So you are being pushed by your building client to cut your prices and deliver a cheaper renovation or new build quotation. You know you could do it, but it makes you very edgy.
Apart from the risk of completing the job inside the quoted amount, there is the risk that using inferior building materials could work out badly should they fail. And what’s more, to keep costs down you will be forced to hire second rate subcontractors. And at such low profit? Will there be enough profit to mitigate those risks.
But more importantly are you happy knowing your client will end up with an inferior job? If only you could teach your client that it’s cheaper to pay more.
In this article I suggest three things about teaching your clients that it’s cheaper to pay more.
1. Investment Value
Over the life of a building, the build costs can be deceiving. For example if a property built to last 50 years cost $200k to build, then the whole of life cost is $4k per year (I’m leaving out maintenance costs). A similar property built to last 100 years may only cost an additional $20k, so the whole of life cost is just $2.2k per year. This makes a huge difference to residual value.
A prominent example in my immediate area is Macleans College (in East Auckland NZ). A beautiful school on a stunning site overlooking the Waitemata Harbour. The school opened in 1980 but the building program continued up to the late 1990s. But the building has leaked and since completion almost $20m has been spent fixing and replacing poorly built buildings.
The current government minister of housing blames an attitude of getting the cheapest price. “They nickeled and dimed every bid, got the pencil as sharp as they could and then even took a bit of a margin off that” [NZ Herald Aug 17, 2013].
It is becoming a very expensive build project.
So, what do you think about running a couple of scenarios on your designs. Could you show the difference in long-term value between a standard 50 year build and one designed to last much longer?
2. Maintenance Costs
Any builder knows that certain materials require more maintenance over time. But does your client?Probably not. And what about the impact of different geographical environments on maintenance? A coastal climate is very different to an inland climate.
Does your client understand how certain finishes will respond to the climate and the maintenance cost of each? Of course not. What may look nice to begin with, and be cheap to install, may deteriorate quickly unless well maintained. So what would it take to create scenarios that help clients compare the ongoing maintenance costs of various materials?
3. Build Quality
Even KB Home (a well established Californian building company) recently reported that it would spend $43m repairing hundreds of faulty Florida homes because of problems caused by faulty installation etc. Fortunately the company is making the repairs at no cost to the homeowners. But imagine the concerns of the homeowners if the build had been done by a non-reputable company unable to stand behind it’s workmanship. Surely it’s better to select the building company carefully, even if it costs a little more initially, and to have the assurance of long lasting quality.
So how strong is the build quality guarantee that you offer, and what would you need to do to make your guarantee stand out from the rest?
So, instead of despairing because client’s want the cheapest price, how about coming up with some real reasons that prove that paying a little more up front can indeed be the cheaper option.
I love like to hear your stories. Have you tried to teach your clients the longer-term value of a more expensive initial build? How did it go?
Please share your experiences.
Post your comments below.