Tuesday, June 19, 2012

Knowing When to Walk Away

Trying to make a good deal out of a bad deal is a waste of time. 
Always be prepared to walk away from bad deals - and never look back!

The other day, we asked a fellow to give a price quote do some work around the house.  We thought about screening in the porch on the studio, and having had a screened porch built for about $5000, we figured this shouldn't cost but a couple of grand at most, even with a hefty profit margin.

The fellow shows up and is squirrely to say the least.  He wants to know more about what I do for a living and how much I make, than in actually measuring the job.  This is the first tip-off.

He isn't measuring and quoting material, he is just figuring out how much he could get me to pay.   He knows that his quote will be far and above how much it will cost to do the job, so why bother even measuring?

He hems and haws and starts batting numbers around, so fast that I cannot keep track of them.  $3600?  No, he meant to say $4400.  But maybe more than that.  I ask him to write up a detailed quote.  He demurs, wanting me to agree on a price, first.  He will get his number, and then make the quote match the price.  No itemization, of course.

He then asks me how much I would be willing to pay.  That is the second tip-off.   When the price of the job hinges on what you think it is worth, that is not a real price.   He is hoping I will say $3000 or something and then talk me up to $3500.   No dice.  I am not playing that game.

What tips me off that his numbers are whacked, is that he wants $800 to sheath four columns with aluminum.  Now, I know that aluminum is expensive, but $200 a column?   Get real.

I tell him, "Well, this isn't going to work, we'll just go to Plan B."

"Plan B," he says, mystified, "What is that?"

"Plan B is us renting a sheetmetal brake and doing the job ourselves."

"You can do that?" he says.

"We build the damn building," I reply.

He apparently thought we were helpless as kittens, and had money to squander.  This is a common misconception people in the South have, about anyone who doesn't talk funny.  It largely isn't true.  And it explains why much of the South is mired in poverty - poverty of the spirit.   This fellow wasn't going to take any job that didn't pay at least triple what his costs were.  And I suspect, within a year, we will see his business disappear.

I realized that there was no way I could get a reasonable deal out of this guy.   His business model was based more on the client's ability to pay than with any real cost and profit margin.  If he could sell a $1500 job for $4400, then he stood to pocket nearly $3000.

And the funny thing was, I didn't call him, he called me - or his secretary did, trying to fish for business.  This tells me that they might be hurting for cash.

UPDATE:  The reason why his secretary called us was that his company was the one that built our first screened porch for $5000.  When I told him that, he claimed that it was impossible and that it "never happened."   I am guessing that the company was sold or something and the old owners did a lot of jobs for a small profit margin and the new owners just want to do a few jobs with obscene profit margins.  He wanted almost as much to screen in an existing porch as his company charged to build an entire room, only a few years' prior!

There was no way to turn this bad deal into a good one.   The only thing to do was to walk away.

Yet, you would be surprised how many people are reluctant to do this - and how many salesmen know it.

You invest time and energy in something you want to purchase, and you find out it is a raw deal.   You have so much time invested that you think, "Gee, maybe I can salvage this deal by negotiating the price!"

But often, this approach doesn't work.   The merchant isn't interested in giving bargains, or even fair prices.  They want to skim you and skim you good.  And the longer they can keep you there, the more likely they will skim you.

Just walk away from these "deals," period.

The obvious example, of course, is the car dealer.  Many consumers report spending hours at a car dealer - five or more - buying a car, even after the make and model is already picked out.   They get you to invest time in the project, so that as the price starts to fluctuate from the earlier promised verbal quotes, you figure, "enough already, just make the deal go through!" and out of frustration, you accept a raw deal you otherwise would not have accepted.

Just walk away.

It is like the optician we visited in Syracuse.  After nearly three hours, they tried to get us to pay $2400 to buy six pairs of glasses at over $400 apiece.   Prices were not clearly marked, and it was only after hours of hassle was a final price presented.

We walked away.

At the wholesale club, we bought four pairs of glasses for about the same price as the pricey optician wanted for one pair.    And we knew the prices ahead of time, as they were clearly marked.

And so on down the line, whether it is a mattress store or whatever.   When you go in, and nothing is marked with a price, just Walk Away, a likely there are no bargains there to be had.

If you feel you can't "walk away" then you have lost what little bargaining power you have in the free market.  Never put yourself in the position of having to have something desperately.  If you do this, you cannot walk away.

Just walk away.   It really is the only option.