Did you hear the one about the two CI salesmen? It’s the $64,000 question!
So two CI salesmen walk into a bar. One of them, Sam, pulls out a system list he just sold. “$64,000 in equipment,” he says. “This baby will net me over $5,000 in hard-earned commission!” The other, Bill, looks at the list and says it looks about right for the equipment. “What about the parts and labor?”
“Well,” Sam replies, “I figure: multiply by 8 percent to get my commission after our bidding software adds the labor and misc. parts. That should bring the deal to over $80K.” He goes on to say that now the fun begins, the “getting it installed” fun – and how the techs usually overrun the labor, and blame him, and he’ll have to go back time and again on small detailed adds and that he wished his tech team was more motivated and content.
Bill says that $64,000 in equipment at his company would end up bringing him over $8,000. “Whoa, dude!” exclaims Sam. “Your boss is paying you, like, 10 percent or something?”
“Well, not exactly,” replies Bill. He then explains how it works. “Our proposal pricing puts in an allowance for labor that’s about 50 percent of the equipment total, and an allowance for install parts and materials that’s about a third the labor amount.” Sam does the quick math. “That’s over $100K total.”
Bill smiles. “Yeah, and I get 10% percent commission on the parts and labor. More than they pay me for the equipment! That’s how I end up at over $8,000 commission.”
He goes on. “But it’s not just good for me, it’s good for the client, too. By putting in enough labor hours our guys can get it done right, and in the time allowed. And we never have to ask for extra money for small parts that invariably didn’t make it into the quote. But that’s not the end of it…”
Sam looks flustered. “What do you mean?”
“My techs, dude. They’re making more money, too. And they’re never mad at me cuz I didn’t put enough labor in the job!”
They both laughed. “You know, Bill, you’re the first guy I ever heard say it’s better for the customer to charge them more money.”
Bill smiled. “Yeah… and it’s better for the company, too.”
THE MORAL OF THIS STORY: If you rely on some bid algorithm to make your quote and you do not analyze what it really takes to be profitable, you are likely creating a host of issues in your company.
Keep it Vital.