Qualifying A Potential Customers Finances.

wackman

With the slight slow down of home sales, and going into winter I have recently decided to revive our remodeling a bit. We'd mostly been building specs and I don't want all my eggs in one basket, just in case, if ya know what I mean.

So I put out some advertising and I've been getting a ton of leads but I'm finding a lot of tire kickers, or people who are serious but really truly don't have a clue what their projects might cost.

What're your favorite ways to qualify your customers finances BEFORE spending days bidding, just to hear "oh man, that's like triple what I was imagining" and without offending them or making them uneasy about telling the contractor their budget?

Thanks guys.

Wack

Grumpy

I'm not the kind of guy who builds houses or does large additions. To be honest I usually assume the customer has the money, however during the presentation I explain we do offer financing which nobody has ever taken us up on.

However I have done some multi family and commercial work and part of my conversation with them during my initial presentation is to ask if they aready have financing in place. I just come right out and ask "How are you financing this project?" wait for answer. "So you already do have the funds available?" I see no reason why you couldn't ask these folks over the phone.

Personally if I were in your shoes I wouldn't throw out the leads who don't already have financing. What I would do is to go meet them and simply give them a rough ball park explaining it is rough and explaining it is to allow them to budget, and ask them to call me back when they have financing, prints, etc...

When people ask me to build dormers, the first question I ask is if they already have prints. 99% of the time they do not. 0.5% of the time they have a rough sketch they think is a print and the other 0.5% they do actually have prints. However I still am willing to bid the dormers. I provide an estimate based upon MY sketch which I do real quick in autocad. I then put an allowance in my proposal for architect's fees to take my sketch and make it a print IF hired. I also put a clause in my estimate which states that the proposal is to be revised after review of final prints, and approved for building by the local building dept.

Double-A

Ask four questions on the phone before you go out to meet them.

1. What size of addition are you considering?
2. When are you planning to start construction?
3. Who will make the decisions on purchases?
4. How much do you plan to spend?

All of this is paraphrase from Michael Stone's book Markup and Profit.

The last question is the most important. It tells you right away if you're dealing with dreamer or clients that have done their homework.

I don't get upset with the dreamers but I do sort of let them know their price is unrealistic with comments like, "Have you already framed this addition and need someone to finish it? From your price range, it seems some of the work might have been done already."

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

wackman

What I've done in the past is to just ask "what kind of budget do you have?" I only really worry about this on three occasions: 1. If I can tell cost is a huge issue, if everything they are mentioning is coming back to keeping costs way down, like at the expense of quality or selection ie "What sort of roof do you want"? "whatever's cheapest". 2. They are all over the place with design and materials like they really don't know what they want, or 3. If they don't seem to care about cost at all on an expensive project and to me it looks like they don't exactly have a lot of spare money.

I can easily see however that almost none of them feel comfortable telling me if they have a dollar amount in mind or if they have funds because they're afraid they'll say $25,000. and I'll say "that's exactly where I was at" and then they'll wonder if I actually would have done it for less and just jumped on their higher number.

If they already have plans and engineering done then I know they'll have a ballpark, but like you said Grumpy, I've only encountered that a few times.

I have had a few who will say "we've got money" a little put off, I still don't really have an answer and now I feel like I offended them.

I had a lady yesterday, in a expensive neighborhood, in a beautiful old victorian (not a lot of those on the west coast) who stressed low cost throughout but said she wanted her rear porch and hip roof torn off, framing and all, and rebuilt with period details (6'X33' with tons of woodwork) with a whole new T shaped stairwell, a new 20' section of detailed cedar 6' fencing with a gate, demo out an outside basement entry then fill the old doorway with cmu and fill the old hole and land scape it, then cut a new basement entry in the foundation on the side of the house with poured walls and stairwell plus a few more things like a paver patio. I'm thinking of all the drainage, retaining walls, excavation. This is a decent sized project. She wasn't sure on anything really though so I asked her what kind of budget she had since she was going from detailed matching victorian balustrades to not wanting to spend too much money. I was thinking with all the custom woodworking and expensive materials in the $50,000-$75,000 range and she says to me "me and my husband were figuring it could be done for around $6,000". I was shocked and told her that wouldn't even get the grounds protection, careful demolition, dump fees and excavation done. Then it was her turn to look shocked.

In the end I told her to talk to an architect and get some real plans made then give me a call, really I don't even want to deal with her again, because I think she would just be a huge PITA.

I'm just glad I asked her budget because I could have spent a week getting prices on matching period woodworking, and subs.

Ever have anything like this? WOW.

Wack

Gordo

Yeah Wack. It has happened to me as well.

The initial meeting with a potential client is definitely a feeling out process for both parties. The longer I am in this business the more I can spot serious clients from dreamers just by their verbage.

Qualifying has saved me from alot of unnecessary estimation time that I can now use to "service" my clients, thus making our company more profitable.

BTW Wack, did you ask those potential clients what year they were living in?

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Looks like some pros were here.

MattCoops

A good salesman told me never to pre-qualify unless your giving a loan out.

Even if you have a good method of qualifying the homeowner to see how finacially well-off they are. How are you going to really gauge if they will want to spend what number you're throwing at them.

I guess only way you can truly pre-qual is ask up front how much money do you have to spend on project? What is your budget?

I never ask that. I give them my price. I never discount. Or go lower than the other guy.
I give my price. If they are truly serious in starting the project and want the project done, they'll sing the line.

By them calling you for an estimate, they obviously want something done. It's up to you to sell it to them on the estimate.

Qualifying is nonsense. All your doing is eliminating potential customers.

__________________
Matt with Cupan Custom Tile & Paint of Lowell, Massachusetts
Design and installation of ceramic tile and natural stone for floor, wall, and countertops
(978) 601-8774 | cupantile@gmail.com | view tile pictures and more

Gordo

So are you saying that Wackman should have not given the potential client his guesstimated price and then wasted maybe 10-16 hours in estimation time?

I think Wack did the right thing. $6,000

__________________
Looks like some pros were here.

Tscarborough

I qualify heavily. I have to, or I would spend 90% of my time selling 30 SqFt of brickwork at a time.

First three questions:

How many/much (SqFt, units, whatever measure they inquire about)?

When do you need it?

New construction or remodel?

Usually, I can tell where it is going after those 3 questions, and will schedule in a longer phone call/ jobsite visit based upon the answer to those questions.

If they ask a straight up pricing question, I ask how many, where, and when. If they are unclear on any of them, I ask that they fax or email me a request for quotation with as much detail as they have available.

cssconstruct

There is a difference between telling somebody how much to paint and tile a room, and spending 8 hours figuring out how much a 1300 s.f. addition is going to cost. You have to pre-qualify to some degree. In these instances we are not trying to find out if someone is serious or not(you alway assume they are serious) you are just trying to find out if these people can realisticly afford these types of projects before you invest huge amounts of time. Telling somebody it is $15, 000 to paint their house vs it will be $145,000 for that addition is a little different.

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www.cssconstructionllc.com

Double-A

Nonsense. For tile and paint, I might say, "fine, do it your way", but for remodels and additions, you're just wasting time if you don't let the client know that your time is valuable and that $6,000 for a $70K remodel is an unrealistic budget.

You can't invest hour after hour of estimating time just to be told that this is way out of their budget range. Qualifying has less to do with finding out how financially secure your clients are as it does with finding out how serious they are.

In my experience, if they are calling you and have a number that is within 40% of your seat-of-the pants estimate, you've got a live one. If they are off by more than that, then they have no real concept of what they are asking and its time to do some educating. Tactfully of course, but educating none the less.

But to say that qualifying is worthless is true only if your time is too. Mine is not.

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

wackman

Keep in Mind that there's a huge difference between a salesman and an estimator. If I sell tv's and someone comes in that I think looks homeless I'd still try to sell to them the same as anyone else, how long will I be with them before I know how serious they are, 15 min maybe? No sweat.

I personally am not much of a salesman and subscribe to the low key, no pressure approach. I almost never go with people who try to pressure me so why should I expect my customers to. I believe our quality of work and reputation does all the selling I need and if the customer doesn't care about those things then I probably don't want to do business with them. I definitely don't think I need to turn every lead into a job, in fact some I want to go away. Of course that's now with construction booming, if things slowed down I'd be less picky. For now though I want jobs that reflect skill, quality and happy customers with healthy margins in there too.

I definitely don't want to spend all my time bidding on jobs that I won't get. Qualifying is necessary for me, I just want to find the best way to do it.

Thanks for the help guys.

Wack

mdshunk

I resent people who try to "qualify" me, but I still find myself doing it to customers. My method is to look their work over the same as anyone else, but I seriously drag my feet preparing the estimate if I get the vibe that they aren't serious or that it is out of their budget. I wait for phonecalls in this case. The number and tenor of the phonecalls may or may not cause me to prepare the actual estimate.

Quick story... I drove onto a car lot with my wife, prepared to write a check for a vehicle if we found one she liked. The salesman focused so much of his effort trying to "qualify" us, that I grabbed my wife by the arm, got back in the car, and drove away. We went to the next lot on our list of places to stop, the salesman focused more on showing us what we were interested in looking at, and we summarily bought the car.

Peladu

I walked into a jewelry store right after work. I was dusty, tired and in work clothes, three people walked in after me dressed nice. After looking at the cases for ten minutes, the youngest girl with the least knowledge (most likely new) came and asked if she could help. But the 'clean' dressed people already had the veterans working with them. I walked out with about 1,500 of jewelry paid in cash, I watched two out of the three couples walk out of the store with nothing. The veterans sized me up, and were wrong, and lost the sale.

Now, that I said that ... there is a huge difference to going to someones home to evaluate the situation, than by what they wear or drive. I know very wealthy people who dress like you and I, but when it comes to their homes, the story changes.

Greg Di

You are allowed to laugh out loud and let them hear it. That is ridiculous. If they have their heads up their own asses far enough to think a job of that scope could be done for $6k, they have not done ANY of the following in the last 20 years:

1) purchased gas
2) read a newspaper
3) been to store

People never cease to amaze me. I don't expect them to be professional estimators, but give me a break and don't waste my time. If you KNOW you can only afford a Ford, don't waste time test driving a Mercedes. Personally, it offends me that people think so little of another person's time to waste it so frivolously.

wackman

That's a good method if you don't want to do the job, I've done that as well as way overpricing it so that if I do the job and it's a PITA at least we're well paid for it and it's worth the headaches, I usually just say we're completely booked up for 6 months or a year or something.

What I'm looking for is an easy, noninvasive way to see if they're both serious (which I can usually tell) and have the funds to do the job (much harder for me). Like someone said back a ways if they're just starting out, but serious and have the funds, I'll draw it up, have it drafted, engineered, the whole works, if it's worth the work, but to do all that and then be told they don't have that kind of money and don't want to do it now after all, well that would leave me a little salty.

Sometimes my gut is wrong. I had a call to do an entire house remodel. I go out there and it's not in the greatest area, the couple have a dirty, run down little house with an unfinished basement and attic, a ratty little car that they share. The wife wasn't working because she had just given birth to their first kid and the husband worked at a car wash. They looked like they could barely pay their electric bill and they want a price to gut everything except the shell, redo everything, then finish off the attic and basement, and finish everything off nicely at that with huge dormers added to the roof plus add a grand porch. They wanted all new windows, siding, landscaping, heating, electrical, plumbing. No plans, no designs, no sketches, no permits, nothing. Looked to me like tire kickers big time and I was going to tell them we could do it but it'd take a year before we could get to it or just throw some huge price out but instead I said "Wow, did you guys just win the lottery or something?" with a big smile on my face (hoping not to offend them)... They told me that they had inherited a bunch of rental properties and they just sold some and had a chunk of money now, loved there neighbors and house but just wanted it a lot nicer.

Turned out three contractors had already come out, scribbled some notes down, said they'd give them a call and were never heard from again. I was the first that took them serious enough to bid it and only because I asked about financing or else I was about to be number 4. The job ended up being a little over $200k with 22% profit .

I learned the value of qualifying right then and there.

Wack

mdshunk

I dunno. On commercial work, everybody pulls credit checks on everybody else. Subs look at the GC's D&B. GC's pull the subs D&B or personal credit report. It might not be too far out of line to pull a candidate customer's credit report. In fact, I'm pretty sure it's been talked about in another thread a year or so ago.

Tscarborough

There are two issues, really. The first is qualifying a lead as to it's worth, the second is to ensure that the lead has the means and intent to pay.

I qualify for intent to proceed and scope of work to make sure it is worth my time upfront, and then proceed with financial information if it gets that far.

Grumpy

Even if everything they have is unrealistic, if they were in my immediate service area I'd still spend the hour to meet with them and do my qualifications then. They may be serious but not be serious yet. By you taking the hour to sit with them and explain what they need to know so they can get serious may sometimes land you the sale a year later when they get all their finances in order. The goal here is that you are the first person they call back requesting a quote and THEN you can spend the few days it takes to put together a bid.

If you turn away everyone who isn't serious NOW, I think you are throwing away potentially good customers LATER.


In terms of what MD said, here is an idea. Ask the customer for a mortgage prequalification before spending your days of time compiling your estimate. Most mortgage companies will do it for free, and presuming they are credit worthy they should easily be able to get one.

Mike Finley

Wack - the easiest method is to let your advertising pre-qualify your customers before they decide to call you.

Without going into a whole book, the concept is as simple as this -

Are the peoples income level the same that are reading the local swapper paper and the people who are reading the Wall Street Journal? That's a gross exageration for an example but it should help to undestand the concept. That's what I would consider 50% of the equation, the other half is in how your advertisements look and what they say. Again for instance an ad that says "John Smith Home Builder" and "John Smith - Builder of fine homes in the $400,000 to $750,000 range" say things a bit differently to potential buyers of your services.