Contractor’s Corner: Making a sale and also a profit - June 2022

By Dave Stafford

An award-winning actor puts in hours to become his character in a movie, and you must do the same to make a sale at a profit. An inept, unprepared salesperson may find himself in front of a client who wants to make a deal, any deal, but making a nice profit requires the salesperson to put on an exceptional performance. Make your client believe you’re worth it through preparation, questions and concern for his welfare and budget. There are no shortcuts to excellence or an Oscar.

PREPARE EARLY AND OFTEN
Research and analysis start when you sense an opportunity, whether through a phone lead, a call for bids or a face-to-face conversation. Perhaps you already have a top-ten questions list. If you don’t, create one so you have a ready reference: what, when, where, type of products, installation, budget or funded, special needs, site prep, furnished or empty, and how to be paid. These points will get you started.

Next, do a profile workup on the potential client. Start with a Google search, look at their website, check Facebook for their postings, and ask around among your contacts.

I once got the phone call we all dream about: a potential client described a funded project and wanted direct gluedown of a blue carpet for an open, empty, clean area within 30 days. He said he had the money approved and wanted to make a decision that week. Would I be able to come by and give him a price? I got the basic info from him, and it didn’t sound like a “cattle call,” so I was excited.

I mentioned my good fortune to a trusted mill rep, Jere, as I was considering showing one of his products. He said, “Dave, he will break your heart. This guy has bankrupted one dealer already. He talks a good game, accepts your opening price, signs the contract, pushes you to order the product and get it installed. Then he will delay paying for stored materials, find problems with the installation. After that, he will claim budget gaps and push you to accept 25 cents on the dollar. How do I know this? One of my other dealers explained in detail why he couldn’t pay our bill. My advice? Price it high; get a deposit; if not paid on schedule, stop work-or just look for a better opportunity.”

I took Jere’s advice and prepared a special list of comments about our policy on deposits and payment. The client acted outraged that I would question him. I gave him a price with plenty of profit and told him we could do the job, but that “I have to have a deposit in hand before carpet is ordered, balance paid on materials before they leave our warehouse, a progress payment on installation completed each week with retention at 10% for 30 days only.” He took his project to another sucker.

In another case, the buyer, a general contractor, had unwanted publicity because he had failed to pay off several subs on a large job. I was reluctant to even give him a bid. However, he explained the myriad of problems he had faced and told me he was on his way back and would personally guarantee payment. “Frankly, your company is well known in the area, and I would like to use you all as a reference,” he said. “Treat me right on this and take a chance on me, Dave. You will be paid and get other projects.” I extracted a deposit, and he made every payment on time. I was happy to give him a good reference. We continued to do business.

DO YOUR RESEARCH
Evaluate your client’s needs and requirements that may be specific to his business segment. A property management company will be different from a general contractor, a school system, a healthcare facility or a major corporate client. This has to do with types and uses of products as well as overall expectations of installation, completion and payment details.

For example, those in property management are looking at the most “flash” for the least capital outlay to convince their potential client to sign a long-term lease. I don’t mean substandard products (a 20-ounce olefin level loop), but rather a product that will perform and remain visually appealing during a ten-year lease term (a 26-ounce solution-dyed nylon with an attached cushion backing). Short-sighted property management buyers who have opted for a lower initial cost have been forced to replace products at significant expense during the lease cycle when performance was lacking, thereby taking a hit for increased cost in an occupied office that could have been avoided. A question or two about this will show the client that you have an understanding of his challenges.

When dealing with a general contractor, take note of their relationship with the architect or interior space planner. Do you detect some friction? Are they open to value-engineered substitutions to get the price down or reluctant to accept anything other than the specified products? Some contractors are okay with submitting “or equal” products. Reading the finish schedule will often spell out how and under what conditions substitutions may be made. I once made the mistake of providing a bid using an “or equal” product substitution only to find out that “any product proposed other than those specified must have prior approval of the architect.” My bid was rejected even though it was the low bid. Since this was a non-government project, there was nothing I could do. My lesson was to read the fine print more carefully.

When dealing with school systems, especially annual bids for their work, just understand that most of the volume will be in June, July and August, culminating in a September crunch to complete final work. First, ask what percentage of their work is ordered/completed during the third quarter of the year. How much notice will you be given to survey, plan and deliver a project? Are you able to handle that along with your other business? My experience has been that there are always last-minute requirements.

We once landed a large school project, over 7,000 yards of carpet in a specific color that was the focal point of an entire remodel project. Unfortunately, solution-dyed yarn was not available in the quantity needed from the mid-tier carpet mill that was specified. In spite of heated discussions, they could not produce the product in time. The architect was desperate and agreed to a substitution, but “the color has to be right on, not close, and the same fiber blend.” After speaking with several mills that said, “Yes, we can deliver on time (but no guarantee),” I went to a top-tier mill rep and explained my dilemma: “Here is a sample of the yarn bundle and a custom sample. Can you all match this, particularly the overall look, and have 7,000 yards delivered within four weeks, guaranteed?” Within 24 hours, I had a commitment that they could get the yarn and would reserve production time, produce and deliver on time, “and we will send a dedicated truck to make sure there is no shipping delay.” They got the carpet order and delivered a few days early, and we got the job installed on time. That made our reputation with the architect and the school system, and the mill was accorded hero status with us.

Working with healthcare facilities, particularly hospitals, is also taxing. Product specs are numerous, accessory items and installation parameters are exacting, and as if this weren’t enough, patient care and comfort must be considered at all times (as they should be). You may only get one chance to install in an area, so punchout must be done and inspection completed at the same time. We were summarily “excused” from one job because we were making too much noise. An installation “day job” was changed to an 11:00 p.m. to 7:00 a.m. project because of conflict with nursing personnel and their frequent trips through wet patching compound. Just be sure you’ve analyzed demolition, floor prep and area access thoroughly.

Corporate clients have their own issues. How long will company production or personnel workspace be disrupted? Where will product staging be done, or will supplies have to be delivered each day? Will they have a site supervisor on hand whenever work is being done? Must all installation be done after-hours? Perhaps the client will opt for vertical-lift installation if they have acres of systems furniture or consider modular carpet if there is high furniture density. What is the potential for an adversarial relationship with company employees? Plan for this through advance notification, alerting them to which areas are scheduled for new carpet. Installation teams should receive “charm school training” (or at least a remedial course) before being assigned to the job.

KNOW YOUR STRENGTHS
Your capabilities, financial parameters and personnel will govern the types of projects to consider. Are you blessed with having experienced, highly trained installers for sheet vinyl and rubber flooring who are also adept at seam welding and flash coving? What about ceramic tile and epoxy grout installation? Do you have one or more vertical-lift crews and the equipment to deal with the popular modular systems furniture? Does your specialty list include poured cementitious flooring and epoxy or MMA (methyl methacrylate)? If not, do you have a subcontractor that will work with you if, as or when needed? You cannot be everything to everyone by doing it all in-house; it’s much better to focus your resources and sub out when needed.

Expanding mill credit limits, bank credit lines and/or cash on hand may be critical when looking at large potential projects. This is especially true when payment and performance bonding or a bid bond is required. Are your credit references up to date, or have you been using the same suppliers without any thought to revision? How is your business rated by Dun & Bradstreet?

When was the last time you had a personal conversation with the credit manager of your three largest suppliers? What kind of an evaluation would that credit manager give you? If you don’t know, you may have a problem just waiting to happen. As I’ve recommended before, just pick up the phone and have a chat when you don’t actually need something: “Hey, Fred, are we holding up our end of the deal with you? Any glitches I need to know about today? No, I don’t need anything, just wanted to check in with you.” They will appreciate you taking the time to call when you are not asking for a credit increase. Building your relationship like this will mean a lot when you do actually need that credit limit increased or better terms on a large job.

Do you really have the qualified personnel to manage that large job? This means qualified project managers, project coordinators, field supervisors, accounting or billing clerks. Many a high-potential project has failed because the project manager was inept or the coordinator was disorganized or billings were not submitted on time. Here’s one to make any manager apoplectic: “No, Dave, I don’t have a check for you this month-because I never received your requisition. It was due in by the 25th of last month for payment this week.” What made this particularly horrifying was the large supplier bill due the very next week. Contrast that with an alert project coordinator who spotted a mistake in a contractor requisition and corrected it in time for us to receive a six-figure progress payment on time.

Putting together the winning package with a profit is all about filling in the blanks after doing your research, evaluating the opportunity the client brings and deciding if it is feasible for you to deliver at a worthwhile profit perspective.

Here are some tips for making a sale at a profit:
• Nothing beats good research into a client and his project. Nothing.
• Know your limitations. A large project is not the place to gain experience.
• Be cunning in your proposal package to showcase your strengths and minimize weaknesses.
• Plan for “giveaways and givebacks” to close the deal (extended warranty on installation or special cleaning of ancillary areas) that don’t destroy the real profit on a project.
• Include an extra factor in your cost basis for glitches and screwups, because they will happen, even on the best-run jobs.
• Trust your gut. If the opportunity doesn’t feel right, pass on it. Don’t force it to fit your preconceived notion of a must-have project.
• When it comes to being paid, be hard-nosed. Make it painful for the client if payment is late. If beyond 60 days late, file a mechanic’s lien no matter how much screaming or how many promises are made by the owner. “It’s very simple: I get paid or I file a lien, today.” Don’t worry about making an enemy or the problems this will cause him; you’ll never do business with him again anyway.

Always remember, the purpose of a sale is to make a reasonable profit. As one astute owner said, “It’s easy to lose money on a job, I’ve done it numerous times. The trick to staying in business is to win big and lose small.”

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