Tool #1 - Be low to charge more
George Hedley,
Posted
01/09/2012
I got a phone call the other day from a concrete finishing and
placing company owner. His company acts as a subcontractor to
general and concrete contractors. He supplies labor and equipment
only to pour and finish concrete slabs, and sells his services by
the square foot of concrete finished. His customers are very cost
conscious and decide if and when they want to do the finishing
themselves, or use his company's services on a job-by-job basis.
Getting awarded contracts is very competitive as he has several
competitors who offer the exact same services within one or two
cents a square foot of each other. This leaves no room for error
and little chance to make a reasonable profit.
I asked him what else his crew could do to offer more services
to increase his price. Stubbornly, he couldn't think of anything he
wasn't already doing. Then I asked him how he could do business
differently to improve his bottom line. No answer again. I
suggested he consider offering more services and getting into a
more difficult type of construction contracting like tilt-up
construction, heavy foundations or decorative concrete where
customers will pay more for expertise and quality. He struggled
with the idea, as he wasn't sure his crew could handle difficult
work plus he didn't know how to price anything except flat slab
labor. I then asked if he could increase his sales volume or reduce
his overhead? He said he was as lean as he could get without going
out of business and he was bidding cheaper to keep his crew busy
and his doors open.
Are you stuck in the muck?
One of the ways to increase your bottom line in a competitive
market is to look for sharp new tools to improve productivity, save
money and reduce costs. Doing the same old things and expecting it
to get better without trying new people, subcontractors, vendors,
methods or ideas won't work today. Remember when you've gotten your
car stuck in the snow. What did you do? You first try getting out
of the rut by gunning the engines faster, but it doesn't work.
You're still stuck and in a deeper hole. Just like in business,
trying the same things and working harder and faster won't get you
going in a positive direction. When you try new techniques, tools,
ideas, tactics and strategies, you'll eventually get out of the
hole and back up to speed. When your hole is getting deeper, you
have to try some new tools. Here are some new tools and ideas how
you can boost your bottom line.
Tool #1 - Be low and charge more! 
On private construction work, the goal of every bid is to get a
meeting with the decision maker. This way you can sit down and
negotiate the final price and scope of work. Unless your customer
is only getting a proposal from your company, you'll most likely
have lots of competition. The best way to get a meeting with
potential customers is to be the preferred builder, supplier,
subcontractor or contractor of choice. Another way is to have a
strong personal trusted relationship with them. But if you don't
have an "in" with the customer on the specific job you're bidding,
and all else is equal, your customer will want to meet with the low
bidder first. So the next best way to get a meeting is to be the
lowest bidder.
Be low to get a meeting!
Your original bid proposal should be for the bare minimum
required by the bid documents. No more. If in doubt, leave it out
and don't include additional items, gaps in the plans, improperly
specified materials or methods, or upgrades from the minimum things
needed to get the job done. If you have a less expensive ways to
supply or install items, include the lower cost items in your
proposal as an inclusion. For example, if the painting
specification calls for three coats of paint, state that you have
included two coats of paint on all surfaces. Or if you know the job
should require door closers on exit doors, but the plans don't call
for them, don't include them in your bid or mention them as
exclusions in your proposal.
Remember your goal is to be low bid so you'll get a meeting with
the customer. If you clarify all of these issues in your written
proposal, the customer will send your ideas out to your competitors
to get apples- to-apples pricing. This standard tactic eliminates
the need to meet with you. When you get the bid review meeting, you
can discuss project problems, conflicts, alternates, substitutions
and exclusions face-to-face. This tactic will keep your pricing
lower, and will help you get that important meeting with the
decision maker to review your proposal.
Don't ask, don't get!
At the meeting, discuss every option to upgrade the project,
improve the quality of materials, add-on additional items, or
present prices for things required to fill the gaps and complete
the work. To boost your bottom line, offer these upgrades and
additional items at lump sum prices including markup double your
standard rate. As you present each additional item to your
customer, carefully watch their face, expressions, body language
and reactions to the pricing you present. Look for clues if you'll
be able to get extra money or when you might have to include them
to be awarded the contract. I use the slogan, 'don't ask, don't
get!'
Your meeting goal is to get a commitment for the contract and
get the work at a higher total markup percentage than you used on
your base bid. If you can get an additional 15 percent markup on an
additional 10 percent of work, this will increase your total bottom
line by 1.5 percent. Over the period of a year this bottom-line
booster tool will add up to big bucks.
Once again-the purpose of your bid is to get a meeting where you
can present the many reasons why your company is the right choice
for the job.
George Hedley owns Hedley Construction &
Development Inc. and Hardhat Presentations in Newport Beach, Calif.
He is an entrepreneur, best-selling author, popular speaker and
business coach. Visit www.hardhatpresentations.com for more
information.