employer who had run the hedge fund, telling him what I was doing. He said right away that he knew a guy who’d been paving all his life. We met, hired him to run our paving, and relied on him to find the rest of the crew.” By the end of that first season in 2001 they were paving one or two driveways every day. Success, right? Kind of... Addington says he and Martin had written an in-depth five-year business plan for a driveway-paving company, but not too far into that first season they realized they were surpassing their initial projections... But they weren’t making any money. He says they did provide the great service they’d planned on and they did pave great driveways – but they weren’t charging the premium they intended or wanted to. “We learned pricing the hard way,” Addington says. That’s because to price their work at the starts they examined what other contractors were charging for work, figured that was the market price, and priced their driveway paving jobs accordingly. “We quickly realized the market was too low,” Addington says. “But not quickly enough. We were hemorrhaging money right out of the gate and it took us until the end of the first season to figure that out.” To fix it they sat down, gathered all their expenses, and figured out all their job costs. They then applied a profit
Premium Pricing Demands Premium Customer Service
Paul Addington (left) spends his days on the business side of things while Tom Martin spends his days in the field, bouncing from job to job and checking in with each crew. That division of labor is exactly how they’d planned it.
margin to those job costing results. “Figuring out we were hemorrhaging was terrible; figuring out how to fix it was great,” he says. “Once we got our pricing down we were able to keep ourselves afloat and pay our bills and barely paying ourselves,” he says. “We weren’t making much money but we weren’t hemorrhaging either.” Once they established the pricing they needed for the type of work and service they provided, they began to grow, slowly and steadily, with each year building on the year before. He says that at the time they were still doing only work related directly to driveway paving – grading, stone placement and asphalt laydown.
But building a business on premium pricing requires providing – excelling – in an aspect of the business that others aren’t. “You sure as hell can’t do it on price in this business because there’s always someone out there lower than you are,” Addington says. “So selling a premium service at a premium price is tough to do.” In fact, he says his sales team often complains how much easier it would be if they could only drop the price. “They complain about the jobs they lose, and we understand that. But I just remind them that we make good money on the jobs we get,” Addington says. “Plus, we’re trying to wear the white hat here as far as the industry is concerned. We’re trying to lead the industry by example by charging what we need to charge – because it’s what others should be charging too.” “Customer service is the reason we can charge more,” Addington says. “What that means in one word? Responsiveness. It doesn’t matter if you can’t give them what they need or if you can give them what they need – you need to respond to them and we always do.” He says that in addition to being responsive, Pro-Pave does everything it can to make the property manager’s life Initially serving only the Virginia market, Pro-Pave now provides paving, concrete, and pavement maintenance services throughout Virginia, Maryland and Washington, D.C.
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