From Seth Godin's Blog
Building a job vs. building a business
Either can work, both do, but don't confuse them.
The shoemaker/copywriter/plumber who seeks a regular itinerary of gigs is building a job, a job with multiple bosses at the same time there is no boss, but it's still a job. You wake up in the morning and you do your craft, with occasional interruptions to do the dreaded looking-for-work dance.
The entrepreneur is in a different game. For her, the gig is building the gig.
On Prices-Paid: Prices-paid is what you expect to be paid for the the work you quote. It is an expectation concept. As with all expectations, only some are met. Probability is in play with prices-paid. Some will be met while others no. A lot of it has to do with your counter party, your potential client. Does your offer meet their expectation.
Intuitively we try to maximize the probability our expectation for prices paid will be met.
One idea in this approach is to minimize price. Any one who needs to sell a house in this market can quickly get the notion of how painful this approach can be. But for some its a matter of survival, and so they will whore themselves for next to nothing; however, clients understand little is expected from a whore after services are rendered.
Another approach is maximize pitches to clients who want YOU or who expect to pay prices at your level. This is the targeted approach. Targeting follows good marketing, good research and good story telling, good content and good distribution. Marketing and entrepreneurship are intertwined.
Returning to my experience last Saturday: I asked her what she paid the man to do her floor. She said $100. His work included removing a couple layers of vinyl and giving the commode a round trip to the tub (for the uninitiated, that's removing and replacing the toilet). The work required all of one day. I told her that it was a good price for the effort involved. (She found herself a whore, a day laborer really.)
No problem, we're all seeking a whore every time we ring the register at Wal-mart. I'm indifferent on the subject. Times are tough and day laborers have mouths to feed just the same.
I gave her an order sheet she could use to go tile shopping, and then I gave her my prices, $250 for the wainscot and $350 for the backsplash, $600 in all for about 3X what her day laborer did on a square foot basis. My offer was 6X the money while no adjustment for demo and toilet levitation only increases my price disparity.
What happened here is she hit some minimum charge thresholds I keep in mind. This goes back to my days in the union tiling company where we could not afford to send a man out of the warehouse for less than $500/day.
At this moment, how high do you think my expectancy was for this offer? If you guessed zip. You are correct. As I said, I'm indifferent. Her viabilty as a prospect was very low, so my duty here was reserved to information. I told her that that I believed she could improve on my prices, perhaps with the fellow who did her bathroom floor. She seemed a bit surprised.
I asked her to consider what she earns per hour (disclosure she works in the penal system as part of a collective bargaining unit) along with the benefits and her employer's overheads related to her employment. (She's my friend, so we can have this kind of frank discussion about her cost to her employer and the relative value embedded in the price she paid for tilework.) Then considering her line of work keeps her fully employed while trade work at the individual level keeps a fellow productive about half to three quarter time, so for him to begin to approach parity to what she costs her employer he would need to charge double her employer's cost. About $500 per day.
On the significance of Seth's post: It truly boggles the mind who would pay that much for day labor. I wouldn't, and I don't. Yet if you are building or running a business, your employees, and that begins with you, will require an hourly rate and benefit package which approaches the prevailing rates in your area while being reasonably well anchored in the market in which you have a high probability of realizing your prices paid. If your market is day labor, then so be it, but understand...you are working on a job. It will never get better, only worse. Forget about ever having a nice truck, health insurance, and once you knees give out forget about the nest egg, because you will not have one. All others are free to identify their target and create their story which wins the day. This is my story. This is my business. I encourage you to follow it.
Conclusion: This is exactly why I do not do house calls. (friends are exceptions) When I get referrals, I do them over the phone or I don't do them. Please call the next tile guy. Like I said, I'm indifferent. On the phone, I have a sales routine, an excel spreadsheet and all. I can walk you through a measure. I can ask you a series of questions to arrive at a reasonable offer for me. Takes no more than 15 minutes. (some day I will roll this up on-line in a little thing called mytilebid.com). If you do get me to come to your house, it will be to finalize your tile order and collect an earnest deposit. Not in that order. That is how Home Depot runs their installed sales operation. Works for me. Regardless of the visit, I can make you smarter about your tile job with one phone call. So, you can feel confident engaging someone for a price less than my X. But there is one thing I would rather do less than waste an entire Saturday morning to discover I am competing for 1-2 days work at $9- $10 per hour, and that is to actually work for $9-$10 per hour.