At close of last month’s column, prospect Sam offered you the opportunity to bid on his million-dollar custom home. In my hypothetical sales scenario you, the builder, have reached a critical juncture in your effort to convert Sam into a client.
You have two options. Proceed in accordance with Sam’s request and provide Sam with the proposal he expects, which commits you to at minimum 40 to 50 hours of estimating time and makes it difficult to differentiate your building company from the competitors. Your bid will be quickly reviewed, compared and characterized by the total package price and the allowances you offer.
Alternatively, you could offer Sam a PSA, or Professional Service Agreement. But beware, this is a one-way road you are traveling and once you head in this direction there is no turning back! My PSA intentionally is written in layman’s terms, decidedly not legal jargon. The reason for this is that you want your prospect to read it and feel comfortable signing and funding it without feeling like he needs to take the time or spend the money to consult his lawyer. If you are able to persuade Sam to sign the PSA, you will have accomplished several significant milestones, including cementing a builder-client relationship as opposed to builder-prospect.
Also, you are now in your own league in terms of the pool of builders Sam is interviewing. And, since Sam is now paying you for your expertise, he is more inclined to listen to your advice. And most importantly, if you have clearly communicated the timelines and goals within the PSA, you have secured a commitment from Sam to participate in a face-to-face presentation meeting of your proposal that affords you a lengthy meeting during which you can further establish your value while distancing and differentiating yourself and your company from the competitors.
However, before you can revel in these advantages, you will need to overcome Sam’s objections, which are easy to anticipate.
The first thing he will ask you is why should he pay you for a proposal when he has already met with several builders who are ready, willing and anxious to price his project without being paid to do so. It will not be easy to overcome this if you are planning on giving Sam a fixed-price bid with allowances. He will not be inclined to pay you to do your homework. So, this leads you to your next critical juncture ... offering to build for Sam cost-plus, also referred to as open-book construction management.
Because you anticipated this objection, you have brought with you another client’s bid book complete with proposals from all the trades and suppliers as well as the excel spreadsheet detailing your phase-by-phase breakdown of all the project labor and material costs. Hand Sam the book and invite him to thumb through it to any section. The project book you show him needs to be organized by construction phase, from foundation through finish-work phases. This way it impresses him with your organizational capabilities. Conversely, if you just pulled out a folder with a pile of bids in it, he is not going to be excited to proceed.
And this is a point that also reinforces why I don’t like to call what I do cost-plus building. Anyone can say they will build cost-plus and merely collect invoices and add a percentage to each, but this is not giving your client a professional open-book management experience.
If Sam is considering your proposal to be paid to estimate his project, you will have to demonstrate to him that he will have many advantages for his willingness to pay you to bid his home. The first advantage is that you are willing to draw back the curtain and reveal to him the reality of where every dollar of his will be spent, including the not-so-glorious mundane line item of having a port-o-John on-site for the duration of the project.
What other objections can you anticipate Sam raising? You can read part three of this column next month and if you like, you can email me a list of objections you expect to handle so I can address them for you.