Pre-Qualifying Homeowners

      Thoughts on how to weed out the tire-kickers. (Remember, talk is only cheap if you call a buck a minute "cheap.") December 26, 2006

Question
I was wondering what techniques people use to pre-qualify potential customers. I like to take on some smaller jobs like vanities and small bookcases to keep the cash flow going, but the footwork on these is disproportionate to the size of the job. Usually the person calls on a whim and does not have an idea of a budget. Sometimes they want something like they saw in a store in a custom size.

I find myself having to get general dimensions from a housewife and then giving a ballpark figure over the phone rather than wasting a half a day taking a meeting. There is also the customer who is looking for a kitchen with a Home Depot price in mind. A lot of people say they don't give ballparks. How can I weed these out without wasting too much of my ever diminishing time?

Forum Responses
(Business and Management Forum)
From contributor H:
If you take these kind of jobs, you don't need to "pre-qualify" anyone. It's part of this business - wasted trips and hours of meeting with clients for a couple hundred bucks comes with the territory. I have had folks walk into my shop with cow manure on their clothes and shoes, driving a rusted out junker, and hand me 8g's for a set of stairs. I have also had folks driving a Rolls try to give me only 10% down and extend them credit on the balance of a job.

What you're asking is a near impossible thing to do. You will become the one who is pre-qualified. Time and your work will attract the clients you now seek. There are weeds in every garden.



From contributor J:
I agree with contributor H. With what I do, I have to call on everybody who responds to my advertising, but I've completely given up trying to predict who will buy and who won't. I know this isn't exactly the same thing, but it does show how impossible it is to know what someone else is going to do or even what they are thinking based on the clues they might present to us. Those people who claim to be able to "read" people are talking crap.


From contributor A:
Mine is simple. If they have to ask what it is going to cost, they can't afford it. I like the "There are weeds in every garden" quote. It is very fitting.


From contributor M:
There are a couple of things that can help. First, know about how much it costs to do something small. Keep track of it next time. I figure that it will take me at least 45 minutes to set up for 1 raised panel door. That is changing all the cutters, making adjustments, etc. So, right off the bat, they have roughly $45 into the project before I get started (my shop rate is $65/hour). That does not include materials, clamping, sanding, hinges, hardware, etc. And then they want to spend 30 minutes to an hour telling me about how it got broke, what shop told them that it was too small, and what their cousin Larry does who took shop in high school. When I tell people that it will be over $100 to build 1 door, most excuse themselves politely. It has taken me a while to realize that these little things have a tremendous amount of hidden costs, and it is not in my best interest to do them. Now, if someone does want to pay me time and material, I will do it. But otherwise, I don't need to do these things at a price that people want to pay and that loses me money.

I do like to give referrals, though. Since I can't find people to do these small jobs, I tell them to call their insurance agent and ask them for a list of contractors. These guys will often take on small projects.

The second thing that I do is charge an "On-Site Consultation Fee." I just bumped it up to $100. I tell them that they will get about 1 hour of my time, travel to and from their house. I will sketch what we talk about, and get back to them with a price. This fee will be applied to the purchase price. I also tell them that I don't work for free.

This does a couple of things. First, it sets up expectations about you. It says that your time is valuable, you do the work and you expect to get paid for it. It also gives them an amount of time so that you do not wind up being their Thursday night entertainment. When you arrive on time, stay for the length of time that you said, make a sketch, and get back to them with a number - it fosters a sense of trust. You said what you will do, and did what you said. I have found that as I use this, the clients are much more respectful of me and my time.

The second thing that this on-site fee does is help people get off the fence. If they are just kicking tires and looking for free estimates, then they quickly excuse themselves. Remember, people are quite willing to waste your time if it does not cost them anything. And when you sent this message - my time is not worth anything - then you have clients with a poor image of you. But, on the other hand, if they are ready to spend the money, then they don't have a problem with $100.

As far as ballparks, I can't remember getting a job off a big fat guess. Most people just want a general idea of price. If they are insistent, qualify your response with things like, "Not having seen your…" or "Now don't hold me to this, but from what I understand…", then come up with a number, double it and tell them. If they come back and want you to do the work, you can spend time doing a formal bid.

Because of the price of these projects, and the amount of preparation and work that goes into these, they can be real money losers. Be careful of them.

A bigger shop down the road had made the decision to refer all things less than $5,000 to me automatically, and if it is less than $10,000, they will have to look at it very hard. They have decided that the amount of work it takes to do any job, no matter how big or small, has a certain fixed cost. And, at this time, it is not worth it to run small jobs through their process because it is not profitable enough. As a result, I have gotten much better at giving people information quickly and not letting them suck up my time. The way I think about it, talking to them costs me just more than $1 per minute. I have to decide how much of my money I am willing to give them. These are a couple of things that have helped me assess quickly if I am going to make money or lose money doing work for this client.



From contributor A:
As gas has passed $3.00 a gallon, it has become very important in our shop to do our best to weed out the tire kickers and people with caviar tastes and tuna fish budgets in the initial contact.

When we get a call, we listen to what they want, and if we can do it, we ask if they have the budget to hire a custom cabinet shop to do their work rather than going to the home centers and furniture outlets or the local handyman.

People who don't have a budget are tire kickers. People who want to buy custom cabinets have done a bit of research and have a general idea about the range of prices. They expect to pay. I will bid work for this kind of customer and compete to get their work, which we may or may not get.



From contributor V:
Pre-qualify...
1. Price and contract
2. 50% down at contract signing. 25% midway through project and balance on completion, but before you leave the house. As long as you are still onsite, the first time you can remove the cabs and take them with you if they do not want to pay. I have not found any other safe way to do business.


From contributor D:
I don't think there's a simple solution that will work for every business. Over the years we've narrowed down what our shop is willing to do, and in defining that more clearly, we already weed out a lot of things that are time-wasters. I'd suggest at least the following:

1. Keep an accurate record for a few months of everything you spend your time on. I mean really write down everything. After you have a lot of data, see how much time was billable to the jobs you did, how much was general overhead, how much went on wild goose chases, etc. I'll bet anything that you'll be surprised by the answers you get.

2. After that, redefine what exactly it is that your business should be selling. See where your profits are coming from and cut everything else off at the knees. You have to be ruthless about this. Better to spend your time looking for the right jobs than filling it in with little things that you think keep the cash flowing.

3. Set up a new price list, including something like contributor M wrote about for house calls. Ballpark estimates are in nobody's best interest. We absolutely refuse to give them.

4. We manage to make 90% of our clients come to us for the first meeting. If you can't do that, at least charge them for your visit.

5. Remember you'll always have a certain amount of estimates that don't turn into orders. Regardless of that, try to turn their experience of meeting you into a positive one. It can come back years later in surprising ways.



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