Time for Your Spring Exams

Is your market tipped against you and in favor of buyers ready to commission a job? Have you adapted your sales strategy accordingly?

As long as the supply of builders remains high and the number of available jobs remains low, the laws of our capitalist economy dictate that the value of custom builder services is diminished. What are you doing to remain in business and achieve profitability in 2010?

Unless your local market is defying local and national trends, you have already decreased overhead and cut costs wherever possible. Now you need a strategy for increasing your closing ratio when you are working with a qualified lead.

Your methodology for estimating, bidding and pricing your profit is critical. A close examination of the way you handle these phases of your sales efforts requires no less attention than any increased marketing efforts you are considering or that you may have already initiated.

Here are some tips for custom estimating:

  • Post plans online so your trades and suppliers can view them and expedite their turnaround time.
  • If your local plan copier does not offer this service, find one you can work with who can operate from a remote location. I use BPI Reprographics, a national reprographer (bpirepro.com).
  • Require that trades and suppliers come to your office at a time you or your estimator will be available to review plan nuances and your RFP.

Here are some suggestions for improving your bid process:

  • State in the preface of all your RFPs that today’s ultra-competitive climate demands that you seek best-value pricing on each bid item and that to achieve this you will be obtaining not fewer than two bids per phase.
  • Emphasize that if their pricing is the best and they have a proven track record with you, if you win the job then they also win.
  • Always require they include a statement on their proposal that locks them into providing the required labor and/or material to complete their phase of your project, “… in accordance with all the details of the construction plans provided.”

Where’s your profit and what do you tell your prospect? In today’s market, this is the most important and relevant aspect of your sales strategy. How do you price your builder profit and what do you communicate about it during your sales efforts? Sophisticated buyers want to know!

Fixed-bid with specifications and allowances? This is the traditional and customary way to bid a job, wherein your profit is built into your total bid. You do not reveal your profit and you may hope the subject is never brought up. If you are closing luxury jobs this way, then bravo. It is the easiest way to manage a job once you have a client. Change orders become an additional revenue and profit center, and you do not have to explain every phase in great detail.

However, there are several negatives to this strategy when you are competing with many builders. First, your client is more likely to use the bottom line as the basis for his decision on whom to select. Any final negotiation necessary to become the winning bidder reduces your job profitability. It is nearly impossible to win the job until after the prospect has multiple bids. This method in effect encourages your prospect to meet and greet other builders. Further, you are dependent on your prospect’s ability to do a thorough and accurate bid-to-bid comparison. You may be penalized by the fact that your bid is the most thorough and you have properly included line item costs for every detail of the plan. How many jobs do you want to bid where you rely on your prospects or their architect’s due diligence and ability to make an apples-to-apples comparison of each bid?

Next month I will explore the benefits of using open-book construction management. I will share how it can eliminate your competition while transforming your prospect from an adversary into an ally seeking best value and top quality builder services … namely, yours!

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