How much should you charge . . . or do you know the correlation between marketing and price/profitability)

lemmings wikipedia
You can elect to join the lemmings, or figure out how to focus more resources on marketing and business development rather than chasing 'low bid wins the job' opportunities

Michael Stone in his excellent weekly eletter/blog primarily for residential contractors makes the point that many consumers are conditioned to expecting absurdly low prices from contractors, ultimately buying into the culture “low price wins the job”.

Price is always an issue, regardless of where you live. I hear that song almost daily. Too many believe that contractors should work for less than minimum wage while doing top quality work to improve one of a homeowner’s most valued assets.

Not everyone believes that, however, and they know that they have to pay a reasonable price for the work they want. So, if you’re hearing consistently that your price is too high, and you’re following the procedure we?talk about here?and in?Profitable Sales, A Contractor’s Guide, you might be marketing to the wrong people.

You can’t control other contractors and their low pricing scams. Fussing about them is a waste of time. They’ve probably been around since cavemen started hiring other cavemen to do their drawings, and they’ll be around long after you and I are gone. They want to give their work away and that’s their privilege. You need to focus on your marketing, and continually practice your sales skills.

Eliminating clients who only want a low price and focusing on the folks who are ready to buy is how you protect your time and knowledge, and provide for yourself and your family. Remember, you’re not in business to drive around and give out bids. You’re in business to provide a service and make a profit doing it.

The “low price wins the job” attitude is of course prevalent in the ICI world, where subs are pressed to submit their low bid on tender deadline. In this environment, if there is truly unrestricted open bidding (as occasionally happens for public sector work), the “low bidder” likely made an estimating mistake or is so desperate for work/cash flow that he is ready to take a big loss just to get the work.

I’m certainly not going to change the industry’s culture with a single blog post, but the most successful contractors indeed find ways to break out of the low-bid trap. They build relationships creating invited bid opportunities or win largely non-competitive maintenance/service contracts that allow them to remain profitable.

Alas, I fear, only a very few invest the time and risk in developing thoughtful marketing and business development strategies so they can truly build their reputation/brand to the extent they don’t have to fight for the majority of their business on price.

And I understand why. Marketing and business development costs in a long-sales-cycle business, when the offsetting option — running like lemmings to submit the low bid on an immediate opportunity — is right at hand, (if successful) puts cash in the till and, realistically, is the way it’s been done for eons.

Sometimes it is wise to pull our heads out of the sand and look at the opportunities with a business model/practice change. Stone offers a clear path for residential contractors. If you are in the ICI world, expect a more challenging journey, but you may find answers resources from the Society for Marketing Professional Services (SMPS) — a mis-named trade association that should actually be called: Society for Marketing Architectural Engineering and Construction Services.

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