This summer, a sales rep from Medallion Home Improvement in Maryland came back with an order for doors. The problem? Due to incorrect measuring, the contract price was less than half of what the company would need to make money on the job. Sales manager Oliver Schreiber sat down with the customer to explain the situation. Unfortunately, he says, “they didn't understand, and we lost it.” (The job, that is.)
Mistakes Can Be Costly Jobs that are seriously underestimated are rare at Medallion, as they are at most home improvement companies. But reps, especially new reps, do make mistakes. And customers, already wary of dealing with contractors, are hesitant to deal with a company that comes back after the contract is signed, wanting more money.
Honor the Price For that reason, in situations where the price is underestimated, companies often try to honor it anyway. “If there's any possible way we can do the job for that price,” Schreiber says, “we will.”
If not, then the job must be re-sold, which can involve meeting in the middle on price.
To get things back on track, the first order of business is to let the homeowner know what happened and why. And that's not going to be easy.
“People are leery to begin with,” says Victor Muscarella, vice president of Full Spectrum Remodeling, in Eddystone, Pa. The best way to approach it, he and others agree, is “to be straightforward with them. To say: ‘We are very, very sorry that we made an error, and it will cost you additional money to proceed with the project in the way you would like it done.'”
At that point, for Full Spectrum Remodeling, “We either have to charge additional money, or, if it was our error, return their money and cancel the contract.”
Cancel is Alternative Brad Bishop, owner of Rembrandt Remodeling in Atlanta, says his company makes a healthy gross profit on its jobs, but in such situations, he says, “I'm not worrying about the GP at that point. If I can do it, and make the customer happy, I bite the bullet.” Where an estimating error results in a seriously underpriced contract, he says, he's covered by a clause allowing him to cancel. That happens “once or twice a year.”
Most companies strive to avoid such situations to begin with. At Medallion, the company manages it by having the rep remeasure, with the customer present.
“We have him remeasure, and we're remeasuring right behind him. We explain (to the customer) exactly what a square is, and that the original estimate was completely off.” In roughly half of the situations where this occurs, customers are understanding. The new rep, Schreiber says, gets good at estimating “as soon as he makes his first big mistake.”