Entry
I wanted to share a meeting my business partner had today that did not go well at all.
He and our Director of Energy and Sustainability Division were meeting with a banker at a long term customer larger bank. They introduced themselves and before they could sit down the banker was telling them that they had a tough road ahead in this particular market with a lot of competition and that my firm's prices have been too high on Phase I ESAs in the past and that is why they (the bank) aren't using my firm. We asked what type of prices that he was seeing for Phase I ESAs and he said between $1,200 to $1,500. We politely told him that those were well below market rates and that we would not go that low.
We quickly changed the subject to avoid a quickly disintegrating meeting and began to describe the energy services. We discussed the services and how major banks may be requesting these services in the near future as part of Green Building Due Diligence on buildings. The banker stated that there is no way that his customers would "buy those services" and how is there is no risk in not conducting this type of assessment and there is no reason the bank would require this. We "defended" our business for awhile but eventually gave up.
THE GOOD NEWS......This is the first meeting we have had where this new line of business had not been well received.
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Have had two similar meetings recently with established customers talking about consultants pitching the same range of costs. I hate the race to the bottom. We didn't offer to meet their prices either, so we can only hope they screw it up. The problem is that in the current environment, some more reputable firms are taking the bait and the ride to the bottom. Paying to do work seems like an odd business model.
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Listen to what your customer is telling you, Mike. He is giving you truthful and valuable information. What you choose to do with it is of course up to you, but he's shooting straight with you, from his perspective. You may not have enjoyed it, but that does not mean that it's his head that is in the sand!
Don't get me wrong, I don't like it any more than you do. And of course I have run into the same thing, as many have.
This industry has become commoditized, and that is exacerbated by the poor economy, especially here in Michigan. Of course we need to fight that every inch of the way, but with some of our competitors embracing their only opportunity to grow market share, "thats the breaks" in capitalism. And no consumer is going to feel sorry for you if you can't figure out a way to adapt to it.
Example 1-A: the domestic auto industry vs foreign imports.
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Also, I wanted to thank you Mike, and also McCarthy, for not insinuating that the "race to the bottom" is perpetuated by "small firms and one-man outfits that just cannot match the quality of us bigger firms". I have seen/heard that slander elsewhere, and it just contains so many falsehoods and unfair generalizations .....where do I begin?
As the owner of a smaller firm for nearly 20 years, I would put our track record up against anyone's. Our clients love us, and they have their reasons for that.
Anyone who is being honest knows this: the fact is that there are many smaller firms that do a great job, just like there are big firms that also do good work. There are also small firms that do not do good work, and big firms too. There are also good firms - of all sizes - that make a mistake once in a while. And, there are larger firms who are very quick to drop price, and also smaller firms who struggle hard not to, and vice versa.
Size may matter in some aspects of life, but not in this area. Just like in those "other areas", it is a matter of client preference!
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David V, I agree with you. It's a free market. The trick is going to be differentiating ourselves from the competition. And that's always going to be the case.
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I appreciate your feed back, but my "head in the sand" blog title is in no way intended to imply the banker is ignorant because he does not support paying higher prices for phase I ESAs. I have read about enough dialogue on whining about price deterioration. Although I do not like it anymore than any of us I refuse to participate in the race to the bottom.
As a firm that is heavily investing in green building due diligence services, I view his failure to recognize the value in a building energy performance analysis and how it adds to the credit equation and the overall value of a property where I believe he is missing the point. And I understand his lack of understanding as this concept is new. I debate this often with other bank risk managers and appraisers.
Although we have a dozen office locations in the eastern US, the bankers I deal with in the Michigan market know me and my firm as the local firm and not some larger firm and it does not really matter in most cases. I totally agree that many smaller firms can often work circles around larger firms, especially when they are a strong regional player.
Thanks for the comments, and please do not view me as a "low price" whiner. We simply do not go low and still get plenty of volume from those who care. I daily am bailing out clients or poor work from firms large and small.
Have a great 2010.
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