Designing a New Profit Center

Michael Pope, president of Safety Technologies Inc. and Audio Video Interiors Inc. of Medina, Ohio, has been charging design fees for his security and high-end A/V installations for almost 10 years. Pope came to learn the true costs for preparing “free” designs was one of his largest overhead expenses. Further analysis also showed his closing percentage remained the same; he just wasn’t paying for the free proposals any longer. It’s a profit-making tool more integrators should consider, he says.

What first-step advice can you give to an integrator who wants to begin a design fee policy?

The first step is to believe that the most valuable thing you have to offer is your knowledge and experience. Don’t give it away for free. Next, develop a process, a set of deliverables and documentation for your design services. Document your success stories by providing prospects testimonials, awards, etc. Develop a culture in your company that rewards achievements and certifications. Once your staff sees the results of their labor publicized or a glowing testimonial from a happy client, they develop a sense of pride. We post all of our staff’s certifications and training accomplishments on our Wall of Fame. It is the first thing we show a prospect when they enter our design center. If you act like a professional consultant, your prospect will treat you like one.

How do you determine the cost of a design?

We charge by the hour, estimating the amount of time we feel it will take to design the customer’s project. We provide a detailed log of all time used and bill for more if necessary or credit the unused portion toward the cost of the job.

Is there a minimum equipment threshold used to determine when a design fee is charged?

If the project is simple and straightforward, we don’t charge for design services. If a designer is required to look at the jobsite or engineer a solution, then we charge for the services. Basically, $450 would be three hours of design time. Regardless of the amount, once a prospect has paid you for services, they become a client. The buyer-seller relationship is different from that time forward. For example, selling a change order to a customer is easier than selling a new system to a prospect because the client thinks of you differently. They trust you.

So your design department has become a true profit center?

Our design department has been a true profit center. First, it established professionalism in our sales approach that helps us win projects even when we are the higher priced solution. Our designers also act as project managers for our bigger projects, which we also charge for by the hour.

Do you often lose jobs because the customer refuses to pay a design fee?

We don’t lose out on too many jobs because of our design fee philosophy. First, we explain that the design is the most important part of any system. We show our prospects the national awards that we have won, largely due to superior designs. We explain that design time is always factored into the proposal costs of a project. We think it makes more sense to pay for it upfront and get a good design. Once a client pays for a design they own it. They can put it out to bid or they can continue forward with our installation services. We explain that if they choose to bid it, they will get quotes that are apples to apples making it easier to make good hiring decisions.

When selling the customer, how important is it to distinguish a true design from another competitor’s proposal?

When you are charging for design services it is imperative that you establish credibility through certifications, awards and testimonials. Of course, you must have the capability to actually do true designs. If you prepare a proposal and call it a design, it will backfire on you and you will lose all credibility. We show our clients what true designs actually look like typically, showing them the design documents associated with one of our award-winning projects.

What if the customer already claims to have a design? What then is your next move in trying to win the job?

When a prospect states they have a free proposal from one of my competitors, I tell them that if they have a design that meets their needs and budget requirements, send it over. We bid on jobs all the time! In many cases, they send over our competitor’s proposals. At this point, if the design is credible, we will quote it. If it is lacking, we respectfully decline to bid explaining that there is a deficiency. More often than not, the prospect will have us prepare a proper design. Worst case, we get last look at the project and bid it.

Has charging for designs become more difficult during these challenging economic times?

Business is more difficult in general. When we provide a design service for a client, the very first thing we do is work with the client to determine a budget for the project. Once determined, our mission is to provide a solution that meets their needs and comes in at or below budget. Again, in our model they aren’t paying more, they are just paying for the design first and the installation second. They benefit from our experienced designers working with them to maximize their investment. It goes without saying that your company’s philosophy must be to look out for your customer’s benefit, always, and never taking advantage of their trust. Do that and your customers will always take care of you.

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