Why a lack of negotiation skills are
Responsible for millions in discounts every year
When you're in business, you must negotiate. There is no way around it.
But one of the biggest objections I get from Subcontractors about negotiating with their builder, is this:
"But Michelle, if I ask my builder for changes to their contract, they will give the job to my competition. I'm flat out getting the job without discounting my quote."
Look, that is a completely legitimate concern. Subbies invest so much time and money quoting, just to get a look in on a project! Asking for changes to the builder's contract feels like the worst sales strategy ever.
But let help you see things differently.
If you are at a post tender meeting, the sales process is already over.
By this stage, what you are actually attending is a negotiation.
So if you are showing up to a post tender meeting thinking you're just there to talk about price - you are approaching this meeting unprepared for the real negotiation.
You see, the builder already knows your price. It was written on your quote.
And yet the contracts administrator turns up to these meetings with a nice long checklist of other issues to discuss with you.
When you think about what is actually going on here - your builder is INVITING you to negotiate those terms.
So in reality, the question of whether your builder will let you negotiate contract terms doesn't exist. You already know they will.
So here's the truth bomb.
When the builder gives you the job, it is rarely just about your price.
One thing I can tell you with certainty, having been a builder's contracts administrator myself, is that more often than not, your builder's budget is insufficient to cover your quote.
Even if the budget is fat enough, I can guarantee you that there is no wiggle room for the variations that we all know are inevitable.
But your builder has to buy from someone...
This is why negotiation is SO much more than just knowing your walk away point.
So many subcontractors approach the post tender meeting as if the builder is handing out jobs like lollies.
This is because subbies are conditioned to assume the builder holds the power in every aspect of your dealings. It's your lot in life as the subbie.
But ask yourself this...have you ever walked into the grocery store with not enough money to buy what you need? How powerful did you feel in that moment. (The answer is not at all - unless you're an expert shoplifter)...
You see my point, right? Despite your assumption, it is actually the builder who is vulnerable in a post tender negotiation, because they are there to negotiate the most lucrative scope for the smallest possible price.
This is no easy feat - unless the person across the table only has the one trick - discount or walk away.
I can tell you from personal experience that if the builder has ample budget and knows you can deliver, there wouldn't even be a post tender meeting. It would all be done in an exchange of emails.
So, if you are constantly being asked to discount your price this tells me one of two things:
1. You're in the tar pit of client purgatory, working for builders who are at high risk of going broke, or
2. You're predictably discounting every quote, and now the builder expects it from you.
SO...the reality is,
99% of All discounts by subcontractors are rooted in fear, that doesn't exist.
But the good thing is, if you have been doing zero negotiating about any other issue other than price to date, you have already experienced your worst negotiation.
If this is where you are at right now, own it! Take comfort in the fact that you can only get better from here.
You owe it to your business to work out what is really going on with your builder, and adjust your strategy to protect your relationship and your profit margin.
Let me show you how.
It works like this:
Your builder currently sees your quote as a dollar amount to complete a scope of work.
The builder's estimating department priced your trade package six to twelve months ago, based on Rawlinson's rates or worse - based on your cowboy competition's quote which wasn't apples for apples.
The builder's contracts administrator has two choices, they can either:
1. Ask you to discount your price; or
2. Go to the cheapest guy.
If its you they're asking to a post tender meeting, either the contracts administrator really likes you, or you ARE the cheapest guy.
ITS YOUR JOB TO WORK OUT WHICH IT IS
The good thing is, most contracts administrators have ZERO negotiation training. So (hopefully) you have a serious advantage.
SPOILER ALERT: every single one of them will tell you you are not the cheapest guy...
..whether its true or not.
Here's where your relationships become your super power.
If your relationships are real, and as valuable as you think they are, your builder will be transparent and share information that will help you work together to solve the collective problem.
So here's what you need to work out:
IS YOUR RELATIONSHIP WORKING FOR YOU OR AGAINST YOU?
because if you are relying on your relationships, they better be working to your advantage.
here's a helpful head start...
The more honest to goodness trust between you and your friendly staffer, the more detailed information they will share.
Negotiation is not about trying to get one up over your builder, or hoodwink them out of cash. It is about closing good deals that meet everyone's needs, so that you can build good buildings and long, profitable relationships.
The truth is:
DISCOUNTING YOUR PRICe will never actually address the real issues you have with your builder!
Which means your deals will never live up to their full potential.
And it's not just about the profit, because I KNOW that your day to day quality of life is affected by your ability to hold your own with your builder in the heat of the moment.
Like it or not, you're in the business of contracting, and in order to contract, you need to negotiate!
So let me put it to you like this. You're doing it anyway - wouldn't you rather be good at it?
Trust me, it feels a whole lot better to walk into a negotiation with commercial street smarts and walk out contracting with confidence!
In this 4 week online course, I’m going to give you a crash course in how to sniff out, address, and dismantle your builder's behaviour to convert better deals and contract with confidence.
we cover Two Types of Negotiations:
Negotiation Type #1
front foot negotiation:
This is all about what you do to get yourself into the best possible starting line before the tug-o-war begins.
It includes, (but is not limited to):
- maximising the money
- getting better contract terms
- minimising risk
- leveraging your builder's urgencies
- wheeling and dealing non-price related conditions.
In our live workshops, we will be dissecting every scenario you are likely to find yourself in, and applying negotiation strategies for you to win the day!
Negotiation Type #2
back foot negotiation:
This is about what the builder is doing to you and how you can get out of it, or leverage it to better your position.
In a lot of cases your options in these situations rely heavily on how well you negotiated on the front foot.
But no matter how stuffed you think you are under the contract, there is always an ability to negotiate.
In weeks 3 and 4 we will switch to back-foot scenarios to discuss:
- dispute resolution
- refusing variations
- what to do if you can't perform.
THE POST TENDER MEETING IS JUST ONE OF MANY NEGOTIATIONS YOU WILL HAVE WITH YOUR BUILDER!
It is short sighted to think that once you sign the builder's contract, the imbalance of power will magically go away...
I know that if you're still reading this you have well and truly felt the vulnerability of being on the back foot with your builder under a big scary contract.
Think about it like this: how do you ever expect your builder to treat you as an equal when when you have built your entire relationship on making concessions?
You won't! The reason the builder trusts you is because they believe they have you under control.
This systemic power imbalance is not unique to you. Blue collar discrimination is a hierarchical suppression that dates back to when they built the pyramids.
The only way to break free from this cycle is to harness your relationships and tap into non price value propositions to elevate your positioning in the contractual chain.
Once you see how this stuff works - you can't un-see it.
"BACK FOOT NEGOTIATION" IS A COMMERCIAL REALITY IF YOU ARE A TRADE BUSINESS OWNER
Nobody wants to nuke their relationships, but you can't subsidise the builder's problems either. When it comes to backcharges, variations, delays, resequencing of works - nine times out of ten the subbie is collateral damage due to mismanagement on the builder's part.
These are the top three negotiation techniques I see most commonly used in the construction industry.
See if you can see any running themes:
Splitting the difference
This approach is the most common strategy I see a builders and subbies take when it comes to negotiating a dollar amount. In fact, I would go so far as to say the construction industry is a one-trick-pony when it comes to negotiation. "Lets just go 50/50 and save the relationship."
Take a hit on this job to get walked into next job
This is my pet hate sales pitch from a desperate construction manager. If a builder is asking you to do this they're telling you two things: they think you're foolish enough to be fooled twice; and they're robbing Peter to pay Paul across projects.
Either way, you want none of this trickery.
Take it for relationship sake
This may keep the relationship with a staffer solid, but there is every chance your own business isn't viable anymore as a result of these concessions. This is akin to a love job - but worse, because you're doing it for a staffer who could be into the wind and working for another builder next week.
See if you can spot any common themes...
If these three negotiation strategies sum up your experience with our industry, you are not alone.
Did you notice what each technique has in common? It is the default assumption that the subbie takes a hit - unless they can talk the builder out of it.
So here's the thing !
You could read every negotiation book and do every negotiation course on the planet...
but NONE of them can give you context to industry learning like I can!
This is the course that will change how you do Business with your builder FOREVER!
- Learn my +32 proven negotiation strategies to unleash the full power of your relationships with the staffers!
- How to quickly identify WHAT is really going on with your builder are (most issues are hiding in plain sight!)
- Unleash the commercial street smarts to get the builder's staff advocating for you, just like I did when I was a CA)
- Walk away with a step by step guide to positioning yourself in a post tender interview customised for every client type (builder, developer, body corporate etc)
- Learn my "good bloke" method for turning a dispute into a relationship solidifying experience - without dropping your dacks! (This you're gonna love)!
- Plus! Enjoy ongoing access to the course for 30 days after the course wrap up, so you have time to grab your printable downloads to build your very own Negotiation School workbook, inclusive of checklists, flowcharts and more.