Pricing & Margins Are Key Elements to Survival

Fortunately, it’s likely that your projects are distinctive and your staff performs and delivers them in a way that is different from (and hopefully better than) any of your competitors. Unless you’re simply selling products (such as faucets, cabinets, etc.) to a client without any service attached to those products, you have the opportunity to differentiate your projects by the design work you do, the services your staff provides, the showroom experience and your firm’s ability to skillfully manage and coordinate all of the elements that go into a successful remodel.

The buying experience is the one area that can be unique to your firm, and you need to evaluate and manage this at every turn. It’s important to pay attention to even the small details when examining this area.

When you drive up to your place of business, do you see a crisp, inviting impression: grass cut, pavement clean and swept, paint fresh, etc.? Remember the old saying that first impressions are lasting impressions; few people will want to do business with a company whose headquarters look tired and run down.

The same goes for the physical appearance of the interior of your offices and showroom. Are samples put away and organized or just piled on the conference table after the last presentation? Is your staff eating lunch at their desks? Nothing like the smell of one-hour-old fish and chips to turn a client off.

Everyone on your staff should be an active part of the sales effort, making eye contact with and greeting each person who walks into the showroom. If that client, or potential client, is not presently working with a designer, an employee should inquire if the person is being helped.

Be assured that people can pick up on the mood and atmosphere within an organization in a short amount of time, and they will want to engage with those people whom they find warm and friendly.

Can You Hear Me Now?

Given the state of the economy, it’s likely that the majority of your potential clients will have a fairly specific budget in mind.

A few years ago it seemed that there were a lot of clients who just wanted what they wanted and were willing to pay whatever it took to get it. In those days, it was not unusual to start with a preliminary budget number and, by the time all was said and done, the final price was 150-200% more than where you started. While there may still be some clients with that kind of price flexibility, most are probably not anymore, and we need to be sensitive to where their project cost is going in relation to the original budget that is presented.

Make sure that you have a good grasp of your costs and expenses and the amount of gross profit you need to cover your overhead. If you do decide you need to reduce prices, be aware of how much more you need to sell to make up the difference. Remember, selling is much more than just beating the other guy’s price!