I get a considerable amount of mail from readers asking questions concerning various aspects of their masonry businesses. I welcome these inquiries. If I don't know the answer, I will research it. If I can't find out, I will say I just don't know.
The other day I received an e-mail that asked what the market value was on a certain type of product nationwide. Here was my answer, in a generic way.
Market value is when two people – the seller who is not under pressure to sell and the buyer who would like to purchase but really doesn't need to – agree on a price for a particular item. Their agreement is that one party is willing to sell for a price that the other party is willing to pay, and neither is under any pressure to buy or sell.
In other words, supply and demand are equal. This situation is in a perfect state where all factors are equal. However, there a lot of conditions that could enter and change the price, such as availability, cost, taxes, and demand.
Times are good when buyers will pay outlandish prices just to have what they want, which is ideal for the seller. Times are bad when people can't afford to buy even the necessities. It has been said that the stock market is driven by fear and greed, which is true when it comes to any market. Fear doesn't make for a good market, but people that have money and like to spend it, does.
I have worked in many places where a part of the job was to test other markets. I was constantly seeking out markets that were better than the ones the company was in at the time. I would simply bid work in a variety of areas around the country for half again as much as I would in a competitive market. I knew that the chances of getting a job would be pretty slim.
When bidding work like that, you are not expecting much. But, when you get some work, bingo, you may have found a profitable area. You learn a lot with that approach. I have seen some areas of the country that were so profitable that you wondered why someone hadn't discovered them sooner. And I have known other areas that were so competitive that it was very difficult to understand why contractors were staying in them. My point is that each area will have its own concept of pricing.
Testing the market is extremely important. You may be working for considerably less than you could be because you have not gone to the trouble to test the markets. Why stay in a market when you are trying to get more competitive, and can hardly pay the bills now?
Test a market by increasing prices gradually, while keeping good records. By the way, it will be difficult to test the market if you expect to get every job you bid. I used to say that if I got more than 10% of the jobs bid I was too cheap. On the other hand, if I got less than 10% of the work bid, I was too high. Set your own percentage, but this approach is a very good way to make sure you are getting the most for your work.
Once you find a profitable area and don't want anyone else to know about it, be careful with the bidding. Stay just under the cap, otherwise the clientele will discover that you are higher than others and will go elsewhere to seek competitors. When that happens, be a very good negotiator, or you will have to move on.