Pushing back on the margin squeeze in fixed price construction work


Pushing back on the margin squeeze in fixed price construction work

I often hear people in the engineering and construction game complaining about the rates and fees they get for their products and services. It doesn’t matter whether they come from a small or large business – the stories about clients “not being prepared to pay what it costs for what we do” are exactly the same.

You are probably aware that what’s actually going on here is the “value” conversation. Clients aren’t recognising the value being offered by your business. Guess what though? This might not just be the client’s fault!

But just before you go getting all defensive about this, let’s instead take an opportunity to hold up a mirror to ourselves. Ask yourself these questions:

  1. Do your clients need what you do?
  2. If they do, why do your clients behave as if they don’t really want what you do?

As a capable and experienced organisation you have an opportunity (should you choose to accept it) to craft a product or service offering that uniquely matches the individual attributes of your business. Rather than offering more of what your competitors have, why not put out there what only you can provide?

SO what should you ask yourself when evaluating or formulating your unique offer? Consider these key questions:

  1. What exactly do you offer? What is your Big Idea? For instance, if your business is managing projects, what do you actually do when you go about effectively managing projects?
  2. What specific client or customer problem does your offer solve? There’s two types of problem to solve that are valuable for clients: a way of doing something that’s better, cheaper or more convenient than the current norm, or an unsolved problem being experienced or likely to arise in the foreseeable future.
  3. Is your idea/offer based on reality? The best ideas typically come from insight into the industry’s specific situation and – most commonly these days – the application of new technology in dealing with an old issue. As an example, Contractors are all about managing resources such as people, plant and materials and there’s plenty of scheduling and tracking apps out there that can transform business efficiency.
  4. Is your offer aligned to who you are? This goes to the “why” question ie. Why is this Big Idea perfect for you and your business?

The final questions to ask yourself are:

  1. Are you truly confident in the value that you and your business offers? and
  2. Are you able to clearly and succinctly tell others about your value?

This is the basis of what’s called a “perfect pitch” and you are well on the way to communicating your answer to Question 1 to clients and prospects in a compelling way.

If your clients and customers are convinced that only you and your business can solve their problems and provide them with what they want and need, why wouldn’t they hire you to do what you say you’re going to do and pay you exactly how much you’re asking for?

Article By Peter Wilkinson

Director – Tipping Point Advisory

Peter Wilkinson founded SamWilko Advisory in 2012 to address capability challenges in the Engineering and Construction industry.

Over 30 years in the private and public sectors Peter has seen many good small and medium sized enterprises in the industry fail to transition through the “tipping point” to become great businesses.

He has also seen many successful tenders badly transitioned into the project phase and a host of major projects fail to get off the ground quickly enough.

The cost to business in terms of lost time and opportunity translates to hundreds of millions of dollars.

What’s the common thread? It’s all about Strategy. Knowing what needs to be done, but more importantly knowing the order in which each task or project needs to be done, is the essence of a successful and well-executed strategy.

There are more effective ways to grow great businesses, win bids and deliver successful projects.

Peter Wilkinson draws on over 30 years of experience as a consulting engineer, project advisor and business mentor in offering leadership, project advisory and coaching services.

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Pushing back on the margin squeeze in fixed price construction work