In bad movies, truth serums are used to get people to spill their secrets, reveal where the loot is, or confess their true love. In Houston, the truth serum favored by Stephen Hann is neither sinister nor liquid but a professional services agreement (PSA) that gets prospects to either quickly become committed buyers or plainly state their objections.

Paul S. Howell

“I can say without hesitation that our closing rate has more than tripled” since introducing the PSA six or seven years ago, says Hann, president Hann Builders (Big50 1998, as Stephen K. Hann Custom Builders). The company did about $2 million in high-end remodeling in 2004, plus $10 million in new-home construction.

The PSA is a simple two-page document that Hann or his sales staff introduces after an initial discussion with a prospect. If the two parties agree generally on the project's scope, budget, and timeline, Hann asks the client to sign the PSA. In the agreement's language, the prospect becomes “Buyer” who agrees to pay Hann Builders a retainer ranging from $1,500 to $2,500, understanding that the fee will apply to the contract cost. Otherwise, the “fee shall be considered a non-refundable payment.”

The PSA is “a great truth serum” in at least two ways, says Hann. First, it qualifies whether someone is serious. Hann estimates that 60% to 70% of prospects sign the PSA, largely because of the company's reputation and approach. The PSA “creates whole conversations” about what the client wants and how Hann Builders will deliver. “I think the biggest hurdle is in the salesman's mind,” says Hann. “If you believe in it, you can sell it.”

Second, when prospects do object, they create “an environment where they have to articulate what their objections are,” says Hann. Hann can then “either overcome the objections or get a better sense of what we're dealing with” — possibly a difficult customer.

Above all, the PSA allows Hann Builders to work more efficiently and profitably. “As we collect that retainer, we're getting compensated for our time but also mitigating our risk,” notes Hann.