EIGHTH POST

Value Engineer, Best and Final Offer, Last Look, Meet the Low Number, should I go on?  You finally won the project or you are on the doorstep and all you need to do is carve up your margin like a Thanksgiving Turkey and hope you have a good piece or two left.  Oh yeah, then you have to get paid, finance the project, and somehow make, I know its a crazy thought, a profit!?!  

 Contractors struggle with covering overhead, making a reasonable profit and covering cash requirements.  One contractor I spoke with told me that he spent 2.5x more  in credit line interest in 2008 and his DSO's were up 15% to 60 plus days.  He maintains good credit with distribution but suffers from having to borrow more.

Manufacturers watch their premium solutions get driven down to more base solutions or even worse substituted for less expensive product.  

Suppliers get scrutinized on every line item and if they are "high" on an item risk losing the entire bill of materials.

What can we do?  A few ideas for survival.

• Leave the business entirely and become a bankruptcy lawyer representing all of your former competitors...OK that's probably not happening.
• Talk to your competition about clients and what their experience are like.  I am not suggesting you divulge any competitive information but you can better understand negotiation techniques.  Some may say this appears like collusion.  Are the users and GC's the only ones allowed to have leverage?  Its not price fixing, its getting smarter.
• Negotiate for payment up front. Sounds crazy but I hear it happens and you don't get if you don't ask.  If the client wants a great deal, they might need to help finance that great deal so you don't choke on a lower margin than usual.
• Manufacturers should have a hedge strategy so they can default to a more competitive position if needed.  Don't give away the store at the outset.  If that is the strategy, then quote 20x more than your competition.
• Distribution can utilize rebates, value added services, assistance with bond expense in exchange for an order, and special inventory for projects.  
• All of us can improve how we qualify opportunities.  If we know price is king based on past experiences, invest an appropriate amount of time on the opportunity and increase the investment on more profitable opportunities.  
• Have you identified five accounts to take from a competitor(s)?  This is an unprecedented economic period, and vendors often get too comfortable with their long (or not so long) standing accounts, and your opportunity to pick off a great account might not be as hard as you think.  
• Acquisitions  Lots of companies, particularly contractors, are cash starved.  Many of those companies have great accounts.  Can you pick up a competitor for the right price.  Are you prepared for this as a supplier or manufacturer?  Are you putting companies together that benefit each other and you?  

Keep grinding and sharpening the saw.  Creativity and hustle are never out of style!