Have you ever been forced to drop your price in order to persuade a client to sign a contract with your building company?
If you needed the cash-flow, then you may have felt powerless to stick to your original quote... As a consequence you end up signing yet another contract that has a gross margin below the industry benchmark…Leaving you effectively working for wages and hoping for an upturn in the market.
What if you could afford to turn down contracts that didn’t produce a healthy margin for you? And still have a queue of clients that wanted you to build for them... It’s a fundamental principle in business and one that new home builders tend to overlook.
The Law Of Supply And Demand
According to investopedia.com “It's a fundamental economic principle that when demand exceeds supply, prices tend to rise”.
Which is why the most successful new home builders are always creating more demand for their services than they can fulfil. While ‘old school builders’ expand their company to fully service the current demand which leaves them in a perilous position when the market cools off...
So stop trying to sign up every prospect that asks you to price their job! Instead, create scarcity in your marketplace by generating twice as many leads as you need. When you do this, the law of supply and demand will help you to increase your margins to the industry benchmarks.
One of the biggest myths in our industry is that new home builders won’t win a contract if they markup their jobs by more than 20%. Truth is, the most successful and fastest growing builders that operate in some competitive markets are marking up their jobs BY OVER 50%, and still winning all the work they need.
And it’s all because they invest a higher percentage of their revenue in marketing and advertising…Which means they get more leads and opportunities to sell.
In other words, the demand for their services outstrips their supply at any one time. And when demand exceeds supply, you can increase your margins or grow your building company.
So don’t listen to those old school builders who are always busy but are still signing contracts with margins way below industry benchmarks.. Instead, listen to the builders that are growing their building company while working less hours and are experiencing far fewer headaches...
Create New Opportunities To Grow
Here are some tips that may help you to open up more new opportunities and grow your building company by gaining control over supply and demand.
The first thing to do is identify who your ideal client is, and what problem you are solving for them. It’s counter-intuitive, but in order to generate more demand for your services you can’t be a generalist, you have to be a specialist.
Specialists NEVER run out of work! And they are well paid for the work they do. So get very clear on who you are targeting, the service they need, and the obstacles they are facing. When you understand those 3 things, you will have a very powerful marketing message that can be put in front of your ideal candidate.
For instance, your best clients may be between 30 and 45, married, with 2 pre-teenage children.
When you understand your audience, you start to realise that they are not looking to build a new house, they are looking to create a home where their children can grow up safely. And by speaking to your prospects, you’ll discover the challenges they are facing, which allows you to craft a marketing message that speaks directly to your ideal client.
Before you know it, you have a niche and that puts you in a very powerful position, because your building company is now viewed as a rare commodity rather than ‘just another builder’.
Another way you can gain control over supply and demand is by ... simply limiting the supply.
Again, this may sound counter-intuitive, and it probably won’t work if you are too tight to invest in advertising and are solely relying on referrals.
However, when you have an ongoing marketing strategy in place, that is producing a constant stream of new leads, it’s important to avoid the temptation to sign them all up into contracts! Instead, set your building company up so that you can only take on 50% of the clients that want to build with you.
Yes, it means that you will be rejecting clients that want to build with you rather than having them reject you because they got a cheaper quote!
But that’s the point, when you move the needle from having availability for anyone, whenever they want to build, to having a limited amount of building slots… Magical things will start to happen in your building company... Better clients, better margins and less headaches!
Manufacture More Demand With Advertising
The fastest and easiest way to gain control over supply and demand is by manufacturing more demand for your service.
How do you do that? Simple, marketing and advertising. It has never been easier for a business to get in front of so many consumers, as it is now...for pennies.
If you are not using the opportunity that exists right now on Google, YouTube, Facebook and Instagram to generate more demand for your building company, then you are leaving money on the table. And the thing is, it will NEVER be cheaper than it is right now.
Sure, advertising costs on Google have gone up dramatically over the past 10 years. Facebook has become more expensive to acquire leads over the past 2 years… However, the big brands still only invest a small portion of their marketing budgets into these channels. And when they finally switch from traditional channels such as print, TV and radio, advertising costs online will sky rocket.
What we have right now is a window of opportunity to get in front of our ideal clients, and generate leads, for a fraction of what it used to cost to advertise a building company a few years ago.
More leads equals more demand, so don’t miss out.
So what if you could afford to turn down contracts that didn’t produce a healthy margin for you? And still have a queue of clients that wanted you to build for them… Would it help you to enjoy more profit for less work with far fewer headaches?
Of course it would. And that's why we are offering free marketing strategy sessions to new home builders.
When you have the right strategy... You can create scarcity in your marketplace by generating twice as many leads as you need.
So you can make more profit for less work with far fewer headaches.