Selling the complete commercial job with multiple parts will add some synergism and increase your overall profit. The easiest sale you can make is adding an additional product into the sale to the same client. Clients are always willing to pay a little bit extra for convenience.
Consider the following job. All names have been changed, but the facts are real. When calling on Werner, a Grayson Properties property management executive, Ray extolled his company’s ability to work with multiple products and a high rate of installation proficiency.
As Ray was showing pictures of some completed projects, Werner said, “I have a 100,000 sq. ft. project coming up. It is still in the design stage, but I know the architect is pushing hard to offer something unique. Frankly, I’ve been a little worried about having to work with different subs to get all of the various finishes installed. When I get the final drawings, I’ll give you a call.” Ray was quite pleased and promised to keep in touch.
Thereafter, Ray continued to follow up with Werner on the project, with no luck. In the interim, Ray did manage to do a couple of small jobs for Werner, but found that competition was fierce. Most of the jobs featured lower-end carpet and small amounts of resilient. However, Werner seemed to be impressed with what Ray had done and continued to talk about the “crown jewel project.”
After almost 11 months, Ray got a call from Werner: “Ray, we’ve finally worked out the glitches on the 444 Orchard Street project. I have the finished drawings here; pick up a set and let me know by Friday if you want to bid on the project. I’ll warn you, I’m going to be personally involved in this one. So it has to be right.” Ray took the set of plans, wondering what he’d find.
Ray took a quick look at the finish schedule and his heart sank! There were five different carpet selections from two different mills; hardwood for conference rooms and custom area rugs; ceramic tile and marble for entrances; and luxury vinyl tile and linoleum for employee areas.
This was a retrofit job and the existing tenant was moving out, so there would be a lot of demolition; this was being handled by the general contractor. Ray went over the finish schedule and approximate quantities of each finish. The company could perform the work, but scheduling would be a nightmare and timing critical.
Ray felt better about the potential of the project, but was convinced that the key was getting the entire job. He remembered Werner’s comments from months ago: “I’m a little worried about working with too many contractors.”
Ray got back to Werner and explained that he was interested in the project, but asked, “Do I have to do the whole flooring project, or am I able to just handle the carpeting and ceramic and let someone else do the marble and the hardwood?”
Werner responded with, “One company to do the carpet and resilient, one for ceramic and marble, and if I have to, another company for the hardwood.” Then Ray asked an important question: “Is there any advantage to a bidder, if that bidder can do the whole job?” Without committing to anything, Werner responded that, “Of course, if one company could demonstrate their qualifications to do it all, it would be preferable, but their price has to be in line with other bidders.”
Ray got the message. Werner would really like to have a single company responsible for the flooring portion of the project if he was convinced the company could do it. There was another factor, too: This was a negotiated bid.
Werner was the executive at Grayson responsible for Orchard Street, and it was obvious that he had a lot riding on this upscale project. So, Ray’s opinion was that while price was important, value and performance qualifications would be critical factors in Werner’s determination of the best-value bid.
This project had great potential for Ray, too. It could make his year. First he did a preliminary take-off; he also had an experienced “plans guy” do a comprehensive take-off, isolating quantities of each of the required products, necessary accessory items, and any unusual requirements. Then they compared notes. In spite of the number of selections, most products were available from suppliers with which his company had an open account.
In making calls to various suppliers, Ray did not let anyone know he was contemplating bidding the entire range of products; in fact, he left the impression he was primarily focused on the carpet portion of the project. He also felt that at least two suppliers would be eager to work with Ray because they knew his reputation for doing a great job. One even said, “Ray, I’m giving you my key pricing and terms on this job; I’m not working with anyone [else].”
Ray also took every opportunity in his supplier conversations to find out which of his competitors might be bidding the project. “Hey, Chuck, before you hang up, have you heard from any other companies on this job; how many have called you; what do you hear about this project?”
Interesting facts emerged from these questions: The project was high profile, complicated, and most companies looking for pricing were only interested in a piece of the job; no one had said they were going after the entire project!
Just before bids were due, Ray again checked back with the major suppliers to get a comprehensive picture of those bidding the job. In Ray’s opinion, there was only one other bidder that had the capability of doing the entire job, but they had apparently not called for pricing on one component; that meant that they would likely not bid the entire project.
With final numbers in hand, Ray sat down with his installation service manager to review the probable installation work. He decided to put a little extra money into his installation cost budget for more job-site supervision to ensure timely completion.
Then he got started putting the bid numbers together, breaking out each major segment for ease of calculation and explanation. As part of his bid strategy, he priced the carpet portion about 3% higher, feeling that he needed to be close to his expected competition; in other areas, he priced at 5-9% higher. After looking the bid numbers over again, Ray decided to add an additional 2% just in case he had to negotiate or had missed something.
With the finalized bid, Ray included a new brochure that explained his company’s capabilities in graphic detail. He also included a summary of the scope of work performance from Ray’s perspective as a flooring contractor. He explained in easy-to-follow detail how long it would take to install each flooring component, how it would be accomplished and the number of crews required, how quality would be maintained through job supervision and inspection, and the method for remedial action to take care of “punch work.”
Ray felt it was particularly important for Werner to know this detail to justify the price he was asking. He delivered the bid feeling he had done what he could do to sell his way into the project.
Ray didn’t hear anything for two weeks, even though he had been told this was a fast-track project. After about three weeks, Ray was able to get Werner on the phone, who said, “Ray your bid looks good, but your price is too high. What can you do to get the price down?”
Ray asked several questions, and then said, “What did you have in mind; do you have a number in mind? I’ll be glad to go back and check my bid, but what am I looking for and in what segment?” If Ray could get some indication of what Werner had in mind, particularly in what area, that would be valuable. There was a pause, then Werner said, “You’re close on most of it, but really high on the ceramic and marble. See what you can do.” Ray thought for a moment and said, “Okay, I’ll take a look, Werner, but as you saw in my scope of work review, I am willing to do the whole project and I am figuring job site supervision to make sure it goes in on schedule. That ought to be worth something.”
Ray did go back and review all of his numbers. He also called several suppliers to find out if they had heard anything about the project. One supplier had heard from a friend at Grayson that “no award has been made on the Orchard Street project, but it looks like it may go to one company rather than several.”
The supplier also said that he had heard on the street that “there was only one company that had bid the entire [flooring] project.” Ray was elated to get this info. He decided that the only way he was going to get Werner’s project was to give up something, rather than dig in his heels and stand pat. So he called Werner and said: “I believe my price is fair, but we’d really like to work with you on what has the potential to be one of our most important projects; therefore, if you will give us the entire job, I’ll trim my price on the ceramic and marble segment by $5,976. That is the very best I can do. Do we have deal?”
Ray got the job! He had read Werner right. The discount given only amounted to 0.8% on the price of the job. This was more than made up for by two large change orders for floor repair. While not without challenges, the job went in on schedule over a period of six months. The job made Ray’s year and came in at just under a 30% profit margin.
All the names have been changed, but the stats are accurate. What would have been an 18-20% gross profit job at the most was increased by almost 50% through the right research, an accurate take-off, effective purchasing, superb project management, terrific negotiation skills, and selling a complete commercial package.