Last month I explored the issue of a labor-only relationship for a big-box installed service program, and how a standard markup percentage would leave you far short of the earnings necessary to justify your time and effort. The retailer I worked with when I was at Archadeck had also requested a catalog of pre-designed components (deck platforms, railings, stairs, benches, etc.) that its inside salespeople could mix and match for homeowners. In addition, it wanted a unit pricing schedule that would enable reps to quickly produce a quote by assembling a design from these components.
However, in my experience, very few customers want a cookie-cutter solution. They want a custom design that considers the aesthetic, functional, site, and budget variables unique to their situation. And given the probability of customers wanting something off-list and the tendency of salespeople to promise anything to avoid the hassle of solving a problem they aren’t equipped to solve … well, I probably don’t need to finish the sentence.
The main issue was the impact of design efficiency on cost, and hence, prices. Given unlimited options, how could we teach the retailer’s salespeople enough about deck design and construction for them to accurately adjust the pricing as they made design changes that altered construction efficiencies?
In spite of my recommendation that the party best suited to design and sell the project was us -- the contractor --the retailer insisted on pursuing its model. So if I wanted the opportunity to capture a new market segment for our franchisees, I had to come up with a solution. This is a rough summary of my proposal:
Platforms. Each pre-designed deck in the catalog had to be offered at a minimum size/cost, so the only change option would be a size increase, and I would be able to provide square-foot pricing for that. Additional options requiring variable pricing were decking material (pressure-treated vs. composite), decking direction (parallel vs. diagonal, or with parting board), fasteners (stainless or galvanized screws, nails, or staples), site access, elevation, attached to the house or freestanding, and so on.
Railings. While the price could be increased or decreased on a linear foot basis, there would have to be a minimum price (the most-stringent local code may not require railings around a platform of up to 30-inch elevation, but would require them on our minimum-size stairs -- see below -- since they had more than two risers). The style of the railing also affected the labor rate (standard picket railings are more efficient to build than Chippendale railings).
Stairs. Stairs would also have to be offered at a minimum size (three risers/two treads) and cost. Additional stairs would be priced on a per-tread basis. For some reason that still escapes me, many customers love flared stairs. So, in spite of their much higher price due to the much lower efficiency to build, I felt obliged to provide this popular design as an option. Also, the height of the stairs introduced additional design/cost variables (no flared stairs above eight risers, landings on long runs, etc.).
Other variables that I had to consider in the final pricing schedule were:
I proposed to develop a pricing wizard to ensure that the retailer's sales personnel would cover all the key variables and price them to reflect local costs of materials and labor. I can’t fully explain the proposal in this column, but I can tell you that it was very detailed. The final step was to address another array of issues to put the proposal in place. In part three of this column, I will talk about warranty issues, intellectual property ownership, and unique local requirements. --Rick Provost has over 20 years experience helping to build the country’s largest design/build franchise network specializing in exterior home improvement. Formerly the president and CEO of Archadeck, Rick now provides his franchising expertise through The Consultancy, a consulting firm specializing in business systems development for contractors. He also is a facilitator, coach, and consultant for Business Networks, a peer-review network for remodelers and insurance restoration contractors. He can be reached at firstname.lastname@example.org.