Dan Holohan: It's not easy being you

A question asked on The Wall at HeatingHelp.com caught my attention and had me thinking of you. Here ‘tis:

When you are doing a job, how do you find the best prices for products? Do you go to the same supplier or do you get quotes from a few suppliers? Do you have any business tips?

The first contractor to answer said that it depends on the job. He said that knowing his prices and having them in a database really makes his estimating go a lot faster. The other option would be to try to price-shop every piece of pipe, fitting, valve, and whatnot, and that would probably put him out of business. This guy uses two local suppliers for nearly all his equipment. He particularly likes one of those two suppliers because they stock only American-made steel pipe and fittings. He sees copper as a commodity and has no preference as to its origin. He notes that both supply houses price copper about the same.

It’s very important to me to keep a happy business relationship with all my suppliers.

“I pretty much know who has the better prices,” he says. “But I’ll often spread the wealth if the pricing is close. It’s very important to me to keep a continuous, happy business relationship with all of my suppliers.”

He rarely buys anything online, unless he can’t find it locally at or about the same price and get it within the same amount of time. “It’s pretty rare that I can’t,” he says.

He saves every receipt, and puts the products/prices into his database if they aren’t already in there. He also double-checks all the pricing, especially for volatile items such as copper and brass.

“It’s pretty easy for me to build an estimate,” he says. “Of course, I add in a certain percentage for miscellaneous items, overhead and profit.”

This guy works alone and he doubts that a larger company would do it his way. He believes they would design the job, make a materials list and then send it to a few suppliers for pricing. He also noted that if a supplier rarely gets your jobs, they will probably not be motivated to price your jobs, or provide the extra service you may need when hunting down parts.

Amen to that.

Another guy who replied lives in two worlds. He works for a commercial heating contractor full-time and goes to whatever supply house is closest to the job he’s working on, but he also makes an effort when possible to spread the wealth. He, too, talked about the importance of keeping a good relationship with all the suppliers, and he noted that this was at his boss’s request.

Smart boss.

But his other life has him working alone and doing only residential stuff. He says he goes to supply houses for boilers and 20-foot lengths of PEX because they’re easier to deal with than rolls of PEX. He likes to buy his boilers from supply houses even though their prices are about 25% higher than he can buy online. “I like the support,” he explains.

He buys all his fittings online or from the big-box stores. “I just can’t see the logic of driving 50 miles from my home to the nearest supply house and then pay more for the same thing I can have dropped at my doorstep,” he says.

He does mainly radiant floors and says that he has it all pretty much memorized when it comes to what he needs and where he can get the best deals for it.

Change Order

Another contractor, a retired guy, says he spent the last 20 years of his career estimating general contracts, mostly for government work, schools, hospitals, renovations and new construction. He says the typical margins were less than 2%, and with something that tight there wasn’t any room for error.

For the bigger jobs he would send the specs and scope of the job to several suppliers to get a packaged price, but he always looked for any wrinkle he could find where sourcing could save him considerably. He said that an estimate could often take a month to get, and that it often came down to deciding on the morning of the bid.

My favorite part of what he said was that in government contracts the profit is in the change orders and not in the original bid. “And the change orders,” he says, “are usually sitting between the disciplines. For example, the structural consultant left us no way to get the mechanical piping past a beam or a column. If I found sloppy work between the consultants on the plans and specs, I always bid my price lower.”

I smiled because someone once sent me a photograph of a yacht with a dinghy tied to its stern. The name on the dinghy’s transom was, Original Contract. The name on the yacht was, Change Order.

Google it.

Oh, and before he left us he noted that another interesting avenue to profit on every job is the value of salvaged materials and sometimes getting the salvager to pay for the materials and then remove them as well.

Finally, we heard from a fella who is working somewhere way out there. “I have dealt with suppliers/wholesalers for 40 years,” he says. “The closest one is 100 miles from me. They all deliver once a week, which is good. Others have come along wanting the sales but no free delivery. I tried a few but the customer service was not good.”

He notes that a major issue for him has been returns. He said that if he could walk into a supply house with a box of returns, the credit would be issued on the spot and that would be lovely. But if he had to wait for their truck to show up, he’d be waiting for weeks, so a lot of stuff never made it back for his credit. That’s has been his pet peeve for a long time.

All of his boilers, furnaces and AC come from 200 miles away. The little items come from his 100-mile-away supplier. Which makes no sense at all to me, but I’m a good listener.

And being so remote, this comment didn’t surprise me:

“What I found really handy for plumbing and piping is going online. To price out a job, I just click on what I need. The cart saves everything and I get a printout of items with total prices. No phone calls to ask for prices and tallying up the total. I click on what I need, even if I have it in stock. This is handy for quotes to have the current prices. Their prices are hard to beat and just about everything is in stock. Online is about the only place for me to get U.S.-made pipe and fittings. However, it takes nearly a week for UPS to get to me out here, although it is easy for me to meet the freight minimum. The online guys send my backorders with no additional freight charges. I know that’s a loss-leader for them.”

He finished by saying, “I’ve learned that if my regular suppliers are willing to cover their screw-ups, take my returns, and not be difficult to deal with when there are issues, then the extra nickels and dimes they charge are worth it.”

I’m not sure if that applies to the extra dollars as well.

Hey, it’s not easy being you.