Management Talk: Is green building in your future?

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Green Building is everywhere. It’s popular for two reasons. One, it makes sense to protect and preserve what we have. It’s the right thing to do. Two, governmental agencies and politicians love it.

But the truth is that selling green building to potential clients is like selling a hybrid car – everyone wants one and thinks they are a good idea, but when it comes time to buy, the price can be a showstopper.

Politicians speak as though green building is the panacea to all our energy problems. “Green is the way to go, it saves us money.” Right! The problem is they are all thinking textbook, they don’t know the real world. Welcome to construction.

As a construction business owner, you have to look at the business management approach to green building. In many cases, green is going to cost more to produce and don’t let anyone — the customer, the government bureaucrats or anyone else — tell you different. When jobs cost more to build, they are harder to sell. That, I believe, is why we all have this deep down feeling that green isn’t nearly the all-encompassing solution to our environmental problems. It’s just not that easy to implement.

Let’s take a real world look at what “building green” is going to cost you and your customers in terms of time spent educating yourself and your company, the expense, and then let’s talk just a bit about selling this work to your potential customers.

Educating Green:
You are going to have to spend time learning green, and that means money. In order to get the certifications that you are expected to have, you are going to have to spend time either in a classroom, by correspondence or the Internet to learn it, pass the tests and get the certifications. Additionally, you are going to have to invest in software and test equipment. It won’t be free, and it will increase your overhead.

After you get all your training and certification out of the way, you need to sell your green building services. That’s when you face the reality that the market wants energy-efficiency, but not if it costs a lot more money. Again, like the hybrid cars, not everyone is willing to spend a lot of money to save energy.

I understand that thinking. A few years ago our heat pump died. We researched geothermal systems, but not for long. The price was considerably higher than any other alternative. It would take over 20 years to recover the higher investment with savings in our utility bills. Your clients will do the same cost/benefit analysis, and might arrive at the same conclusion.

It’s different if you are selling to the government or to a public agency like a school district. They aren’t concerned with the cost / benefit analysis, they are concerned with the politically correct analysis, and that means green. They will go for green building even if the taxpayers never see any cost savings from reduced energy. But private homeowners don’t have the luxury of spending other people’s money.

So when your potential customers start talking “green”, you need to explain that “going green” might cost them more money.  Depending on the “green” they want, you’ll need to explain why.

That also means your sales call may take a bit longer because you will have to make sure that you and your client are on the same page when you talk about Green Building. There are all kinds of certifications by groups and associations. You need to find out what they mean by “green”, and find out if you can do the job they want, according to the standards they have mentally bought into. You can’t just start talking and expect folks to either believe you and your ideas or that your method of “Green Building” is the correct one.

Your clients have three fears when you show up at their door to solicit their job. Their number one fear is, “Will they do the job I want them to do?” If they want the job done according to a green standard they found on the Internet, and you build to a different green standard, you’re headed for trouble. You need to spend the time to get on the same page.

You can’t buffalo your way through the green stuff; either you know it or you don’t. Many times you will find your customers know as much or more about what is required for energy efficient certifications than you do. You may know more about getting the job built, but they know the whys and wherefores of what should get done and why the new energy codes require it.

Additionally, you should have at least one alternative option ready to present if you find the owners do not want to spend the money for the green option. Present your green estimate backed up by a ballpark estimate for a traditional way of building the job. That doesn’t mean you need to estimate two jobs. Just be prepared to talk intelligently about an alternative and let them know roughly what it will cost because doing so might keep you from losing the sale.

You would also be smart to know what tax breaks are available for energy efficient building. Some tax breaks are federal, other tax breaks are local, like state tax credits or credits from utility suppliers or other governmental agencies in your area. You need to be current on these, because when you get pointed questions from your clients, you’ll need to know what they are talking about. If you don’t know the answers, they will migrate real quickly to a contractor who does. And with tax breaks, you’ll need to make sure your paperwork is in order so your client can claim the benefit. More time, more expense.

The bottom line is this: you can get as involved as you want or perhaps are required to be. You can talk about it, advertise it, discuss it, cuss it, swear by it, swear at it, but it is, in all probability, here to stay. That is our new reality. For some contractors, there isn’t any other option, your state is determining how green your jobs are. Others can still set their own path just as they have for everything else in their business.

The one thing you must keep in mind is that regardless of the type of jobs you build, you must charge enough to cover all your job costs, pay all your overhead expenses and make at least an 8% net profit on your jobs. If you don’t, your business won’t survive long term.

The green market place is our new normal. My prediction is that for the next several years, you are going to have to do a lot of studying and invest the time in education yourself on green building. Education is the key to long-term survival and making money in construction. The green movement is just the newest item on the list of things you need to know if you want to stay in business. -RB

Michael Stone is a business coach, speaker, consultant and management trainer with more than 50 years in the building industry. He wrote “Markup and Profit: A Contractor’s Guide” and “Profitable Sales: A Contractor’s Guide.”

He offers business management assistance to construction-related companies with audio and CD programs on his web site, as well as coaching and consulting services. Find him at www.markupandprofit.com, by e-mail at michael@markupandprofit.com or at 888-944-0044.

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