Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
TBC Podcast Ep 3 ''Redefining Value ; Why Quality Beats Cost
92 Plays2 years ago
In Episode 3 of "The Better Contractor Podcast," host Brent Oberlink leads a compelling discussion on the concept of value in the contracting industry. Joined by industry experts, Brent delves into why prioritizing quality over cost is essential for contractors aiming to deliver superior results. Through insightful anecdotes and practical examples, this episode sheds light on how redefining value can positively impact businesses and client relationships. Whether you're a seasoned contractor or new to the industry, this episode offers valuable perspectives on enhancing your approach to delivering exceptional value in your projects. Tune in to gain valuable insights that can elevate your contracting business to new heights. Follow us on all socials @TheBetterContractor
Recommended
Transcript
Introduction & Episode Topic
00:00:12
Speaker
All right, welcome back to another episode of The Better Contractor. As usual, so far, we've got the bean king next to me. Hello. AKA John. And I've got Travis. Still working on that. We had a few nicknames before we started recording, but he didn't like it. But we're still thinking about it. Yeah, we'll work on it. Anyway, today, we're going to talk a little bit about pricing your services for success.
Impact of Low Pricing on Value Perception
00:00:37
Speaker
So we've noticed in our line of work,
00:00:41
Speaker
And it's kind of a little bit of a sore subject for me, really. But you go back and you see all these different low bidders, you know, this is in our line of work, whether it's in long, it's in every industry. But it seems especially relevant in the contracting world. So whether you're building a house, you're doing long here, you're doing landscape, you're doing tree. There's so many people that want to go just low price.
00:01:04
Speaker
And I feel like that's a little bit our fault, meaning that a lot of us, we don't do it here, because I've realized it. But a lot of people, that's actually their marketing effort is, hey, we're cheap, use us, choose us. Affordable. Yeah, we're affordable. So when you say it's our fault, it's not? The industry's fault. Yeah, okay. Yeah, because too many of the people in the industry are allowing their marketing efforts to be focused on that as well.
00:01:29
Speaker
You know, and even Atlanta Corp, like we've went through over the years and kind of determined by our bidding process, who honestly is just completely low cost and who out there is best value.
00:01:42
Speaker
And internally, we're best value all the way. Like I actually, well, actually, to be honest, we don't bid anything out. We basically choose our vendors simply based upon their core values. So, you know, well, and honestly, too, we talked about this earlier. One of the big things I look at is, do they respond to an email, you know, same day or, you know, within 24 hours? Do they deliver the product or the service in a timely way?
00:02:08
Speaker
do they embody our core values? And are they a direct extension of us? And the answer is no to those. I really don't care if they're 50% cheaper, because I'm not going to use them, because that's not how we operate. So it was the consequence of going with somebody who the values are misaligned. So, in my opinion, so if you're sitting here telling your customers in your marketing efforts that, hey, you know, we respond to you as a customer within 24 hours, or whatever,
00:02:34
Speaker
If I have a vendor though that I have to rely on for that answer that that customer is asking for, or part of my product or service also relies on them. So my promise to you as a customer is 24 hours or whatever it is, but now my vendor is not able to help me, you know, actually do that for you, then I have the wrong vendor. And I know for us, it's helped us so much too with just, you know, being able to deliver. Yeah.
00:02:58
Speaker
So in house, we do not really put stuff out at all. And we don't market ourselves as the cheapest either. And there's a lot of companies that still do and there's just so many issues with that. And in our world, we have to deal with procurement departments. So it's a little bit different than like an individual homeowner. But again, even with individual homeowners, I can sit here and pick, you know, who is my customer.
Choosing Vendors & Value Alignment
00:03:21
Speaker
you know, as a long, long landscape company, I can choose to go through and say, Hey, I'm going to do this higher end neighborhood, or I'm going to do one that's not as high end. And if I'm doing the one that's not as high end, for the most part, it probably is going to be more low cost centered. Just logically, that's what it's going to be. If it's one that's more high end, I'd probably dealing with someone who really just wants me to handle it more so than just be a little bit. They don't want to babysit my butt.
00:03:47
Speaker
And I know in the neighborhood that we're in and even Even previous place we lived it wasn't necessarily high-end But there was still that value proposition of and what's my time worth? what's the time that I'm spending with my kids or not or other interests and I I'll be honest we said a Few years ago. We lived in Missouri. We moved back to Texas Two and a half years ago
00:04:12
Speaker
But in the Missouri place, we would have paid more than what the person was charging. We're paying higher than what we maybe wanted, but it came down to what's the value. If I do that with my skills and my equipment, it's going to take me a day. I'm going to lose a day of my life Saturday or whatever. And especially for these places that have homework associations where it's required to have certain maintenance standards.
00:04:41
Speaker
I think there's a lot more out there. And I know in the current neighborhood that we live in now, there's a lot of people who would just, they would pay more and they would pay for somebody to come out. So there's two things that have occurred. One is you can't find consistency. You can't find state, you're like, hey, we needed our yard mode.
00:05:05
Speaker
like Tuesday you said that you're going to be out there get it rain whatever labor challenges. Now we're like a week and a half since then we're getting notices from the HOA. There's been no communication on your part I'm having to reach out to you
00:05:21
Speaker
to find out what's going on. And so you're constantly hopping, and there hasn't been a great place to, and maybe there's a tool that can be developed to you, but where do you find these? In a lot of the Facebook posts and social media, like, hey, who do you use? You constantly see those, but majority of the conversations with the neighbors who ended up pivoting, like, I'm just gonna mow myself. Just because you couldn't find reliable, you couldn't find quality, you were willing, and we were willing to pay more,
00:05:50
Speaker
those conversations didn't come up.
Articulating Value Over Low Prices
00:05:54
Speaker
Yeah, so as a company, if you stay in that, you know, we're low price mindset, you're never able to deliver. And don't necessarily assume that they're wanting low. Talk about the value. Talk about the value proposition. I know a lot of our neighbors and us too, we'd hear that like, okay, you're charging X amount, articulate a little bit more about what you're getting for that. Don't just assume
00:06:18
Speaker
that they're wanting the lowest and feel bad about it. But if you can articulate, hey, this is my price, and this is what you're getting for it, we're going to communicate with you. We're not like those show that the differentiation between I think that's what I know conversations with people, some of the people in the industry, like they're just they're just assuming that they want the lowest bid when it comes to residential is not maybe necessarily the case. And, and when they did get pushback,
00:06:43
Speaker
there wasn't really a great articulation of what's the value they're getting at. So yeah, we're not going to be the cheapest, but here's who we are. Here's what we represent. Here's what we'll deliver. Yeah. And then you got to make sure you deliver it though. I have seen that happen a few times with some companies where they, they market themselves at X, they deliver, you know, below that, then you're setting yourself up for disaster as well. So
00:07:06
Speaker
But I know in house, like, you know, I look at, again, we deal with procurement departments. So some of them, that is their policy, their policy is low bid. And some of the policy is best value, meaning that you maybe take five bids, and then you automatically kick out bids one to five, the highest and the lowest, then you're choosing based upon the three in the center, which are probably more accurately priced, because most likely,
00:07:30
Speaker
The lowest bid either is not going to deliver or he messed up his bid and it's actually not accurate. Which means you're probably going to have a legal contract dispute or something on that vendor at the end. And number five, most likely bid at high, to be honest, because he was busy and he didn't want to tell you, no, we're not going to do your work. So instead, he just bid at high enough knowing that you're not going to accept him. And if you do accept him, there's enough profit in that job that he'll make it happen.
00:07:54
Speaker
You know, so in our world though, with procurement, you know, we've kind of learned to not necessarily bid some of the ones that is low bid because it's honestly, it's not worth the time because bidding a project is not free. It ties up talent, it ties up people to go bid it, to look at it, it ties up office help. And if your chance of success is 5% and the customer doesn't value any of the stuff that we are selling, customer service and all the value added type stuff, then they're not your customer anyway.
00:08:20
Speaker
So, and when you're the low price contractor, you always have to be in a state of fear of somebody coming in and providing the same service for cheaper.
Risks of Solely Low Pricing Focus
00:08:34
Speaker
Yeah. Yeah. Cause you're not, you're not, you're not doing anything about value. Right. This is simply your price and your prices.
00:08:39
Speaker
Honestly, it's a commodity, meaning that anybody else can probably beat it if they're willing to work cheaper than you. But what we see in all those is you're not going to be in business for very long if you don't make money. That's just business 101. And you see with low bids, if you've made a mistake in your bid, and that's the trouble with procurement departments,
00:09:02
Speaker
If you've made a mistake in your bid and you're still going to stay in business, still perform the contract, you really only have two options or a few options. Cut corners, which means safety, quality or whatever, or don't perform the whole scope of work, which we've run into on projects before where we come to a right of way or a job site where it's very clear that the person that was there before us did not do the entire scope of work. And then we get there and we're like, well, shoot.
00:09:29
Speaker
we got to do this whole thing ends up causing us actually more money because we're not going to skip that spot. So that spot took longer. So again, contract issues too. So was you going to say something too? Oh, so anyway. So it's a little bit of a mindset. So for the contractors out there, the long care landscape, whatever, you know, what can you do about this? And I think really the answer comes back to changing how your marketing is selling your service. Stop simply making it about low bid only.
00:09:59
Speaker
Find out what you're good at. So are you good at you know when your crew shows up they always perform the scope because that's actually Not uncommon to not do
Marketing Strategies: Focus on Strengths
00:10:09
Speaker
the whole scope, right? You know that on how many times even our house not the current contractor but previous I'll walk outside and they forget to blow the sidewalk off not a big deal but I still have to go get a leaf blower and blow the sidewalk off or they forget to edge or they forget to do the leaves or they forget to do whatever and
00:10:24
Speaker
And that's where, you know, so if, if your strength is that or your strength is, you know what, we have all brand new equipment. Like we're going to show up every week because our equipment is more reliable or our guys are passionate about what they do. So find those strengths that you're good at. Market on those strengths instead of marketing on the price and then sell that and market that.
00:10:44
Speaker
Another there was a couple conversations So a couple of the expos and some of the breakouts they had was dealing with so the economic conditions and higher inflation rates and the cost of doing business and there was a general fear of Well in order for me to even just maintain I'm gonna have to raise prices and I don't want to have that conversation We're gonna lose business and they built it up in their head. There was a couple companies. There was one there was a
00:11:07
Speaker
well over 400 crew pretty successful one of the Midwest and then there's one on the East Coast that was about 60 but a very successful one and they didn't hesitate as far as yeah we raised prices to accommodate for it.
00:11:23
Speaker
And the thing that was common between both of them was we articulated that to the customers. We had a very clear message like, hey, this one is costing us. We're not just raising it. I mean, what you're feeling there, I get it.
00:11:38
Speaker
I think both of them said the majority of the time, 9 out of 10, they didn't lose. They understood, the customer understood. Pricing is so important in multiple aspects and I think there's just a fear that if
00:11:55
Speaker
If I ask this and I don't fully understand maybe it's just rumor and partial experience to you that they've come up against some people who push back on price and that made them gun shy about about charging maybe a higher price to cover doing things right. And so they just feel like they have.
00:12:14
Speaker
But it came down to being able to stand on your values or principles understanding what what you're doing. The value that adds the importance of that and being able to articulate back to the customer. So even in those conversations where they weren't the cheapest already.
00:12:29
Speaker
they're having to raise prices, those conversations went better than what most people would expect because they were able to communicate to the customer. And because they're actually delivering. Yes. Because if they weren't doing a good job, the customer will then will say, I wasn't happy anyway, I'm definitely not paying more. So again, it really goes back to, you know, marking yourself, but then delivering on what you're saying
Importance of Cultural & Brand Integrity
00:12:51
Speaker
you're going to do.
00:12:51
Speaker
In a market like we're in right now, if your customer doesn't understand that you have to raise your prices or your rates, they're probably not a customer that's worth having.
00:13:03
Speaker
And to be honest, you're probably going to have some customers that there's a threshold that they're dealing with things too. So it's not to say that 100% and neither were those companies and they did have some customers about out, but not compromising your principles. And I think that goes just go back to culture and who you are as an individual, as a company, as a brand and staying true to it.
00:13:28
Speaker
and through economic times where it's good and bad your brand will sustain itself and your those customers will come back I mean social media and people talk and if you're staying true to your brand whether that one customer dropped out or not conversations will persist and
00:13:52
Speaker
that you'll still be represented in those conversations when they're like, hey, I can't find anybody or like, hey, this company, we've used them for years. So staying true to your value, understanding who you are, what are your values, what are your morals, ethics, what's your culture and staying true to it and not compromising on that just to go to lower cost. And I think it's circling back around of
00:14:18
Speaker
I don't think the fear there that I have to, so long as you add the value you deliver or not and they understand that that's part of your brand and you articulate that to the customer. Yeah.
00:14:31
Speaker
Yeah, and we'll talk about culture some in previous or future episodes. The culture doesn't just stop at the employee. Like it also, you know, goes to the customer. So, you know, if I can't imagine running a business and being, you know, thinking, Hey, these are my core values, or whatever, this is my culture, and then going and selecting a customer that doesn't meet it either. Because technically, your culture is extended to there. So
00:14:55
Speaker
you know, and that again, goes back to that conversation, you know, if you're, like you said, doing a quality job, most customers are going to be fine with a 510% increase anyway, because they are very satisfied with what you're doing. And they've probably been burnt in the past. So they're just they're just happy they found you. Yeah. So yeah, so as long as it's not like a 100% price increase is 510%, which is most time what you're asking for.
Benefits of Appropriate Pricing
00:15:16
Speaker
They're gonna pay and move on.
00:15:18
Speaker
you know, and if you do lose one or two, if you've increased your race by 5%, and you lost one or two customers, three customers, and that equates to 1% of your business, you still do your business by 4% and you have less work to do. So and going back to not to get into whatever that podcast is for culture, but that manifests in other ways when your people know that you're taking care of them. And it's a career for them. It's family, you have less turnover, you have less incidents, which
00:15:45
Speaker
actually makes up for the revenue that you have increased or decreased for that one job, having stability and longevity in the business. It
00:15:58
Speaker
Yeah, and not having to expend money in other ways for having lesser values or standards. It'll even out. Yeah. Yeah. Yeah. And like you said, you know, being able to charge the customer what you actually need to be charging, it does allow you to actually pay the employees enough to retain them. It does allow you to go buy that newer equipment, which is more reliable, which then allows you to always show up to the job site, hopefully, because you got newer equipment and better employees.
00:16:26
Speaker
It just allows you to better perform all together, which means you're beating your competition. I think at the end of the day, kind of in a nutshell a little bit here, you cannot market yourself strictly on price, unless that's the game you want to play. There are contractors that do that, and that is their little niche, and they're good at it. I'm not going to name competitors on this show, but there's some I can think of in my head that are very, very good at being cheap, and they're huge.
00:16:55
Speaker
That's not what I want to do. And they're working on very slim margins, which means they have very, very little room for mess ups. And that's just not the business model I know I want anyway. But anyway, so, but you got to be very careful, I think, too. I think some people may hear this and be like, oh, well, I'm going to increase my race by 20% tomorrow.
00:17:17
Speaker
It'll be a recipe for not not for success. If you do that and you go to that customer site and there is nothing at all different than there was last time. So if you show up and your crew is not performing, not executing the work, leaving stuff behind that customer has to babysit your work.
00:17:35
Speaker
If you're rolling up in a janky truck in a falling apart box trailer, you know, with an old mower, more than like they're thinking, huh, something's off here. I have this marketing effort, but this is what showed up and they're charging me for this, but I'm still getting the actual low bid contractor. You cannot do that. So you're going to have to make sure contractors that you're doing both, you're delivering on that, that, that, uh, service. Um, what else are you guys going to add?
00:18:03
Speaker
My favorite saying of all time is you get what you pay for. Oh yeah. We've, we've, we've used that a few terms around here. We've used it
Challenging the Low-Bidder Mindset
00:18:11
Speaker
a few times. Um, you know, and I go back a little bit to, you know, we kind of use that expression to like, you know, push the other contractors to stop little bit in each other. And, but a little bit that goes back to, it's not just that it's a little bit, you know, us calling this out a little bit too. Most people don't say much about it. They just get mad and they move on to a different customer, but,
00:18:32
Speaker
At least for you guys that are working more in the commercial space, you definitely should be calling this out some because I do have a little bit of a pet peeve with some of the companies that say, Hey, we have these core values. We're, you know, all about safety. We're all about quality. We're all about this. We're all about that. But then they choose whoever is a cont, a vendor, a contractor.
00:18:52
Speaker
and they let them do whatever on their job site. And I don't, to me, I view that job site as that's an extension of me. So therefore whoever I choose to work that job site also needs to be an extension of me and my core values. So, you know, calling that kind of stuff out, like you can't demand this.
00:19:10
Speaker
and only pay this, it's not how it works. Business, you're going to charge for what you get. So if you're going a little bit, but you're demanding this, those two are never going to meet. You're going to get this, you're not going to get that. I do have a story. So we recently started working for a company that, let me back up.
00:19:32
Speaker
We started working for a customer who we've done business for in the past. And they, I can't say with 100% certainty that they went the low price contractor route, but the contractor was unable to perform the job. So they reached out to us and asked us if we could come in and finish that job for them because their contractor is failing.
00:19:59
Speaker
And we did and it turned out to be a very lucrative contract for a pretty lengthy amount of time. And hopefully that customer realized that they're better off going with the contractor that they know they can rely on, they can trust and do the job and do it safely. Yeah.
00:20:19
Speaker
That's not the only example over the years either. There's been multiple times where we've lost a bid. And a lot of our stuff, just so you guys are aware, is on an annual contract. So meaning we bid it at ours, not bid oil, whatever. It's either renewed or it's bid out annually. So there's been multiple times where I can think through where we've had, we've had a contract for two or three years. It goes out for bid. They end up choosing the low bid. We just like, you know what? So, okay, for one year we do not have this contract anymore.
00:20:49
Speaker
And I'm not kidding. At the end of that year, we're back on the bid list and they're like basically requesting that we come back to perform the work. Because again, they went a little bid that dealt with them a whole bunch of issues. And the thing at the end of the day is if I have to babysit you, I have time.
00:21:06
Speaker
As we all know, time equals money. So it's really not a little bit because now I have to put my time into it. You know, so whether you're a business that it costs money to pay people to go babysit a contractor, or if you're a homeowner or, you know, a personally or more of a like a landowner type deal, then it's just time that you don't have to spend doing this. You've hired someone to do it. So they need to just do it. So.
00:21:30
Speaker
And part of the reason, yes or no, part of the reason why they came back was because you didn't compromise who you were. Right. Even losing that bit, it would be easy and it is easy for companies to say, crap, we just lost that bit. Maybe we should lower the price, which was going to cut them out of price for who you are, maybe the values and things you offer. If you did that and you came back,
00:21:57
Speaker
Right now, they're offering you to come back and be a part of their program or work on whatever it is because. Who you are the values and they know the quality of work if you degrade that you're then degrading your brand you come back and you can't deliver what they're expecting.
00:22:15
Speaker
And, uh, but because that wasn't true and they knew who you were, even though you're more expensive, they came back, um, because you made, you can maintain your integrity. Right. Yeah. Yeah. Now I agree a hundred percent. So I think kind of to wrap this up, guys.
Final Takeaways & Post-COVID Market Risks
00:22:34
Speaker
There's a few things like key takeaways. So one, think about your marketing efforts. So whatever you're doing for marketing now, evaluate that, look at your content, look at what your, your messaging is. And if the messaging is primarily we're cheap, that's probably not the right messaging. And then number two, go into a little bit deeper and think, okay, am I, what am I delivering though? So if you're going to redo your messaging on marketing, you've obviously obviously have to think, okay, what is company A strength?
00:23:03
Speaker
Then you need to market that strength instead of just the price, but you need to improve the overall package as a whole and then do your pricing almost backwards. So to perform at an A level, what does that cost?
00:23:17
Speaker
That's what your marketing should be. That's what your pricing should be. That's your messaging going forward. But then second, so that's part A. The other part is don't be afraid to turn customers down. We have fired customers before because of that kind of stuff. They're a drain on your management staff. They're a drain on your employees. And if you're not making money doing their work and they're a drain, what are you doing? That's not what business is about. But again, like we said earlier, you have to actually
00:23:46
Speaker
perform, actually deliver what you're saying. But don't be afraid to not choose that customer. If you know they're a little bit, let somebody else do the work. But I think as contractors, we've got to start calling out that cheap and gosh, every industry is that way though. I look back at like the building trades industry even, how many times have you heard about these just horrific deals where somebody's hired somebody that's just been completely messed up? It's the same way they go back to a little bit.
00:24:14
Speaker
I've seen in the creative industry too. And there's some funny videos out there that they give three snapshots. So like somebody who's doing artistic work for like marketing and like time constraints. I need this by tomorrow or here's my hundred dollar budget, whatever. It's like, okay, here's your drawing. And they do like, here, here, based on time and money, here's the things that I can deliver. And it's like a little third grader horse instead of like a,
00:24:42
Speaker
I can do it. Here's what you're gonna get. So every industry that deals with it. And I think those making those videos are companies that are that are also trying to help their culture. Like, look, guys, don't just accept. You guys got to push back on the customer a little bit and help the set expectations. Yeah. So every industry doesn't. Yeah, I think really, this is a little bit of a side topic, but I think really, you owe it to your employees. Because in post COVID,
00:25:12
Speaker
where everybody's dealing with a totally different labor market than you were a few years ago. And I don't really see how the low bid model works right now.
00:25:20
Speaker
Because to me, if you're doing low bid post COVID especially, I have no idea how you're finding anybody worthy of hiring to operate equipment that I would want on my property. I really don't know. I don't think they are. That story I mentioned a little bit ago, the contractor that we replaced, they had employees on their job site that didn't know how to operate the equipment that they needed to perform the job.
00:25:47
Speaker
So that's, that's the result of right there. So, you know, I think, I think as we wrap this up, just really evaluate that, you know, I'm not saying everybody's doing this little bit deal, but there are plenty that do. And I was just really reevaluate what you're doing, if it's working, if that's the business model you really want to have. And if it's not, then you need to pivot and move to something different. But again, you just you've got to deliver until. So anybody else got anything?
00:26:16
Speaker
Nope, I'm good. If not, we're at 25 minutes and we will call that a wrap. If you guys liked it, please share it. Talk to you next time. See ya.