Sales Question

realpurty2

Usually I am pretty comfortable doing sales, finding the right way to approach a potential client, convince them of the value and close the deal. This one has me stumped on what angle to take with the owner because my gut doesn't agree with my inner sales voice.

I've got a proposal to deliver today for a complete property improvement project. House interior and exterior and the small outbuilding interior and exterior. The owner bought an old farmhouse he wants to renovate for his son. He wants it gutted to the studs, rewired, service upgraded with subpanel, redesign the bathroom layout entirely, build two closets, level the floors, install new flooring, new windows and doors, vinyl siding, soffit, guttering, paint the metal roof, replace porch post and patch concrete porch, deck in rear with rails and stain, shutters, replace outbuilding floor and insulation. (probably still some I left on this list that he requested)

He would not commit to a budget during the estimate process but made a statement of "You know the area, You know about what I paid for the house so go from there." We worked up the estimate, reworked it, comparison shopped on supplies and distributors..and it's the best it gets for all he wants done.

I've already talked to him once with our first estimate, which I knew was completely out of his range. He nearly choked..lol He said he could build a new house for that price. Which is true.. he could even buy a bigger nicer house in this area for what the renovations would cost, but he's the one who wanted it gutted and started over..which IS a new house with all he wants done. He narrowed it down to the things that were his highest priorities for the house and I reworked the estimate again and again. I'm putting more effort into this one than I would most because it is a project I'd love to sign off on. (Yes, it's a female ego thing) Any other estimate would have gotten the price and they could either take it or leave it. I'm not compromising our pricing, just trying to work with the owner to fine tune areas he could save money by changing his original choices.


My problem- It's time to quit on the shuffling and re-arranging. The price is still more than he would be willing to spend. Any way you look at it, he's getting a new house once the reno's are done..inside, outside, outbuilding, everywhere would be new except the framing. I can't sell him on value or equity because it's not a good investment considering the size and location of the house will drastically hurt any resell value. The amount of work he wants done is the direct reason the estimate is out of range. Any suggestions on what angle to take when trying to close the deal? I'm at a loss on this one because I usually try to think like an owner and base my sales pitch from that perspective, but on this one, even as an owner, I wouldn't invest that much in the house either..it's just not worth it for the size, property values in the neighborhood etc.

Any suggestions or should I just toss out the numbers, explain he is in fact getting a new house for the price and leave him to take it or leave it?

__________________
Woman in a Man's World.

bob the builder

That statement sums it up right there. I too take the approach of the owner when at an estimate. Some times when I think it is to much for the property I just tell them that. It may end up with them thanking me and sending me on my way I'm not in it just for the sale, I want them to have a r.o.i.. Now if they weren't going to ever sell the house then it really doesn't matter. Then they could live there and be happy with there home.

It sounds like you have put effort forth already on crunching numbers and that makes it more difficult for you to walk away...


Bob

Teetorbilt

He just wants what he can't afford, nothing new there. I'd be boogieing out of the before you get into real trouble like him running out of money 1/2 way through the project and you know whos fault that will be. It surely won't be his!

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You can't solve you're problems with the same level of thinking that created the problems.

Albert Einstein

Patty

Robin,

Has anyone else submitted a proposal? Perhaps this potential customer needs to 'shop it' and actually see that your price is 'in-line' with other builders in the area.

Sounds like this guy wants Neiman-Marcus on a K-Mart budget.

realpurty2

Well, actually, the root problem is not either one of those. He has the funds to spend, our price is definately competitive for the work he wants done. I am just not sure how to sell him on it being worth doing exactly like he wants.

I did the research on the property. The land assessment value is only 11k and the house value 16k.. he paid 28k to buy it last month and we're talking over 45k in renovations he wants to do??? The house just isn't worth it..yet I've got to put the 45k proposal in his hands and sell him that it is worth it or else just move on to the next one. ( I admit, I want this one toooo bad to be truly objective.. my gut says give him the numbers, leave him contact info, and walk. If he calls, celebrate.. if not, oh well. But my she-devil side wants to close this deal against the odds..it's a personal challenge now. lol )

I could go the R-O-I and Equity route to try and close but I'm trying to weigh in the fact that even with the renovations, the property's overall value would not match or exceed his investment. It's in the middle of no where, surrounded by houses that really should be razed due to deterioration, and it's a small 860sq ft two bedroom one bath house. He could spruce it up all he wants but at best, he's looking at a 45k resell value for that area. He bought it to move his 25 yr old into so resell is only if the son ever moves out of it.

I'll probably drop him the numbers, make some conversation about the potential the house has and the fact it will make his son a nice home for years to come, briefly touch on if the pricing is out of his budget for the complete project how it could be prioritized and completed in phases even after his son moves in it. Leave him to think on it and get other quotes. Follow up first of next week to see if he's already selected another contractor or rethought what he really wants done versus all he asked for in the first quote. It's a long shot..but since the crew is working and I've got the time... I like a good challenge. hehe

__________________
Woman in a Man's World.

Mike Finley

Just some random thoughts for you on your subject...

I wouldn't take it upon myself to justify a customers budget based on a good investment or not. That's totally up to him. If somebody wants a solid gold toilet and diamond encrusted faucets in their 1950 double wide, I'm not going to sit down and do a financial counseling session on the pros and cons of their "investment".

There is only one case where I would do that, and that would be if the customer is a real estate investor... however that won't ever happen either because I refuse to do any work for real estate investors doing flips or people with rental property or people who are moving and just want to gloss over something so they can sell it.

Some where along the line before now I probably would have presented him with a A-B type scenario. Here is plan A which is exactly what you said you wanted and worth every penny. Here is plan B which is what can be accomplished based on your budget.

Of course that brings us back to budget, somewhere along the line I would have refused to go any farther until he came up with a budget figure. With a figure of $30,000 or $25,000 or whatever you could come up with a plan B.

The A-B close is probably the easiet way to get somebody off the fence. They want plan A but they don't want to pay for it. The can afford plan B but they want more than what it gives them. They usually end up somewhere inbetween and get on with it.

That attitude is a big stumbling block that is standing in the way of increasing your profits by not keeping your mouth closed and helping customers bring their visions to reality no matter how much money they want to throw down the drain to do it.

Woz the Painter

Why would anybody put 45k into a property worth 28k? Is there oil or gold under there?

bob the builder

You have to look at the indicators that the potential client gave though. I could build a new house for that. You know the area, Well you know how much I payed for it.
He never gave his budget which is the problem. As far as refusing jobs hurting profits to a point, maybe if that is the only prospect for a job. My advice sometimes loses customers, that will remember in the future, that contractor was looking out for my best interests. I have no problem saying goodbye to a customer with tight pockets and unrealilistic dreams...

Bob

Woz the Painter

Maybe hes got a reefer cave under that house?

Ken@K&R

I personally think the guy is just a nut. #1 if I had a 25 year old son and bought him a house unless he is handicaped im handing the bum a brush and telling him where the black paint is for the roof. Alot of jobs take skill but some just takes elbow greese. Hell new siding, new 200 amp service with a 100 amp sub panel and house rewired along with windows cost more then the house was bought for. He made a bad decision.

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Ken

realpurty2

The A-B scenario is exactly what he's going to get tomorrow at 2pm. We discussed options today and I came back to draw up the B scenario.

As far as not ever down-selling or telling them what's in their best interest... I know better and don't do anything even close typically, but like Bob said, there were indicators that clearly stated where his limits were, which also gave me a pretty good idea of his budget at the same time.

We don't "need" this job at all, I just want it, if that makes any sense. It's one of those rare times when I don't have anything to invest or lose but MY time. Ken or the crew aren't affected unless we do close the deal and I have to shuffle some of the crew around to knock out the smaller jobs before attacking this one.

I am breaking all my rules and going against everything I stand for by chasing this job down, but again, there is no loss potential other than I'm taking a break from day to day operations here and there to devote to working up a feasible proposal to take a real dump and turn it into a comfortable home.

Either way, I'll know tomorrow around 2pm est because if he doesn't sign either A or B, I'm done and moving on.

__________________
Woman in a Man's World.

Mike Finley

I like your plan and thought process. Wishing you luck!

Double-A

So, Purty, how did this story end? Did he do any repairs or fix-ups to this home?

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

Grumpy

Here is one you might try. Stop wasting your time, put the ball in his court.

Sir, what can I do to earn your business?

He will tell you how to close him. If you can, then do it. If you can't then you can explain why you can't and hopefully he will understand and you can close him... or if you can't then youu stop wasting your time trying and you move on to paying customers.

Edit: Honestly as I ponder what you've written it sounds more and more to me like he just wants you to do plan A for plan B's budget.

I'm sometimes funny like that. I may have budgeted $x for something, I found out that something is within my budget but then when it comes time to spend the $x which I have already budgeted, I just don't want to let go. That's when I shut down and kick around the decision in my head for a few weeks (procrastinate) before pulling the trigger on the decision for one reason or another forcing me to do so.

Mike Finley

Yep, that's a good one, it pretty much is the put up or shut up type scenario, you'll find our pretty quick if the customer wants to do business with you or is shopping because it puts them right on the spot.

realpurty2

Actually, when he found out how much it was going to cost to do even the most minimal repairs to make it functional, he put it back on the market and sold it to the next unsuspecting person who leveled it and built a barn on the land. Go figure...

__________________
Woman in a Man's World.

mdshunk

Sometimes I start out these wacky, pie-in-the-sky bid requests by trying to disqualify the customer.

Coming to look at a house that this much work is requested, your gut should tell you right off the bat (before you've even done the estimate) that it will cost more to do that work than the improved property will ever be worth for a very long time. I'd explain that right off the bat, whether "joking" or serious, the cards will be on the table. My typical script is something like, "Say, Mr.Jones, sure seems like you could build one heck of a nice home for the money that you're intending to invest in this one." Gauge his reaction. If no response, follow up with the very powerful response getter, "Don't you think?". This will at least prime the candidate customer to the fact that this will be expensive, and the estimate won't be a shocker.

Remember, you choose your customer's in much the same way they choose you.

Grumpy

Go figure? That's all it was good for. Iin your own words they could build a new house for what it would cost to remodel.

Double-A

Even if its only a house for Eastern Tennessee milk makers. MOOOOOOOOOOOoooooooooooooo.

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

Grumpy

Go figure? That's all it was good for. In your own words they could build a new house for what it would cost to remodel.