During these trying times we all are desperately trying to find ways to save money and improve our cash flow. In our quest to find an answer, we sometimes over look our true cost, thinking paying lower prices on our materials is the answer.

With the hopes of reaching the goal of bringing the bottom line closer to the desired figure of the client’s “lowest bid,” we cut cost on materials, cut back on quality, push our times frames … anything we can think of to “win the bid.”

Try to keep this in mind; the customer has a vision of what they want. It is your job to discover the wants and the needs of that vision. Once you find out what the customer is looking to get, you can then start putting the pieces together based on your quality and expertise to deliver their vision. In most cases the customer has seen your work and based on your work they have chosen YOU to bid the job. My question to you then is, WHY do you want to bid the job based on someone else’s value or bid? What products will they be using? What is their quality standard? What is their overhead? What is their deadline? Is there a penalty if the deadline isn’t met? If all things were equal, and that never really is the case, we still would and should be different in our bid. Only YOU know what you are worth and how long it will take to provide the service.

The truth in saving money is not always the dollar amount you may have been able to squeeze here and there out of your materials and tools. The time spent on the job can end up costing you more money if you over look even the basics. When you look at what a job truly costs, the largest piece of the pie is the LABOR costs, not materials. In many cases your suppliers can help ensure you don’t waste time reworking the project due to insufficient products or with lacking knowledge of them. Good suppliers can become great resources in saving you time and money, tap into them! Many have specialist on staff who are there for you!!

Let’s look at some basic cost villains

Using substitute substrates: The customer loves the deep rich color of the cherry wood sample you presented during your sales presentation. However, the cost of cherry wood would drive the cost up higher than they wanted to spend, so you suggest using maple wood in its place giving the customer similar grain texture and appearance, selling to them that you can “finish” it to appear similar to the deep rich color. Although this is true, the added steps needed to achieve the same look will cost you morein labor hours than if you would have just bought the cherry wood in the beginning. Where did you save?

Switching from Conversion Varnish to Precatalyzed lacquer: Your shop typically uses a post catalyzed coating at $175 a pail; you apply two coats as a self sealing system and have had no issues with your current system. You’re looking for ways to trim cost so you decide to save $30 a pail buy buying a Precatalyzed coating still doing the same self sealing system. You just saved money! But what really happened? Let’s take a closer look, the post catalyzed coating had 36 percent volume solids, you typically apply 2 coats, approximately at 5 wet mils per coat, giving you a dry film build of 3.6 (5 x .36 = 1.8 x 2 = 3.6) let’s say you have a HVLP spray system, that would mean you get approximately 404 sq.ft per gal.(1604 x .36 x .70 = 404 )404 x 5 gallons = 2,020 sq. ft. per pail. Cost per square foot with the post cat is 8.5 cents

Now the Precatalyzed system, the coating has 27 percent volume solids, Applied again at 5 wet mils per coat, two coat system will give you a dry film build of 2.7 (5 x .27= 1.35 x 2 = 2.7) using a HVLP system is 1604 x .27 x .70 = 303 sq.ft per gallon this multiplied by 5 gallons equals 1,515 sq. ft per pail. Cost per square foot is 9.5 cents.

Where did we save? The film build is significantly lower, the durability is lower, the square footage you will get out of the pail is much less but most importantly the cost per square foot for the Precat went UP!

Chasing Cheap suppliers: One common mistake we fall victim to is buying or bidding jobs from lower prices given to us by struggling suppliers. We think, “I’m going to save X amount of dollars on this job because they are selling the same product I normally use at a cheaper price.” I caution you to stop! Think about why they are selling cheaper, how much inventory do they have of that product you need? Will they have it in stock when you are ready to buy it? If they are struggling, they too could be trying to get cash flow, they may not have enough of the items you want when you need it, and therefore you will lose not only time but money because you either have to buy it at a higher price (that could have been in the bid) at another supplier in order to stay on schedule or lose money waiting for the supplier to get more supplies in. If they are constantly running out of the same materials, they may be struggling with keeping up with “their cash flow” to suppliers to keep adequate inventory. Think too about the service you will get from a supplier with lower costs, in order for their prices to be lower they have to give up something, is it delivery days? Less employees in operations (this can lead to picking errors and returns) Trained experts? Inventory?  Return policies? Maybe credit terms?

Remember price is only a number, you need to choose what is going to service the needs the best and fastest. To prove my point, let’s say you needed a new vehicle to make your deliveries, if you based everything on price, then you would buy a “Smart” car. Here is why…Smart car vs. Box truck… both vehicles can get you from point A to point B. The SMART car is by far MUCH CHEAPER, gets much better gas mileage, cheaper to fill up, easier to maneuver, doesn’t have to stop at weight stations, and is cheaper on maintenance and repairs. However, you would need to make several trips to deliver everything, but …hey you get great gas mileage, right?  Now is this vehicle really what you want to use to deliver your goods? Really? We both know that the box truck is the better choice.

Don’t fall victim to price, know your TRUE costs and start saving money by saving TIME!

Comment on this story New Comment Created by Keydrick in 10/25/2011 2:30:43 AM Posts like this brighten up my day. Thanks for tkinag the time. Delete UnApprove Inside Sales Representative Created by Patti Zamora in 10/9/2011 11:10:11 AM Excellent article Diane, love the analogy between the smart car and the delivery truck. Keep up the good work. Delete UnApprove Your Name Email Website Title Comment New Comment Enter the code