Like any blue-collar business, this one is full of old adages that, taken together, add up to sort of a redneck MBA. It's possible to ignore them when business is booming, but it's always interesting to see granddad become a genius again when the market turns sour.
In the Northeast, a dealer is sparring with a competitor that snatched away a third rival's top outside salespeople with guarantees of $250,000 per year for five years. Now they're guaranteeing they'll beat any quote by 5%.
A Midwest dealer says a competitor has promised to undercut anyone by 10% if it gets the last look. In the Florida Building Material Association's July 17 newsletter, association chairman Don Magruder of RoMac Lumber says he lost a project to a competitor that came in 25% below the other two bids.
So how do you do that and make the numbers work? You don't. Nobody buys that much better than anyone else, no matter how big they are. If you're getting beat badly, your competitor is either losing money or cutting corners somewhere. Either way, granddad had a few tricks up his sleeve to take care of it.
The first is to avoid apples-to-apples comparisons, if possible. Low-ballers often will try to minimize their losses by cutting back on waste factors or leaving out key accessories, like framing connectors. Make your take-off as complete as possible, even if it opens up a bigger gap between yours and your competitor's bottom-line totals. It's not hard to convince builders that a low-baller is planning to gouge them on fill-in materials that were left off the original bid.
If your list is different, the bottom-line totals will never match. That gives you another option; it's difficult and time-consuming for builders to compare every line item, so instead, they look for key items like 2x4 studs, 7/16-inch OSB, or 2/8 interior prehung doors. Learn each builder's hot buttons, then cut those prices to the bone and make up the difference on less-sensitive materials.
Bundling works the same way. If you sell categories that your competitor doesn't (for example, cabinets or drywall), offer to match prices on framing if the builder also buys those categories from you, then use them to make up the difference.
Competing on service is tougher. When builders are in a pinch, they'll often take a chance on lower service levels–after all, how bad can it be? Show them. Visit competitors' jobsites regularly, and take pictures of everything you see that is wrong: framing packages that scattered when they were dumped, empty holes where windows were back-ordered, piles of 26-inch 2x8 cutoffs, and so on. When crunch time comes, you'll have plenty of ammo to undermine confidence in your low-ball buddy.
If a low-baller promises to beat whatever you quote, chances are the builder is giving him your list. You can quote packages without line items (e.g., "one lot of windows") but that often ruffles builders' feathers. If you can't get away with it, quote the job at cost and hope the low-baller takes the bait. If he doesn't, he'll lose both the job and his credibility.
Nothing works in every situation; it's hard to beat free money. Granddad didn't worry because he knew–as you should–that the oldest joke in the business was written for low-ballers:
"How do you make a small fortune in the lumber business? Start with a big one."
Greg Brooks is president of The Building Supply Channel Inc., a training and research firm in New Albany, Ind., that serves the construction supply industry. 303.845.4880. E-mail: [email protected]