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Know Your Value As A Trades Business – How To Achieve Stability
Your Value – Stability
This is another video in the series on ‘Knowing Your Value’.
I’ve said it before, and I’ll say it again, ‘Customers don’t buy your price. They buy your value.’
That’s what you need to do in sales.
Don’t just price up a job, chuck your price in the ring and hope for the best. That’s not the right way to do it.
This is a true story about the value you bring, particularly, if you’re competing against businesses who are undercutting your own price.
It sounds fine to your customers, doesn’t it?
“Oh, yeah the same stuff, only cheaper”, but it’s not the same.
It might be cheaper, but generally speaking (particularly in your industry), if somebody’s considerably cheaper than you, something’s different along the way. They’re going to use cheaper materials and components.
And here’s an example of how things can be different.
Risk is a big factor.
I have a client. He makes custom electrical cabinets – switchboards and things. He supplies electrical contractors. He makes high-quality, expensive ones that are built to last using standardized and high-quality components.
Recommended Reading: Price vs risk (cheap tradies vs expensive tradies)
A new electrical contractor came charging into town full of big talk and big bullsh*t and said “We’re going to shake up this town and undercut everybody”.
These complacent electricians are going to make some noise and take market share.
My client thought they were full of sh*t frankly, and he said, “I’ll give him 5 years”. They lasted 3 years. They went into liquidation last week. They made 20 local electricians redundant. They ordered more than $400,000 worth of stuff from one national electrical wholesaler and they didn’t order anything from my client. They didn’t buy his lovely, expensive things. They bought cheap sh*tty ones from someone else and lumbered on poor customers with sh*t cabinets.
And here’s why it’s a useful story to demonstrate that charging a bit more means stability.
They went under because they didn’t charge enough. They had skinny margins and they couldn’t sustain their business. And to tell your customers that you’re charging more and you have a sustainable business means ‘we’re not going to go under and leave you in the sh*t’.
And here’s where it hits home for the customers – 9 fairly large commercial electrical projects were left hanging and not completed. So about 9 builders and developers or commercial customer’s businesses were left with a project not completed.
That’s bad news for those customers, isn’t it?
Their projects are compromised.
Undercutting on price and having skinny margins as any trade business means you compromise something.
- You compromise quality. They’ve bought cheap and sh*tty cabinets rather than good quality ones, and in the end, the customers are going to pay for that. They’re going to have cheap components that are going to need replacing soon. They cut corners on the job when they’re trying to work to a price.
- They are under pressure. Tradespeople are trying to finish things quickly and cut corners. And what happens is either the general sh*t service over time and the end-user thinks ill of whoever did the project. Or the builder suffers because the defects get caught and the builder’s reputation suffers.
Undercutting means lower margins for the electrical contractor – which means more risk of going under because it’s more precarious. If you’ve got low margins and not much cash around, it’s very easy for you to go under.
They got skinny margins, something happens, bang(!), they’re gone.
So a builder might say, “We can get someone else to finish it. If that happens, I can manage that risk.”
And that’s true. There are builders not going under because the project doesn’t get completed. Of course, another electrician will come in and finish the job. Probably, not at the same price. And probably, the other electrical contractors that is in contact with the ones who didn’t give the job to, I doubt they’re going to go, “Oh let me drop everything, and come and get you out of that hole you got yourself in by being a cheapskate and giving the job to some other asshole.”
They’re probably not doing that. So the project is going to suffer – there will be delays or an additional cost or maybe even contract penalties from their customer. So, there’s going to be a cost in money, stress and business interruption to the Builder or the developer.
There is a cost and no matter how many builders say, “No, no, I can manage that”, that’s bullshit. It’s going to be shit if that happens to you.
So, whatever the builder says, the cost is significant and the risk is significant too.
It’s quite likely that the cheapskates are going to go under at some point. They all seem to.
Educate Your Customers
As always, it’s up to you to point this stuff out to your average customer. And remember, I might be using builders in this example, but whoever the customer is, it’s still shit if your contractor goes under, leaving your project incomplete.
And the customer won’t be saying, “This company is cheap. I hope they’re stable”.
He’d be going, “Woo hooo! Well done me, winning! What a bargain I’ve got with the same service”.
It’s up to you to point out that it’s not necessarily the same service.
It’s up to you to point out:
- How the technical solution is different, or whether they’ll be cutting corners or how they’ve managed to allow only those many hours.
- That if they’re cutting their margins and undercutting everybody, he or she’s at risk of them going under and not being stable and reliable for their project.
You need to make this point in your marketing consistently. And you need to make this point in your sales process. You need to hammer it home. You need to make sure that your customers cannot ignore the risk that’s involved in choosing the cheap undercutters.
That’s your responsibility to yourself as a salesperson for your business, but also to your customers if you like them. Get them to consider what the cost is if a problem occurs or if the supplier or contractor goes under.
So, this is part of building your marketing machine. Knowing:
- This value
- This stability
- Your competitor’s value or lack of it
- The risks of going with your competitors and why they might be rubbish
And it’s part of your sales machine to be hammering it home so they can’t ignore it and just pretend you’re all the same. Hammering it home so they have to make an informed choice about who to go with and they can’t just buy the cheaper one and pretend it’s the same.
I’ll help you. Risk is important. Don’t neglect it. Build an understanding of risk into your marketing and sales.
If you want me to help, there are four ways you can engage with me:
1. Subscribe to these emails and get them once a week in your inbox so you never miss a video from me.
2. Join the Trades Business Toolshed Facebook Group where you can watch these videos, ask me questions or talk to your peers.
3. Attend my next Tools Down workshop.
4. Book yourself a 10-minute chat with me. We’ll talk about whether coaching is right for you now and if it is, we’ll go further into the process before you have to make your mind up.
See you later.