“Michael,

I have to tell you about an amazing marketing tool that we have started using and it works really well. We call it our ‘Referral Bonus Program’. We offer all our previous customers their choice of either a 1% cash bonus on any referral they give us that turns into a contract – or – 15 min of free remodeling on their home for every $1000 of contract sales they refer.

I realized 1) People want to work for someone referred to them because there is some accountability built into it. 2) Previous customers who think of us as a partner will tend to remember us when they need new things. 3) Our previous customers will put on a new positive mind set about us. While we have had virtually no disgruntled customers in the last 4 years (minus one woman who difficult to please), it is easy for people to think negatively about everything they deal with. If they are trying to sell our services to their friends that automatically puts them in a positive mood about us. 4) The cash back is insignificant to the total cost of a project for us but in a household economy even 1% is nice. (We just sold a $6500 job and the referrer was so excited to get a check for $65.) 5) If the customer opts for the free remodeling time (retail of twice the cash value), we get to come back into their house and cement the notion that we are ‘their’ remodeler.

I have sent out 12 letters and have already received 3 referrals from them. It is virtually free marketing.

What do you think?

Alan W. Gray
Principal Managing Member
Northwest Woodcrafters LLC”

I think it’s a fantastic idea. This is the new marketplace, gang, and this kind of creative thinking is required. Same old, same old doesn’t work as well. If you want a copy of his letter, send us a note and we’ll forward it to you. Thank you Alan, we all appreciate your sharing.

One of them related how he had taken a small repair job, while he was doing that job the owner found some work in another room that needed doing. That lead to fixing a leak in a shower stall on the second floor and the next project is finishing an unfinished room on the second floor of the same home.

Times change, business changes and while it seems painful, we need to change as well. Three or four years ago you didn’t have to take this approach to bringing in new business. Today, if it works, then get right after it. You can feed your ego or you can feed your family, seldom can you feed them both. Decide which one is more important.

Here’s a thought. Think of your prospective client base like a bucket. The bucket will always have prospective clients that are no longer interested in your services. They change their mind, move away, sell their place, hire another contractor. Consider those clients the ones that are leaking out the bottom of your bucket.

A majority of the bucket consists of prospective clients who want to do the job but always seem to have something that keeps them from calling you up and saying, “Let’s do it.” You need to stay in touch with these clients because you never know when they will finally decide to go for it.

Then there are the prospective clients who become actual clients. They are a small part of the bucket but they are the ones you are looking for. You will find all three types of clients in your bucket but if you don’t constantly advertise, eventually the bucket will run dry. You must keep filling the bucket. You need to stay focused on lead generation. That means advertising 24/7/365.

Where to start? If you didn’t get a chance to listen to the webinar live, you can listen to the recording. Details are available here – http://www.markupandprofit.com/advanced-lead-generation.html

And if you don’t have a website, get one. We have an informational page available that explains the basics (http://www.markupandprofit.com/how-to-get-a-website.html). It’s only the basics, but you have to start somewhere.

You have to go out and get your hands dirty in the selling world to know what really works best for you. No two of us will approach a sales call the same way. I can, however, pass along a couple of thoughts I have accumulated since I started selling remodeling back in 1969.

The price of any given job is set by the customer by the design they create and their selections of the products to be used. That is reality.

Price is normally a secondary consideration if the people know they are going to get exactly what they want. Almost all customers are more concerned about whether or not you will do what they want to do, on time and at what they consider to be a fair price. They are usually even willing to pay a bit more for that security. During my years in sales, I was constantly reminded of that. I would let apprehension about my price creep into my mind while I was quoting a job, only to hear them respond with, “How soon can we get started?”

Selling remodeling is not rocket science. It’s not about the money. It is about the job, giving your customers what they want.

Anyway, this business hired an attorney to represent them. They didn’t hear much from the attorney over a period of several months, but they did receive bills for some $8,000 worth of his work.

They made several calls to the attorney and when they didn’t hear back, they contacted the IRS agent assigned to their case to see what had been done. The agent hadn’t even heard of the attorney let alone gotten any calls or correspondence from him. The business owner immediately contacted the State Bar and filed a complaint.

What is the lesson? Get dates and times for everything you do when you purchase the services of a professional. If they are any good at all, even average, they can estimate the time they will have to invest on your behalf and what the maximum cost should be. Don’t let things sit – make sure you know what’s happening. When they send you a bill, make sure you know what they are billing for. Most of the complaints I hear from contractors about working with either attorneys or CPA’s is being billed for work that wasn’t done, or paying for work that provides either no results or negative results for the contractor.

There are two sides to every story. But you do not have to put up with someone not providing the service they were paid to do. Make sure you get what you are paying for.

I have discovered there are two main reasons contractors get involved with this type of contract. The first and the worst reason is they or their customers believe that Cost Plus (or T&M jobs, Time and Materials) will get the job done cheaper. Too often, that’s true, but only because the contractor either isn’t making enough to survive or because the customer decides not to pay for part or all of the job. The second reason many contractors use this type of contract is that they simply don’t have enough faith that they can compile an accurate estimate.

If you are building jobs on cost plus contracts because you don’t trust your estimating ability, maybe it’s time to upgrade your estimating skills and develop a system that will result in accurate, more profitable estimates. Successful estimating is doing the same thing, the same way, every single time. Learn what to do, then do it.

Our new Profitable Estimating Training Class will teach you how to estimate and how to develop such a system. If you are risking your business on Cost Plus contracts, or if you’ve lost money on fixed price contracts because of errors in your estimating, you’ll recover your investment in the program quickly.

A job’s “life expectancy” is when either the contractor or the client think the job should be done. It’s the point where the contractor and the client are tired of the job and tired of each other. How you handle a job when it goes beyond it’s “life expectancy” will determine whether or not this job will turn into a problem, costing you money, or stay profitable.

Your contracts need to specify how change work orders and your punch list are handled. If you’re smart, you’ll also include language on communication, especially e-mail and how it is to be used between you and the client. And, of course, have language that covers what will happen in the event of a disagreement or all-out dispute.

I think it’s also important to discuss with the client the possibility the job might reach it’s “life expectancy” before it’s finished. Make sure they understand the life cycle of the job and what can and probably will happen. Let them know that you’ll get tired of each other. Tell them the warning signs so they know exactly what to expect and when.

Now, will that get you through the job any easier? No, but at least you and your client will have talked about it and if necessary, you can remind them that you did tell them that near the end of a job, problems could occur just because the job has reached it’s life expectancy. You’ll both just have to soldier through it.

Think it through, incorporate it in your pre-contract signing meeting and you will find that the “end game” of your job can be much smoother and far less stressful.

He just recently completed a $90,781 contract that had $7,752 in additional work added for a total contract price of $98,533.

When the job was complete, his cost estimate was within $3.94 of his actual job cost. Congratulations Gary, that is good estimating.

The writer pretty much nailed the biggest problem with e-mailed bids. She commented that if clients insist or demand that their bids be e-mailed, that’s a red flag. It signals that the client’s main priority is price. I’ve discussed this before and couldn’t agree more.

But I’d like to add – When clients become insistent or demanding on any subject, that’s always a red flag and unless you get the situation in hand, you are going to have nothing but trouble. This is normally brought on, as the author of the article pointed out, by the clients thinking they have the upper hand in the negotiations and they are going to take advantage of it. Bad plan.

Negotiations for any job must be a win-win, which means everything is in equal balance for both the owner AND THE CONTRACTOR. This is not about making the owner happy. This is about win-win. You want a job done; I will do it for my price. We both get what we want. If you want certain materials or a particular design, you must be willing to pay for it. If not, then we are not on a win-win path and it’s time to close the proceedings. Remember, the owner sets the price on any given job by the design they choose and the material selections they make.

Other things that clients might insist on:

“We want to compare quotes.” In previous posts here, our newsletter and in our books, I have talked about clients asking for itemization so they could compare bids they might get. That isn’t going to happen. In 41 years of estimating, I have yet to meet any client that could do a fair and accurate comparison of 2, 3 or 4 estimates from legitimate contractors. You and I would have a tough time comparing your quote and mine. How can a client with little or no training in construction do a relevant comparison?

“We don’t have time to meet with you again.” Sorry, I don’t have time to do an estimate for you. Win-win, remember? If I am going to take the time to do an estimate, the client must be serious. That means they are willing to spend as much time as needed to get the decisions made and their project put together as needed. I don’t have time is a verbal red flag that they are trying to use you.

These issues boil down to the client not wanting to make a decision or only looking for the cheapest price. Here is one more thought for you to consider. Why are you in front of people like that? That is the question I would be asking myself if any of the above scenarios showed up on my sales call. What did or did I not do that led me to find that type of client?

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.