Steve Payne 2017-09-20 05:35:57
FROM A VETERAN RENOVATOR Very few contractors learn anything about selling before they learn to build. Mike Cochren has taken 35 years to learn the best methods to sell the services of his design-build firm in Oakville, Ontario. In this interview, he shares his secrets. One of five contracting sons of a Hamilton, ON home builder, Mike Cochren first incorporated Cochren Homes in 1983. Today it’s a design-build firm that does a mix of very high quality home building and renovation projects in the Oakville, ON marketplace that generate some $2.5-million in annual revenues. Mike, now 68, has learned many business lessons in his 35 years at the helm of his firm. Canadian Contractor first talked to Mike about his business at our RenoFocus event last November. He told us about his experiences helping train contractors when he was chair of the CHBA National Renovators Council. We were so impressed that knew we wanted to explore his sales philosophies further in an extended article for all of our subscribers. Very few contractors learn to sell at all before they learn to build, which can lead to some challenging years for their firms early on. The growth curve of Cochren Homes was no exception. We thank Mike for sharing his sales tips in this interview. As the reader will see, Mike is frank and open about the many pitfalls that can trap the less experienced builder, especially those operating with older business models where the architect is king. Hopefully, some younger contractors can benefit from this veteran builder’s wise counsel – especially when negotiating with “challenging” customers. Can you briefly describe your business model? We do additions, complete guts and general renovations, mostly based on referrals. About a third of our annual business is with repeat clients. We also do complete new builds as well. We have two designers and an architect we work with on a regular basis to do the design and process the permits. The majority of our projects are usually in the $125,000 to $250,000 range. Why is that the sweet spot for you? Within that price range, the jobs are big enough that we are separated from the smaller contractors who don’t have either the capability to handle that size of job, nor the management skills to handle either the complexity of the job or the planning and permitting aspects. Further, on the larger $500,000 to $1-million projects, clients tend to polarize to architects, who despite their design skills, usually design a product that far exceeds the owner’s budgets. The fallout of this is very dissatisfied clients and a substantial amount of wasted time that could be spent more productively elsewhere. We like to apply our expertise right from the ground floor, where we prequalify, based on the homeowners wish list - and what we feel is a realistic budget. Thus the old adage: “I'd rather take a No today and stop working, than continue on and get a No next week.” So you are a design-build contractor, essentially? Yes, though we weren’t always that way. We started moving in that direction about ten years ago. We realized that we were wasting so much time when the architect had already done the design and established a budget – but with designs that were usually not actually complete! Also, we would sometimes start building and find that the architect was still drawing and designing stuff that they, and the client, expected you to do for the price you’d agreed on for a previous version of the project. So we prefer to do it so that we manage it from the start to the finish. If we can establish the budget and the design we can make sure that, as we go along, it’s not going to exceed that number. Now, when we hire the designer, they answer to us. Whereas with the outside architect, there would be conversations happening with the client that we would not be privy to. And this would lead to issues down the road. Ours is now a much more successful process in terms of meeting the budget and getting things done on time. You have been the sole salesperson for your firm for 35 years. If you were hiring a replacement for that role, what special skills would they have to bring to the table? Given the nature of our industry, a successful candidate for a salesperson would be someone with a good background either in design or fieldwork. The key to selling in our industry is to be able to evaluate the customer’s personality, relate to the customer and properly align the budget to the scope of work. Your three drivers in selling in our business are (1) budgets (2) objectives/ scope of work and (3) timelines. But again, you’ve got to be able to assess and relate to the customer to make sure you are the right fit. What I mean is, relate to them as human beings. Different generations of customers bring different challenges. Millennials are a new challenge for many contractors. They are going on Houzz and looking at all these images online – which is great – but they are often putting icing on the cake in terms of going right to finishes when we haven’t yet established the cake! How has your sales approach evolved over 35 years? Well, nobody ever sat me down and taught me how to sell. So when I first started out, it was mostly about the lowest price. I think this is typical of the growth of firms in our industry. Usually a contractor starts out on the tools and then manages his way up to the point when he starts his own business. Then he needs to rapidly acquire some business acumen. Unfortunately, there is a high business mortality rate amongst contractors because ours is a highly managementoriented business. Thus as contractors grow they can easily over step their management infrastructure. Give us your firm’s basic selling proposition. I tell people, “We are not the cheapest on the block, nor are we the most expensive. If you get ten prices, we might be about the sixth.” And there are a number of reasons for that. One, we don’t do part jobs. We don’t go for the cheapest of everything; we try to improve what we do: we add value. As we say on our website: Good, better, best. We make our ‘good’ better and our ‘better’ best. My staff knows that if they come across something where they don’t think that’s the right way to do something, if it takes a few extra hours to do it the better way, then they are to do it that better way. No one at our firm is going to challenge them for spending the time to do it the right way. People appreciate that. And the second point we stress to our prospective customers is that we have a track record: we have stability. We have the proper staff to do the particular jobs we like to do. We highlight jobs that we have done for others, take them through the projects and show them the work that is in there. Another key value-added item is the fact that we keep the number of actively running projects to approximately three at a time. I highlight this to potential clients and explain that that is about the maximum we can handle and keep the projects running smoothly and on time. We also show them the timelines from where they are now and when we can start the project, as well as the estimated production time to complete. Further, once the drawings are progressing, we will do a customer selection list and dates that we need met in order for us to meet our production times. This illustrates that a successful job is a collaborative effort and that we have the experience needed to execute professionally. Did you have any sales mentors or people you specifically learned how to sell from? For me, a key moment was when I was the chair of the CHBA National Renovators Council. We had our first stand-alone renovation conference in Toronto. We found a speaker, Charles clarke III, who spoke about “personality selling.” His technique is called BOLT Selling and basic message is that you should sell to people the way they want to be sold. The concept categorizes people into four basic types, Bulls, Owls, Lambs and Tigers (BOLT), based on two personality traits, “emotion and aggression.” Once you can access their particular leaning, you can then illustrate to them features of your product or proposal on which they would place the highest values. For an example, a client who is fairly low key and analytical would be categorized as an Owl. Owls are typically more interested in values like “cost per square foot” or “energy efficiency” than, say, a glamorous kitchen or party room. Thus, you would highlight to this type of client details like better insulation, better windows and high efficiency HVAC units. The BOLT concept is very beneficial and I highly recommend looking further into it as a helpful tool in doing presentations and addressing clients. You can thus have an easier, more successful closing ratio than just presenting in the same fashion as you have always done. How do you deal with the highly aggressive prospect who demeans your price in almost insulting language: “You’ve GOT to be kidding me! You are TWICE the price of your competitor! We may as well end this discussion right now.” We get often get this reaction. The younger Mike Cochren would have replied, “Well, I can go back and sharpen my pencil.” But what you really need to do is stop. Step back. Calm them down. Do not argue with them when they are emotional! This customer is a bull. They want what they want and they want to win. You have to calmly explain: “I can do this, and I can do that, and based on my experience, this is my price that includes certain value-adds that maybe you haven’t taken the time to fully consider. So let’s go back and review this item by item and I’ll explain why I’m different than the other guys. I explain that there are only three ways I can change my price. We can delete – take something out. We can defer – not do this or that section at the same time as the rest of the job. Or we can substitute. Instead of the quartersawn oak that matches what they’ve got, for example, we will go get a prefinished one at a half the price. And you explain How much that will drop the overall price. There are only those three ways. Now there’s a fourth way that the customer can lower the price. They can go and get a different contractor! But you don’t want to propose that. You do need to deal with price issues right away. As I said earlier, it is better to take a No today and stop working on it, than to go home, come back tomorrow, and get a No tomorrow night. How do you handle the prospective customer who hasn’t a clue what their budget is and won’t declare it? Normally, from the initial discussions about the scope of work, from the wish list, you will have a fairly good idea what the price is. So you just have to table a number out there. If it’s $100,000, it’s $100,000. If you get the response “Oh, that’s WAY high, WAY high!” you reply that, “Well, I did one similar to this for $85,000 but you’ve got some extras in there. So if you come down very much from $100,000, you are going to be cheating yourself out of many valuable features. The most important thing is that you come at it from a position of strength. You have to ask yourself, “Do I really need this job? Are my groceries next week really going to depend on this? Or is it just one of ten potential jobs and you’re going to close four? So you want to leave it on a positive note, but be honest: “Look, I think your expectations are way beyond what you’re going to be able to do if you want a reputable contractor that’s going to do a proper job. You don’t want to dirty down your project to save a few dollars. You don’t want to spend 10 per cent less but get 30 per cent less value. Your home is worth $850,000 (or whatever it is). You shouldn’t put a $15,000 kitchen in it, because that’s not the right fit. You don’t buy a Jaguar and then put the cheapest tires available at the discount store. Many veteran contractors with a lot of repeat business eventually stop doing competitive bids. Will you still get involved with them? I shy away from them unless there’s a really good reason for me to be involved. Usually in a competitive bid situation, the client will have a set of drawings. And if they’ve gone out and obtained a set of drawings they’ve already become biased by the price put on the work by the person who produced the drawings. Of all the times in my career I’ve been involved in competitive bids, I’ve won about 10 per cent of them. Yes, historically I have gone out and bought the work just to keep my guys busy. But they’ve pretty well all turned out to be bottom-line disasters. So all being perfect, I would rather stick to my knitting. We have had great success with our method. People say, “Mike, we had a good experience. It was fun. And we knew all the time where we were. And we’re coming back.”
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