For construction companies that offer demolition services, winning business and delivering high-quality service at an acceptable price keeps them afloat. When the quality or variety of services is undifferentiated between construction companies in the same region, construction companies become locked in a bidding war for buyers who choose the lowest price.
To these buyers, as long as a selection of companies can complete the job, the lowest bidder will win. One of the ways to break this commodity barrier is to differentiate your demolition services and use deconstruction as a tool to win contracts for your construction company.
Construction companies take a three-pronged approach to the commodity issue and win contracts:
1. They can improve operational efficiencies to lower the cost of services and submit lower bids than competitors.
- They can differentiate their services and offerings.
- They can build competitive variation through their branding and reputation.
Many of these companies offering demolition services are stuck in a loop of operational cost cutting in an attempt to outbid competitors. What these companies don’t know, is that there’s actually an alternative to demolition that gives massive tax incentives for the construction company’s clients.
Deconstruction is the dismantling of a building piece-by-piece and then donating the reusable building material to a non-profit. Because these donations qualify as a donation of charitable goods, those donations are tax deductible.
Not only do these tax benefits reduce the overall cost of a demolition project, but these benefits can actually produce a net gain for the client. Let’s take an example of a deconstruction project that is a $600,000 project for the construction company, and yields $3,000,000 of fair market value building material. The owner of the building material could get $1,200,000 back on their tax returns (based on a 28% federal tax bracket and 12% state tax), creating a $600,000 net gain for the building owner on a project that would have been a net loss if it had been a demolition project instead of a deconstruction project.
While selling deconstruction services to a buyer takes a sophisticated buyer who has a basic understanding of tax benefits, we’ve found that construction companies who are able to convey the massive tax benefits of deconstruction are put in a strong competitive position against companies who are just proposing to knock down a building and drag it off to recycling plants and landfills.
We’ve also found that both construction companies and their clients are interested in the philanthropic benefits of deconstruction, adding another differentiator for your bid. Not only does deconstruction preserve usable materials for a second-use and create a greener process for taking down a building, but those materials also go back into the local community too, quite literally, support local non-profits. Both the client and the construction company performing the deconstruction can say that they have contributed to building up non-profit infrastructure through their efforts.
Deconstruction is a win-win for both clients and construction companies. The biggest hurdle is helping a client understand why demolition is just wasting perfectly re-usable and valuable assets.
Do you want help with that conversation or just want to learn how we’ve helped other construction companies create their own deconstruction services? Reach out to us at Green Donation Consultants, and we’d be happy to talk through any projects or questions you may have.