As progressive contractors, we’re all attempting to create as much value as possible while collecting the fees required to remain (or become) profitable in this industry. If we’re priced correctly, there is a very good chance we’re selling our services at two to four times the “going rate.”
This isn’t new information for you. I know I’m preaching to the choir. In fact, my mentor Frank Blau was writing columns in this very publication about this topic many years ago. However, I hear contractors constantly talking about how they simply can’t create enough value in order to collect the price established by their break-even and profit analysis.
As a side note, if you haven’t done a break-even and profit analysis on your own company, this is an absolute must if you want to understand your numbers and run a healthy, profitable business.
When it comes to delivering value, examine your systems first. Your value delivery system needs to be a well-thought-out, specific system for providing maximum benefits to your clients. In today’s world, you cannot rely on hope when it comes to communicating effectively with your clients. It takes dedication and commitment to build a culture of value for them. This involves ongoing training and follow-up to ensure that your company is differentiating itself from the status quo.
When I hear people say they can’t create enough value, I cringe. This is partially because they’re using that despicable four-letter word (can’t), but also because it represents an underlying limiting belief.
I’m a realist, and I still own and lead my plumbing, heating and air conditioning business. Therefore, I know instances occur when you’ve done everything right, and it’s difficult to justify your price to a client when he’s holding a written estimate from a competitor for the same product, equipment or “promised” installation process and warranty that you’ve presented.
With a clear, understood value delivery system, these situations become less common because you’ve created a competitive advantage by implementing a superior process before presenting a price.
The Mercedes-Benz factorLet’s focus on averages. More than 90% of the time, contractors have primary price resistance due to their lack of a quality value delivery system. Let’s look outside our industry for a moment to find a great example of what I’m referring to.
I’m a big Mercedes-Benz fan, and I love the Benz I drive every day. I recently needed to take my car in for the 20,000 mile service (or the “B” service, as Mercedes-Benz calls it). This is required to maintain my factory warranty. (If you relate this to service agreements in our world, I said this is required to maintain my factory warranty. Do your technicians clearly communicate the true value of service agreements to your clients?) Since we don’t have a Mercedes dealer within 200 miles of my hometown in Colorado, and I spend a lot of time in Southern California, I made an appointment at Fletcher Jones Mercedes in Newport Beach, Calif.
This began the most incredible service experience I’ve ever received from an automotive service department or dealership. I completely understand that some of you might dismiss this comparison and say we’re not in the luxury car business; we’re in the contracting business. I would challenge that perspective. I also would remind you that this thought process might be precisely why you have difficulty demonstrating sufficient value for your clients.
As soon as I pulled up to the maintenance area, my “Service Advisor” welcomed me, asked me some good questions, and assured me everything would be completely checked out and taken care of. Then, I was ushered into the “Client Lounge.” Think about this in relation to your service call process. Don’t you welcome your clients, ask quality questions about their situation, and assure them you’ll completely inspect everything and take great care of them? Regardless of which service call training you follow or what system you have at your company, these are key components of the process that too few contractors pay attention to.
Client Lounge sounds like a glorified title for waiting area, doesn’t it? It is technically a waiting area, but this was a very different experience and atmosphere. This lounge included a Starbucks, a nail salon, a complimentary shoe shine station, laptop work stations, and two different rooms appointed with comfortable leather chairs and multiple flat screen televisions, just to name a few of the amenities. It’s hard to explain in writing how great this place is.
When my car was completed, I paid the service bill of slightly under $500 for my “B” Service, which I’m quite certain would be less than a couple hundred dollars for most other auto manufacturers. Did I pay extra for all the amenities in the client lounge? Yes, I did. Am I fine with this arrangement? Yes, I am!
Remember the Mercedes-Benz factor and the fact that, now more than ever, it’s all about value. Based on news reports, perceptions about the economy and the stories we begin to believe, it’s very easy for our technicians and salespeople to fall into a negative mindset. They start thinking nobody has any money and nobody is spending any money, when nothing is further from the truth.
People still have money and are willing to spend it when the perceived value of a need or want is greater than the actual price of a specific product or service. In our case, these needs and wants come in the form of repairs, replacements, upgrades and service agreements, to name a few. There are always opportunities to provide value to our clients; sometimes we need to take a closer look at what’s really going on.
Even at a 10% unemployment rate, 90% of the market is gainfully employed. We must remember this ourselves, and help our front-line team keep this in perspective as well.
People are looking for more value than ever right now, so your value delivery system is critical to your success. What lessons can you learn from Mercedes-Benz and implement into your client service experience? Keep in mind that not everyone is a Mercedes-Benz client, and its business model is designed to make sure this is true. You don’t need everyone to be your client; you just need the right people to be your clients.