If you’re a remodeling or renovation contractor, using a design agreement is a smart way to sell your services. A design agreement is a semi-formal contract for design and engineering work. When it’s properly used, the client makes a commitment to doing business with your firm, and you get paid for work that you shouldn’t be doing for free.
When you’ve reached the stage of asking for a design agreement, you should already know the budget for the project. This is critical; the budget will partially drive the design. You’ve also discussed enough of the project that you have a pretty good idea of what they want, and you know it can be achieved with the budget they have. (This is all discussed in our book, Profitable Sales, A Contractor’s Guide, where you’ll also find a sample design agreement.)
But one problem some contractors run into is dealing with clients who want to change the scope of the project after signing the design agreement. As they get further into the design process and discover more exciting things they can do with their home, they want to upgrade and get all they can while they’re at it. I’d do the same thing, and you probably would as well.
That’s why it’s important that they know and understand the parameters of the design agreement.
On a sales call, when you have your four basic questions answered (as outlined in the book), you say, “Let’s talk about how we proceed from here. We work by way of a design agreement. I have a copy of the agreement here, can we take a look?”
You bring out your design agreement form and proceed to walk them through what it says. When you’re done, you ask if they are ready to proceed with the agreement. If they are, you start filling in the blanks.
When it’s time to write down the budget for their job, if they’ve given you a budget range of between $40,000 and $50,000, that’s what you use. If they’ve given you a budget of $50,000, it’s better to have a range than a single number, so aim for five percent lower and five percent higher, and write in a target budget of $47,500 to $52,500.
Explain it to them by saying something like this:
“John, Mary, I’ve listed your budget based on our discussion. Your target budget is the number you have agreed to in order to get your job built, is that fair enough?”
Make sure you get their agreement on the target budget as written or adjust it as necessary. This needs to be an agreed-upon figure before moving forward.
“As we go along, you’ll discover items you may want to consider including in your job. I want to be real clear here. If you ask me to include a Sub-Zero refrigerator in your kitchen and I tell you that it is going to add $4,800 more to your budget, I want to be sure you understand that means that the budget for the job goes up. If you want to switch from the composition shingle roof to a tile roof, the budget for the job is going to go up. In other words, when you make a change, the budget for the job will change as well.”
“I’m telling you this because I don’t want you upset with me if you add a number of items to the job that are beyond what we’ve discussed already and I come back to you with a final price that’s higher than your stated budget. Is that fair enough?”
That lets them know that there is a relationship between the design and the budget. They need to know that the price of the project will be impacted by the choices they make. Changing the scope of the project could change the cost of the project.
It’s important to follow through during the design phase by reminding your client, whenever they ask for a significant change in the scope of the project, that it might impact the budget.
Part of your job is educating your client on how the remodeling or renovation process works, and that includes the price of the project.
The rest of your job is to do what you say you are going to do. Return every call the same day or by 9 am the next day. Show up for every appointment and on time. Keep them busy making decisions, doing research, visiting showrooms or providing good websites for them to peruse. Do your work and you will find that you will greatly increase your sales and your bottom line.
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