WAIT!!! I can already feel you seeing the word ‘negotiation’, sighing and already starting to turn the page… But hear me out and give me just ten minutes of your time to read the next couple of pages, this may very well change the way you look at what we do.
Ask yourself, are you a charity masquerading as a small business? In the competitive world of pest management, securing contracts, managing your time and maintaining healthy profit margins hinges as much on your (or your employees) skill as a technician as it does on strong negotiation skills.
Yet I already hear you shouting, negotiation? Me? I haven’t time to haggle over every single job Alex.
But getting a ‘good deal’ is human nature, and even if you don’t feel like negotiating, you can bet yourself a shiny penny that your clients (big, small and in-between) will always try to find a way to find the best deal from you, and this of course, is the heart of negotiation.
So for small business owners, every conversation is a negotiation, and therefore every conversation is an opportunity not just to make a sale but to build trust with clients and turn short term wins into long-term partnerships. We will over the next couple of pages aim to delve deeper into negotiation tactics and strategies for pest control professionals, including some explanations of key concepts you should try to factor into every single job.
- Know Your Own Numbers:
This goes beyond simply sticking a finger in the air and having ballpark figure in mind for a certain type of job work. That being said, there is nothing wrong with a rough estimate, but no two jobs are ever the same and so unless you have factored in a little wiggle room to these ballpark figures, you can easily find yourself on a job which can ultimately see you in dire straits. To prevent this occurring, conduct a quick cost analysis to determine your Break-Even Point (BEP). This number is the minimum revenue required to cover all your fixed and variable costs and therefore to avoid making a loss. To determine what this number should look like you should consider the following basic formula:
BEP = Total Fixed Costs / (Price of Service – Variable Cost per Service)
Fixed costs; These are your total costs over a given time frame (say, one month) that remain constant; such as taxes, business rent, insurance, and equipment depreciation (remember, your shiny new kit will not be shiny forever).
Variable costs; These costs fluctuate with the type of service provide and will be incurred on every job, consider therefore costs such as; your labour, materials used per treatment, and travel expenses.
Price of Service; This number is what you would expect to charge as a standard for a certain job type.
To explain this in context, consider this (entirely fictional set of numbers); Your Fixed Costs for one month are £2000, you also know that on average your variable costs per mouse job are going to be £20, and the on average you charge £100 per job (Price of Service). This means that within a month you will need to do at least 25 mouse jobs just for your business to break even. With this information you can see that by increasing your charge, you can either increase your profit, or decrease the number of jobs you have to do to break even. So how do we negotiate an increase in charge?!!
So first things first, by calculating your BEP and determining what looks like a feasible number of jobs a month for you (or your technicians) to achieve, you will then be able to establish you Minimum Acceptable Price (MAP) for a job– this is the lowest price you can accept without then incurring a loss. Anything above this number is your profit and will make your business grow, anything below this number and your business will be eating into it reserves (or worse). Although this sounds like a ‘bleeding glimpse of the blindingly obvious’, you would be surprised as to how many businesses accidently end up operating at a loss despite having a lot of work coming through the doors. Your MAP should therefore form the foundation for your negotiation strategy.
- Research the Client:
Although often times you will be going into a job relatively blind (such as a domestic property or even another small business) you conversely be might be going for a large tender. In both instances gather all the information you can about the client.
You can do this relatively easily by basing the majority of your research off your site survey, information such as the business size, pest history, and budget expectations can all be generated during your initial survey as well as a brief conversation with the client. Knowing the clients needs and wants, as well as having a better idea of what your variable costs will be for the job will allow you to tailor your proposal and pricing structure.
From there, you will have a good understanding of what they want, what they need, and what it is you should be able to offer. This should then give you then two overlapping scales, and the point at which and amount that they overlap is your opportunity for negotiation.
- Having a Plan B, (your BATNA).
Knowing then what your client wants, and what it will cost you to achieve this will then allows you to calculate the second most important metric in negotiating, what is called your BATNA, or the best alternative to a negotiated agreement. In the simplest terms, what is your plan B?
Imagine you’re trying to sell your car. You’d ideally get an asking price above your MAP so you can turn a profit, but what if the buyer keeps offering lower amounts? What is the best offer the buyer gives you is lower than your MAP? Should you take it and just accept the loss and hope you make it up on a subsequent job???
Your BATNA would be your best option if you can’t agree on a price above the MAP. In this context your BATNA could be things like:
- Selling the car to someone else
- Trading the car in for a new one
Knowing your BATNA gives you power in the negotiation. If the buyer offers way less than you’d accept, you can walk away because you have other options. This can also help you avoid getting stuck in a bad deal. This concept works equally well when it comes not to selling cars, but to selling your services… do you need this work if it is going to cost you money? Remember, not everyone is YOUR client.
- Understand Industry Standards:
Understand who you and your business are, and what ‘good’ within our industry looks like. No business exists in a vacuum, so research average pest control service costs in your area for business with similar standards, property portfolios and pest issues.
This data serves as an anchor – this is a reference point for initiating negotiations and is NOT a cost point to undermine for an ‘easy’ win (this will only ever lead to a loss-loss for all parties involved). Knowing the market rate equips you to justify your pricing and identify potential negotiation points. For example, if the average price for quarterly rodent control for a restaurant in your area is “£XXX” and this number sits above your MAP, then you can use this as a starting point for your proposal, with room then for negotiation up or down.
It is at this point that you might assume that in any negotiation there will always be a ‘winner’ and a ‘loser’. But this is rarely the case unless you are negotiating exclusively on cost.
If the only negotiation variable IS cost, then of course there will be a perceived winner and loser, but in reality, we are very rarely negotiating just this single parameter are we? We are also negotiating the speed at which the work can be started/completed, the methods used to achieve success (traps or bait?), the after-service care or potential upsells & cross sells (proofing, repairs and ongoing support). All of these variables will have a static cost to you, but will be of an differing value to your client, meaning that a client who values continued piece of mind may well be happy to pay more for your service if you are able to present this as a part of the value to them for working with you.
- Focus on Value, Not Price
Of course, price is often one of the easiest variables to haggle over and therefore will often raise its head first. Consider the following statement we have all experienced, “We have asked around and found someone cheaper, can you match this quote?”. You initial reaction to this is a perfunctory hand gesture and a comprehensive list of where they might stick such a suggestion. However, this statement for you should tell you two very important things, firstly YOU are their preferred candidate for this job, despite what it may seem. If the client wasn’t interested in you then the answer would be “no” regardless of the cost. This then brings us to the second important thing, they are trying to start negotiations with you, so negotiate with them.
Sometimes in this situation you might be tempted to say, “yes we are expensive, but that’s because we have to….”. If possible try to avoid this for two reasons, firstly it sounds like you are excusing your prices and secondly it sets you and your client immediately on opposite ends of the table. Instead try to say, “Yes we are expensive, and let me tell you why”. What have you done here? You’ve turned your expenses into sales points, “Yes we are expensive, and that is because we ensure that all of our technicians are fully insured, trained and members of a trade associate ensuring that they provide the highest level of industry standards.” Suddenly your costs are now their value added.
If then they then further press for a reduction in price, actively listen to what they are saying. Are they asking for a lower price simply because they cannot afford your services, which may well be a red flag and highlight for you a walk away point. Or are they haggling to simply get a better deal? In which case, what can you offer them? This your time to swap negotiation from cost to your value proposition.
When you shift you the focus from price to the Value Proposition of your service you can then start to highlight the benefits you deliver, such as: Peace of mind, after all you’re selling your client freedom from pest worries not just now but potentially in the future too. The value from a healthier environment as your service will protect their employees and customers. Ask them, what’s the cost of not using you? It may well be continued damage to property, stock and reputation. And finally you may well be adding value to their business by helping them remain compliant with regulations.
By demonstrating how your service saves them money in the long run, you move the conversation beyond a simple price comparison.
So, in synopsis, remember that negotiation is a continuous and ongoing process. That everyone likes a deal, but value for both parties is created through negotiation. And finally, there need not be any situation which you cannot walk away from with both parties coming away with a win-win situation.