Every once in a while we would have a potential client ask to see a breakdown of the costs of their project. Here are some things you might keep in mind when dealing with such a request.
Go Slowly and Assume
My experience was that most potential clients had a different set of assumptions than I did about how the sales experience was supposed to unfold. To prevent problems later, I had to focus on building trust first. The better I did this, the less likely a potential client would ask for a breakdown.
It also was important for me to slow down and spend some time discussing the potential client’s pains—the emotional, irrational reasons feelings he or she had about the home. What was the client embarrassed by, frustrated with, or feeling unsafe about? (Aging in place is an example.) These were some of the pains I would dig for. It was important to help potential clients talk through how emotionally distraught they were, as the longer they did and the more questions I asked him, the less likely they were to ask for a breakdown.
Ask What Needs to Be Seen
I came to realize that BEFORE preparing a proposal I should ask the potential client, “What do you need to see to make a decision?”
We had a standard format for our proposal that had one total number at the end, without a breakdown of costs. For most potential clients, that was all they needed to see. However, it would save me a lot of frustration if I knew what the client was looking to see and, most importantly, why.
Some folks are interested in knowing what some product or products were going to cost. Others had a relative who “knew about construction” and would be taking a look at my proposal. And then there were folks who were retired engineers or accountants who could not buy unless they could review “all the numbers.”
If I knew what they were looking for and felt it was a reasonable request, then I could more often than not fulfill it. If the potential client was going to be sharing the proposal with someone else, I wanted the opportunity to meet that person and sell him on our company before simply having him review our proposal.
Set Up Clear
We would prepare an estimate using the Construction Specifications Institute’s 16 divisions. Most of those divisions, such as Carpentry, would be broken down into increments like Rough Carpentry, Finish Carpentry, Cabinetry, and the like. Each of the divisions and the sub-divisions had total costs connected to them. This allowed us to do thorough job-costing as the project was in progress.
I was not against showing a potential client all this detail, but I wanted to know what the client was going to do with it as part of his or decision-making process. After getting a better understanding about the potential client’s process and needs I would ask, “What would your next step be if I were to present you a proposal that solved the problems you have with your home and that had a total cost which was more or less the same as the targeted investment amount we both agreed was reasonable?”
If the potential client didn’t reply, “Sign your construction contract” it did not make sense to prepare and present the proposal.
Why? I had not yet sold the potential client on why working with us was the best choice he could make and that if he worked with anyone else he would be making a serious mistake. I had to get that established in the mind of the potential client because if I did not he would regard me and our company not as the best choice but simply a commodity, just another contractor like the other folks he had been speaking with.
With or Without
Expressed Contractor’s Fee and Expected Return
Some contractors I know and respect would provide a breakdown of sorts. They would have maybe 10-15 categories of cost. And they would apportion their overhead and profit dollars across all those categories.
My experience trying that was a potential client would usually have one thing that he wanted to know the cost of and it was buried in one the large categories. That is why I suggested earlier that you ask the potential client before doing your proposal if there is anything in particular that he wants to know regarding costs.
I also found it clumsy trying to manage the apportioning of overhead and profit dollars. Inevitably the potential client would ask for the price of a particular item which was buried in a larger number. I struggled then with how to deal with the effects of having answered his question, now that the veil was being lifted.
So if we were going to provide a breakdown I would lay out at end of the proposal our overhead dollars in 5 or 6 contrived categories, such as “Training” and “Office and Administrative Salaries and Burden”, and our profit dollars as “Expected Return”, implying that we were taking a risk by giving the potential client a fixed price. I would express the associated percentages as a function of the overall sales price for the project, not as the percentages the direct costs/cost of goods sold were being marked up.
Ask and you will find out what you need to know so that you don’t prepare your proposal one way and then have to rework it before you can get a buying decision. Too busy to slow down and take the time to do that? Then expect to be frustrated with your potential clients only telling you what they need to see AFTER you have presented your proposal!