Why We Need to Flip Our Quoting Process Upside Down

When my new clients build a proposal, they tend to start with the equipment, then add labor until they hit a budget number they’re comfortable presenting.

But when you do it that way, you cut corners on labor. If you start with labor, on the other hand, you optimize equipment.

The process of designing a project to match the customer’s budget is called value engineering. However, this isn’t about making compromises. Value engineering is about delivering optimal results, which means balancing the scope of work against resources.

If you’re looking to build better proposals, start with labor, not equipment.

Why We Need to Flip Our Quoting Process Upside Down in 2024

This blog post is even more relevant now than when I first wrote it in 2022. Here’s why I’m excited to double down on it:

1. Our industry is witnessing uncomfortable changes in buying patterns. Younger buyers are less likely to negotiate. They’re inclined to make a decision based on the price you present at face value — which means price shoppers don’t give you a second chance anymore.
2. If you understand scalability, you know dynamic pricing is important. You want to be busy year-round, which sometimes necessitates aggressive pricing during slower periods. If you have an opportunity to earn gross profit, you need to win the job.

So, to win the jobs that matter from the customers you want to do business with and stay busy year-round, you need to change:

• How you develop proposals
• How you engineer value
• How you present the price for a given project

Now, how do you get to the baseline quote of a particular opportunity’s minimal needs so you can separate that negotiating point?

Start with this model.

How to Value Engineer Effectively

A common mistake in value engineering is to build roles around specific individuals to take advantage of their dexterity. This often results in asking people to do two or three jobs instead of concentrating on one.

This is what I call bidding yourself into a corner. You’ve created only one way to accomplish a job, and it’s through a unique group of individuals you can’t find.

It’s much easier to value engineer a technology specification than a human specification. When you implement this idea, you assemble a team appropriately sized for the baseline scope of work the customer requires.

You already know you’ll need audio and video, as well as some lighting and decoration. The place to start, however, is with baseline labor. Then, you can put together the baseline equipment that the baseline labor supports.

All the technological wants that arise after that become options, enhancements, or upgrades.

Value engineering in this direction allows you to create a “Not to go below” number. If your baseline labor is X and your baseline equipment is Y, then X + Y = Your Minimum Budget. And a minimum budget gives you a firm foundation to stand on.

The Application and Benefits of Value Engineering

So, why is this valuable?

If you’re good at putting together baseline budgets quickly, you can zero in on a customer’s budget.

If you say, “Hey, here’s a $50K to $80K solution,” and they come back with, “Oh, my goodness, we don’t have that kind of money,” great! Stop talking about that price range and move on to a more value-based solution or an entirely different approach.

This way, you don’t waste time talking about options that don’t meet the customer’s needs or that they simply can’t afford.

Another thing about baseline budgets is they’re very easy to communicate to your internal teams. Baseline solutions are provider-specific solutions.

For example, how do you install ground-supported sound for 500 people at a banquet in a hotel ballroom? Your company has a solution for that. That’s the baseline. Is there an upgrade? Of course there is. But it’ll cost X at minimum.

Now it’s up to the client to decide how they want to dedicate their budget, which:

• Addresses the changing buying styles in the marketplace today
• Optimizes your core resources so we can generate revenue more easily year-round
• Creates opportunities for upselling through the life of the project (and remember, an upsell may happen after you’ve closed the deal, when the client finds more money)

If we ever return to a seller’s market a la 2022, this methodology still applies, but the margins will increase.

Final Thoughts

When I was in second grade, my mom gave me $2 to go to the cafeteria at my new school. She said I needed a healthy entrée, but I could have dessert with what was left over. I agreed.

I wanted the chocolate cream pie, but it was the most expensive dessert on the menu. Not being a math whiz, I bought the pie, ate it, and went back in line with my change to see what else I could buy.

I got stuck with fish sticks. Who wants fish sticks? I could have settled for Jell-o and gotten the pizza. Augh!

This is what happens when you put budgets together for clients. You forget about the things that are most important to make the budget work, like having the right people in the right roles and the right positions.

When that happens, you put in dessert items, like video walls, flying sound systems, and moving lights. I call these budget killers. You don’t have room left for the people who are going to make the equipment work.

In the process of creating a budget, you promise the client technology without considering the cost of the people needed to deliver it. Now you have to walk your promise back. Nobody wants that.

So, start with what’s most important: PEOPLE. Then, you can have a realistic conversation about what technological capabilities the customer can actually afford.