Mason Knowles,
President of Mason Knowles Consulting LLC.
A common contractor complaint is, “I can’t make any money with all these crazy spray foam contractors low-balling my bid”. Sometimes it seems impossible to get profitable jobs in a marketplace where chronic low bid contractors are abundant.
Over the last 48 years that I have been in the spray foam business, I’ve found many ways to survive and even thrive in those environments. First, realize that companies that have great quality and good reputations can charge more even in a highly competitive marketplace.
Here are a few tips to separate your company from the others:
Marketplace: First you need to know the marketplace. It’s hard to find out why and how other contractors are bidding so low without decent information on the marketplace. Determine the overall size of the spray foam market. What industries use your type of services? What is their relative financial status? You may find that the economy is not robust enough for good profits.
Your Competition: How many competitors are there and what is their market share? Find out why or how the other contractor(s) are bidding so low. It is possible for a small contractor with a very low overhead to apply foam cheaper than a larger contractor and still make a reasonable profit. More often it is a chronic low bidder that is taking some short cuts to get the price down. Check out whether they have insurance and how much. Do they spray less foam than the specification calls for? Are they just working for wages and not saving money for overhead and equipment maintenance? Do they cut corners on safety and health practices? What is their overall quality and customer service? What do they specialize in? How do they train their employees? What is their reputation?
What About Your Company? Perform a self-analysis on your company’s work and quality to find out what do you do best and what needs to be improved. Be Honest with yourself!
Self-Analysis:
- Conduct surveys with current and prospective clients
- Obtain customer feedback on completed jobs
- Review your call backs and any complaints
- Conduct in-house skull sessions with your employees
See how you match up against your low-bid competitor. If you have much better quality and provide more professional services, then you can point out those differences to a prospective client.
Analyze your Jobs and Review Your Bid Process: From your job records have the project manager and job foreman review:
- How many hours it took to complete each phase of the job
- Check your material yield
- Amount installed per day
- Down time (total time at the job site or traveling to the job site when the rig is not installing material and why).
- Overall quality of the job
- Call back and customer satisfaction
From this information, develop a checklist for improvement in all job tasks and provide it to the sales person. Why the sales person? This can be very important in determining if the bids are right or if they need to be adjusted.
Case in point: I was hired by a friend to run his spray foam business in the early 1990s. He had a lot of work (more than $2 million worth) and a 6-month backlog. They had a very good reputation, could pay the bills, salaries and overhead but was basically breaking even at the end of the year. They did, however, keep excellent job records. I found that after 3 months of analyzing their jobs and bids that they were bidding on the wrong jobs and using a poor formula. They bid a lot of public work where the margins were tight and sold jobs that brought in less than $700. I found that based on our overhead, and how many days and hours we could work each year, that each day the foam rig left the shop it had to make at least a $1200 profit.
Over the course of the next 2 years, I stopped bidding cheap on the large public jobs, eliminated the small jobs and reviewed each bid to make sure we covered the overhead correctly. After 2 years, we reduced the total amount of work down to $1.6 million, reduced the backlog to 3 months and gave the owners an annual $200,000 profit at the end of the 2nd year!
We also found that by raising our prices, we could reduce the number of call-backs and complaints. It seemed like the clients that insisted on the really low-ball prices were also the clients who were more likely to complain. It makes sense to me. If you beat someone up on price and get a really low-ball bid, the common tendency is to assume you are also getting a low-quality job.
Build a Reputation for Better Quality and Service
Most folks will buy a higher priced product or service if they perceive a better quality and value in the product. For example, you would expect to pay a significantly higher price for a new Mercedes sports car over a Ford Escort. A savvy customer will know that too low a price can result in a poor application.
There are customers who are always looking for a deal and the lowest price. A contractor can go out of business catering to that cliental. Establish your company’s focus away from the low-bid client towards one that wants the best quality and are willing to pay a premium for the service.
Spray foam is already considered a premium product in the prospective customer’s mind, so half of your work is already done. A typical spray foam job is more than double what a fiberglass insulation job would cost. Therefore, a prospective customer is likely to buy up rather than down.
There are a number of ways to create a favorable impression on a prospective customer that would allow you to charge more than the overall market place:
1.Join a trade group and participate. Spray Polyurethane Foam Alliance (SPFA), Insulation Contractors Association of America (ICAA), National Roofing Contractors Association (NRCA) Air Barriers of Association of America (ABBA), and local or state-wide organizations. Your membership and participation in these organizations demonstrates to your prospective customer a desire to contribute to better overall quality in your industry. It also shows that you are willing to spend time and money to stay abreast of up the latest information on the products and applications.
2.Provide your workers with the best training and education available. Each employee, including work crews, project managers, owner, sales staff, administration staff should know what products and services your company provides, the potential issues with the application, how bids and jobs are processed, the type of training the crews have and any awards, certificates and membership to trade groups.
Take advantage of training and educational courses offered within your industry. Educational courses offered by suppliers, trade groups and 3rd party consultants cannot only provide your workers with knowledge of industry best practices, it gives your customer peace of mind that they have the skills necessary to do the job right.
The following courses are available for the spray foam contractor:
| SPFA | ICAA | ABAA | 3rd Party | Supplier | OSHA |
|---|---|---|---|---|---|
Spray foam Certification courses
|
Online Webinars
|
Air Barrier Certification
|
Classroom & hands on training
|
Classroom & hands on training at their facility
|
10 hour & 30 hour training |
Provide courses specific to their job, such as sales & marketing for the sales staff, management courses for your project managers and supervisors and customer service courses for administrative staff that answer the phone.
3. Learn to spray great-looking foam: Foam application is an art that requires the skills to spray foam more uniformly and smoothly. You can charge a premium if your applicators can spray better-looking foam than your competitors--not to mention that you use less foam in the process and can keep more money in your pocket.
4. Keep the jobsite and the foam rig clean and neat: Customers tend to perceive clean jobsites and equipment with a good quality application and conversely a messy job site tends to be associated with poor quality.
5. Protect items in the spray area from overspray: Many contractors don’t mask off items in attics and crawlspaces such as HVAC equipment, water heaters, ductwork, flooring, etc. Mask off everything in the area that overspray can drift to. A great way to emphasize this to your customer is to note it in your bid as a separate line item.
6. Develop effective quality control and inspection procedures: Keep good job records. Take quality control samples during application. Have a final quality assurance inspection by your own folks before the final walk through with your customer.
7. Advertise your company’s strengths: Emphasize the list of topics above in your brochures, website, trade shows, seminars, lunches, etc. Use these opportunities to place your company at the head of the class. Educate the public on what to look for in a quality application. Be sure to include photos, job references of the good work you have done. Have your rig painted by professionals and make sure you have company certifications and trade group affiliations on it.
8. Offer Extras: The more you separate your services from competitors the more you can charge for the job. Consider extras that your company can offer your client such as blower door measurements before and after the application to demonstrate the amount of air sealing the foam provides.
9. Think Outside the Box: We used to hire a local artist at a hundred bucks each to cut out large figures of team mascots, animals or designs out of roofing insulation for roof jobs. (Razor Back Hawg, dolphin, octopus, etc.) After we fastened the façade to the roof deck, we sprayed foam over it. The foam conforms to the shape below and then we coated it a distinctive color by dyeing the coating. We were able to charge about $.50 more a foot for that, and it cost us next to nothing.
10. Work in Different Markets: Sometimes a specific market place is so crowded that there just isn’t enough work to go around and even companies performing good work start bidding low. In those cases, you need to broaden your business scope.
Find industries the low-bid applicator doesn’t work in. For example, if the low-bid player is in residential insulation markets, then find other markets in your area that uses or could use foam. Here are some examples:
Cold storage
- Produce storage (citrus, vegetables, fruit)
- Meat packing plants
- Super market warehouse
- Agricultural buildings, poultry sheds, alligator farms, mushroom farms, etc.
Fiberglass fabrication
- Boats, hot tubs, spas, tanks, pipes
Fishing Industry
- Fishing, crab and shrimp boats, processing facilities, warehouses, offshore storage and processing plants
Metal fabrication
- Tanks, pipes, vessels, etc.
Most of these industries negotiate prices with a limited number of contractors who know how to perform the work properly. This way, you can typically charge a little more.
11. Make More Money from Your Jobs: Sometimes you can maintain your prices (or even lower your price) and make more profit by becoming more efficient. Analyzing your company’s efficiency in all aspects of your operation.
12. Increase the Efficiency of Staff and Crews: If you increase the efficiency of your crews, then the job goes quicker, costs less and more profits flow into your pockets. The following crew recommendations are based on personal experience combined with visits to hundreds of insulation contractors.
13. Warehouse Manager/Mechanic: I have found that a company who has a warehouse manager who also is a good mechanic greatly increases work efficiency. The warehouse manager takes care of the equipment and makes sure each rig is ready to go each day. This helps guard against down-time.
- Maintain the right inventory of materials and verify they are stored correctly.
- Maintain a spare parts inventory for each rig.
- Repair and schedule maintenance on equipment such as trucks, insulation equipment, compressors, generators, power tools, forklifts etc.
- Pull or identify the materials for the rigs each day so they can be loaded quickly.
- Verify equipment, such as trucks compressors and generators are working properly and fueled up.
14. Project Manager and/or Job Foreman: Some companies have project managers and job foreman. Some only have a job foreman. Either way, project managers and/or job foreman can greatly impact efficiency. They should be able to handle and compile the correct paperwork for the job such as Safety Data Sheets (SDS), overall job plan, daily job reports, safety plan, daily work schedule, etc. They should help determine the staging area, review the safety plan, provide tool box safety talks, how much work should be completed each day, anticipated amount of material to be used and where and time expected to complete each task. They should also communicate with the client on progress of the job, things that can affect the schedule and any potential issues that may arise.
The foreman supervises and ensures that the application equipment is in the correct staging area and is set up properly, including any warning signs, barricades that are needed. They also notify other trades and building occupants of work to be performed and secure areas that are restricted to work crews only. They assign work for the crew each day and verify quality control during application. The project manager/job foreman performs the final inspection before the walk-through with the client.
15. Set-up Crew: While there are many tasks that are required to prepare the area for installation, it is inefficient for a higher-dollar insulation crew to perform them. A set-up crew under the supervision of the job foreman can arrive at the jobsite prior to the application crew to perform this task including but not limited to:
- Isolate and contain application area
- Set up warning signs and barricades (if required)
- Mask off or move items that require it
- Set up lights, ventilation fans, etc.
- Condition the area or substrate if required
At the same time the set-up crew is working, the job foreman can use this opportunity to review the safety plan, daily work schedule with building owners/occupants and other trades and verify that climate and substrate conditions are suitable for the application.
16. Application Crew: The application crew should be sized appropriately for the job. If conditions exist that minimize the amount of time each day that materials can be installed, (too hot, too cold, too wet, too windy, etc.) then having 2 or more applicators is recommended so that they can stagger the shifts and get more work done each day. When I had a spray foam business on South Padre Island, TX, dew prevented us from starting roofing jobs until 10:00 am. Moreover, the dew quickly set soon after the sun went down in the evening. Taking lunch and rest breaks in the middle of the day would decrease our work efficiency by 20%. So, we sprayed foam without stopping from 10:00 am until around 3:00 pm--where we switched to coating what we had sprayed that day. This gave us at least 3 hours for the coating to dry sufficiently so the dew would not to affect it. We switched sprayers every 2 hours. This reduced fatigue in the application crew. We found that this also inspired healthy competition among the applicators to see who could spray the smoothest foam in the shortest amount of time. We ended up with better quality and yield combined with maximum output.
17. Clean-up Crew: The cleanup crew is the same team as the set-up crew. They come in the next day (or the same day on small jobs) to perform the following tasks:
- Unmasking and trimming
- Taking down warning signs, ventilation equipment, etc. (only after fumes and mists have dissipated).
- Touch up small voids, gaps, and other areas with foam kits or sealant foam (as directed by the job foreman)
Other Efficiencies:
Driving to the Jobsite: It always bothered me to calculate the money I spent on crews driving to the jobsite. Worse yet, I was getting a phone call from the foreman saying he was stuck in traffic or couldn’t read the directions. Based on these experiences, here are a few tips about getting to the jobsite.
- Have someone navigate (not the driver in the truck) that has been to the jobsite before.
- Have directions clearly printed along with a map in addition to using GPS technology
- Anticipate and work around heavy traffic patterns
- Check out alternate routes ahead of time in case of delays or accidents
- Fuel up ahead of time. Don’t waste time fueling up during the application window.
Maintain a Steady Work Flow: Anticipate moves from one area to another
- Have area masked off ahead of time
- Start in an area where there is an easy flow from one space to another
- Minimize the number of staging areas
- Do detail work and the hard spots first. Leave the easy stuff for the end of the day when the workers are more tired.
Switching Material: I have seen some applicators take 15-20 minutes to switch out materials. A good helper should be able to switch drums in a minute or less. It pays to practice reducing the amount of time it takes to switch to new material. Think of it as a Nascar pit crew changing tires.
- Have drums open and ready to receive drums 15-20 minutes prior to having to switch materials.
- Have helper in foam rig ready to switch.
- Tilt the drums to get as much material out as possible without running out.
- When they are near empty (1-2 inches in the bottom of the drum) turn off the proportioner and the air to the pumps at the same time.
- Move the drum pumps to the new drum, hook up the air and turn on the proportioner.
If done swiftly, the applicator may not even know you had switched drums.
Spray Smooth and Uniform Foam: You can use a lot less foam if your applicators can spray very smooth and uniform foam. Consider that if your applicators can spray a 2 pcf (pounds per cubic foot) closed cell foam within a 1/4-inch tolerance at 2 inches they can obtain more than 4,000 board ft. per 1,000 lb. kit. If they can only obtain a 1/2-inch tolerance, their yield drops to 3,500. That can be the difference between buying $200,000 lbs. of foam a year or 225,000 lbs. of foam.
Warm the Substrate: Your yield falls off significantly on a colder substrate. That is even taking into account the supplier’s cold-weather foam. Try to maintain the high end of the manufacture’s recommended substrate temperature. Depending on the system, it can take 20% to 30% more foam to cover 50-degree substrate over a 70-degree substrate.
In conclusion, go ahead and silently bitch at those low-ball bastards, but take charge of what you can control. Do your research, analyze your own company’s strengths and weaknesses, fix what you can, get more efficient, promote your quality, offer extras, and make more money!
About the author:
Mason Knowles has more than 48 years of experience in the spray polyurethane industry as a consultant, contractor, material supplier/manufacturer, equipment manufacturer and trade association professional. For more information visit Masonknowles.com