His colleagues say he's crazy, but his prospects say, “Where do I sign?” Darius Baker, co-owner of D&J Kitchens and Baths, Sacramento, Calif., is referring to his new policy of disclosing his markups to clients and prospects. “Contractors try to hide these figures, and it becomes uncomfortable,” he says. “I decided I was tired of playing that game.”
As excerpted from Baker's sales contract:
“D&J Kitchens and Baths Inc.'s business model calls for a 30% gross profit. In order to achieve a 30% gross profit, a .67 factor is used to mark up the cost of any given product.”
The contract further notes that subcontractors' costs are marked up as well.
Baker also explains markups on sales calls. After ascertaining how much the prospects want to spend, he says, “Here's what we'll do ... given your stated investment figure and my profit goals, I now know how much I need to build it for.” He lays out his historical costs for labor and materials, and can then start the discussion of what type and quality of materials their budget allows. If they want more expensive finishes or products, “they now know they can cut back on other products — or come up with more money.”
Baker says his closing ratio has been 70% to 80% since he began disclosing markups. In his first sales call under the policy, the prospect thanked him for his honesty. “Now I'm on an incredible roll that's got my head spinning,” he says. In May, for instance, he went on eight sales calls and says, “I walked out the door of six of them with a check in my hand.”