, they will pay. They will shop you. But I didn’t go into business to break even. I need to make a profit. If I am just going to make a paycheck, I can go work for someone else and avoid all the stress and risk along with the liability. I know we may not be able to command double digit net profits ever again or at least in the near future, but I need a fair net profit plus overhead or what’s the point. It’s been 6 years. It’s time to start making money again.
I feel, and have always felt, that a large percent of all jobs are capable of picking up an additional 15-20% over and above the profit as long as you and your foreman are monitoring your budgets on a weekly basis. Removing 15% of your man-days at the time of setting your job up and having your foremen work off those production rates will increase your chances for a larger profit; however, if it is not monitored closely in the field, it will not work. Your foreman must make this happen daily. I have tried several different ways, and this seems to be the best for higher profits.
Our trade is the most labor intensified. Drywall contractor keep themselves down in features of losing work; this trickles down to low wages for their help. I have been in this business for 30 years and wages have not increased 15 years. I have raised my prices and most lost work was forced back down by new startups. Startups are the culprits. We cannot pay the help because of the cost; they leave and start up on their own. Approach your contractor and the trade goes nowhere.
Looking the market conditions, labor and material shortage and having a good backlog
—Jorge Lopez, Senior Estimator, Baker Drywall Houston, Ltd.
In 2014 we spent a great deal of time and money training our workforce to do the right job the first time so we could work efficiently. Our biggest problem was schedule and coordination with the other trades. Our ceilings were destroyed when fire alarms, security systems, etc. were installed after the grid and tiles were done, causing us to have to repair sagging grid and replace damaged tiles. Back charges are never paid no matter what the GC says. And that was the case on 90% of our jobs. Same goes for the drywall and framing—electrician/plumbers cutting walls open that need to be patched at the last minute is a constant problem. These issue are out of our control and need to be addressed by the GC. We constantly coordinate with the GC to make sure this doesn’t happen—to no avail. Pricing isn’t the problem. I’m hoping BIM is the solution. We’ll see ...
—Joseph Brazil, President Mainline Construction Island Park, NY
My competition seems to like the close shave so sharp razors will remain the way for the forseeable future.
—Keith Kennedy, President, Aries Contracting (Ottawa) Inc.
General contractors need to stop bid shopping after the bid date and time!
When they send all the illegals out of the country that work for beans and what's left will fall short of the demand and we can go for it!!!
Wall and ceiling contractors more than any other trade have been overly commoditized, and we have no one to blame but ourselves. We repeatedly allow the conversation to revolve around price when the value proposition of our businesses is distinguishable far beyond price. By cutting our prices and trying to be a volume-driven operation, we merely increase the risk of our businesses. It is not a sustainable strategy so it’s time to wake up and start valuing ourselves.
More work! I believe if we are all busy we will start getting more margins in our numbers.
—Billy Marks, Estimator, T.J. Wies Contracting
Communicating with the other drywall subs. Online chat room, forum or whatever it takes. We are all in this together. Also, changing the bidding practice of government taking the lowest bidder. It should be the closest to the middle.
The only thing will be an abundance of work; It’s simple economics of supply and demand, too much work with too few contractors will necessarily drive up numbers. I guess the more relevant question is, how do we get back to a thriving economy? That only comes by an environment that is friendly to business, i.e., low regulations and low taxes—stimulate the supply (investor) and the demand will follow. Until these conditions exist, nothing will change.
It will take losing some work to the contractors that are still light on margins. After they load their schedules with cheap work and can’t get to it because of manpower, GCs will swallow the loss to get the job finished. It is happening today. We have raised our labor cost in our bids because wages will increase, finally. Lath and plaster wages have not increased in Houston in 30 years.
—Tim Rogan, Vice President, Houston Lath and Plaster
What it did take was a rough economy to eliminate the competition that happened. Those who survived along several other factors in this area there is now a glut of work available. Top quality work and good service with that has attracted plenty of customers and the margins are way up. You do have to keep up with rising material and labor costs.
—Kevin, Owner, KL Drywall LLC, Minneapolis, MN
Experiencing the forbidden pit-in-your-stomach feeling on a few projects as you watch your project’s margin fade is all it should take to remember it’s better to lose a project than to pay to produce it.
Truthfully, moving out of the environment of razor thin profit margins is not a matter of feeling comfortable as opposed to what the market will bear. There is nothing comfortable about doing business for free. Our industry exposes us to many uncomfortable realities that can only be remedied and made worthwhile by a fair profit. So, until my competitors realize this to be true, I will be forced to play this precarious game!
—Bradley Rutherford, President, Rutherford Co., Inc., Los Angeles, CA