October - November 2003

By Bill Rauser

It’s time to apply the newcomer mentality to an existing business—to do something that collectively will make all of our businesses more profitable and enjoyable. We need to change the rules of the game, and eventually, our entire industry can adapt this methodology after seeing the benefits of this “new” way of doing business.

Specifically, the change to which I refer is simply eliminating the typical bid process. In residential construction and many other industries, people often shop on price.

To shift the emphasis of the comparison of companies on a price basis to another aspect, such as experience and quality, we have simply moved away from bidding for the sake of bidding. That’s right—Rauser Professional Contracting has abolished the bid process under the belief that everyone ultimately wins.

Let me explain. By eliminating wild goose chases, the wasted time associated with nonrealistic or non-serious shoppers is minimized; the time savings associated with that previously wasted time is can now be passed on to jobs that do come through.

Create a process that represents the chain of communication and engagement with a client. During the first meeting with the client, do the normal—identify the objectives, vision, desires, and the budget. As we all know, however, in many instances, the client does not have a realistic idea of the cost of his or her ideas and dreams. So, to make sure everyone is on the same page from the very beginning, provide a “ballpark estimate” on the spot—based on your years of experience.

The second step in the new process is to give the client a written budget estimate. This is done in-house without field visits with subcontractors. The estimate goes over the major components of the project. It usually gets the client to within 5 to 10 percent of the actual cost of the job so the client can decide if it comfortable to move forward with a great degree of comfort from the pricing standpoint.

If the client is willing to continue after reviewing the written budget estimate, the client is presented with a pre-construction agreement, and a non-refundable retainer is requested. (This fee is applied to the final job, but forfeited if the client does not go through with the project or hires another contractor.) The point of this is not to profit, but rather to separate serious clients from those who are not serious about moving forward.

The agreement says the client intends to use Rauser as their general contractor and states that for the retainer fee, we will give them specification and design analysis, cost analysis and value engineering. The latter is a presentation of “what ifs” to show the client some options to save money in one area so they can afford to pay for something more important in another area.

This is part of the process during which an extensive amount of client education usually takes place. It is also, by virtue of the preceding steps, an easier education effort because by now there is an established relationship.

The last step in this re-engineered process, is the final fixed price and contract which is signed so work can begin.

So the moral to this story is simple for business owners in many industries, and in particular those of us in residential construction: Determine where you are potentially wasting time with inquiries that are really fishing expedition. Then, implement a system that quickly allows the serious one to move forward with you—giving you more time to service them and the rest of your clients more effectively and efficiently.

Bill Rauser is president of Rauser Professional Contracting. He can be reached at 410-833-3883 or br@rauser.com.

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