I recently completed a seminar for roofing contractors and one of the group’s favorite topics was to complain about lowball competition. The comments and questions flew in. “These other guys are too cheap.” “I can’t compete with uninsured contractors.” “All the piece workers who were doing new houses are killing us.” The list goes on and on. Contractors love to bitch about how bad it is. The problem is such moaning and groaning does little to help your business. If you are not careful, you will create a situation where you fulfill your doom and gloom predictions. Hopefully, the following 10 truths will help you better understand today’s market realities:
1. The current market is what it is. Complaining about it is not going to do you any good. If you are not careful, such complaining is going to convince you to cut prices until you low price yourself out of business.
2. Business is not as easy as it once was. The folks who cannot sell quality are in for hard times. Selling may sound like an ugly word to you. Too many contractors envisio selling as a high-pressure activity. Selling is your ability to communicate your trade or craft to solve customer problems. If you cannot communicate how your job is of more value, the customer is going to take the lowest price. It is not your customer’s responsibility to tell the difference between you and other estimates. The days of drive-by estimates and mailing of proposals are gone.
3. Times are tough. People need to be able to buy a good roof. If their roof fails, they are not going to be in a position to replace it. Today’s recessionary environment requires consumer to make sound capital expenditures.
4. As consultants, we see fewer job leads. However, for professional contractors who can communicate their estimates, closing ratios are about the same. The simple truth is that with fewer leads you are more conscious of the folks who underbid you and offer ridiculous prices. You will never compete with these folks, and cutting your price only hurts you own profitability. The real issue is one of cutting overhead or generating more leads.
5. Being a better salesperson is the one of the few things you can do as a businessperson that takes little more time or money. If you go to the trouble to give an estimate, it only makes sense to be able to sell and communicate how your job is of value to the customer.
6. Be wary of trying to talk the customer into buying a roof. Good salespeople make it easy for the customer to buy; they never push customers. If your tendency is to talk too much and you need work, you may find yourself babbling to the customer. Asking questions and listening to your customer will bring far greater returns. Remember, the customer may not know the technical difference between a good and a bad job. However, they do know if you listened to their concerns and showed a genuine interest in what they wanted.
7. In today’s market you cannot burn through legitimate leads. Terminate salespeople who are not producing and wasting your leads. With fewer leads, you cannot afford to let those leads go to waste.
8. Offer good, better, best. Presenting three distinct shingles with three distinct looks allows you to offer the customer three estimates in one proposal. The business theory of relativity states that many consumers need a comparison prior to making a purchase. Offering options allows the customer to make comparisons without getting another bid.
9. Only cut your price when there is a legitimate reason to do so, such as if your schedule is slow next week and you want to fill it. If you do not have a legitimate reason to lower your price, it looks like you are overcharging the customer. However, assuming you will make the sale by lowering your price is stinking thinking. In many circumstances, you merely end up getting less money for a job you would have gotten anyway.
10. Remember, it is the customer’s job to tell you your price is too high. If you gave a customer a quote and they said it was the perfect price, it would scare you to death. There is no such thing as the perfect price. You are either high and do good work, or you are cheap and, well, cheap.
Robust economic times have allowed too many contractors to go into business. The economy appears to be getting better but the real payback will be when some of your cheap contractors start to go broke. Just make sure it is not you.