A new home construction subcontractor was seeking advice about the mystery of lost business because their book rate was less than 20%. This person was an electrician, yet the principles I present in this article apply to just about any small business. The opening remark began with a statement that they thought they knew why, so this theorizing meant they were actually uncertain and probably needed a trusted neutral opinion. Don’t guess the reason for lost business when you don’t know. Find out.
Many solo small business owners cannot state why they get business or why they lose business. We make assumptions, or just don’t ask. Until you make it a priority to get both these questions answered, you’ll never understand your strengths and weaknesses. Consider the dynamics of conscious marketing and sales efforts.
After the marketing is done and you find prospects the sales cycle is preapproach, approach, presentation, trial close, answer objections, and final close. Ask a trusted friend to tell you bluntly if you are weak in any of those areas. If you lack knowledge of basic sales techniques, it’s time to learn. Marketing extends into the preapproach to understand how decisions are made and the price structure. The more you prepare and form a strategy, the more likely you are to succeed.
The small business owner in this instance felt his bid invitations were received to leverage the existing contractor on price. For some of the new home construction jobs he was told his proposal was cheaper, but they awarded the contract based on an established relationship. People buy based on trust, not just price. To win over an existing source you need to demonstrate outstanding credibility and trust. The mystery of lost business for this contractor was still elusive because the right questions were never posed.
People without any intention of ever buying from you may tell you outright to save both parties time, or perhaps they like you and keep you hanging on just to be polite. You could be the pawn they use to drive down the price, but I doubt it. Years ago US Air Force procurement officers proved that even on sole source items, just stating there was competition produced lower bids by an average of 10%. The new home construction companies in this case study already made it known that their quote requests went out for competitive bids. The final decision was not about price. In similar circumstances, any theory is not as important as finding out the real reason why you lost a contract. If a customer stalls without making an immediate buy decision, here are some follow up tips before an award is made.
My sales tips and advice for small business owners when calling about proposals that are pending is assume the contract is open. It must be because they didn’t call you. Be positive. If your steps in the sales cycle are “hat in hand” then the lack of confidence factor could be killing your efforts. If you call about a proposal saying “Is the contract still open?”, then your client is off the hook. The only answer to that question is either “yes” or “no”, and the wording itself is an admission you didn’t expect to win it anyway. These subtle differences in what you say could make or break your sales success.
Try open ended questions at each step in the sales cycle. Start your inquiry with phrases that encourage your customer to open up. For example, “How would you describe…”, or “What steps do I need to take…”, or “What would you like improved…”, etc. These cannot be answered with one word replies. After your proposal is made, and at an appropriate interval for follow up, contact your prospect and state a new benefit that you offer that they may not have considered. Express your interest to do business, and finally ask for the order. “I’m ready. When can we get started?” is much more effective than asking if the order was placed.
Handle disappointments in a professional manner. After you know you lost a contract, or in this case 80% of the bids, keep your dignity and continue with the open ended phrases. State with confidence your ability to do quality work at a fair price delivered on time. Never accuse or complain about their decisions once they’re made. Find out what you could do differently next time to become their subcontractor.
Finally, you may want to consider your niche. If customers don’t open up when asked open ended questions, then it’s probably time to admit the opportunity is not worth the effort. Your time studying quote requests and preparing proposals is costly. When a prospect is repeatedly indifferent, perhaps solo work with smaller contracts or individuals would allow you to grow even if it’s in smaller steps.
In conclusion, show interest by asking about the needs of the client. Open ended questions or statements allow the customer to provide details that you may not get with a “yes” or “no” answer. Apply the open ended principles to be prepared in the marketing and sales cycle, and then deal with and learn from disappointments. If necessary, revise your strategy and redefine your market to deal with people who truly appreciate what you offer.