Never Split the Difference: Profit is Mandatory
Stop treating profit like an apology. Somewhere along the line, contractors started believing that “margin” was the only negotiable part of a bid.
It isn’t. Profit is a raw input cost. It is just as essential as diesel, hydraulic fluid, and payroll. If you remove profit from the equation, the machine doesn’t just run slower; it seizes up.
The Cash Flow Reality Check
82% of small businesses fail due to cash flow issues. Most of these businesses aren’t failing because the phone stopped ringing. They fail because they have plenty of work but zero buffer. They are one blown transmission or one slow-paying client away from insolvency.
When you strip your margin to win a bid, you aren’t being competitive. Unfortunately all its doing is removing your business’s shock absorbers.
Margin Funds Survival, Not Luxuries
Profit isn’t about buying new trucks; it’s about keeping the old ones running. In a healthy contracting business, margin pays for the invisible costs that cheap bids ignore:
CapEx Reserves: That track loader burns value every hour it runs. If you aren’t pricing in the $15,000 rebuild it will need in two-three years, you are subsidizing the customer with your own asset depreciation.
Retention: Keeping a skilled operator costs more than hiring a rookie. Margin allows you to pay for experience, which prevents mistakes. Can’t grow if there’s no money to spend.
The Power of “No”: This is the most critical asset. Margin gives you the financial stability to decline bad clients and risky jobs. Without profit, you are forced to take every desperate gig just to keep cash moving.
The Math of Discounting
Here is why dropping your price destroys you.
If a customer asks for a $500 discount, they think they are asking for a small percentage of the total job. They are actually asking for the majority of your paycheck.
Your costs (fuel, labor, insurance, wear) are fixed. They do not drop just because you lowered the price. The only place that discount comes from is your net profit.
Scenario: You quote a job with $600 in net profit.
The Ask: The client wants $500 off.
The Reality: You didn’t lose $500 of revenue. You gave away 83% of your paycheck. You are now doing the same work, taking the same risk, and burning the same fuel for $100.
You are paying for their discount out of your own pocket.
Erosion, Not Explosion
Businesses rarely explode overnight. They erode because of weak margins.
Phase 1: Cash is tight, so you delay maintenance. You push that mulcher head another month.
Phase 2: Equipment efficiency drops. Jobs take longer. You work weekends to catch up.
Phase 3: Desperation sets in. You underbid the next job just to get a deposit check to pay for the last job’s materials.
By the time the actual crisis hits—a lawsuit or a major breakdown—the business is already dead.
It just hadn’t stopped moving yet. These are very difficult to save and typically starting fresh is a better move.
What is Actually Negotiable?
When a client pushes back on price, you have two levers you can pull without destroying your business. Price is not one of them.
Scope: “We can hit that budget number, but we will need to remove the finish grading/fence line clearing from the list.” Whatever. Do less work to have less costs so you can match the budget required.
Timeline: “I can offer a better rate if you can wait until we have a crew already in your area next month, saving us mobilization costs.” I call this Cluster Scheduling. Typically done best for large service areas.
The “Cheap Bid” Red Flag
For the customers reading this: When you hire the cheapest contractor, you aren’t getting a deal. You are hiring a business that is underfunded.
You are hiring a company that might not be around to honor a warranty in six months. You are hiring a crew that might be skipping safety insurance to make payroll. Sustainable pricing buys you a contractor who will show up, do the job right, and still be in business when you need them next time.
Real World Email Template for PricePirates!
Subject: Re: [Project Name]
Hi [Client Name],
I’m reading through your note here, and I’m a little unsure how to help—maybe you can clarify?
Usually, when clients ask us to cut the price significantly, it means we either misunderstood the scope of what you needed, or the “cheapest bid” is a higher priority than the [Specific Result] we talked about avoiding (e.g., “drainage issues next spring”).
Are you saying you’d prefer to cut out some of the prep work to fit that budget, or were you hoping we could do the full scope for less than our cost?
-[Your Name]
Im Jeremiah. This is TreeShop.