"The Big Lie" regarding countertop pricing
If you are like most of the stone shop owners I know, you probably started your stone career with wild expectations of how much money you can make. Some of us started buying granite for our homes and thought that we could make a go at such an easy task as putting in countertops. Then you did some research and found out you could buy Ubatuba for a seemingly crazy low price. Then the wheels start turning, and the finger counting begins. Before you know it, you are seeing dollar signs, so you strike out on your quest toward financial bliss.
You start calling around to see where you can get slabs. You buy a rail saw, some polishing pads and get to it. Maybe you already know how to fabricate from working for another shop, and you jump right into a bridge saw setup. You sell a job or two, and then Murphy’s Law comes into play. You slowly start to realize how steep the learning curve is. You replace slabs; you hire; you fire. But in the end, your bank account is empty. So you figure as soon as you can learn the business, you can make money.
You see a sign on the side of the road for granite at $29/square foot. Then one for $25/square foot, and then maybe even $19.95/square foot. I have personally even seen $9.99/square foot. You are disheartened by this, and begin to believe that you need to keep your prices in line with these others that seem to know what they are doing. They are much better at fabrication and can sell for way less. You start to think your business model is whacked out. On your next job, you do the rule-of-thumb math, and after you buy the slabs for the job, there is a couple thousand leftover. You can easily make money with that margin, or so you think. You are still counting on your fingers.
After a year or so, you have a grip on the business and have managed to organize a little. Mistakes, though still common, have reached a reasonable level, but your bank account is still empty. So you look at your business and decide that you need to hire a foreman to help you organize your business and get out the volume you need to put some money in your account. You go through a few guys and find the right one, but still your bank account is empty. After a meeting with the guys, you decide that if you change this process, or buy that router, or use these polishing pads, you will finally make money. So with much vigor, you put in place these changes only to find out that your bank account is still empty.
By this time, you have become pretty organized and knowledgeable, and you have paid your dues in the business. You are making a go at it, but still don’t have anything left over to send to grandma, so you start looking inward again. You just can’t seem to get the volume you need to make money with your manual shop. Your prices seem to be where they need to be; after all, everyone else is selling for low dollars. You cannot possibly raise your prices, as you are already having periods of no work.
Next, you go to a trade show and are presented with the answer. All you need is automation, and you can simply pump out kitchens with no effort - as easy as slicing bread. You can finally reach the goals and will be able to compete with anyone on price. You can put out the higher volumes that you have always dreamed of. You will no longer have to rely on the humans in the back who have been holding you back all this time. So you drop a few hundred thousand dollars, and you are off to the races again. You still, however, have not really ever sat down and figured your costs. The rule-of-thumb fuzzy math still rules. After all, the problem is your operation, not the low margins.
Now a new demon shows up. You now have a digital shop, and you are getting kicked in the face again. You can no longer hand your guys the templates and have them successfully install a job. Somebody has to program, and they have to be smart. You yourself are overwhelmed with the new addition, and cut parts out upside down, you forget to add overhangs, or you run your tools on the wrong side of the line. You are still charged up over all of the new additions and how fast you can produce a kitchen. You figure that in a few months, when the wrinkles are ironed out, you will finally have some dollars in your account.
By now, you are a professional fabricator. You have a fantastic shop, and you have guys that have been with you awhile and can efficiently produce a job. You take a look in the mirror, and you realize that there is nowhere that you can trim. The shop is as efficient as it can be, you have the latest gear, and your bank account is still empty. You start to believe that the big lie is that you cannot make money in the stone business. You finally sit down and figure out your true costs of doing business, and this is when you make your most important discovery.
The big lie is that you cannot run a legitimate business and sell granite for what others are advertising - or for what you are charging. They cannot do it, either. You have artificially been charging less then you should. There are only two possibilities: One is that the lowballer down the street will eventually go out of business. I have found this to be true more often then not. However, in my market, a lot of these guys have been advertising this way for years, and they are still going. The obvious answer is that they are using bait-and-switch tactics, but cannot possibly make it for what they advertise.
Now you sit down and work out a pricing schedule that fits your true costs, and you begin to see a dollar or two in the bank account. Unfortunately, for all of us, the days of taking orders is over. The granite industry has matured, and now you must run an efficient operation and provide good service to survive. We will always be plagued by the lowball hacks that abound, but what they are doing should never influence your pricing schedule. However, they should influence the way you sell. Make it clear as to why you are worth more. Focus on the items the hacks don’t have or can’t provide. Focus on making your product appear to be worth more.
Itemize your charges. Lowballers tend to offer all-inclusive pricing, where for $xx/square foot, the customer gets a bullnose edge, sink cutout, steel bars on overhangs, sealing, etc. Try to separate your charges so that your initial price per square foot may seem small, and then they won’t get sticker shock early on. This way you can also “throw in” extras if needed to close a sale after you have shown them how much they cost. A free bullnose edge can go a long way.
I have discovered that customers find the color that they want and will generally pay to get it. How many times have you had someone come in looking for remnants to save some money and leave without even discussing price as they cannot find the color they want from your 300 remnants? You need to be the guy that identifies that slab for them. Try to help them find that color while you still have them in your grasp. With remnant customers, charge them for the full size of the remnant. If they want that color, they will pay it. This will help you net a few dollars here and there that would have otherwise gone in the Dumpster.
Talk to your suppliers. Convince them that they hold the keys to the race to the bottom. After all, if they didn’t sell to hacks, then you could charge more and therefore pay them more for their granite. Your pleas will fall on deaf ears with most suppliers, but some may listen. Most hacks do very little quartz, as it is harder for them to get into the supply chain. Use this to your advantage.
The obvious answer is to provide quality fabrication and good service, but it is harder get a potential customer to swallow that than a fancy showroom, nice vehicles and properly dressed employees. Be active in your community. Give all you can, and proudly display the awards that will follow. They go a long way towards distancing your shop form a hack.
We raised our prices this past summer, and we were terrified on what the outcome might be. The hardest hit were the resellers we fabricate for. We fully expected a number of them to go elsewhere. As of this writing, we have not lost a single client. We also now have some money in our bank account. I am no longer missing paychecks here and there, and we can afford to buy some things for the shop. Our resellers know they can count on me to not let them down when a problem arises. They are willing to pay for that guarantee. We have worked hard for the last five years to gain the reputation that we have. The digital equipment we have goes a long way to distance us from the hacks. We are pretty much at the top end of our market in terms of pricing. We don’t waste a lot of time on price-sensitive customers. Usually we don’t get the job if all they care about is price.
The point of this article is to not sell based on what you perceive the going rate to be. Sit down, figure out your true costs and at what volume. Then set your prices based on what you need to make. Be realistic. The only thing left to do is to raise your reputation, your image and your service to the level at which people will pay the price you are asking. You may find, as we did, that you are already there.
Join together with other fabricators and try to raise the bar. Help those that are helping the industry and discard those that don’t. Only through education and by working together as a group can we have an effect on the destructive forces that we face everyday. Charge what you need to, sell what you can, and don’t give in to the big lie.