Case study of a client that "needs your help".

[rockstar.esq]

The following is an example of a behavioral pattern I've encountered many times in my career as an estimator.  Every project that's contracted via this pattern has ended up profitless no matter how kind, professional, and enthusiastic the parties involved are.

Client: "Hey I've got this barn and I need a bunch of lights installed.  It's a fair distance from the power pole, could you come out and let me know what it would take to do the work?"

The contractor heads out, spends several hours taking notes and making detailed observations about what will be necessary.  Throughout the meeting the client is enthusiastic about "working with" the contractor.  A lengthy list of requirements are drawn up and the contractor comments about what will and won't add significantly to the budget.  To every item, the client responds that they're good to go and they just want things done right.

The contractor hustles back to the office and really digs in to make sure the client's going to be thrilled with their work.  Every piece of necessary material is sourced and it's delivery time is verified so there won't be any delays.  Extra effort is made to generate photometric drawings to show the client how the light will be distributed on their floor.  The utility company is contacted to determine the necessary steps, costs, and duration's for all the necessary modifications.  It's not just a bid, it's the Project Management tasks of buyout, logistics, engineering, staging, and coordination all completed before the contract's been signed.

All of this naturally takes time.  Since it's a "done deal" that the client wants to hire them, the contractor puts this to the top of their to-do list.  The proposal goes out to the client in record time.  Follow up calls are made to see if there are questions, or to see if the material can be ordered to get a jump on things.  No answer.  Days lead to weeks, weeks lead to a month or more.  Finally the client calls back and apologizes that they were on vacation + super busy + the dog ate their homework, etc.  After much hemming and hawing, the client mentions a competitors bid that's way lower than yours.  Of course they'd "still like to work with you", but they don't understand the complexities of what's written on the proposals.  Two things are suddenly crystal-clear; their original budget (which they never shared) equals the cheapest bid, and they want the job done yesterday.

The contractor can't match the price without reducing the quality of the work.  It's more than likely that the client told the competition to include less "stuff" because they were sticker-shocked by the original contractors bid.  None of that will matter because the client believes it's not their responsibility to know what's involved, because they're footing the bill.  The original contractor may find ways to scale back the job, cutting corners where needed to make the new budget amount.  As the project proceeds, the job starts later than promised, and inevitably the client demands costly changes that they later decide not to pay for.  Eventually the reduced size of the job, the lost profitability, and the inability to get on to other more worthy projects drives the contractor to just take the loss to escape the client.  As a parting shot, the contractor will almost certainly get referrals from that client, every one of them promising a repeat of the pattern.

How can things go differently?

It's really important to understand the client's concerns and motivations.  The client's understanding of what is required to realize their project is hazy at best, but will be mostly focused on major assemblies.  The time spent managing logistics, sourcing material, or drawing plans are all seen as  hand-waving "stuff" that's not real work to the client.  Meaningful metrics are a foreign concept to the client.  For example most people have no idea if carpet is estimated by the square foot, the square yard, the room, or the roll.  Even if they did know carpet is estimated by the square yard, they likely have no idea how much they're going to need, or what price point corresponds to their needs.  Lacking this knowledge, they assume it's all very simple and their scant instructions to the contractors bear that out.

Clients want to know they're getting a good value which is absolutely impossible if they regard proposals as a mystery box containing their project with a price tag on the side.  The cost-to-quality fallacy I've written about in another post plays a vital role here.  There is absolutely no causation between cost and quality.  It's just a common falsehood used by savvy marketers and foolish consumers.

Sorting this out takes time, and your time is valuable.  It's not too difficult to show your client how paying for a little education goes a long way towards fixing everything they're concerned about.  Offer a service to develop a scope narrative which outlines the quality parameters consistent with the client's actual budget.  Asking the client to pay for a few days of your time is small-change to the client who would otherwise receive "mystery box" bids that are indecipherable save for the price.  Clients making empty promises to "work with you" won't be interested in paying for your insights, which spares you the losses you'll inevitably incur by working for them.  By giving your client the means to fairly compare your value against your competition, you can rest assured that hack bids will be rejected.  In the worst case you'd at least be paid for the consultation efforts which might turn out to be more profitable than the actual project.  All of this assumes you can accurately estimate your services.  It's here that we should take inspiration from design professionals.  A base fee for the service should quantify the hours included.  Any additional site-visits, conferences, amendments, or revisions are billable at a stipulated hourly rate.  Don't be shy because these amounts give the client a sense of what your time is worth.  Things they might have had a meeting to discuss will find their way into efficient emails.  Better information leads to better decisions. Clients looking for the best value should have no problem paying for the insights that make it attainable.

 

[ThomasPowers]

May we also add that there are some Customers you *want* your competitor to have!

[rockstar.esq]

That's an excellent point Thomas!  It reminds me of something. 

"Firing" a bad client once the job is underway is a bit like evicting a wolverine from your swimsuit while treading water in a shark tank! 

The damage an angry client can do seems bad enough, but once lawyers get involved, your business will fight for it's life.

More companies go under because of a job they won than because of a bid they lost.  I literally doubled my companies profitability by ending our relationships with three bad customers.  Their projects weren't just unprofitable, they were so poorly managed that we could neither make production, nor leave.  Every other job we had suffered as we alternated between falling behind and swamping the site with costly overtime crews.  That let-down the best clients we had which limited our repeat business with them.  From my bosses perspective we had a long history of projects with the bad customers and only one or two jobs with each of the good ones.

It was hard for my boss to understand that we could have less revenue while bidding at the same markup, yet we'd actually net more profits every year.  Now that he's seen the increase in profitability with the corresponding decrease in nonsense, he is more interested in avoiding troublesome customers.

[ThomasPowers]

Far better to not be involved in the first place than having to try to sever your involvement later.  Recognizing possible "problem customers" early is a skill worthy to be rewarded!

[Kozzy]

You can consult the magic 8 ball to decide where your efforts will be valuable or wasted with a client (as most do) or you can develop and follow some basic procedures to better utilize your efforts..basically doling out less at a time in way that balances how cemented your customer is on the job.  The latter can be REALLY hard:  Sometimes reading a customer is like trying to drive by smell.

I think you have to be burned a few times to really start to see that preliminary efforts need careful metering.  I once worked with a client in podunk Texas who was really hot to get a job started.  Several phone calls were made with preliminaries and a date was made for me to fly to him to nail the job down.  With plane tickets in hand and bags packed, I phoned one last time to extra-confirm the appointment and place..."Joe is on vacation for a month.  That facility is locked up for the winter and there's no one else who can take you over and show you. "  

I shouldn't have let my wish to do a bang-up job for him get in the way of a more sensible approach.  As it turned out, Joe was only passively interested in the first place and my salesman had been the one pushing the job, not the other way around.

In any case, my fingers are well singed from making a similar mistake several times over.  Efforts now go in concert with the customer's efforts in return to move forward rather than trying to show them that we are guys they want to work with via pre-job overkill.  I trickle efforts at them as they in turn show efforts back and the job grows in a natural way rather than a forced way.  It significantly improves client-quality to work this way---the wonky ones stand out a lot more quickly by either demanding ridiculous pre-job info or just sort of fading away by lack of their efforts to move forward.

[rockstar.esq]

Good point Kozzy, I appreciate your example with the salesman co-worker who "oversold" the lead to both you and the client. 

It's also good advice to have an effort-matching principle driving your side of the engagement.

Every time I think about how common these sorts of problems are, I wonder how it's possible that not a single one of my business courses touched on them.  The closest we got was psychology, but most of that wasn't about practical application beyond stuff like subliminal advertising.

We've reached a point where it's novel to expect a straight deal. 

I've found that good clients are receptive to guidance.  Defining a good deal for both sides strips a lot of the hokum and nonsense out of what follows.  Clients who are bound and determined to demand stupid things are often the most receptive to outright rejection.