It's What You Don't See That Counts

The picture is beautiful, no doubt about it. But what you do not see is the transformation my client has gone through from just grinding it out being in the construction industry to becoming a hugely successful business person who happens to be in the remodeling industry.

The operational side, financial side, sales and marketing all became front and center for this client of mine.

On the Operational side you don't see the systems, processes, and organizational change that was needed to go from doing the work himself to hiring and implementing a working system for them to follow.

On the Financial side you don't see the development and mastering of his financial and business metrics that drive the business and tell you what to do next. You don't see the return on his investment in the program of 1245%. Nor do you see his personal wealth doubling in six figures two years in a row.

On the Sales and Marketing side you don't see his R.O.I. on his marketing investment, nor do you see his increase in closing the work he wants. Let alone his new website that brings his largest lead numbers.

It's what you don't see that makes the difference, the huge change in confidence and perseverance in him as an individual and business owner that he got from mastering the Golden Hard Hat Mentoring business model.

Check out his site at https://www.oneilindustries.com/ and you will see so much quality.

Want to learn how he got there, check me out here. I would love to have the opportunity to change your entire direction for 2020 and beyond for life! 

Happen to know another construction company who may need my services? Then please share this post.

Understanding Pricing Models

Do you understand what you need to charge for your construction services?

Whenever a prospective client tells me they’re doing a lot of work but not making the money they should, I know they have a basic pricing problem. In other words, they’re either not charging enough, or their costs are too high.

One big problem is the use of pie-in-the-sky markup rates or guesstimating the job cost. Either one will lead to some form of financial headaches. This is where the low-ball arena will take you.

There is a way to properly calculate your markup, but few even make the attempt to run through the numbers. However, there are some other factors that must come into play when determining your pricing model.

VALUE

One big element is what you bring to the table. Do you have a selling process that uncovers exactly what the prospective client is looking for, is it something they can’t get from your competition, and can you deliver?

No one can put a monetary amount to value, even your prospective client. But they do know they want it.

COST

What are your costs associated with the service or product you are delivering? How much is the “cost of goods” or as I call it “cost of sales.”

One of the problems with using margins to develop your selling costs is that it must cover your overhead and produce the profit you desire. If something changes below your gross profit, such as your overhead, this will impact your use of your gross margin making is an ineffective pricing method. That is why I use the markup method. It forces you to monitor your overhead and net profit amounts.

In the low bid arena, where you must have complete control over your costs, the MUR (markup rate) is especially helpful if it is coupled with good cost control and budgeting models.

PRICING OBJECTIVES

What are you trying to accomplish with your pricing?

This depends on what you are trying to accomplish with your overall business strategy. If you are pricing low to maximize sales, you are bootstrapping your cash flow and it’s a no-win game.

Are you trying to maximize long-term profits by increasing market share through an economy of scale? If that is the case, revenues might be more important than profits and that can be a no-win game.

Higher revenues at a slim profit, or even a loss, reveal what I call the Wal-Mart Syndrome which is a risk based on market capitalization.

The bottom-line is where you need to focus after you have considered all related costs, including your reasonable salary. Here are some basic considerations:

·         Your pricing model must be high enough to cover reasonable variations in sales volume.

·         Your selling price must be enough to provide you a reasonable wage.

·         Your pricing must produce a reasonable net profit.

·         Your price should NEVER be below your direct and indirect costs.

A pricing model is a tricky thing to develop. It takes a lot of variables that must be considered and tested. You are entitled to cover your costs and make a profit. That profit is what you determine, not your client.

Your pricing model must provide the value that the client is seeking because it is worth what someone is willing to pay for it.

However, if you don’t know your business metrics, it will be tough getting anything of value formulated. I suggest you start there. If you are looking for help, I have some business coaching slots available. Click on the link below and let’s talk about how I can help you.

>>>Set up your no-cost, no-obligation telephone consultation with Henry!<<<

Henry Goudreau has been a business coach, mentor, author, speaker and seminar leader to the construction industry for the last 24 years. His proven business model for contractors have helped his clients achieve and exceed their goals like it did for his own construction business. His education is in civil engineering and business. You can visit his website www.contractorcoaching.com or www.hgassociates.com or email him at: henry@hgassociatates.com

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How to Close More Deals – Part Two

In the last blog I talked about the process of having a lead qualifying sheet and with that, lead qualifying question or questions. 

The idea behind this is quite simple. To eliminate prospects that will never buy from you or are not your best type customer. This one simple process or part of your lead generation system will save you time and money.

Today, I would like to elaborate on the art of asking questions.

Last week I focused on finding that question that qualifies your prospective client as a real hot prospect.

Since every contractor has a different marketplace or best type client, this ‘qualifying’ question may vary. However, here are some more examples.

“How much do you expect to spend?” This is a great question and sets up the financial perspective the client is coming from. It also gives you an idea of the realistic financial value of the project.

Another great financial question is:

“Will you be paying for the work with your own cash or with a bank loan?” This also sets up the financial status of paying for the work, who will pay, and how long it will take to get paid. No matter where the funds are coming from it is important to find out how much they have to work with. 

Remember, projects often do run over budgets with unforeseen conditions or changes. You need to make sure they have the availability of acquiring the additional monies to cover the changes.

“Are you the final decision-maker or is someone else a part of the final decision making process?”  Too many contractors eager to get a job, expend too much time and money jumping right into a sales pitch without properly qualifying a potential client. 

It’s vitally important to determine who makes the final approval and decision on the deal or project. Otherwise, you’ll find yourself having to start all over again, or out of any opportunity to close a deal.

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Now that you have qualified the client as serious, the next questions should help you drill down on why they want to do the work. To be successful with this part of the process, listen intently and don’t be afraid to ask drill-down or follow-up questions.

The opening question for this part might go something like this.

“Why do you want to do this work?” This questions reveals a powerful emotional buying trigger, the “WHY” 

Again, you might need to drill down a little farther. Remember, people buy for emotional reasons, not a logical one. They JUSTIFY their emotional buying with logic.

Another might be:

“What exactly is the problem you are having?” 

Or …

“What do you need and what do you don’t need?” Good question since it focuses them on exactly what they need and you don’t have to make assumptions. Everyone has their pain points and during this process, you should be trying to uncover them.

Speaking of pain points, here is another question to uncover what you need to avoid.

“Have you ever worked with a contractor in the past on work like this?” This reveals whether they have had experience before or not. If they have, you would come back with this drill-down questions.

“What did you like and dislike about that experience?” WOW! Dynamite questions. Now they will tell you the things you want to do and the things you want to avoid!

Another question might follow along these lines.

“What are your expectations?”  Another powerful question since it reveals exactly what they expect and allows you to deal with it in a realistic manner. Now is the time to elaborate on how you schedule the work, handle questions, change orders, budgets, allowances, and all those things that can go wrong on a project.

“When do you want to start the work?” This question will help you understand the prospects perspective of when they expect you to be working on their project. In some areas of the country, the permit process can take days if not weeks and this allows you to educate them on that process and details the steps you have to take before any work gets started. Believe me, this question will avoid a ton of misunderstanding in the future.

“When do you expect the work to be completed?” This question gives you two important items. One, when they think the work will be done, which may not be realistic, and two a chance to work the deal back to a matter of urgency which might just help you close it sooner.

Let me explain.

Let’s say that they feel the work should be done by a date three months away. You calculate that it could be done but not unless you get the deal now. In this scenario, you play the urgency back to them. Such as ...

 “Mr. & Mrs. Jones. I know you want the work completed by this date. Unfortunately, the only way I can make that happen is if I have a done deal with you today. Let me explain. The permit process will take three weeks. Ordering the materials with delivery will take six weeks. The work will take three weeks. As you can see, that is your three months! In order to meet your final completion date, I need your approval of my proposal so I can get started today.”

Asking questions, the right questions, is an art form. It takes practice. To start, I would suggest you write down as many questions and drill-down/follow-up questions you can imagine. Then categorize them to the situation they apply.

If you do this, you will start the process of memorizing the questions and knowing when to ask them. However, practice is the best process.

Next week I’ll discuss part three, the Measure Call. Until then, happy hunting!

How to Close More Deals

In this segment, we are going to discuss a very hot topic. How to close more deals.

This will be a four-part series, so keep coming back for more valuable information.

Now, let's get started.

Being a successful contractor requires two parallel mind setting processes. Getting Sales, and getting them at a price that makes you money (see my eBook – “How to Calculate Your Money-Making Markup!”).

One does not work without the other.

Now here is the problem.

Too many contractors are following a single and dangerous mindset. Getting the job.

Unfortunately, this throws them into the coliseum of rabid dogs who are also fighting to get the job.

The result?

Low pricing! 

The real question you need to ask yourself is this.

Are you selling low price or … are you selling value?

If you are selling low price, you really don’t care about making money. Instead, you just want the job and hope for the best.

However …

If you know you provide vale and a uniqueness with your service that the prospective client cannot get from the competition, you need to develop an approach that will accomplish just that. I cover this in more detail in my book: “How to Market & Sell Your Construction Services like Magic!”

In the next three blog articles I will lead you through the steps one at a time.

I am not going to discuss marketing or developing your promotional materials. If you want more on that, you can get my eBook: “The Contractor’s Magical Marketing Tool Belt!” which is loaded which is loaded with examples and information.

In this blog, I am going to discuss the first step. The one you must accomplish first.

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Qualifying Leads

This starts the minute you have first contact with the prospective client. The cornerstone in this system consists of two things:

1.      The questions you ask

2.      The record of the answers.

By designing the questions, your goal is to uncover enough information to validate the value of expending your time with this prospective client. You are trying to uncover whether they are serious, or fit your needs.

Let me give you an example.

I had a high-end roofing contractor who only did slate roofs. To make it even better, he only worked in three specific towns. His qualifying questions was: “In which town is the home located?” If you didn’t live in one of his three towns, you weren’t one of his customers.

Another contractor did high-end kitchens. His average job size was $150k. This made his qualifying question simple. “How much do you expect to spend?”

In my own construction business, my best customers were waterfront facilities. That made my niche and qualifying customer question very easy. “Is this a waterfront facility, and if so, on what body of water is it located?”

Once you have qualified the client as an ideal prospective customer, you can move onto the next series of questions that allow you to drill down for more information on your qualifying sheet.

Qualifying Lead Sheet

Today we have different forms of media that we can keep and track information. It can be on paper, spreadsheet or a good CRM software.

How you keep it doesn’t matter, it is just important to keep it.

The qualifying lead sheet stays in the process for the customer from initial contact, to sales person, to estimator, to job supervisor. It has all the pertinent information gathered on the client from their first call to the end of the job.

By having this information and correlating it, you can develop the profile of your best customers from the psychographics, demographics and geographic. This will help also reduce your advertising costs and focus your marketing dollars with accuracy.

This is important.

When you qualifying your prospective clients, you will reduce the wasted time on clients who will never buy from you, and increase your capture rate. All at higher dollars!

Next week I will talk a little more on the type of drill-down questions you need to ask. Until then, happy hunting!