Since we are in the middle of 100 Days to Sell, I want to share a timely sales tip.
This tip will increase your design-sales conversion and improve your margins.
It has to do with how you handle the design-sales process on your design-build projects.
The discussion around this sales tip happened a few weeks back, when a client (who sells projects in the 250-500k range) came to me with an issue:
Beat up on price:
They were having trouble selling their projects at the margins they needed to make a decent profit.
They were afraid of their own price (like being afraid of one’s own shadow) and it showed.
Their fear of pricing began with how they asked for an upfront commitment from the client.
Meaning…their design fee was relatively low, at about 1% of total project costs.
This undermined (underplayed) the high value and complexity of their designs, which was quite high.
When you charge a low design fee, you make it easy for the client to say Yes.
However, this can backfire when the selling process is short circuited and critical discussion points are skipped or skimmed over, namely:
- Clarifying the budget and the client’s connection to the budget
- The scope of the project, what’s included, what’s not.
- The timeline and related expectations
- The differing needs between the two buyers (spouses, if residential)
- Etc, etc.
How much design fee is enough?
As I said, the client in this story charged 1% of the total project cost; it was a loss leader for them.
But did it need to be?
I surveyed a group of clients who design and build large jobs over 250k. I found the following range of design fees (as a per cent of project costs):
- Some charged 1/2% to 1%.
- A bunch charged 2% and more,
- And one charged over 5%.
- As you can see, it’s a wide range.
One thing is certain, there are 3 benefits of charging a design fee that is more in line with the value of your design:
- You are forced to do more selling up front, which benefits everyone.
- Your clients have more skin in the game and are less likely to shop you around.
- You have a better chance of recovering your design costs.
Your Challenge: Keep your sales team efficient, during up and down economies
It is easier to sell when the economy is booming: but it’s also easy to get lazy, which I saw happening this past year. Has your team or processes become lazy?
It is harder to sell when the economy has a hiccup. A down economy can throw you off balance. When this happens, some companies become defensive, or short cut their sales process, or they start scrambling.
It may seem counterintuitive to raise design fees in a down economy, but if your design-sales process sets you up for ineffective selling or low margin selling, then that is exactly what you need to consider.
No matter what you do, have the courage of your convictions!
Regards, Jeffrey Scott
Bring Your Team And Finish the 2023 Year Strong!