The second of two parts shows how shooting straight and a reluctance to negotiate help to close more sales and generate more business.



Last month we began looking at what I call The Straightforward Approach to selling custom work, acknowledging the widespread aversion to selling felt by many shop owners. We traced that feeling to the basic mistrust – much of it based on first-hand experience – that so many of us harbor for less-than-honest salespeople of every stripe.



How do we counter that? How do we make ourselves comfortable with the idea of selling and convince our customers that we are worthy of their trust?



Like so many things in life, it comes down to honesty.



Dissecting The Straightforward Approach last month, we identified four steps that should be taken early in the relationship with a prospective client – steps that will give them confidence in both your technical ability to do the job and, far more important, your dedication to ensuring their compete satisfaction.



That's really all folks are looking for, after all. “Give me what I want and don't take me for a ride.” Not an unreasonable request, and as I've often said in these pages before, if you succeed in making your customers happy, they'll tell a few close friends about it. Disappoint them, and they'll tell everybody they know.



Here's a quick refresher on those first steps:



1. Establish yourself as a professional. Give prospects confidence in your ability to tackle their project by showing them a few photos of your work that reflect the type of work they need done. Show a few more of different types as well. Reinforce for them an idea of who their woodworker should be, just as sure as they know their doctor, lawyer or electrician.



2. Provide references. Offer written testimonials and/or contact information of highly satisfied customers. No showroom? No problem. Line up an ecstatic customer or two who is willing to let prospects see your work with you present. If the prospect called you based on word-of-mouth, offer more references only if asked; you've probably already received all the referral you need.



3. Get the customer invested. Make clear that they are an equal partner in their project's success. Ask lots of questions about exactly what they want, tactfully making clear that you can't give it to them until you know what it is.



4. Provide a timetable. Agree to a firm date to return with drawings and a contract, and confirm the appointment by phone the day before.



The Next Steps

The last five steps of The Straightforward Approach build on the trust and confidence you will cultivate with the first four. The difference is that you're guiding the project off of the drawings and into the customer's home or business. Here they are:



5. Show them the money. So your drawings are complete and you've priced out the job. Before you jump in the truck and head to the appointment, think of how you will respond to potential customer objections.



If you did a good job in Step Three, objections to your design will be few or none. And in Step Two, you already established yourself as someone who will see the job through and produce excellent work. What's left now is your selling price.



After reviewing the drawings with the customer and showing them how your design satisfies each of their needs and wants, wait for their response. If you've done your job right, it's usually, “That looks great. What's it going to cost me?”



To answer, use a simple form that's prepared in advance. On it, highlight the costs you project for the job. Show the cost of materials plus a nominal wastage factor. Include the hours you've estimated the job will take, multiplied by your hourly shop rate (including overhead). Show the total, add a fair profit margin. (I explain to the customer that mine is based on a sliding scale – the bigger the project, the lower my margin.)



After you review the form with the customer, set the drawings and your contract (also prepared in advance, see Step Six) before them. Then dummy up and let them read the contract. You'll know you've done your job right when they ask for a pen, sign it and say, “How do you want the check made out?”



Some customers may still try to negotiate price and to me, this a big red flag: Every additional minute I spend trying to sell these folks may well be wasted time. So I focus tactfully, but forcefully, on two points, just like this:



(A) This price, for this project, is not negotiable. As I have shown in detail, it is based on your exact needs and wants, and the price quoted reflects what it costs me to make the project and a modest profit.



(B) If you want to change the project to try to lower the cost, that's fine. But before I spend more time working for you, I need some good-faith money to cover the time I've already spent and the time it will take to make the modifications.



The message is pretty clear: Either you're hiring me today to build this project, or you're paying me for the work I've already done and the time I'll spend redesigning it. The subtext is clear as well: I've designed what you want, now pony up or let's both move on.



6. Put it in writing. Contract writing doesn't require a law degree. A contract is nothing more than a written agreement between two parties, spelling out what each party is gaining from the agreement.



I write plain-language contracts which do the following five things: (1) Name both parties, identifying me as the Contractor and the purchaser as the Customer; (2) describe briefly the work being done, with the statement “details and drawings of which have been reviewed and agreed to by the Customer;” (3) spell out the total cost of the project and the timing and amount of payments; (4) give a time frame in which the job will be completed (i.e., “4 to 6 weeks from the signing of this agreement”); and (5) let me off the hook for delays which arise due to materials shortages, acts of God, and other circumstances “clearly beyond the Contractor's control.”



7. Use change orders. On particularly large jobs, make clear that any changes requested after work has commenced will require a written order modifying the original contract. Include this language in the contract itself.



8. Install carefully, clean up thoroughly. It goes without saying, but the last impression you make upon your customer is the one they'll best remember.



9. Follow up. After the job has been in for about a week, give the customer a call and ask how they like their new furniture. Answer any questions they may have, tell them you look forward to working with them again and, if they are particularly effusive about their satisfaction with the job, ask if they would be willing to become a reference to future customers.



And the process begins anew.



Still leery of selling? Imagine taking your prospective customer, step-by-step, through The Straightforward Approach.

Then ask yourself this: At what point in the process were you “selling” anything?

___________________________________________________________

‘Ask Tony'

Our new “Question and Answer” feature began last month with Tony's answer to the first half of a two-part question from Jack Hanley of Eastern Millwork and Design Inc., about how to calculate shop labor rates. Jack's other concerns were as follows:

“I would like some firm info on material markup and profit – does it vary from region to region? Is there a legal cap on how much I can add? I've not been able to find anything written on this, and when I ask other shop owners, I have only gotten vague responses (maybe they don't know, or don't want to share).”

Tony replies:

There are two reasons nobody is answering you about this, Jack. Reason One: There are no firm answers, locally, regionally or globally.

Reason Two: Those other guys don't want you to become more competitive with them!

How much you charge for the work you do is entirely your choice. While that doesn't mean you should throw darts to get your profit margins or material markups, it does mean you're free to – and I strongly recommend you do – structure your pricing with two things in mind: How much you need to sell the job for in order to make it profitable, and what you think people are willing to pay.

That's a little simplistic, but as I explain further, remember that how you price your work is always tied to what YOU want YOUR business to achieve. It doesn't matter what other people are charging for work. Concern yourself with YOUR bottom line, not theirs.

Last month, as we discussed establishing a Shop Labor Rate, the importance of knowing the number of shop hours you expect to be worked during a given time period became clear.

Similarly, if you want to bank $20,000 or $50,000 or $100,000 in profits during a month or a quarter or a year, you need to factor in markups that will get you there, basing them on: (1) that estimate of shop hours to be worked during the period in question, and (2) what experience is telling you YOUR customers are willing to pay.

As we did with the Shop Labor Rate, we use projected shop hours for profit calculations, too, because the shop is where the tangible, income-producing products are created. Indirect costs are indirect not only because they are hard to assign to one job, but also because, sadly, they are often wasted time — jobs you quote and never get, for example. You need to cover that time and those costs, and factoring them into your overall Labor Rate does the trick.

As for material markups (versus job profit margins), I favor using what some call a “wastage factor,” meaning the material you buy but throw away — that eighth of a piece of plywood you'll never use, for example, or the stain that has surpassed its shelf life, or the sheet of laminate that snapped during fabrication. One could argue that the wastage factor is a fudge factor. After all, if you're charging for full sheets of material and full cans of stain on a job (as you should be), you're already covering their costs, whether you use them entirely or not.

However, by tacking anywhere from 5 to 15 percent onto your materials estimate, you make sure you're covered for a couple of key things: (1) Material cost increases, which may occur between the time you take a job and when you actually begin buying materials for it, and (2) Actual wastage due to production errors, like that snapped piece of p-lam.

To pin down the exact percentage you want to use, I suggest keeping track of your known errors and what they cost in material and labor over a month (or a quarter or a year), and divide the grand total by the number of actual shop hours worked. The quotient can be easily converted to a percentage rate (the wastage factor) you'll need to tack onto your materials estimate to ensure that mistakes don't wind up costing you.

NOTE: CWB reaches the desks of owners and managers, so we gladly preserve questioners' anonymity if they so request. Tony reviews his response with each questioner prior to publication. E-mail your question to anthonynoel@suddenlink.net. Please put “Ask Tony” in the subject line. Even if your question is not used in the magazine, Tony will do his best to respond personally via e-mail.

...if you succeed in making your customers happy, they'll tell a few close friends about it. Disappoint them, and they'll tell everybody they know.

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