How to Handle the Money Conversation With Clients (And Avoid Wasting Time) (Ep 283)

The money conversation is one of the biggest roadblocks contractors face when speaking with prospective clients—even those who have already started construction. 💬💰

Today, Max breaks down how he approaches the topic of money with his clients. 🛠️

No matter how much you focus your business on quality of work, you still need to have clear, direct conversations about cost. 📊

Catch today's episode on the whiteboard --> https://www.youtube.com/playlist?list=PL76rc3DrCOMb7VM9icAOQmLodNCSZTfKf

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💡 Important: Before signing up for the 30-day trial, email Paris Woolever to request her as your support manager. She’ll help you get set up and maximize your trial!
📧 Email: paris@jobtread.com
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Transcript

SPEAKER_00 0:00

Does chatting with clients about money on the first phone call make you cringe? On today's episode, I'm going to show you what I do to ease my clients into the money conversation. Enjoy. How old are you going to be before you start to experience life like you want it? I want to tell you right now, whether you like it or not, there is a better way to do business. Hi everyone, uh, welcome to the Business Rebuilders podcast. My name's Max, you know me, I'm your host. Welcome to you if you're a long time listener, and of course, welcome to you if this is your first time. I hope you get something out of this episode. Um, as usual, like and subscribe, all that kind of wonderful housekeeping stuff. Would love it if you leave a review. Hopefully, it's a generous one. Um, if you're enjoying, you know, what we put out here at Business for Builders. Um, also get across to Business for Builders on Facebook and uh or go for B for B or Business for Builders VIP. Answer the three questions and I will let you in. Um on today's episode, we are going to chat a little bit about money, money, money, and how I go about dealing with easing clients into that money conversation. And this is where I guess as an operator I always want to refine what I'm doing. And so, you know, having been a CEO and president of a major franchising group, that's given me, you know, the ability to I guess understand what works for builders, and we're always trying to refining, but there's nothing better than being in the trenches at grassroots level doing what I do, like trying to make a sale. Okay, leads come in yesterday, you've got to go out and you've got to do this, you've got to do the deal, you know. And so, what I'm always doing because I want to improve my sales velocity, I want to improve my full profitability, we want to improve our construction, execution, all of the above. Um, we're always looking at where we can improve. It's that continuous improvement always ongoing. And so I gathered all of that up and I bring it to you. And so, out of a conversation I've had just recently with a client, it dawned on me that I need up right up front to ease the clients into the money conversation, which is why I've called it this today. Okay, so really, I think I've got what have I got here? Four points. One, two, three, four. What we want to do is we want to set up the process. So, um what I'm gonna do now. Remember, this advice is what you're paying for it right now, okay? So it may be completely irrelevant to your situation. You might completely disagree, you might agree in part, but not completely. Guys and gals, it's a buffet. Take what you want and put it under your arm and go and do what you do, okay? This is just one guy's opinion talking about what he does on his in his daily job as a builder, as a general contractor. Okay, so when we talk about setting up the process, and of course, having had these conversations literally, you know, with clients live, um what I find is that I've got to, if I'm gonna control the narrative, I've got to set up the process, right? Clients will assume the process. You know, I got a giggle out of one client. Well, I giggled while the client was talking, but you know, not obviously, but I I need this addition done, so can you get me a quote? And you know, there would be once upon a time I'd be offended. I would be like, Do you know how much work goes into putting a quote together? And I think this was part of the trigger around it's like kids, you know, if your kids ever ask you they want some candy or they want lollies or something for you know for dinner or when they first wake up or whatever, it's like they can sort of make those demands, but it's not happening. These clients are very similar to that. They're making these demands, but it's not happening that way because the tail doesn't wag the dog. Okay, you might have heard me say that a few times. Your job is to define it clearly from the first conversation. You've got to put together a simple roadmap. Now, I'm not saying get something convoluted and something so extensive, by the time you get to the end of it, you can't remember the beginning of it, right? Not that. That's that's too complicated. You've got to take something that I guess is complex and selling in the construction business is complex, and we've got to make it simple, okay? Because if you ever want duplication to happen inside your business, i.e., bring people in, replace yourself so you can have some time freedom, it better be simple. If you don't control the process, the client will, and that will lead to friction and scope creep. And I'm telling you, what we do is we by default, we give up, we abdicate our responsibility because we're trying to be the nice guy and we're trying to be, you know, the likable fellow, you know, or fellowette, or whatever the case is. Like, so by default, we give up control and then we begin to begrudge the client, you know, uh, because they're leading the way. Well, if you don't, they will. So I'm not saying that you've got to be a you know a domineering personality, but you've got to be an authority, you've got to know what you're doing, okay? When you hate it to get on the bus, then the bus driver doesn't know where he's going, and everyone has their opinion as to which way he should go. No, the driver's the driver. Let him do his job, but he better know how to do his job. Okay. Um, yeah, so give us a quote. It's just like bizarre. I'm sure you've had that every day of your building life. Number two, okay. So this is where inside of this, let's quickly go over here. This is let me just map out real quick. When I'm talking to him, when I'm talking to homeowners, remember this is my opinion, okay? When I'm on the phone, I will map out, I will map out these these three. Okay, because that's me setting up, and then I jump into going through this. And so essentially what we're doing, I guess I don't need to go over there to that arrow, I'll just do it here. Uh, I want to talk about opinion of probable cost. Probable cost. Now that happens, that will usually happen, that'll happen on the phone or on site. Right. So basically, in this phone call, right, set up the process that should be on the initial uh phone call. Okay, so I'm gonna talk about opinion of probable costs. The next thing that I would explain in this first phone call is that I'm gonna give you, okay, you talk to me about an addition or a basement renovation or a second story edition or whatever the case is, right? I'm going to give you my opinion of probable cost. I will then say the next thing that I'll do when I come and visit the site, I will be able to collect a little bit of headline data and I can go away and I can come back with to you with what I call an estimated price range. Now, the reason I'm doing all this is because I am trying to move the dirt to find the gold. I need to figure out who are the players and who are the pretenders, okay? Because people go, if you're a builder and you say to me, I'll give you a quote, I'm like, okay, give me a quote. Guys, you're not controlling the narrative, you're just you're just going through the typical convention of what was taught to you by the three or four people around you that just said, Well, that's what I do. But no one ever really gave it specific thought around high performance, high productivity, high profitability. Okay, that's what we're doing here. So, now the result of the opinion of probable cost. I think your garage build, I'm gonna tear that sucker down, I'm gonna give you back a brand new one with nine-foot ceilings and everything that you want. But a bim, but a boom. My opinion of probable cost there is going to be, let's say, 150k. Now, ask them the question. What what are your thoughts around that? Is that above or below what you were thinking the investment required was going to be? Guys and gals, this is the authority. Because if I'm asking the questions, I control the conversation. And questions are the answers. Is that number above or below what you're thinking? Now, this I just had a thought last week. Was it yeah, last week, I think. Crikey, was it this week? Anyway, he said to me this: he said, Max, I thought it was going to be 100 for the build plus the demo or the tear down. He didn't have any idea. And I talked to my business partner, I said, Jed, what do you think, mate? It's going to be 600 square feet or 60 square meters, give or take, nine foot ceilings, overhead garage door, one window, one personal access door, nothing special. What do you think? And he said 100. We we agreed that 150 was going to work. Okay. Then when I spoke with the client, he said 100, but he said that we we don't have to be responsible for finishing the inside. So we might just get the envelope, the outside, roof, windows in, doors in, siding, cladding done, throwing the keys done. He can take care of insulation, poly, you know, any interior, whether he's gonna plywood it, whether he's gonna put OSB, whether he's gonna put Jiprock or a mixture of all of those. He can uh he might even do electrical, right? So there's a whole bunch of stuff that we can remove to get it down to a price point where he might be more satisfied. So it might end up being 120 grand instead of 150, and he'll do the other stuff going forward in his own time. Okay, so the idea of this over here is to we're always trying to figure out who the players and the pretenders are. Okay, and so at this point, I got an okay. I thought, you know what? It's and now here's the other thing, too. He told me that they'd own the home for about 20 years. Now, you and I both know 25 to 30 years, you're paying that thing off. The thing's probably doubled or tripled in value since they've had it. I know they've got good equity. So I know it's not do they have the money, it's do they want to spend the money. Okay, two different camps. Okay, so now what I'll do, I've got photographs, I've got measurements, I've got a good understanding of the specifications, the inclusions, what the scope's gonna be. I will then quickly build a budget and come up with an estimated price range. So I might go back to him and say, look, I think we can do it bare bones for 125 anywhere between 125 and 165. Okay, so that's that's what we get here. Right? So if if I present that estimated price range at that level here, and I get matched, that sounds all right. What the very next thing that I'm going to do is I'm gonna present the two pathways. Now that relates to the agreement type. Okay, so if you're a cost plus builder, that's all you do, and there's no pathway, there's just one. But what you might find is clients go, well, I don't want to do an open check or a you know, a blank check or an open book and all of that cost plus stuff. I want to have a fixed price. I want to know what I'm getting, how long it's gonna take you, and what it's gonna cost me. Okay, that's the two pathways. So the tooth part the tooth, two two pathways is one, there's cost plus, and the other one is fixed price. Okay, so now if you're not a fixed price builder but you get clients that ask you for fixed price, you're not willing to do it, you're losing work. Okay, so you've got to figure out whether you're happy continuing on that that that route or whether or not you're gonna discipline yourself to figure out how to create opinions of probable costs based on historical data and experience, estimated price ranges by efficient estimating mechanisms using AI perhaps, okay? Um, and then being able to sort of dictate to them what's gonna suit them the best. Now, what we're trying to do is get to the player now. So, if this player says to me, okay, I'm gonna take you up on cost plus, well, we can go straight to agreement and we can basically commence. Okay, can commence work, okay? So that's that's pretty quick. If they want to go the fixed price route, what we've got to do is we've got to go then go into a pre-construction agreement. Now, if they've asked for fixed price, they are risk averse. They want certainty, they want security. Okay, so if they want that, odds on is they're going to be prepared to invest a little bit up front to know categorically what their investment level is going to be before they go and commit to that. Okay. So to do that, because that represents value, if I can get security and certainty, that's valuable. It has the ability to be valued. Therefore, for me to provide you with that security and certainty, this is what I've got to do, that costs money. Now, if they don't want to go cost plus, okay, and they they don't want to to get fixed, we've got to then go for it, we've actually got to do a pre-construction agreement first. If they don't want to do a PCA, where are we up to? The opportunity is dead in the water because they don't want to go cost plus, that's a no-go, we've already proved that, and they don't want to pay me for my time. We've just come down all of this to get to this, and all of a sudden it becomes a no-go. That they are the craftiest clients that you can probably deal with, the ones that can walk through this and not really get pinged until such time as you say, I want to get paid for my time to help establish what's included, when we're going to be done by, and uh what the price is ultimately gonna be for your project. Now, what you need to have is to be able to, when they might give you an initial flat no on a pre-construction agreement, what you need to be able to do is explain um what it is that you do. So there's various ways of doing it. I've got a job might be a couple hundred thousand. I've told the client I'm gonna oversee the whole process from design with all my trades doing walkthroughs, so bid request walkthroughs is what I call it. Um, I've got a design team that's 15 minutes from here that I can use for no cost. I can cart the client, get them to meet me out there. So the design part of it costs me no dough, cost the client no money, and I can call 85 bucks an hour. Now that might be too cheap, might be expensive. Who knows what your opinion about that is, but that's what I do. That to me is about the marketplace. So I get paid for every hour I'm either sitting at the desk or whether I'm driving to that meeting or I'm meeting trades on site at her place, and I've got four meetings this week to do with trades, two plumbers, electrician, and toll setter to be able to figure out you know what the scope is and get them to start giving me some rough quotes. Um, I'll be waiting for the selections to come through through from the design team so that any of my guys, trades that need that input, they can get so they can finalize their quote. This is me directing the traffic. You know what? Because I know what it takes to get this client, because they want the security and certainty. Okay. So you've got to know once you get an agreement, let's say they say, Well, yes, Max, we would love to go for a pre-construction agreement. So, what I do is in this in that case that I just gave you, I ask them for$2,500 plus tax, and we're off to the races. And then I just track the amount of hours that I spend. Once I use up that$2,500, I might think, well, you know, I've got another week's worth of work, perhaps. Um, maybe I'll get another$2,500 from them, something like that. Okay. But odds on is I think I can finish the whole pre-construction side and get them a fixed price quote inside of that$2,500. Now, you might think, Max, that's not even close. I'm not working for$85. Whatever your opinion is, it is it, it is, it is, it is what it is. Okay. Um, feel free to lecture me on email. You want to have a crack at me about how I can do it better, do it. Like, send me an email. Maxelitebusinessadvisory.com. If you want to sit with me and have a chat about it, hit the uh the yellow button on the uh elitebusinessadvisory.com website, book 30 minutes, and let's just shoot the shit. Let's talk about what you think you might need to do better, or maybe what you think I can add to my process. Okay, I am not the guru, I'm just a guy and a girl, you know, like you. I'm not anybody special, right? But at the end of the day, we've got to have a way of uh bringing our clients through. And I would really when people say, Well, what is the pre-construction agreement? What do I get for that? Well, what you get to get that fixed price is we have a design, a plan, and ultimately we have pricing. Hopefully, you can see that I'm going a bit low. Design, plan, and price. That is what we do as far as uh the pre-construction agreement. So we have a pre-construction agreement, and this is what happens inside that pre-construction agreement. So, yeah, I talked about if they transact, and here's the deal. I had the client say to me, uh, well, there was some reference to other contractors, and I said to her at the design meeting, I said, What other contractors are you talking to? Oh, no, no, don't worry. You're the guy, you're our guy. Okay, now, once they transact at a low level, this is why we have a conversion rate. So our conversion rate might be 20%. That's from lead to job. Okay, but the other conversion rate that we talk about is from quote to job, and that's more like 85%. So when they transact at a low level here at 2,500 bucks, and then we've got this 18 to 25 touch points. I'm talking to the clients every second day about I've got trades coming out on Wednesday and Thursday. Is that going to work for you between 10 and 1, you know, and between 10 and noon or whatever the case is, these working uh touch points, the communication, the in-between, the backwards and forwards, this is what helps you nurture the relationship so that if they've had a good experience, okay, and they've invested a little bit of money, which they have, and ultimately I want to cover my time. Of course I do. But if they are willing to invest something here, this is where I know I've got a very good indication as to whether they are a player or a pretender. In this case, we have a player, okay, which is always good if they're going to drop a couple hundred thousand on a reno. Okay, so when they transact at a low level, it's likely that they're gonna transact at a high level. Right, so why does all of this matter? Eliminates the confusion and misalign expectations. So we say in the setup process here, we talk to them about what we're going to do. I'm going to give you an opinion of my what I think the probable cost is going to be right here and now on the phone. I could be way off because I haven't seen the project, but it's a good starting point. If I say to them, look, your bathroom is going to be 25k, and they think Max, it should have only talked, should be only 10k, well then mate, that that job is a no-go. Easy, that it's done its job. That's why we do it. Okay, now you'd want to have some fairly reliable data. Like start thinking about different projects, okay, and understand what some of those rough costs are going to be or rough sales and amounts. You know, you don't want to tell them it's going to cost 25 grand, then it really only costs 12 grand, and you've just lost yourself an opportunity. That's that doesn't make sense. Okay, so we set up the process, but in that process, we are going to talk about okay, we're gonna bind these two together the opinion of probable cost. We are gonna chat about that. Then we do a site visit. Okay, so at the site visit, we talk about what we think is more around the estimated price range, and that'll evolve from the probable cost. The opinion of probable cost, then you might say, look, we can do it from 125 to 165. Okay. And then really, once if they agree that they think, look, if it doesn't cost us any more than 150, we would like to move ahead, okay? Cost plus, we just want something a little bit more determined, something a little bit more specified in what we're getting and how it's gonna roll together. At that meeting here as well, when I thought this client had a decent understanding of the estimated price range, that's when I run through. I think I said, mate, it's gonna cost you three and a half grand for engineering, it's gonna cost you a couple of grand for the architect, it's gonna cost you probably 500 bucks to lodge the building application permit. Uh, and then when it comes back and you want to get that approved package, that's gonna cost you about four grand, about two percent of contract value, whatever I was saying. So at that site visit, I was able to talk about not just construction cost but the preliminary design cost as well, over and above um, you know, figuring out the specifications. And then, of course, you know, um, he was in a position where he said, no, Max, I want to do fixed price. So, what happens is when I give him this estimates the price range, what's the next conversation? How do you feel about that? Um, what do you like about that? And what do you think you'd like to do with that? Well, Max, we're happy to have a cost plus. Great, we'll move straight into an agreement. Oh, Max, I really want fixed price, right? So, what we're gonna do to give you and to give you exactly what you want. So we've got to know your specifications, we've got to know how long it takes, and we've got a um uh we've got to understand more about the project in detail. Then we've got to go to a pre construction agreement. This is where we get the design, plan, and price. That's gonna cost. You about 2500 bucks. Fred, how do you feel about that? See, when I remove the the grey, when I remove the confusion, when I shed light on the process, bring clarity, we're able to get decisions made quicker. The reason clients don't make decisions with you, because they're confused, and that for the lot a lot of the part is your fault because you haven't got clarity in your own mind about what the system is. Well, hopefully, today, in amongst all that mess, you've got some understanding about how you can liaise with your next opportunity that comes through the door, rings you on the phone. Okay, you've got to have now it's important that you have this very much clear in your mind because odds on is you're running the building side as well. Okay, right here and now. I missed, I just missed a call from a business partner. So you got priority over my business partner. Okay, I'm here with you. Let's go. Right? So, you know, I've got clarity. What that helps me do is I can move through that quick, which means if I get 10 leads today, I'm gonna figure out who's the gold and who's the dirt, who's the player, who's the pretender. And the reason I can do that swiftly and I don't get backlogs of inquiry is because I have a very clarified way of doing things. I have a very well-defined process. Okay. So it eliminates the confusion. We talked about that. It enhances the process and speeds up the decision making, which is important. I think a lot of the trouble that you and I have in achieving our revenue targets is because we're slow in the pre-construction phase. We're all over the shop like a mad woman's breakfast. Okay, if we can get some order, last episode I talked about order, if we can get some order in our sales process, what we find is we shorten the distance between contact to contract, which means we get into the delivery of the product sooner, which means we increase our revenue in the financial year that we're in. Okay, something to think about. Uh, it also protects, so why this system matters? It protects margin by controlling scope and process, right? So it's there's a lot of cost engineering that goes into this process, and it also is very intentional. So I'm not wondering what my next steps is with the client. I can take you from, let's call this the first phone call, right here. I can take you all the way down to contracts which are here. I know the steps, it's just the client's got to make the decision on selections, but I've got to then complement and enhance and assist them in that process using my systemized approach to design so that we can get to the contract, okay? Because to go from the first phone call to contract, odds on is cost plus or fixed price. There's going to be some discussion around specifications. So are you mid-tier, are you entry-level premium luxury, or are you mid-tier with a little pinch of luxury premium, right? You've got to know that as the builder. What am I offering? What is a mid-tier premium? You know, you can say, well, mid-tier premium is a cheaper quartz countertop, is it is a cheaper engineered stone. Mid-tier is post-form lemonade tops. Okay. Entry level, Kia, IKEA furniture, Ikea kitchens, whatever. You know, like so there you've got to have this distinct understanding of understanding your client and going, where is their palette? Where is their price point? Because you can't start doing anything in the way of PCA or pre-construction agreement selections if you don't understand their palette, their design, and of course, you know what they want to invest. Okay. Improves client experience through clarity and professionalism. This represents a system that people get carried through and they're not nervous about. Does Max know where he's going? Okay. I know what's up, I know what the next steps are, I know what my timelines are in conjunction with clients say to me, I want to start this month. And I'm like, not gonna happen. Because I know you can't make decisions fast enough. I do pull that one out occasionally, it's a bit cheeky. Okay, moves clients forward with confidence, not assumption. That was what I was just talking about. Because the goal is at the end of the day, when we go from first phone call contact to contract to construct to completion of construction, we ultimately want to turn the clients into raving fans. We want to see them come in being very have little education about the process, to being guided, carried, assisted through the process, nurtured in the construction process. Any changes that happen in there, they were handled professionally. So at the back end, when I go back to saying, wondering if you'd like to share your experience in dealing with Smith Sons to help other homeowners who might be considering using Smith Sons as their preferred general contractor. Would you be would you be interested in helping other homeowners? Five-star review, video testimonials. Like it's very human, guys and gals. This is not this is not tomfoolery, this is not trickery, this is not bait and switch. This is thoroughbred, empathetic understanding of what a client wants. And then identifying that and serving that at the appropriate level. Confirms that hiring you is the right decision. That should be what happens at the back end. Yes, Max, we're more than help, you know, more than happy to give you. You know, I've got three from the last three completed projects have agreed to give us a five-star review. And that's all in the last two months. Okay. In closing, when you control the process, you control the outcome. Okay? And that includes profit preservation. See, if you can, if you can have control, guys and gals, and you can organize this pre-construction aspect from first phone call to contract, one would expect, if you're orderly in this process, clients would automatically expect that your delivery and your construction is as good or better than this. So demonstrate to the client your competence, your confidence, okay? Your authority. And that will actually help you when you go and give them the price that may be a pinch higher than they thought. They might go, you know what, the experience so far has been great. Max knows what he's talking about. We'll find a little bit extra cash and we'll get after it. Close the deal and then get after it and start building. If you like what you heard and you're feeling generous, leave us a review. I don't ask for that very often. Um if you want to have a chat with me, you want to spend 30 minutes with me in a complimentary coaching session, um, we can have a chat about what you're doing good, what you're doing not so good, see if I can give you something to tuck under your arm and get after it and do better. Um, and then maybe you know, we can talk about coaching. Um, if you want to just email me, maxelitebusinessadvisory.com. And look, understand this. This is free information, not very specific to you, although relative. Okay. Second thing is go to elitebusinessadvisory.com forward slash academy. Okay, 65 bucks a month. There is over$10,000 worth of information there that can help you figure out whether or not you're a good student of the business, not the construction, but the business side. Okay, that will help cement in your mind whether or not you are actually keen on learning the numbers and everything to do with business development, not construction. And then in that process, if you've done that for a little bit of time, you might then take me up on my coaching on demand. Okay, it's basically the same price as one-on-one coaching, but you've got 90 days to use that. Okay, so it's not a monthly, it's not a monthly sort of setup. And then, of course, once you've done 90 days, you might say, you know what, now it's time. I got to get on this week by week. I need max's input on a on a week-to-week basis. That's one-on-one, it doesn't get much better than that. So, guys and gals, take that information. You go and do your best, be your best, go and build a kick ass business, and I will see you in the next episode. Cheers