Believing in your value is the first step to success in winning on value. The next step is to walk away when clients don’t fit your new standards.
We’ve all been there, sitting in front of that client we know we don’t want to work with. But the fear takes over, the fear of not having enough work. So we don’t walk away. We succumb to the pressure and lower our fee.
Or maybe it is our best client, and he is threatening to go to one of our competitors, telling us we are too expensive. What do we say? Do we just agree and go ahead and give him a break on his estimate – knowing we will lose money on the job?
Situations like this are happening every day and slowly killing the AEC industry. The problem is, we really do start to believe we can’t get the kind of fees we need to be successful and profitable, but we still don’t know how to turn down work. It is just against our nature.
As our employees navigate these difficult situations every day, small amounts of money are being given away. Rather than believe we are adding additional value to our clients’ projects, we assume we are not any better than all of the other firms out there and compete on fees. Even if we do believe we are better, many of our staff do not have the tools to articulate why we are better and fail to have the right conversations with clients.
While it might not be quick and easy to transform your firm culture and practices away from accepting unprofitable work, it can be done. The highest performing and most profitable firms are the ones that are proud of who they are, understand where they are different and better, and willing to walk away from clients who do not have a win-win approach.
The following are six steps that can lead your firm closer to better and more profitable projects:
- Understand your culture. First you must understand those cultural attributes that are directing your staff’s behavior. Most of this culture is formed based on the attitudes and beliefs of the firm’s leaders. Carefully examine those cultural traps such as “keep the client happy at all costs” and “our client doesn’t want us to make a profit” that are driving your fears and willingness to lower fees below acceptable levels. Openly confronting these traps can lead to a stronger resolve that the firm can’t continue to thrive with these values.
- Analyze your strategy. Does your firm have a strategic plan and do you stick with it? The first step is to determine what types of clients and projects are the best fit, and most profitable for your firm, and strategize how to get more of those types of clients. Are you able to add more value for certain types of clients? Is there a particular client mindset that is better to work with? Understanding where your firm can be more successful, and committing to pursue these types of clients, and avoid the others, is key to having a strategic plan that drives higher growth and profits.
- Determine your true value. The key to selling on value rather than price is to really understand how you are different – and better. It is possible that many years of working with tightwad clients has forced you to overlook areas where you could excel. Or possibly you are intent on maintaining a reputation of high quality, despite the fact that your clients don’t appreciate or want to pay for it. Look at where you save your clients’ money as a first step in calculating the additional value you bring to the table. Do your staff go above and beyond? Do you help clients avoid risk or get jobs done faster than other firms? Do you require fewer change orders or corrections to your drawings? Can you save clients’ money in the construction process? One way to gather this information is to meet with your project managers and discuss specific areas where your team has added value to projects. Putting a dollar value on these aspects of your work can start to give you the foundation for educating clients about how you will save them money even if your fees are not the lowest.
- Educate your clients. The next step is to figure out how to communicate this value to your clients. Look for opportunities to discuss aspects of your proposals with clients. Offer them advice about how to save more money on their projects, and even on your fees! Show them that their success is your highest priority. Most reasonable clients will be willing to pay extra if you are able to show them a return on investment. Look at different ways to calculate this value and show clients that while you aren’t the cheapest – you are the best and this will ultimately save them time, money, and frustration.
- Train your staff to sell on value. After many years of being beaten down on fees, your PMs may be hesitant to increase fees with existing clients. It is important to ensure that they really understand the numbers, and the negative impact of accepting unprofitable work. Developing PMs into business leaders will give them the knowledge and confidence they need to have difficult conversations with clients about fees. Many PMs are afraid to talk about money with clients and role playing is a great way to prepare them so that they know exactly what to say and feel ready when the topics come up. Being able to review the numbers with a client and feel confident in having the tough conversations is the key to transforming your culture into one where your employees internalize the firm’s value and are not afraid to turn away bad clients.
- Walk away from bad projects. Ultimately you must be willing to walk away from clients who don’t want a true partnership with their consultants or don’t believe in your firm’s value. Wouldn’t it be better if your competitors have the cheap clients and your firm has the fair-minded clients? In order for this cultural transformation to be successful your firm’s leaders must first embrace the value you bring, and be able to communicate it regularly to your entire staff. Believing in your value is the first step to success in winning on value, and the next step is to walk away when clients don’t fit your new standards.
To move away from the commodity trap and elevate your firm to a new level of profitable growth, your entire team must embrace the value you bring to your clients and continue to look for new ways to deliver exceptional value. Being the low cost provider is a path to mediocrity and is not going to ever attract the best employees or high profits necessary to be a top-tier AEC firm.
June Jewell is the author of the book Find the Lost Dollars: 6 Steps to Increase Profits in Architecture, Engineering and Environmental Firms. She is the president of AEC Business Solutions, helping progressive AEC firm leaders increase project profits and employee performance. Connect with her on LinkedIn and learn more about how to improve your project financial performance at aecbusiness.com.