I was recently in Las Vegas to do some classes for a company called Energy Panel Structures whose home office is in Graettinger, Iowa. They were holding their annual dealer meeting in conjunction with NAHB’s International Builders’ Show.
Energy Panel Structures had a few hundred contractors show up for their dealer meeting. Those contractors were there because they understood the value of education. EPS held a truckload of classes and seminars for the group, and the rooms were full for each class. The attendees were smart enough to know that they had an opportunity in hand to learn more about how to run their business, how to build their jobs, and how to deal with customers.
They could have just as easily fallen into the trap of wandering around the gaming rooms at the casinos or seeing the sights in Vegas. Instead they focused on how to improve their approach to business and building jobs.
One of the things they learned was that by using insulated panels, they can build a new home for 16% less than standard building procedures. They can now offer the same product as most other contractors and at a lower price. Best part is they don’t have to give away their profits to do it.
Education, the key to your success.
Many homeowners want work done on their home, but are concerned about the price. In sales, it’s important to understand where your clients are coming from. So let’s try something a little different on your next sales call.
When it comes time to quote a price and ask for the order, have a backup plan ready. Here’s how it works.
Suppose the nice folks want their kitchen remodeled. You’ve qualified them, using the four questions in “Profitable Sales, A Contractor’s Guide“. They are serious about the work and ready to commit.
You’ve told them that what they want will run about $75 – $85,000. They are okay with that. It’s not a job you want to lose. With a design and/or design agreement in hand, you build your estimate. Now, before you present your estimate to the homeowner, spend a little time to rough out an alternative plan that will reduce the price of the job anywhere from 15% to 30%.
Will that take some time and effort? Of course it will. However, when folks have time to stop and consider the money they are spending, especially when they are constantly being peppered with all the bad news about today’s economy, they may be reconsidering their budget for the job. Anticipate that move and be ready for it.
When you come back and quote your job, add a phrase like, “John, Mary, this is the plan you wanted and our price is firm. This is what the investment in this job will be unless you decide to change the job. Let me add though, that I have been considering some options for you that will reduce the overall price of this job and if money is a consideration, we may want to look at those now.”
I didn’t use this option often when I was selling, but if I was concerned my clients might be second-guessing their budget, it worked well. In today’s economy, many more clients might be second-guessing their budget.
Give potential clients some options when it comes to decision time and see if that helps increase your sales.
I am reading the book “Rich Dad’s Conspiracy of the Rich: The 8 New Rules of Money“, written by Robert Kiyosaki. He has written a number of books starting with “Rich Dad Poor Dad: What the Rich Teach Their Kids About Money-That the Poor and the Middle Class Do Not!” and in my opinion, they are all excellent.
On page 175 of “Rich Dad’s Conspiracy of The Rich”, he says:
“It is also easy to see why many businesses are failing. When revenues go down or during hard economic times, many accountants cut the advertising budgets for a business. That is the worst thing they can do. Cutting advertising kills a business. Rather, in hard times, businesses should increase their advertising and try to capture larger market share.”
Have you heard that before? Just a few times? It’s tough – but if you’re going to stay in business, either keep advertising or die a slow business death. Your choice.
On my desk within easy reach is a copy of the book, “Never Give In”, written in 1995 by Stephen Mansfield. The subtitle is, “The Extraordinary Character of Winston Churchill”.
Churchill is one of my heroes. He is arguably one of the best orators in the history of the world. This man knew how to communicate. He was there at a time when the average man in England and around the world needed a lift. And lift he did. On October 29, 1941, in a speech to Harrow School where he attended as a boy, he delivered his famous “Never give in” speech.
Leafing through Mansfield’s book, I found many other Churchill quotes that apply to our economic climate today. His quotes came before and during a time of war. We are at war today with economic factors that have been perpetrated by people in positions who made bad decisions and bad mistakes. That is reality, and we face it every day as we rise to the challenges of our businesses.
“Continuous effort – not strength or intelligence – is the key to unlocking our potential”
Some of you are down, even considering throwing in the towel. I hear weeping, wailing, the gnashing of teeth. And who can blame us? The construction industry has been hit as hard or harder than any of the banks, insurance companies or vehicle manufacturers. The difference here is that our beloved government is not going to throw big bucks at us and bail us out. The much-touted Economic Recovery Act is not the answer to our problems. It is directed at bailing out the unions and union contractors, not you and I, the common businessperson owning and operating a construction-related business.
It’s tough out there. No one told you that business was going to be easy. We all experience highs and lows and how you deal with them will determine your survivability. Look at it this way – being in business is kind of like the natural act between a man and a woman. Even when it is bad, it is still pretty good.
Read, study and learn what successful contractors are doing. Do it too.
Give each day your best effort, one day at a time.
Put a smile on your face and remember, a fake smile is far better than a sincere frown.
Tell someone your story, ask for their business.
I have a good buddy down in Southern California who has a great way of saying things. I love talking with him.
We were talking this morning about business and why so many contractors are having trouble getting work in the door. Dan said, and this is a quote, “Opportunity may knock, but it doesn’t know your address.”
Now, tell me, does that put it all on the table? He is dead on. You have to let folks know who you are, what you do and how to reach you. If you don’t, they won’t “know your address”. Advertise.
Last week, we held a webinar on prepping for taxes. One topic Karen Mitchell (OnlineAccounting.com) covered was how to handle bad debts.
A question came in from a contractor. They had a change on a job and now the owner thought the charge for the change work order was too high and they weren’t going to pay. Would that be considered a bad debt?
Let’s back up here. Why was the change made before the Change Work Order was signed and paid for? We’ve talked about this elsewhere on our blog, in our newsletter, and in both our books, “Markup and Profit; A Contractor’s Guide” and “Profitable Sales, A Contractor’s Guide“.
Additional work orders are estimated, written up, signed by the owner, paid upfront and THEN the work is done. If they don’t like the price, don’t make the change! That is not so hard and it is the way smart contractors do business. Yet, contractors continue to do changes, ask to be paid and then are aghast that the owner won’t pay for the change. Go figure.
Do you wonder if the book, “Markup & Profit; A Contractor’s Guide” can help your business, even in today’s economy? Check out a note we received earlier this month:
“Michael, I just wanted to thank you for putting together your book Markup and Profit. It has helped get our firm back on track during tough times over the last year and now we are experiencing tremendous growth by getting back to the basics and applying your sound business principles.
In short, our general contracting firm has been around since 1948 and has never had to file a bankruptcy, had a lien placed by a sub for non-payment and has never had a lawsuit filed against it. But we got in trouble. As money was coming in hand over fist in the late 90s and early 00’s, the company failed to set up an operating capital fund, properly distinguish between job costs and overhead, and made the cardinal mistake of 10/10 pricing which slowly drove the company from having millions in the bank to just $200,000 when your book was purchased.
As the operations officer it is my responsibility to steer the ship so to speak. I am embarrassed to say to you that though I have a BA in Economics from a prestigious school, I did not see the forest for the trees. Markup and Profit was the answer.
After reading the book through twice in a week and literally destroying it while taking notes and annotating sections with cross references, I implemented the appropriate principles and techniques.
Our salesmen now dress appropriately when making calls on customers. We have determined our optimal overhead rate and are now making real profit. Our sales and project management processes have been streamlined.
We are on track for 2010 to have the best year on record for volume of work sold and completed in our over 65 year history, and I can honestly say it is solely due to Markup and Profit. In addition, we are using your Fast Track software and absolutely love the menu drop downs.
With the deepest thanks and respect,
Steven, Director of Operations”
I have talked about focusing your attention on just the 1, 2, or maybe 3 things you do well and make the most profit on. Doing a good job of advertising and promoting those things will get you the lions share of the business in your area on those particular type of jobs. This takes a good advertising campaign and a little time, but it works.
Brian Tracy talked about profitability recently in a newsletter that he sent out. He said: “You begin your profit analysis by determining the exact gross sales revenues that you receive from a product or service after all subtractions for defects, returns, breakage, etc. Take every single deduction so that your gross dollar amount is completely accurate, and you are crystal-clear about the exact amount you are netting from sales.”
Brian went on to say: “You will probably find that fully half of your product and service offerings are generating very little profit or even causing you to lose money with every sale. A turnaround specialist would immediately either raise the prices of the low-profit items or discontinue them altogether.”
Amen. Focus your efforts where you make the most profit, stop doing everything for everybody. It is hard if not impossible to be all things to all people, and in business that approach can be costly.
Stay focused my friends, do what you make the most money doing.
