Today I would like to discuss these incredible discounted rates or sales in any remodeling trade, which we always hear about on TV, Radio or Internet. In order to get our attentions, some remodeling companies advertise 30%, 50% or even 70% discounts on their services. That looks like an awesome deal and it’s not the secret that we are all like to pay less than original price for goods and services. And the bigger the difference between original price and the price we paid, the happier we are with that deal. I’m sure, everyone would like to get his windows replaced for $10K, if he knew that original price for those was $100K. And that’s the catch. Before you get hooked, ask yourself, what is behind that awesome deal? If you don’t know how the total price for any construction work formed, I can explain in a few words.
When remodeling company pricing the job, the quote will always include 3 basic types of expenses: Materials, Labor and Profit. In most cases these expenses will be equal, which means 33% they will spend on Labor, 33% on Materials and the last 33% will be Company Profit (When I say company profit I don't mean clean profit, it will also includes company’s overhead, like insurances, office rent, tools, vehicles etc. so the real profit might only going to be 10% or less).
Now, let’s get to the business. When you hear 30% discount, try to imagine where did it came from. Will the company be able to remove labor cost? No, I doubt that the boss will say to the guys: today everybody works for free because of our promotion. Will the company be able to remove Material cost? No. Will the company remove their profit? Definitely No, because like I said above, this profit also includes company’s overhead. I’ve heard one company said on radio, it is slow season for us now and just to keep our guys busy we will replace your roof for the price of materials and labor - Scam. When company don’t make profit, they losing money if they still operating. All insurances the company pays for based on annual sales, if you increasing your sales working without profit, you are actually losing money on insurances, vehicles and tools depreciation etc.
From all of what I said above, I cannot imagine a real 30% discount on a new roof or siding or some other major renovation to your house. In order to give a 30%, 50% or 70% discount, first you need to increase the real price of the job by this amount, so that down the road you could give this “Nice Deal” to a customer.
I understand that 30% discount sounds like a better deal versus 5% discount, but please don’t judge by the loud offer. Always get into the details and always compare apples to apples only.