Right now, many contractors are saying “I can’t sell work, it’s too hard. The price of materials and the cost of lumber are too high.”
Well, today I’m gonna share how you can succeed in selling your projects even when the lumber gods aren’t helping you. Let’s go.
I know it’s tough out there. I know it’s a challenge. A lot of times, it’s 30x, 50x, 100x more expensive (depending on what you’re buying and where) than it was last year. Those are just the conditions that you’ve been dealt. It’s important that you make sure that you’re controlling what you have control over. You don’t have control over the prices, so quit your bitchin’.
The questions are: How are you going to hit your sales goals? How are you gonna feed the family? How are you going to pay the tax man, make the payments, the overhead, and your salary when material prices are working against you?
1. Vanguard With Prospects
You’re the one who sets the expectations for how shit’s going. You have to be super upfront with people right out of the gate. If somebody calls you up and wants a new deck, In your pre-qualification process, vanguarding might look like this:
“Hey, Tom, I’m really excited that we’re talking about your deck, but I want to be totally upfront with you here. Lumber prices are way outta control. So, I just want you to know that our prices are gonna be higher than they were a year ago. In fact, this deck and the lumber for it might have been 12 grand last year. This year, it’s 18 grand. It just is what it is.”
Set the expectation that it’s gonna be more money. You gotta own this. What I mean by owning this is: the prices are not your fault. The lumber prices are what they are. You don’t control these circumstances.
It’s also not you who needs to absorb the price increase. If you gave somebody a bid 8 months ago and they’re calling you now, you have to call a timeout and tell them that prices have gone up. Don’t you dare eat this. Don’t you dare steal from your family because of the circumstances going on around you.
Get out in front of this and own the shit.
The customer pays for the increase, not you.
2. Lead With Confidence
There are no apologies needed. I can’t say this enough. Customers can either agree to the job or not – it costs what it costs.
When the prices of raw materials go up, and those materials get to manufacturers, and manufacturers get those things to your vendors, and your vendor passes the price increases onto you, everybody’s paying more. It’s not rocket science. You need to do the same to your customer – with confidence.
So many of you are struggling to sell right now because you’re being a bunch of babies about these increases. You’re the one who’s making it your problem, and it’s not your problem. It’s the customer’s problem.
It’s up to the consumer to decide if they want to spend that much money or wait a year to see if prices go down, and build the project then.
You guys are working your sales process from a place of fear instead of confidence. That needs to change.
3. Market More
A lot of you are not confident in selling shit at the price that it costs because you don’t have enough damn leads. You have to take your marketing seriously.
If your phone ain’t ringing with qualified prospects, if you’re not building your brand, if you’re not investing in that, then you’re not gonna have a lot of leads. Then you’ll be begging for a job, happy to absorb the price increase yourself – and that can’t happen.
People still want what they want and they’re gonna spend the money to get it, so you better market your ass off.
You claim you don’t have any money to market? You have a cell phone! You have a computer that you walk around with that includes a movie studio. Use that shit.
4. Hit Your Profit on Labor Only
Price your labor to recover all of your overhead and your net profit so you don’t have to mark up materials if you don’t want to.
When prices are out the ass, it can be tough to buy lumber for $12k and charge $24k for the labor – that sounds high. It can be done, but for those of you looking for a different way, make sure that your price to pay the guys in the field and to pay your overhead and net profit, is just based on your labor.
That way, when you’re selling to a prospect, you tell them that material prices are what they are. And that you’re not marking it up. Then, you charge a fee to handle the materials.
Here’s what I’ve done on large projects where I knew doubling material would put me over the edge: I took the receipt for the materials and handed it to the customer. Then, my vendors put a hold ticket on it. The customer would pick up the phone and tell the vendor they got an invoice to pay, and they’ll pay for it. Then, that material expense never goes out of your business nor does the income for it ever come through your business. So, you’re generally just working with your labor numbers.
Don’t let it scare you. What I mean by material markup is that basically if a guy costs me 40 bucks an hour, I don’t charge $50 for him. I’m charging $100 per man hour for that guy who makes $40. $100 – $40 = $60, which means I have 60 bucks left, and that’s $60 of gross profit per man hour.
Take the time to make sure that you’re recuperating all of your overhead and net profit in your hourly rate.
Side note: Don’t go out and tell people that you’re charging them $100 an hour. What I’m saying is that if you look at a project and see that it’ll be 80 man hours, do 80 x 100 and charge $8,000 for labor. It’s your job to bring the job in on time and within budget, and the materials just are what they are. Then, you hand the homeowner the receipt.
Stop making lumber prices and material prices your problem. They’re not your problem. The prices simply are what they are.
Get the math right. Learn to sell, problem solve, and it’s game over. You’re moving on. You’re kicking ass. You’re making money.