Leadership Selling: Profitable Pricing
August 1, 2009
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As new construction starts plummet, many builders have begun shifting their business from new construction to remodeling. It’s easy to assume many won’t understand remodeling. But make no mistake that some will not be worse, but actually will be better business operations than their more experienced remodeling competitors.
As new construction starts plummet, many builders have begun shifting their business from new construction to remodeling. It’s easy to assume many won’t understand remodeling. But make no mistake that some will not be worse, but actually will be better business operations than their more experienced remodeling competitors.
Many builders will market and sell better, thus meaning that they will sell roofs as part of a larger project. Some will subcontract with you and mark up your price and make a profit on you. In order to succeed, you must now compete against a growing marked-up labor and overhead pool of contractors in a shrunken market. Recognize that builders have routinely marked up labor, materials and overhead for years. You should, too.
Scott is the owner of a roofing company that gets it. When I recently worked with him, he bluntly stated that he has to get back to basics and stop paying himself only a salary. With a full staff of installers, office staff and a small fleet if trucks, he knows as well as anyone the reward he deserves for his risk.
Thus he is getting back to sales basics in order to find more sales opportunities to choose from. With the improved sales leads, he can afford to lose a few in order to hold to proper pricing strategies. He is also becoming more proactive by leading his sales team to sell more than roofs.
Now more than ever you must understand concepts in pricing and profit if you want to thrive. Here are key strategies that will help you compete and grow profits as competition heats up.
1. Mark up your labor, not just your products. Imagine how you would price your goods and services if you had to hire subcontractors for every aspect of your business. If that were the case, you would not be profitable without a labor markup. Builders have done it for years and so should you.
2. Work on your business, not in it. I have met a surprisingly high number of roofers and remodelers report that their “profit” is the salary they receive. They make just as much as they would if they worked as a superintendent by failing to recognize that profit is what remains after all salaries, including the owner, are paid. Builders have known for years to work this into the pricing on each project.
3. Change your business focus. Instead of thinking of yourself as a roofer, consider yourself a home improvement consultant that can discuss any product or aspect of construction. When you reach this level, you become more than a roofer New installation and product sales opportunities will come your way.
4. Build your business to scale. Don’t let my last tip alarm you into thinking you must jump onto every opportunity that comes to you. Quite the opposite is true. Even if you want to become a large-scale remodeler you must reach your goal with baby steps.
Open your mind to the possibility and begin introducing new product lines. This is not solely an issue related to selling, but also defines the soundness of your pricing practices. If you can properly price roof projects with markup for goods and labor along with allowance for overhead, then you can do it for the next product, and the next, and so on.
Run your business for profit and you will better serve your clients by having adequate resources to do the job right and build your reputation. As more competitors enter the market, your success will rely on a proper pricing structure.
As new construction starts plummet, many builders have begun shifting their business from new construction to remodeling. It’s easy to assume many won’t understand remodeling. But make no mistake that some will not be worse, but actually will be better business operations than their more experienced remodeling competitors.
Many builders will market and sell better, thus meaning that they will sell roofs as part of a larger project. Some will subcontract with you and mark up your price and make a profit on you. In order to succeed, you must now compete against a growing marked-up labor and overhead pool of contractors in a shrunken market. Recognize that builders have routinely marked up labor, materials and overhead for years. You should, too.
Scott is the owner of a roofing company that gets it. When I recently worked with him, he bluntly stated that he has to get back to basics and stop paying himself only a salary. With a full staff of installers, office staff and a small fleet if trucks, he knows as well as anyone the reward he deserves for his risk.
Now more than ever you must understand concepts in pricing and profit if you want to thrive. Here are key strategies that will help you compete and grow profits as competition heats up.
1. Mark up your labor, not just your products. Imagine how you would price your goods and services if you had to hire subcontractors for every aspect of your business. If that were the case, you would not be profitable without a labor markup. Builders have done it for years and so should you.
2. Work on your business, not in it. I have met a surprisingly high number of roofers and remodelers report that their “profit” is the salary they receive. They make just as much as they would if they worked as a superintendent by failing to recognize that profit is what remains after all salaries, including the owner, are paid. Builders have known for years to work this into the pricing on each project.
3. Change your business focus. Instead of thinking of yourself as a roofer, consider yourself a home improvement consultant that can discuss any product or aspect of construction. When you reach this level, you become more than a roofer New installation and product sales opportunities will come your way.
4. Build your business to scale. Don’t let my last tip alarm you into thinking you must jump onto every opportunity that comes to you. Quite the opposite is true. Even if you want to become a large-scale remodeler you must reach your goal with baby steps.
Open your mind to the possibility and begin introducing new product lines. This is not solely an issue related to selling, but also defines the soundness of your pricing practices. If you can properly price roof projects with markup for goods and labor along with allowance for overhead, then you can do it for the next product, and the next, and so on.
Run your business for profit and you will better serve your clients by having adequate resources to do the job right and build your reputation. As more competitors enter the market, your success will rely on a proper pricing structure.
