About Your Exorbitant Markup . . .

A note we received:

“Hi Devon and Michael
I hope things are well with you!
Just wanted to share an email from a prospect who went nuts on me for not following “Market price”.
I am definitely going to do a better job in pre-selecting my clients after this one.”

We met this contractor last spring at our class in Buffalo. He’d worked with the client before attending class and reading Profitable Sales. This is the email he had received:

“If you did not want to take on the renovation project, a simple email indicating that would have sufficed and saved everyone a lot of time. The fact that your quote came in at such an exorbitant mark-up compared to your competitors has compelled me to reply today.

I’m not sure what extra value you could possibly provide that would justify the extra 40 – 50k more than the other quotes from top companies that we’ve already received.

If the attached quote is serious, and not just an attempt to pro-actively turn down the job by over-quoting us then you are either of the following:

1) Delusional.

2) Dishonest, in that you hoped we would counter at a lower price that is still way beyond market value.

Whichever one it is, you have just burned the goodwill and credibility afforded to you by the person that referred you, and your strong first impression that you left us with. Even if you lowered your quote to the mark where we were aiming you would absolutely not be considered due to the laughable starting price of 80k to renovate a basement.

That being said, I wish you no ill will, and hope this email helps you in the future when working on future proposals. Please do not contact us again.

All the best,”

I’ve read notes like this and listened to similar phone calls over the years. As I explained to the contractor, this is exactly the kind of client that you don’t want anyway.

In our book, Profitable Sales; A Contractor’s Guide, I lay out the steps that you need to follow to get to the “yes” of a sale. It’s clear that in this situation, the budget was not communicated before the contractor went to the time and trouble of estimating this job. The customer referred to the strong first impression the contractor made, which tells me the contractor is doing a good job of making his presentation and communicating. Unfortunately, he missed a few steps in that presentation or he would have walked away from this client much earlier.

I talk about the four questions you need to ask in your sales presentation in the book. One of those questions is asking the budget range for the project. If you don’t get an answer before you take the time to estimate a project, you’ll waste time and trouble.

One more thought: It appears the contractor emailed the quote. Quotes should be presented in person, not by email. If he’d presented it in person, he’d have had to deal with a shocked client which isn’t pleasant, but he’d also have the opportunity to question why his competitors were so much lower. He’d be able to ask questions about what was and wasn’t included, and either explain to the client the risks of going with a significantly lower quote, or discover that the competition quoted a much smaller job. If you want to make the sale, present the quote in person.

Don’t let notes like this bother you, and don’t start worrying about the quotes you’re giving. If your estimate is accurate and you’re using the right markup, then the price you quote is the price you need for that project. Let your competition lose money on the job.

Michael Stone

The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations as needed.