Perceived Great Divide Comm vs. Resi

JUNE 07 FORUM TOPIC Can't remember what year. Such great stuff written here.

TOPICTHE ROOF COMPANY Perceived Great Divide Comm vs. Resi MikeH. brought up the issue with the perceived divide between commercial and residential work. Being new to the industry I admit to sharing this possibly skewed perception. I was wondering if MikeH or any others in the commercial side would elaborate on the perceived divisions and how closely related the two really are.

I don't do commercial but my perception has been the cheapest bidder always wins. True? False?

REPLY'S

NO CHIT - Cheapest bidder always wins. True? False? True most of the time IMO But that's when bidding for work.

The secret is to get the work without bidding on price, be it through having your niche product specified or even better to have your Company specified as nominated contractor (or sub contractor) Some of the best jobs we have ever done have been of this type.

I have found that some of the Main (General) Contractors don't like it when we get specified as a NC, I guess because they have less control over us, and they have to do it OUR way not THEIR way.

This is a big topic, should get a few replies.

A big difference, although it is not in every case is that commercial money is SLOWER than residential. JMO

RRD - Neurosurgeons and proctologists are both physicians and work on the human body, but I'm pretty sure they play in different golf leagues.

THE LAMINATE KING - I have done mainly residential roofs but I think that it is now time to make a move into small commercial work and also have a guy do roof inspections, as that seems to be the next niche market that I want to enter into.

TARFACE - Its who you know not what you know I believe price given its the same ballpark isn't a issue on most bids

MIKE H - TRC,

Buyers are buyers. They come in all shapes and sizes. Which ones you pursue will dictate which market you serve. Faced with nothing more than price on which to base a decision, buyers will ALWAYS choose price. Educated buyers make smart decisions. They may not always be able to afford what they want, but their decision to buy on price may simply mean they reduce the specification, giving the better roofer a chance to do the work when he might normally have been shut out of the job if he had not taken the time to educate the buyer.

Now you tell me. Is that statement above made about the residential market, or the commercial market? BULL - I can certainly apply it to recent experiences in BOTH genres.

I've been getting a bit bored with building houses, and started doing some GC work on commercial projects as well. I sold a nice little 100 sq. EPDM commercial Job today. It’s a complicated roof on an Architectural/ Engineering company's building. Price was clearly not their PRIMARY concern as I was the highest bid by far.

I've always said YOU set your price, and find YOUR customers. If your in a low overhead, low cost situation you may be able to be profitable doing "lowest bid" work. If your not, There's plenty of customers out there who will pay more. I don't sell on price, and I don't sell on manufacturer's/product warranties.

I agree with Mike saying that if all you give them to decide on is price, then the lowest one will win. I think it comes down to the right fit for the company. If I was hired to sell for a small company, with low OH, maybe where the owner also runs the job...I'd clean up on bid work. I've only been in that situation once. I don't even think of bidding fax in new const. work. I find my niche in the customer whose primary concern is quality. Not that the new construction bid guy isn't "doing" quality, but rather that's usually a secondary concern of his customer.

MIKE H - DING DING DING, yes we have a winner.

Both.

AARON - Someone tell me this...how do we do it when the man you talk to and the decision maker aren’t the same guy? When you learn 'em and then they take one page of your proposal and fax it to the building owner, and refuse to give up the digits? This is one that peeves the chit out of me.

MIKE H - That's the hard part. Building relationships.

OLD SCHOOL - What Bull said and then again... It depends on what you define as commercial work.

Commercial is the doctor's office that has shingles on the roof...basically a house roof. It is also a large flat EPDM or PVC membrane roof with tapered insulation, roof drains, parapet flashing details and roof units. The job Bull talked about, if it had all of these things could go for 60 0r 70 thousand dollars easily. A shingle roof on a doctors office may be $10,000.00 or less. That is the big difference between the two. A lot more details and a lot more risk and exposure. That is why they get more on commercial. On the other hand, it is very competitive too. Go figure. They are both good in their own right.

JIM B - In the commercial market relationships do mitigate price. Large property owners who have ongoing roofing needs would value reliability in both workmanship and service. Likewise business owners who have operations that particularly sensitive to water intrusion would value quality. And there are real estate companies who are only interested in the bottom line. So it's like finding those markets within the market.

Residential is different in that you are unlikely to form a long-term business relationship with a customer. A good contractor will do a good job in hope of referral business and because its the ethical thing to do. The price contractor will hustle the customer and hustle the job for whatever he can take out of it and put in his pocket. When he leaves he's gone, moved on to the next one. And He's usually got the full-page ad in the yellow pages hyping a zillion years experience through 48 generations with a guarantee for twice the life of the shingle. Some customers are looking for a good job. Some customers are looking for a low price. It's the market within the market again. You have to find the one you want to serve. TWILL - Whew! Some really good stuff in here. Let me add: Be good at what you do and charge a fair buck for it. We can all cross back and forth, to some degree anyway, but where you put your effort is where you will find your reward

DC ROOF - I think Mike H has it right with the statement about educating buyers. You need to listen closely to learn the person's real needs and concerns then put yourself in their place and determine what they need or what they want to buy. Then do your best to educate the on what will best serve their interest.

Old School has it right too with the different definitions of commercial. Small commercial is much like selling residential. You deal with the building owner who has a vested interest and a sentimental attachment to the building. Also, this person generally has limited if any experience with purchasing roofing-especially flat. This type person responds much the same as a home owner, is accepting of a "sales pitch", often has limited funds and in my experience usually buys on lowest price or gets sold a bill of goods for high dollar. Successful sales technique here is really the same as residential selling.

By contrast many large commercial buyers are very experienced with major purchases, are very sophisticated about the technologies, know what they need, have a budget guideline and are very busy and don't want the "sales pitch". These buyers still can be sold. But you need to be technically savvy and able to explain in real terms why and what differentiates you in the first 10 minutes or you have no chance. Design and specification abilities go a long way with this type of buyer.

One thing I keep reading in here is the BIG DOLLARS for commercial work. I've been in business for 28+ years now and I don't see that. The dollars sound big but the overhead required for sizeable commercial work is costly. You aren't subbing- you are using hourly employees and paying all the associated overheads, you need office staff to prepare the type of documents needed to sell and administer this type work, you have to be able to wait 30-60 days for hundreds of thousands of dollars in receivables while continuing work on other projects, you have to purchase expensive insurances and you need expensive equipment to efficiently complete the work. Then add in that at this level of work the competition is very sophisticated themselves.

AARON - Ok, DC, how's about my query?

DC ROOF - Hi Aaron, How are you doing?

That's a tough one for sure. All you can do is try to make such a good impression that your guy will want to request the owner uses you. But absentee owners are usually on the cheap like a landlord or something. I try to always leave the door open for further negotiation. Maybe the owner approves a budget number off the bids and your guy will come back to you to see what you can do.

Most of our jobs we get to talk to the guy who makes the choice. He has a budget but can choose the contractor.

AARON - The reason I ask...

I went on a 505 sq. metal roof with a built-in gutter between buildings. Gave the presentation on the spot, proposal printed, everything, job pics on computer, PowerPoint, the whole shot. Tenant loves my system, and I was only a G higher than my local archenemy using a lesser product (I stayed on track and avoided the topic of the arch enemy, and focused on me). Followed up three times, just to have the tenant tell me that the owner wouldn't listen, and went with more tar on seams and fasteners...ARGH! Tenant just faxed over the contract page to owner, and therefore, owner didn't get product samples, literature, etc, nor my charm and wit .

How frustrating to do it right, and get your nads chopped off. Tenant said he couldn't give the phone number to the owner to anyone. MISCREANT - Ya mean you could have potentially sold a 505 square job and not been able to speak to the person paying the bill?

AARON - Well, I didn't know it when I went out there, but figured to present it anyways...I was there.

I did, however, take the initiative to locate owner, and talk, but he wasn't having it...he had already gone with the black mamy bid. I wouldn't have gotten it anyways, but that's not the point of my questioning.

MIKE H - Aaron,

Some folks refuse to speak to anyone other than the owner or owner's rep. In my mind, a tenant that is not participating in the funding is not the owner's rep.

Even if you just had the owner's address, which you could get from various sources, including the county auditor, you could send your info overnight, samples included with a nice letter of explanation touching on the differences between your repairs and competition. Talk about the expense of your equipment and that it's not just everyone that has committed to this level of quality and that while your price might be just 1G more, you'll probably make 5G less than the competitor. Real value is not indicative of the price paid.

But what you describe has happened to us all in the commercial market at one time or another. If you're busy looking at stuff... move on. Nut the best reason for getting your stuff in the owner hands is that he might remember you well in a couple years.

MISCREANT - I'm making a point Aaron. Find out who the players are and what they want before you go up on the roof.

Once you give them the bid you don't have a hand to play anymore.

AARON - the guy that got it was 80g less than me. Next year he can pay it again.

Miscreant, that's my point... Hafta get to them to get them to listen.

I found out who he is (the owner of a local strip joint) through my friend, a local politico, who had mentioned the sale of this building a couple of years ago, and I somehow remembered him speaking of it. Otherwise, I would have had no clue who he was. He was kinda perturbed that I located him, and asked who told me where to find him.

MISCREANT - If the same situation came up again, what would you do differently?

MIKE H - Well 80G is a different story. That's where getting the interview and finding out the owner priorities comes into play. It may not have mattered in your roof was gold plated for 80G. You cannot be in commercial and really build a business on one single product. Well maybe you could in Chicago where you have more people in the area than I have in the whole state, but...

Be ready to do what they need. Provide options and make sure they understand the ramifications of each option. What's important to convey is that you want to do their work, you want to earn their trust, and you want to meet the needs they have right now.

AARON - I think that if it happens again, I will have to be tactful enough to pry the info out of the tenant's cold dead fingers (oh that's something else). He was pretty resistant to my requests.

Thing is, even with my preferred system, I could have got him watertight for the price of the black mammy guy, and had it last a while. if I would have got to him.

Miscreant, what might you have done better/differently? I thought I did everything in my power. IN ADDITION, I PROPOSED WHAT perceived TO BE WHAT THEY WANTED, A LONG-TERM SOLUTION WITH A STRONG WARRANTY BY a reputable contractor. This tenant told me they were tired of trying to patch things up.

Also, Google Earth is dead on with their measuring tool...I checked.

MISCREANT - It is not unusual to have a difficult time getting to the principle.

I insist on talking to the decision maker. I won't spec out a job until I've talked to him/her first. This is a two way street. If the guy doesn't want to talk to me I don't want to enter into a $400K contract with them. I don't want to try to guess what he needs. You mentioned that you could have done a better roofing job for him than the other guy. He will never know that.

Everybody wants the bid, right? You have power in the relationship until you give it to them, then they hold your fate in their hands. If the prospect won't speak to you before you give them the bid, then they won't speak to you after.

If I was in your shoes with this guy it sounds like I would have not spent much time with this one. Or I would have gotten in to see him and gotten him to tell me what he wanted (not gotten him to listen to me) and probably sold him the repair job.

So I either would have had free time to pursue another more amenable prospect or I would have a high probability of a sale.

I used to do what you did. The deal with roofers is that our default mode is talking about roofing, a subject we are more comfortable with. So we tend to skip over the obvious steps to a sale, especially the ones that make us uncomfortable. TINNER - Interesting read. I've dealt with tenants and gotten the job as often as not. I've met and never met the customer, and gotten the job.

Moral is: Every customer is different, as is every roof. Even if they look and feel the same.

Of course, I've never looked hungry for any particular sale, to my knowledge.

What puzzles me at times, is I'll see one I don't want, try to persuade the client to use X Co. and still get the job. (Just landed another commercial job I didn't want or need. Price wasn't a factor either) Go figure.

AARON - I guess I knew what I had to do, but failed in the initial interview to get to the check signer.

Thought it sucked.

Thanks for the input, guys. I am learning something everyday.

JSC - From the building owner's POV, why would anyone use a company that didn't have the financial wherewithal to stand good for the job if it failed? (Not that it guarantees they will). Or one that hadn't been in bus long enough to establish a track record for scrutiny? Roofs ain't cheap, and I wouldn't want to risk my capital on someone unproven. It makes no sense to award a $250K job to someone with a net worth of $7,500.who has only been in business for 4 years. THE LAMINATE KING - To be perfectly honest-I have used Google Earth to get a pre-measurement by satellite picture of a home so that I have somewhat of an idea of total squares before I physically go there and measure up. I find that my pre-measurement has generally been within two squares of what the actual true measurement is. Google Earth or Portland Maps.com have become an invaluable tool ion my arsenal of tools to use in formulating the estimate. I truly enjoy this computerized age that we live and work in.

TOM B - Big subject. There are great differences, or one can rationalize their similarities also....

New const., both res & com. are "basically" price driven. There are exceptions in both arenas. However, in my experience, due to the plethora of small "custom home builders", I'd say GENERALLY, new const. com. is more price-driven.

Re-roof, Com. and Res. share equally in the quality/price department, (IMHO), due to the fact you're dealing with more owners in com. rather than GC's.

Technically and logistically, com. is far easier than res. Of course that depends on your market niche. Our res. re-roofs are typically upper-end, "specialty" projects, like tile or slate, or some other specialized application(s). So it's not so different as comparing, say, typical res. shingle projects to typical small commercial re-roofs. One would have to do 10-20 typical re-shingle res. projects to equal the sales of one small $ 50,000 com. re-roof. That's 10-20 more sales contacts, customer contacts, project locations, specifications, permits, collecting, blah, blah, blah.... you get the picture....

AARON - I picked up "How to Win Friends and Influence People" by Dale Carnegie. Very interesting read. I applied it to my kids, and have tricked them into doing things my way. I hope I can do this to the customers...if I can actually get in to see them. DCROOF - Aaron, Some of them you just have to blow off and that sounds like one to walk from for sure. I have a similar one coming up. 40-year-old apartment complex housing college students-- our contact is the manager. Our sales rep stirred it up by calling on his previous customers from the drain/sewer business he formerly worked for.

We will try to be sure to get info thru to owner but I ain't holding my breath. Recent re-roofs look like doggy crap-no one ever addressed the total ponded water situation rather just did the shower curtain or rubber. The 3 we looked at are rubber and saturated. TO to deck, taper iso, fibertite. Competition judging from other complex roofs could do anything.

We will try to get the full packet to the owner but it looks to me that price is the driver here. We will submit and follow up as best we can but sometimes you can see the writing on the wall. You have to just let em go and move on to the better prospects. I was actually angry yesterday AM that it took me the whole AM to prepare the proposal package feeling I was wasting my time! But, that said I have landed some that I thought was lost causes in the past.

MIKE H - In that scenario, I would have followed that price with 2 other options, making sure the pros/cons of each were well documented.

This way, they see that my pricing is simply not just sky high, but that I can be competitive as well. Other roofers may not even offer the upper end, which will separate you from the crowd. IMHO.

This gives you credibility to bend their ear, if they are interested in why they should spend more money. I'd be a bold faced liar if I portrayed every roof we do as a Cadillac system. I want to be their roofer, and will try to find a way to give them a roof that fits their budget, even if it's not really the best thing. Just so long as the reasons they should NOT do what we are doing are documented, and the decision is clearly theirs.

BULL - I agree mike. Do your best to educate the customer, but all in all it's their decision. I may put the plain magnets over the truck lettering, but I'm happy to be the guy they chose.

Twill; Res. here is all about being ""hooked-up" with insurance co.s/adjusters....and sophisticated marketing.

You got that - Ya got it! Pretty simple.

The roofing knowledge/ability/integrity/ethical quotient is minimal, (5% maybe?)

And yes - You must be proficient with Xactimate

These are great....knowledge overload on salesmanship techniques....lovin it!!!

I cut my teeth on Gov't work.....Been there-done that. However, in a region that relies on merit, rather than salesmanship.....

My point was, that generally, (notice I said "generally"), there is more salesmanship involved in states lacking authentic state contractor licensing.

Conversely, and comparatively, there is less salesmanship with commercial as compared to residential in states lacking state licensing.

I disagree with the comment on commercial. It's only true if there's nothing provided to differentiate between sellers. The largest roofing company in the world is almost NEVER the cheapest. Neither am I. Perhaps in small commercial, with a handful of local contractors this is true on a frequent basis, but as a rule of thumb, commercial is a very competitive game on many different levels.

re; Commercial - "The cheapest bidder always wins".....

This is basically true as the players are generally of like stature; IOW's - The playing-field is generally level, as most "bidders" are established roofers/companies with credible/authentic knowledge & experience.

This is extremely more prevalent in states lacking contractor licensing, where residential roofing can exists just because one decides to hang a shingle out. These type of states require savvy salesmanship.