By Rob Blackstien
Last month, we gave you a taste of the polling results from some of the top contractors from across the country on negotiation. Here are a few more nuggets of wisdom and cautionary tales we received from that survey.
It’s Not All About the Money: Brian Kelly-Campbell, Senior Sales and Project Manager of Laval, QC-based Renovco Inc., says that while price is important, it’s not the primary factor — especially on large scale projects and perhaps even less so on small scale projects ($10,000 or less). These projects rely more on speed and availability.
“Generally from my perspective this price range is more than likely a one or two trade project and allows for both the ease in quotation as well as it being easier for a client to accept the price quoted,” he says. “The best negotiation practices are always based on what you have to offer and how you promote it.”
Eat Your Frog: Steve Barkhouse, President of Ottawa-based Amsted Design-Build is not endorsing the consumption of amphibians as part of your arsenal. Rather, he’s referring to Mark Twain’s quote suggesting that if you eat a live frog first thing in the morning, you can go through the rest of your day secure in the knowledge that it’s all uphill from there.
Barkhouse translates this concept into the negotiation context: “It is easy to put things off, to the detriment of the negotiations. For example, you have been back and forth with a customer on price. You finally agree and are meeting to sign the contract. They bring up an addition they want to add. It is easy to say that you will have to get back to them with pricing and leave so that you don’t have to get in the uncomfortable position of further price negotiations.”
“Instead, take a moment to explain the challenge of their late request. A lot of people do this once in their lifetime; it’s unlikely a ploy on their part, just ignorance.”
Barkhouse advises taking a moment to run some rough numbers then explain the cost impact and that you will make an allowance for it until full pricing can follow. Deal with all their questions and concerns right there, he says. “Get a decision from them no matter how uncomfortable. Sign the contract and celebrate. You are doing them a favour as well as yourself.”
Earn Their Trust: Paul Gallup, President of Toronto-based Men at Work Build Ltd. believes the best negotiating strategies are simply about putting the client at ease.
“The tactics we employ to increase the likelihood of closing deals are more around building trust, demonstrating that we operate with integrity, showing a genuine interest in understanding the underlying issues they’re trying to resolve in their homes and their lives, offering creative solutions to solving those issues in a way that works within their real target investment amount, and structuring our processes so that at each decision moment the customer doesn’t feel threatened or bullied and feels in control but supported by an organized, structured system that makes sense and seems fair.”
Consider Their Position: Barrett Risser, shareholder/project manager at Lunenburg, Nova Scotia-based D. Risser’s Construction Ltd.,says negotiations can go a lot smoother if you try to understand where the other party is coming from. “Be honest, calm and listen during negotiations,” he says. “Most people are not trying to nickel and dime you; they just only have so much money to work with and are trying to make (smart) buying decisions.”
Bend Where it Makes Sense: Calgary’s David Litwiller, President of Litwiller Renovations and Custom Homes Ltd., says he’ll bring his markup (currently 26 to 27 per cent, up from 24 per cent last year) down based on different factors. “I am willing to bring markup down depending on job size and my interest in working with the particular client. Location of the project can also be a determining factor. If there is another project that is going to be active and it’s within 20 minutes of this one I’m that much more interested.”
Establish “Why” Before “What”: Figuring out what the client needs will help you figure out what they really want, and that will go a long way towards ensuring smooth negotiations, says Neil Damackine, President of Terrabonne, QC-based Construction ND. “Seldom are features and benefits (the “what”) the most important issue during the client-contractor courtship phase. By first exploring impacts and needs (the “why”) faced by the client, a wise contractor is better equipped to present solutions that will bring the greatest long-term satisfaction to project owners.
Leverage Your Past Clients: Brian Kelly-Campbell, Senior Sales and Project Manager of Laval, QC-based Renovco Inc., says that referrals are huge as they “provide the right information to prove a sufficient belief in your honesty.”
Look Beyond the Surface: Richard Speare, Owner of Barrie, Ont.-based Speare Construction and Contracting, says that when you’re working with people you don’t know, you sometimes have to vet them and try to get a read on what they’re going to be like. “But obviously the best thing is a good contract,” he advises.
Manage Expectations: Robert Griesdale, Director of North Vancouver, BC-based Blackfish Homes Ltd., says that all negotiations are about managing the expectations of the client. “We always start out our bidding and timeline negotiations with the client by finding out what their expectations are.” If they think that the job can be done 25 per cent faster and cheaper than what is realistic, that throws up a red flag. “I always say, if you can’t make the customer understand and be comfortable about key issues before the work has started, there is no way you are going to be able to once the work has started.”
Present to Key Stakeholders: Damackine advises only doing presentations when all the key decision makers are present. “The most complete presentations become confusing when one decision maker debriefs the other using the broken telephone method,” he says. “The contractor will always have to start over with aprospect who’s possibly biased by confusion.”
Prepare for Meetings With the Right Knowledge: Kelly-Campbell says this allows you to distinguish yourself when in the initial selection process. “Always have something more to offer than that what you are there for.”
The Devil is in the Details: Speare tries to avoid conflict by providing extremely thorough paperwork. He advises including lots of detail in your quotes — what you’re doing and what you’re not doing to ensure you cover off unforeseen hidden deficiencies and things of that nature. “I just find that a well-written quote or contract is going to really protect the client and yourself,” he says. Conversely, poorly written quotes leave you “begging to be taken advantage of, so good details are essential.”
Negotiate Scope Not Price: Griesdale is adamant that contractors should be in charge when it comes to balancing cost and project size. “A lot of contractors try to fit a budget into the numbers that the client has offered up in order to get the job, but often this number is born out of what they have or can finance, and rarely has any association with the scope they want. Too many contractors let the client with no experience set the cost to the scope and this always ends in disappointment and conflict,” he says. “We make sure that the number we offer is reflective of the scope we can do for that cost. If they can’t afford that number, then the scope is revised, not the price.”
In part 3 of Zen and the art of negotiation next month, we’ll tell you how negotiations can raise red flags and cause scope creep.