Better or worse? Options

[Harry]

In another topic we saw that Kevin had high hopes for the paint industry and so do I but I equate anything to this as pure speculation, fortunes cookies and tea leaves. Not trying to be smart but I speak with contractors daily from all over the U.S. and I just don't see it. Sure there may be a few niche markets or great businessmen who have prepared themselves (I'm sure Kevin is one of them) or just plain lucky fellows... but in GENERAL, it's a mess out there, it really is.

A fella called me last week and asked me to check his bid. I did and found that he had a good bid and had figured in a 5% net profit after covering overhead costs. His price was $172K but the job went for $125K...can you imagine that? And this wasn't a fluke type bidding process either. Another guy bid $860K for a project that went for $750K!!! This guy is sharp, does 3.5 million per year and all that good stuff. He told me that he has been able to up his production rates from his men while dropping their wages (sad but true and it's happened in many places)...and still can't grab a job!

Now, I can see the small time jobs being taken by painters who haven't a clue but these are jobs that are being bid by the bigger boys. I wish I could hold a country wide town meeting and shout to everyone that we need to raise the tides immediately because too many painters are going to fail from this day forward...yes it's ALREADY TOO LATE for many. But that would probably be collusion, huh? Geez...

Most people think that the problem lies amongst the bidding parties and when you see your neighbor outbidding you by huge percentages, you're probably inclined to agree.

But though this is definitely a part of the problem, It may not have been created by the "lowballers", it may be survival, period.

Why do I say that?

I had an interesting but disturbing conversation with an old friend of my father a few weeks ago and realized that THIS TIME, it may be different. This builder was talking about how he has done well this year despite so many claims of the opposite. I was telling him how things were out there from my observations and conversations with others and he basically said that guys like him, the smart guys have held back on building their projects until they saw much lower prices! When they were informed that contractors were bidding for peanuts, they started building again! Sure I pretty much knew this really but hearing it from this guy confirmed what was only speculation.

So basically, these guys were just sitting on their money, waiting for a major collapse...then building their buildings dirt cheap? I mean, sure the concept works but gee, what a price to pay if you're the contractor or sub?

Wating for the bargains, looking for the deals only works in correct measures...causes disaster if prolonged, obviously.

So sure, I have been seeing some movement with the good jobs...they're starting to be built again but for outrageous prices...prices that are just too low for bill paying.

Hopefully, we have rounded the corner but the heyday is over, prices are at rock bottom and everyone now knows what they can get their projects bid for and are squeezing the pennies from everyone...pennies that need to go back just to cover overhead. Contractors are running on fumes and that's the way it is until the slow rise to MINIMUM PROFITS (yep, that's the big goal today...MINIMUM) begins...

Thanks,
Harry

[Steve Hobson]

Harry

I agree, it's going on here too, see the reply I gave to Kevin's post.

Have a good one!

Hob