Sam, my prospect, recently told me he liked my proposal and will get back to me after he hears from three other builders. Sam bought a home in April for $1 million and demolished it to clear the lot for his new 5,000-sq.-ft. custom home.
He originally called me in April, following his home/lot purchase. After we met twice, I sent him a Professional Services Agreement and asked for a fee for assisting him with his new home design, architect selection and budget. He declined my offer and opted to hire an architect he found who subsequently completed Sam’s construction drawings last week. So, we met again and he brought me three sets of plans so I could start bidding out his home. He opened our meeting by saying, “So, Jay, I know you will figure this out during your bid, but give or take a half-million dollars, how much do you think this home will cost us to build?”
How many times is Sam going to try to steal my time and get me to work for him for nothing, on the hope that I will get a contract to build his dream home? During our two initial sales meetings he picked my brain and toured two of my clients’ homes. The other builders have taken the bait and are working on preparing their fixed-price-with-allowances bids. Depending on their estimating expertise and methodology, I assume they will invest at minimum several days to prepare their proposals, maybe more. If Sam is being straight with me and only talking to four builders, then each of us has a 25 percent chance of landing the job. These are not terrible odds; I was tempted to compete, not rock the boat and meet his bid expectations and submit a fixed bid. But, I chose to stick with my regimen of offering open-book construction management and asking to be paid for my budget expertise, which I believe is a better win-win business model for a custom builder/remodeler and our prospects/clients.
Sam had emailed me PDFs of his approved schematics prior to our recent meeting, which revealed a stunning Georgian home with slate roof and stone veneer on four sides. I spent a few hours preparing budget estimates to share with Sam. It showed him the following:
- A photo journal of a 4,000-sq.-ft. custom home I completed last month
- A job cost summary of what my actual cost was to build that home
- An Excel report showing him what my ballpark estimates are for building his slightly larger home with more expensive finishes, without profit
I explained that the combination of the completed home job cost, my experience and his plans allowed me to come within a $100,000 range what I believed the budget would require. Then, I explained open-book construction management and told him I would not be submitting a fixed bid. I would, however, build his dream home for a fixed builder management fee, which he said was fair. I left the meeting feeling cautiously optimistic about my chances.
I refused his request toward the end of our budget review to hand him copies of my reports. He said he understood. If he hires me, I will email him a copy, spend the time needed to gather multiple bids on every major phase of his home and hand him a financial road map of where all his money will go during the construction process. I will be doing all this for Sam the client, however, not Sam the prospect!
Sam tried to steal my time and my budget expertise, but I politely refused and stuck to my business model. Clearly, Sam is an excellent prospect. However, apply this situation to any of your prospects for remodels or new homes. Think about all the time and energy you have spent in the past on jobs you did not get. Reflect on all the time you may spend in the future bidding on jobs, competing with other qualified builders. It is enough to drive you to bankruptcy or run you out of the custom building business!
Editor’s note: Jay Grant will be sharing his prospect management and related business strategies in two live seminars in 2013, in New York on May 23 and Chicago on Oct. 24.