There comes a time in the life of a business where it has to decide what it will represent to it’s clients, or what it’s brand will mean. You might call it a “moment of truth.”
In a contacting business, a point where the “roads diverge in a yellow wood” is when the business must choose if it will be “the contractor with the cheapest price” or if they will be known as the contractor that delivers the best value when the job absolutely, positively must be done right.
The problem with choosing to be the contractor with the cheapest price is that very quickly quality must be sacrificed upon the altar of lowering the cost.
The trap that ensnares, however, is that conversation that is had between the client and their friends is never honest. You will never hear an unsatisfied client who knowingly chose lower price over higher quality say to their friends “Despite my contractor’s warnings I choose to go with the cheapest solution I could find to gamble with and sure enough it failed, I wasted my money, I had to pay more money to have it fixed properly and the whole time I was thinking ‘Sure Enough, that contractor told me so!’ I wish I had listened to his wisdom in the first place!”. Rather, it is much more likely that the conversation will sound like a condemnation of that contractor’s work. Eventually, as this pattern repeats itself, the contractor will develop a poor reputation.
The truth is, to develop a good reputation, where people happily refer their trusted friends and family to you, you must be willing to lose some jobs to contractors who would cut corners to do the jobs cheaper. This is the only way that your list of clients over time becomes a mob of raving fans who are evangelical about your company and it’s work.
In fact, to be awarded more of the types of jobs that you will be proud of doing and that clients will refer you for, you must lose more bids than you are awarded.
Do not mistake this as an excuse to charge high prices for the same work as your competitors or become lazy about doing your due diligence on each proposal in an attempt to deliver the proper solution at the lowest cost to your clients. Make your focus be helping your clients find the appropriate balance between product and cost – which would be “value.” Value is what the wise client wants, not the lowest price.
Possibly the best quote on the subject is by John Ruskin in the Common Law of Business Balance:
“There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price alone are that person’s lawful prey.
It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot — it can’t be done.
If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”