Selling for higher profits
If I had a nickel for each time someone told me they couldn’t sell a job for more money, I’d be a rich man. Sometimes I try to argue the point and other times I just let it ride. If a person doesn’t want to learn something new, rest assured, you are wasting your breath.
The perception of value
Nevertheless I’ll try to convince you – show you – that you can increase your margins, if you’ll change your prospective client’s perception of what they are going to receive.
To demonstrate this, let me introduce James “Honest James” Remodeler, and his cousin, Joe “Broadway Joe” Remodeler.
Honest James is, as his nickname implies, honest. He believes in wearing work clothes to a sales call because that’s just being honest. That’s him. He works hard, and he wants his clients to see that he puts a lot of effort into being the best contractor he can. He believes in “open book” estimates, and shows his prospective clients every line item in the estimate. Honest James isn’t much for words – he’s better with his tools. And he delivers a top quality product, if given the chance.
Broadway Joe, like his cousin, is honest. He can build with the best of them. Sometimes he has to get in the field and work, yet he makes a point of showing up to his sales calls on time, dressed in nice clothes, and clean. He knows that this takes more time to prepare for a sales call, but he also knows that if he closes a sales, it is going to be well worth it. He doesn’t believe in “open book” estimates. He is honest about his price, but doesn’t see a lot of sense in exposing all of his business/estimating practices to the prospective client. He shows one price, and that’s it. Basically, “Here’s what you get for this amount.”
Honest James’ margins are around 25%.
Broadway Joe’s margins are around 35%.
For the sake of argument, let’s say that they both sell $1 million worth of remodeling jobs this year.
- Honest James grosses $250,000.
- Broadway Joe grosses $350,000.
Using some fancy math, we see that Broadway Joe made $100,000 more than Honest James.
The question is, how did Broadway Joe sell at higher margins than Broadway Joe?
“Spying” on Honest James and Broadway Joe
For the answer to this, let’s secretly observe each of them on a sales call to the same prospective client.
Honest James shows up on time, dressed in clean work clothes. His truck has been out in the field and shows it. He brings with him, a tape measure which he wears on his belt, a legal pad, and a pen. He also brings with him, as he does on every sales call, a well-worn photo album with samples of his work.
When he arrives he introduces himself, and asks them to show him the project. They gladly do so. After measuring the space, he assesses the project, tells them that this is the kind of project he enjoys building, and offers them a rough guesstimate. They reply that they will consider the rough guesstimate and will call him. As an afterthought, Honest James offers to show them his photo album. They oblige and the next half hour is spent showing the prospective clients some examples of his work and basically getting to know each other better. He can tell the prospective clients are comfortable with him and he will likely get the job.
Just like Honest James, Broadway Joe shows up on time. He is wearing a nice golf shirt and khaki slacks. His truck is clean because he just ran it through the car wash on the way over. He has a small briefcase at his side. Because he has a sales process, which has already been conveyed to the prospective clients, they know that the first thing he wants to do is sit down and show them his presentation “book”. They go to the living room and sit down together. Joe pulls out his trusty iPad and shows them his contracts and other relevant forms, all the while laying out his sales, job, and post- job processes. Then he shows them some professional photographs of his work, even showing some videos so they can get a real feel for his job sites. He finishes by showing them an easy to use online collaboration program that they will be using to privately communicate during the project.
Now it’s time to look at the project space. They eagerly show him what they want to do with the space. Joe likes it, and makes several suggestions how the proposed project can be improved. He mentions several products that will make their lives more convenient and comfortable. They like what he has to say.
Broadway Joe now offers them a rough guesstimate, and asks if they would like to proceed to the next phase – design. He tells them how much he’ll charge for the design and lets them know what to expect during the design phase.
The hard cost of this fictitious project is $50,000 in both of their estimates.
Honest James’ markup factor is 1.33, yielding a sales price of $66,500.
Broadway Joe’s markup factor is 1.538 yielding a sales price of $76,900.
That’s a $10,400 difference. Quite substantial. Why would they choose Broadway Joe over Honest James?
Getting into the client’s mind
In all honesty, we don’t know which remodeler they would choose. But let’s look at some of the buttons that were pushed during Broadway Joe’s visit.
- He looked like he would cost a little more from his appearance.
- They felt at ease with him as he showed them his contracts, forms, change orders, etc., and explained his processes.
- He demonstrated his proficiency with technology as he gave his presentation using his iPad. They might have appreciated his being paperless.
- He became a consultant to them, not a salesperson, and not a worker bee. He showed that he was in charge and would remain so throughout the project.
- As he looked over their project, he offered his expertise, showing them better ways that the project could be built for no more money.
- He told them that they could collaborate over a private online network, and they could share documents, photos, emails, manuals, warranties, and schedules. They could easily contact him and would always be in the loop.
- Although he gave a rough guesstimate, he was quick to point out the need for design so that everyone was on the same page and they got exactly what they expected.
- He made them feel comfortable about taking the next step – design – as he explained that process to them.
All of this led to them trusting Broadway Joe as their consultant and builder. He showed expertise, and they had no reason to believe that this would not continue throughout the project.
What really happened…
Two very important, yet invisible, things occurred: Trust was built and perceived value was demonstrated.
Jobs are sold on emotions, not on cost.
Whichever remodeler built out the space would do a great job. That’s not the point of this story. Jobs are sold on emotions, not on cost. You have to believe this in order for it to work. The prospective clients felt better about Broadway Joe. He laid everything out for them to see on the first visit. There were still some questions they weren’t sure about with Honest James. It was a lot easier for them to accept Broadway Joe’s numbers than to pry additional information out of Honest James. They felt confident that their investment was safe if they used Broadway Joe. And that’s exactly what he intended for them to think. He made a presentation that could not be rivaled, he had all his ducks in a row, and made sure that the prospective clients had all their questions answered before he left.
In conclusion – Never sell on price alone
The moral of this story is, “Never sell on price alone”. Increase the perceived value of your work by being a consultant to the owners. The difference being that a salesperson is on the other side of the fence from the owners. A consultant is on the owner’s side and is watching out for their well-being.
Now get out there and show ’em what you’re worth. It may be a lot more than you are presently charging.
This article was written by Randall S. Soules, writer, remodeling coach, advisor, educator, and creator of the Scientific Remodeling System. The Scientific Remodeling System will show you easier ways to advance your business, raise your profits, and improve your life, through the use of superior remodeling processes. If you would like to learn more about this eCourse and all of the forms and contracts available to Premium Members, click here. You are free to reprint or copy this article to your blog, newsletter, staff, etc. as long as the article is shown in its entirety and has a live link to RemodelerBiz.ScientificRemodelingSystem.com.
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