Most likely if you are reading this you care about the service you offer your customer and are quality minded contractor. You also most likely are sick in tired of being asked to lower your price due to another contractor giving what you would consider a unreasonably low price. First thing you need to realize is that you can't win them all. What you can do is educate the customer on what you offer that the others guys don't and show value in your service. If you don't present yourself as being knowledgeable and professional you are just going to look expensive. Price doesn't drive a customer's decision as much as you might think. You can learn the most about people's buying habits by studying your own. Are you wearing the cheapest shirt you could find? Did you drive to three different store's looking for cheapest pair of work boot's? If you are a price buyer, quit trying to sell things. Your doomed. If you think your service is expensive, you're going to show that when you deliver your proposal. Whether it's inadvertently with body language or just come out and say "I know this more than you where thinking"…

Lots of times you find yourself doing work by the hour. Some business's such as electrician's, HVAC, and plumber's that run larger service departments normally always charge by the hour. There are lot's of way's to figure your hourly rate and the large company's have it down to a science, but the little 2-3 man shop's tend to leave lot's of money on the table. They tend not to spend the time to break down the real costs and overhead because they think "Hey it's a small job. It wont' take much time". The reality is the small jobs take more time and company resources than it appears. Normally a small job consists of sending a salesman out to see what exactly the problem is, typing up a proposal that show's the hourly rate and estimated cost of materials, vehicle expenses, drive time including port to port, labor, profit, and if you pay a salesman - commission.

A salesman that is good finds out what the customer needs and expects. Most know little to nothing when it comes to types of materials, costs, maintenance, and other things that go with construction. They might call you out to build a deck 6" off the ground that has rotted prematurely. Little did they know the moisture from the ground kept it wet and a concrete patio might cost a bit more but will fix their problem for good. Also how often do you deliver a proposal only to find out it wasn't what the customer wanted? If the answer is often, then you are wasting a lot of time and loosing sales in the process. Most sales are lost before the proposal is delivered because you didn't find out what the customer's problems and expectations where so you could match a solution to solve them.

I've been asked a few times for an example proposal and what they should look like. It's amazing how many contractors fail at customizing a proposal that sell's the job for them. Most use a standard quickbooks template with some item costs on it. This might work if you are a sub-contractor working for GC's and doing new construction work. For the rest of the customer base this is a huge mistake. Spend the time to customize it. Show pictures of existing failing construction. If you're a roofing contractor, take the time to go up on the roof and find defects and clearly explain to them what is happening and why it needs to get fixed. Time and time again I see so many contractors dropping the ball here. If you want to command the higher price you have to show value. If you deliver a full color 10 page proposal outlining the entire project for $10,000 and the other guy hand writes one on a generic contractor template for $9,000, I bet you have a better chance of being awarded the job.

I know most of you are wondering what's the difference between the two? There is a huge difference between them, and this is one of the biggest error's contractors can make and it can cost you your profit and then some depending on the size of your operation. Selling a job using a percentage markup is fine but you need to make sure you understand what gross profit is. Most contractors figure out their job expenses and add a percentage they call markup(net cost plus percentage). That's fine but when they fail at is understanding how to arrive at the markup. If you markup $1,000 by 25%, you will be selling it for $1,250 with a gross profit margin of 20% and a gross profit of $250. If you are told that your overhead is 25% and you markup your job cost by 25%, this results in a 20% gross profit margin and creates a net loss of 5%. Confused? Let me try to explain how it all works.

Most salespeople think price is way more important than it really is. If you are selling a true commodity like materials sure it is. If I'm buying a certain brand of material sure I'm not going to put much more thought into except price. A service like a contractor offer's it totally different. Most cases the price is more important to the seller than the buyer of a service. If my alternator goes out in my vehicle I don't take it to the cheapest shop in town. I don't personally know a mechanic so I normally take it the big dealership, knowing it's going to cost a little more but at least if there's is a problem down the road they are most likely to be around to fix a problem with their installation. That brings up two reasons that make a price buyer a poor prospect as a salesperson.

When Businesses get into financial difficulty, it's inevitable because some genius gets the bright idea that one can cut price and make it up in volume. Most people get that idea when they take course in economics. Most sectors of the construction industry have created a rat race to the bottom. Using cheaper less difficult materials to install. Lowering the skill level and ultimately making it very hard for a person to make a living with out owning the business themselves. Perhaps you've heard the story of the entrepreneurs who set out to make their fortune by buying watermelons for a buck each and selling them for $10 a dozen. And, like any good joke, it is readily adaptable to anything. Just change the subject from watermelons to carpeting. The joke goes like this:

Like many of you, I have many roles that I must fill. I don't have the luxury of concentrating on just one function. And, I'm sure most you don't either. But as we look at the various functions we must fill, we must keep in mind what it is that is our primary function. And no matter what our title--account rep, REALTOR, loan officer, financial planner, producing manager, manager, sales rep, attorney, accountant or whatever, we must be ever mindful that our primary job is selling--keeping the business open and healthy. We are the production force for our company, whether that company consists of just ourselves or tens of thousands of employees.