I posted a blog earlier this week that produced dozens of calls from restoration contractors seeking additional information regarding the services we offer. I was caught off guard when several of contractors asked me the same question… Can you beat the discount and weekly treats we get from the “other guys”?
After explaining why we don’t offer discounts or donuts two of the contractors simply said OK and then hung-up. Before I answered the third contractor’s question I asked him a question… How much of a discount are you looking for? His response piqued my interest even more – He wanted “something in the neighborhood of 40%” – his exact words. He went on to explain the math and how I could help him reach his target.
According to the contractor he received a 10% “discount” from the “other guy” plus he was able to mark-up their invoice 10 & 10. By his calculation his profit margin was 30% (never mind his math error, stay with me on why his response surprised me). If I heard correctly, he was routinely submitting invoices from the subcontractor as a line-item expense (plus the 10&10 markups) on the contractor’s Xactimate estimate agreed to by the Adjuster. He suggested that I should “pad” my invoices an ADDITIONAL 10% so that his profit margin would be in-line with his minimal profit margins (40%).
In my opinion, what he described is not only unethical, it’s illegal – How is this any different from what went down in the DRI/Griggs case in Colorado back in 2013. A contractor was found guilty of conspiracy (and served time in prison) for submitting inflated invoices. I do realize, however, that the “smoking gun” in the case was the fact that the subcontractor actually submitted TWO invoices (inflated and actual due). Is it ethically acceptable to skirt the law by simply calling it a “trade discount”? If so, shouldn’t the terms of the discount be noted on an invoice intended to be presented as a line item (with markups) on Xactimate?
I’d like to believe that the “Discount and Donut” marketers that operate in my space offer legitimate – and fully transparent – trade discounts if they actually offer the incentive to contractors. For the sake of the industry, I trust that they’re not inflating their fees to accommodate a contractor trying to hit their minimum profit margins. I hope that the contractor that reached out to me and asked me to inflate an invoice was simply a bad apple that we need to remove from the barrel.