A potential client wants a 16′ x 24′ room addition with a half bath. They tell you that they expect the price to be under $25,000; you know it will be considerably more than that. Now what?
Don’t be in a hurry to write off someone with an unrealistic expectation on price. If they called you, doesn’t that mean they need or want the room addition? Take the time to gather information before you decide they aren’t worth your time and energy. See if you can turn it into a sale.
This can be accomplished with the proper set of questions and a little patience. Start by asking the four basic questions that are needed to get to the contract. Those questions are listed in this article; we cover the process in detail in Profitable Sales, A Contractor’s Guide.
At some point, the budget will come up. Ask the question, “How did you arrive at the budget you have set for this job?” You will get all kinds of answers, but the usual sources are other contractors, something from the media, or a hopeful wild guess on the part of the owner.
Give them the three price ranges that their job will fall into. Not one lump sum figure, not two broad figures, but three well-defined ranges with the wording just like in our book. You want them to make a decision, and that is why the wording is so important. Start with the middle range, move to the top range and finally explain what they will get in the low budget range.
Will they have sticker shock? Most likely. Will they think you and your prices are nuts? In some cases, yes. Will you get through to them that their budget is unrealistic? Maybe.
Most of it depends on how you present the information. Good questions can lead them to the conclusion you need them to reach. Blanket statements are not as effective. Remember that you have two ears and one mouth, and use them in that ratio.
When you have given the three price ranges, ask the question, “Which of these three budget ranges would you like to invest in your home?” Or, “Which of these three budget ranges do you think would work best for you and your family?” There are several ways of asking this question but after you ask it, STOP! One of the biggest mistakes salespeople make is that they ask a question, and then keep on talking. Put a zipper on your lip. Button it up. Let them give their answer.
If they come back with the nonsense that they don’t know what it will cost, tell them it will be in the ranges you just discussed. Give the ranges again if necessary. They don’t like making decisions, and are trying to avoid the fact that you provided that info already.
If they come back with, “We don’t know what our budget is,” it’s time to excuse yourself and move on. In all probability they’ve made their decision, but don’t want to tell you because they are afraid of hurting your feelings, or they don’t want to say they can’t afford it.
Here is where you must be firm. Before you leave, tell them nicely that they need to establish their budget because you can’t design or estimate the job until they do. Ask them to give you a call when they have selected one of the three budget ranges you have set for their job, then excuse yourself and leave.
Don’t ask them to call you when they’ve set their own budget. Ask them to call you when their budget coincides with one of the three ranges that you’ve set. If you aren’t clear on this, they’ll come back at you with another low budget and you’ll waste your time on another trip to their home or building.
If they pick one of the three budget ranges you’ve set, move directly to the request for a design agreement. While they’re making good decisions, get them to make one more and commit for the design of the job. Get the design agreement signed on the spot. Don’t be bashful or shy: it’s time to ask for the order. You’ll get nine of ten jobs that contract for a design, but you will be lucky to get one in four when you fail to get that commitment.
One last comment: If a potential client has set a low or unrealistic budget for their job, you’ve countered with the three probable ranges for the job, and they still insist on their price, walk away. If they tell you to “sharpen your pencil” or “be more aggressive in your pricing” or any of a dozen other ways to tell you to lower your price, walk away. If they’re trying to chisel your price before you even do the estimate, what will they do after you’ve written the contract, completed the project, and asked for your final payment? This is trouble with a capital T. Recognize it and move on.
Give your clients good information, help them adjust their budget, and make the sale. If they won’t adjust, move to the next client with a realistic price expectation. If you can’t cover your job costs, pay your overhead, and make a reasonable profit, you don’t want to do the work.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations.