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Construction Programs & Results Inc

We Like to See The Good Guys Win!

Lower Your Price, Gain Exposure

by Michael Stone

This is the type of "great opportunity" that's offered to business owners. Should you take it?Not Always a Great Opportunity

Thanks for your recent note in the mail. I had bought your book on Markup and Profit a couple months ago. I just finished reading it a couple weeks ago. It was very insightful.

I'm curious what your take would be on this: I just met with the owner of a new baseball minor league stadium . . . about acid-staining the vast expanse (10,000 sq ft) of concrete in front of the stadium, engraving the league's logo, and starting on some of the inside concrete as well. . . .

My fear going into the meeting was that knowing how many baseball team owners can be with their players - "frugal" – coming to agreement on price would be difficult. The meeting went well – they are very interested in my services – but I was right: they are going to want a cut-rate price and possibly offer tickets or program advertising instead of cash payment.

I don't need more advertising or more work. Given a bigger budget right now, I would put the money into my web site or equipment before increasing my advertising. Furthermore, I have to pay the bills. And make a profit. I know you would agree. Have you ever encountered situations like this?

Basically, after presenting my proposals, and discussing their interests, the owner moved right to "pricing" and "cost". The emphatic gist of his message was: "This is different from your normal project;" "People are happy when they come to the ballpark, they're in a great mood," and "This is going to be your showcase," implying that this project is going to result in a ton of business for me, and that that is going to be a big part of my recompense/reward for the project.

I still have to put together a detailed proposal and bid, but my first reaction is: leave well enough alone. In fact, when I got in my truck after the meeting, and turned on the radio, the first song that played was "We Just Disagree" by Dave Mason – you know the lyrics, "So let's leave it alone, 'cause we can't see eye to eye. There ain't no good guys, there ain't no bad guys, There's only you and me and we just disagree."

Well, that's exactly how I feel! I don't need a "showcase project." It would be nice to have but not at my expense. I remember in your book how you said you can't take a cut rate on one job because you have to make it up on the next. I'm not particularly worried about getting this project at this point, but before I put my best effort forth for this project, I thought I would get your take on it. I know that, in my experience, "showcase projects" don't usually result in more work. . . .

If you get a minute, I would very much appreciate your thoughts. Thank you.

I don't need to say much here; this contractor has it figured out. He's right: don't cut the price on a job expecting to make it up on the next job. You'll never find the job you can overcharge to make it even, and is it even fair to try?

There's a practical way to look at offers like this, and that is to consider the numbers. Let's say the project is worth $100,000, and they want you to drop your price to $70,000 because you'll get exposure and free advertising. Would you pay $30,000 for that advertising? If you were to write a check today for $30,000 worth of advertising, would that be where you spent the money?

The owner in this situation is a promoter, and they're promoting what they can do for you if you'll lower your price. You'll deal with promoters often when you're in sales. Sometimes they are homeowners instead of public arena owners. They're ready to use you for everything they can get, all the while telling you it will be good for your business. Don't fall for it without running the numbers.

Calculate your price on the project. Look at the loss you'll take in dollars, and the gain you might achieve in exposure. If you'd be willing to write a check for that gain, then it's worth considering. Otherwise, walk away.

By the way, this also applies to offers to barter or trade work. Estimate your cost and apply your normal markup to reach the actual price of the project. Is that what you'd pay for what you're being offered in trade? If not, don't make the trade. Now, if you still want what they're offering, buy it. It'll cost you less than making the trade.

A business transaction must be win-win for it to be successful. That means the transaction must help all parties. You're in business to provide a service and make a profit doing it. Don't do a project for any other reason.

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