November 15, 2018

Is Your Profit Being Held Hostage?

By Tim Belcher

Tim Belcher

In the world of negotiation, there may be no more highly skilled practitioners than the negotiators of the FBI Crisis Negotiation Unit. This elite team is part of the FBI Critical Incident Response Group and may be the most famous and skilled negotiation team in the world. This team is on call 24 hours a day, 7 days a week to provide operational response capability and conduct and manage on site negotiations during any significant crisis event worldwide in which the FBI is involved.

We have all heard stories and seen depictions of FBI negotiators in the movies. However in their real world situations the stakes are of the highest gravity and lives are at stake; it truly is a matter of life and death.

In his book, Never Split the Difference, former FBI hostage negotiator Chris Voss outlines the strategies the FBI uses in negotiations and how everyday business people can use a more insightful negotiation approach to win in business.

As I correlated the information in Voss’s book to the HVAC business, it crossed my mind that the HVAC contracting community may be in the midst of a hostage situation of their own…their profitability is being held hostage. While certainly not literal life and death, profitability is the lifeblood of a business and I think it is being arbitrarily sacrificed without much of a fight.

FBI negotiators will never give in on a demand or request that puts the lives of the hostages at risk. In the same light, I would encourage contractors to draw a line in the sand when it comes to giving away profit…your profit margins should be non-negotiable. The HVAC industry seems to be lagging behind other home improvement industries when it comes to profitability. We can make a compelling argument that the technical aptitude and skill level required to make HVAC work correctly is superior to these other industries that outperform us in profitability. The average HVAC contracting company profitability is between 2% and 5%, depending on what research you reference. With this in mind, isn’t it time we stop making price concessions for the sake of “being competitive”?

For many contractors, their profit is being held hostage by a lingering myth that to win projects you must lower your price. Your price is your price and should not be lowered without lowering the value a consistent level. When price is lowered without removing value, profit is taking a direct hit and unfortunately many contractors fall into this trap.

You don’t have to be a FBI hostage negotiator to hold your price. In fact, I would encourage you to explore how you can add more value to your customer’s experience in order to increase your margins.

Don’t allow your profit to be held hostage by a false myth that you must lower your prices every time you are in a “competitive situation.”

About the Author:

Tim Belcher is a sales and marketing HVAC industry veteran with over 30 years of experience working with manufacturers, distributors, and contractors. Follow him on Twitter @belcherhvac.

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