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Mike's Columns by Topic • Nick Drummer, builder/remodeler
RemodelMAX and ClearEstimates
Mike's Book on Sales
If I SELL You I Have a Job
If I SERVE You I Create a Career!
A linear sales process which covers:
1. answering the phone
2. screening the leads
3. setting the appointment
4. educating the prospect
5. establishing distinction
6. making the presentation
7. justifying a higher price
8. making the sale
9. collecting the money
10. assuring repeats and referrals
Written specifically for remodelers and small volume homebuilders.
What Others Say About Mike's Book:
"Hey Mike, purchased your book last year. It has transformed my operation. I am unable to attend any of your seminars due to my schedule. I am writing to know if the content of your seminars may be available in tape or book form?
Thanks so much. Ronnie Rogers, Little Rock, Arkansas
"Hi Mike, just a note to thank you for the information given at the Baltimore seminar. I
have made $30,000 in commissions in the two months since I started creating the preliminary design right there in the customer's kitchen. My son Jim is doing the same. Also, the information on treating the home as a "system" is the frosting on the cake. Joe C., Bel Air, MD.
"Hi Mike, this is Jim C. from Bel Air, MD. I would like to know when you plan to be up this way again, as I'm bringing most of my office with me next time. I have added exponentially to my income by designing the additions (for a $650.00 fee) and then turning around and selling the addition for good money (100% mark-up) using your approach.
"Mike, business is great. I have opened my eyes to a whole new world with your information. Thank you for staying in touch with me and sending all those e-mails. At the end of last year, I put $37,000 (first time ever) in the bank thanks to your approach. Skip, Miami, FL.
"Hi Mike! I am about ½ way through your sales book and look forward to reading more every day. What an enormous help it is to us… Laurie J., Mechanicsburg, PA.
"Mike, Sandy and I want to thank you for your material. We're ready to massage our sales techniques. Please keep us on your list. Sincerely, Steve S.
"I highly recommend anyone interested in developing a professional system of marketing and sales for their contracting business to contact Mike Gorman. With kind regards, I am O.W. "Woody" D., Winter Park, FL.
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Tool Box Order Form
Ordering your tools is very easy following sections 1 through 4 below. If you have comments or questions, see #5 below;
How to Determine a Fair Price - Laying the Groundwork
Before presenting a proposal to a prospective client, it's customary to determine job cost, including; labor, materials, subcontractor costs, plans, permits, cleanup, rental equipment, and so on. Any of a variety of methods can be used to estimate job cost, each more or less accurate depending on the estimator. It's normal to add an amount for overhead (the cost of operating our business) and profit (the just reward earned for the effort and risk involved in producing the job) to this job cost figure in order to determine the price to charge the customer. When we speak of profit here, let's say it is before tax profit, for the sake of simplicity.
In spite of the fact that many pages have been filled with words describing how to identify and understand the ever-changing numbers for overhead, it really can be easy to determine what percentage of every dollar that comes in the front door gets spent on items that are not directly related to the job. These numbers make up the category of business costs we call overhead. Really, there are only two ways to get money out or our businesses. One is by writing a check for overhead, the second is to write a check for job cost.
Let's assume we have been in business for a year or more but have never calculated our overhead. We can perform a simple audit of our checkbook for the previous 12 month period by taking a sheet of lined paper and writing two headings on the top of the page, on the left we have overhead, on the right we have job cost. Now we'll go through all the checks we wrote during that 12 month period and write the amounts from the checks to which we couldn't assign a job address under the overhead heading. These would likely include bills for; rent, utilities, transportation, communication, office equipment and supplies, postage, licensing fees, liability insurance, salaries and benefits for people in the office (including ourselves as the owner), and more.
As we find checks paid for materials, labor (including labor burden, benefits and other perks), subcontractors, plans, permits, rental equipment, and cleanup, for example, we list these check amounts under the job cost heading, as we can easily associate these amounts to a job address. If we haven't been in business for a year, we may have to project what these numbers will be to the best of our ability, imagining what is likely to happen in the coming year.
We also would like to find the total amount of money we brought into the business (income) during the period we are exploring. That information should be available in bank statements or the checkbook. At the end of this exercise we should have a total number for income, as well as for job cost and overhead for the preceding twelve-month window. If you haven't been in business for twelve months, the window you study might be smaller than a full year. This means you might have to estimate what will happen during the months that don't appear in your window, remembering those charges that don't happen every month, like; license renewals, accounting or legal fees, and so on.
To get the most use of these totals we have assembled, we should look at the numbers in relationship to each other. Overhead is most useful when stated as a percentage of income. So if we had $200,000 income and our overhead worked out to $60,000, we could use this formula: total overhead/total income = overhead expressed as a percentage, (60,000/200,000 = .3 = 30%). This indicates that for every dollar of income we receive, we spend 30 cents just to keep the business open. This exercise can be an eye opener for some.
Now, let's assume we have a project with a job cost of $10,000. In order to come up with the price to propose to the prospective client, we need to increase this amount by enough to pay the overhead and hopefully generate a profit. So our equation now looks like this:
Selling Price = Job Cost + Overhead + Profit
Or, if we want to use a mathematical shortcut, we could multiply Job Cost by a factor sufficient to pay our overhead and give us a profit as well. Let's try this as an example:
Selling Price = Job Cost x 1.66
This means that we are going to increase our job cost by 66% to arrive at selling price:
$10,000 x 1.66 = $16,600.00
If our estimated job cost is accurate and our calculations for overhead are correct the outcome should be:
$16,600 (selling price) - $10,000 (job cost) - $4,980 (overhead) = $1,620 (profit)
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Winning the Job at Your Price
People don't think in words, people think in pictures and/or images. Words are the raw materials of thought. When spoken or read, that amazing instrument, the mind, automatically converts words and phrases into mind pictures, according to research in Neuro Linguistics.
Hearing a word initiates a process by which pictures in the mind appropriate to the individual's experience of that word are accessed. Hearing the words; "Jim remodeled his bathroom," creates one picture. The words; "He installed a new whirlpool tub in his bathroom," creates a different picture. The picture you see in relation to the whirlpool tub most likely is different from the mind picture another person would access in their mind.
When the remodeler speaks to the prospect, he or she is, in a sense, a projector showing movies in the minds of the prospect. The pictures seen by the client are more or less similar to those of the remodeler depending on the communication skill of the remodeler and the experience bank from which the prospect draws his or her photos. The presentation book or, when a laptop computer is used, the presentation screen, bypasses this inefficient communication system and creates a remodeling movie more assuredly composed of similar pictures. This presentation tool, when used efficiently, creates a movie in the prospect's mind consisting of the entire remodeling process, with the final scene being the homeowner enjoying the new environment.
Use of the Presentation Book or the Presentation Screen (laptop);
Remodelers who don't properly present their product leave the door open for competitors. Remodelers who use a presentation book find that it increases their closing ratio substantially. Remodelers on the leading edge of technology have the presentation book on their laptop computer and use a power point system to share this information at the kitchen table. One reason prospects may hesitate to take the necessary steps to become customers is 'fear of the unknown.' The presentation book is the ultimate tool used to educate the customer about the remodeling process, minimizing the fear.
Read the presentation book to the prospect page by page, this age regresses them. When the remodeler sees that he is getting a positive response, he stops for a second, letting the prospect absorb the information. The remodeler uses a little of the kind of tonality used with a kid. People like it. It makes them feel good. Remodelers do want the prospect to feel good, it's a valuable sales objective. Additionally, eyes do not "see," they compute what is placed in front of them. Everyone translates what is 'seen' based on their own experience. Remodelers are highly paid translators who translate today's services and products into solutions for the customer. While using the presentation book, the remodeler translates the value of each point to the homeowner. The remodeler realizes that if they fail to translate what is on each page of the presentation book, the prospect might reach the wrong conclusion. The remodeler uses the presentation book to identify the difference between the company represented and the competition. Establishing such a difference is crucial: If the homeowner can see no difference between this company and the competition, the purchasing decision may be made simply on the basis of price.
Benefits to the Remodeler;
Benefits to the Sales Manager;
Experienced users report that the one single step remodelers should take to increase their ability to sell for a higher mark-up is the proper use of the presentation book. The presentation book is organized in such a way as to lead the prospect through the entire remodeling process by explaining each step in a linear fashion.
The Remodeling Company
Company history and philosophy
Resumes of key personnel
Certificates of Insurance
Business Licenses (if applicable)
The Remodeling Process
Copy of agreement
Additional work order
Application for financing
Right of rescission
Lead-based paint disclosure
Lien release letter
Pre-construction conference form
Job-site communication form
Quality control pre-completion checklist
What the Company Does, for Whom and Where
The customer list
Awards, honors and articles
The guarantee or warranty
Evidence of pride
Construction of the presentation book can be as simple as stopping by a photocopy store and requesting 25 pages of material known as 80-pound card stock. The color should be light gray, light blue, or hunter green. Request that this material be bound with the Comb Binding System. The front and back of this 8 ½x 11-inch book should be of clear acetate. This book is the skeleton for the presentation book, the expense at this point, around $3 to $5 dollars. The first page behind the clear cover is simply a piece of company letterhead. In the lower right corner the professional remodeler's business card is attached with a glue stick. Across this page is written perhaps in flowing calligraphy; "2015, Our Seventh Year…" Of course, the presentation book can be much more elaborate. Some remodelers choose a leather binder. Experience dictates that clear sleeves designed to cover and protect photos and documents tend to inhibit easy viewing. With proper planning, a stock of photos and photocopies allow the book to be updated whenever necessary.
To establish rapport verbally, match the representational system verbally. The client says; "I feel like I need a new kitchen." The remodeler replies by saying; "I feel like you are entitled to that"... We all have choices in verbal communication and can communicate the same idea in all representative systems. The remodeler tailors use of the presentation book to match the representational system of the prospect by presenting his or her translations for every page using the same representational system the client displays. The following numbered items represent the contents of the presentation book. Each numbered item includes examples of how the remodeler translates the information in each category of the presentation book to the prospect matching the use of the prospect's representational system: I see, I feel, I hear. The examples are suggestions only, experienced remodelers know that to use someone else's words when communicating is as uncomfortable as wearing someone else's shoes. The suggested wording should be personalized by remodelers and expressed in their own words.
Percentage of population using various verbal representational systems;
40% I feel: "I feel comfortable.…" (kinesthetic comment)
"Do you feel interested in knowing more about this?" (matching kinesthetic response)
35% I see: "I've seen this...." (visual comment)
"Does this look interesting?" (matching visual response)
25% I hear: "I've heard about...." (auditory comment)
"Does it sound like something you would like to pursue further?" (matching auditory response)
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"Remodelers, please raise your prices!"
Hello, My name is Mike Gorman, you may know that I have been training contractors how to raise their prices nationwide for over fifteen years. What you may not know is that I am presenting seminars for contractors both in small groups and privately in their offices.
I want you to sit back in your chair and get an image in your mind of your happiest customer. You may work for this customer every year. He or she may refer you to neighbors and friends. You might close your eyes until you get a clear picture of this person, and open them to continue reading when that picture is clear in your mind's eye. Close your eyes now until you have the picture!
Now that you have that picture, let me ask if that customer, your happiest customer, is the customer who beats you up on price, or happily pays your asking price every time? If your experience is like almost everyone who performs this exercise for me, you realize that your happiest customer is the one who pays the most! I'll teach you how to find more clients who will pay you more. Much of what I share with other contractors comes from my experience running my own firm in Denver, Colorado. During twenty years as a contractor I earned various honors including "Top 500" and "Big 50" status. From this experience I have developed a system to help you earn higher prices, while still converting your clients into raving fans.
My system is not perfect, but it is good enough that several "Fortune 500" corporations have paid me to travel around the country and present it to thousands of contractors. I have spoken of my system by invitation, at every major convention and trade show over the years with the exception of the International Builder's Show. When I was finally invited to the show in Las Vegas; January 2003, my attendees were so thrilled that I have already been asked back for next year. By now you have to be asking yourself: "What's in it for me?" Let me explain; through seminars and coaching I will not just deliver information, I will provide you with books, forms, programs, materials and information, and then assist you in implementing these systems in your business. These might include systems for your administration, sales and production departments.
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