5 Tips for Converting Estimates Into Business
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- October 1, 2012
You’ve found a potential customer, invested a ton of time analyzing the problem, called suppliers to price the parts and equipment, and finally come up with a price estimate. But despite all your hard work, the customer responds with a tepid, I need to think about it, or — worse — offers no feedback at all.
How do you respond and make sure that business comes through? Use these five tips.
1. Resist the Temptation to Slash Prices
When Sandy Steinman, president of Profitability Partners Inc., a national consulting firm that specializes in the turnaround of troubled small- and medium-sized businesses, took on an established concrete contracting firm as a client, the 40-year-old concrete company had already lost $1 million over the previous three years.
“They couldn’t figure out how they were losing all this money when they were winning over half their bids,” says Steinman, who also wrote a book, The Small Business Turnaround Guide: Take Your Business from Troubled to Triumphant. “They were getting a lot of jobs and [were] extremely busy, but they were on an unsustainable path.”
After conducting a fully burdened labor-cost analysis, Steinman uncovered that for every hour the company billed, it was actually losing $3 because they’d bid their projects so low. At that rate, the more jobs the company would win, the sooner it would go out of business. The lesson: Avoid falling into a “win-the-business-at-all-cost” mentality. Make sure the jobs you’re quoting will make money for your company.
2. Sell Value, Not Price
Customers always want a lower price, but you need to make money, too. How do you redirect the conversation from a focus on price to value? Steinman recommends engaging the customer along these lines:
You: Thank you for your request. I’m happy to provide you with a quote. But before we begin, may I ask: Is this job going to be rewarded strictly on price?
Customer: Well, most likely price is going to be a significant factor.
You: OK, I understand. But what are some of the other important factors that will impact your decision?
Customer: Your ability to deliver. Can you get us what we need, when we need it done? That’s crucial. If the vendor can’t meet deliverable times, it will cost us a lot of money.
You: That sounds reasonable. I just have to be up-front, though. If you think this job will go to the lowest bidder, I’ve got a problem because I’m never the low bidder. … Now, knowing that, why do you think people do business with us?
You now have an open door to build credibility with the customer, with the opportunity to explain the value your company brings to the table — your team’s expertise, on-going support, ability to deliver on time and on budget, and so forth.
3. Understand the Customer’s Objectives and Motives
Before writing an estimate, ask questions to try to understand exactly what the customer wants done, and why, advises Jim F. Thomas, president of JS Thomas Service, Inc., an Atlanta-based commercial HVAC service contractor with 18 employees. He says this approach helps build trust and rapport with customers, making them more receptive to your offer.
“Customers don’t want to hear my pitch. They want the opportunity to tell me what they need,” Thomas says. “[Asking questions] makes customers feel important — which they are — and focuses the entire process on them and their needs. And it establishes me as someone who is not just out there to make a quick sale, but someone who wants to serve them.”
4. When Possible, Present the Estimate in Person
Unless it’s a minor job, Thomas prefers to present the proposal to customers face-to-face because he believes the personal contact gives him the best opportunity to earn the customer’s trust — and business.
Instead of talking customers through each point in the estimate, he gives them time to read and absorb it, while sitting alongside them. “I just shut up and wait for them to start asking questions,” Thomas says.
If, after several minutes, he senses that the customer seems interested but has yet to speak, he’ll break the silence by talking about the logistics involved to make the job happen, conveying an assumption that the customer is ready to move forward. He’ll say something along the lines of, “We’ll come in on a Friday and set up a crane over here [pointing]. By Saturday we’ll have your system running, and then you guys will have a nice cool building when you come in Monday morning.”
After a brief pause, Thomas goes for the close: “When is the best downtime weekend for you guys to do something like that?” Once prospects start to think about logistics and the delivery date, they’ve likely made the decision to buy, he says.
5. Follow Up (!!)
No matter how well you’ve presented the estimate, there are times — especially when a landlord, committee, or board is involved in the final approval — when customers won’t say “yes” on the spot. So, what do you do?
Before Thomas leaves the meeting, he nails down a timeframe on when the customer plans to have made a decision. “If I haven’t heard from them by that date, I may wait an extra day and then follow up with a call. I’ll ask if they have any further questions or if they’ve made a decision yet.”
What happens if you get a “no”? Don’t give up, and take the long view, Thomas advises. “If the customer’s business is worth the effort, I’ll keep in touch and use each proposal opportunity to establish a relationship and build rapport,” Thomas says. “By the sixth, seventh or eighth time I’ve priced things, I often become the preferred provider and get the business.”
Image used under Creative Commons by Flickr user 401(K) 2012.