Want to be an ‘ultra-successful contractor’? Ron Smith tells how

April 18, 2014
Ultra-successful contractors report annual growth in revenues; they report annual double digit net profit; and they maintain a pleasant work environment. Determine your competitive advantage. Determine geographically and demographically your three market areas. Decide what business or businesses you’re going to be in. Create your portfolio of products and services.

LAS VEGAS — The word legendary is overused but it fits when applied to Ron Smith. Who’s Ron Smith? He invented the service agreement and that alone should make him legendary. He’s become one of the nation’s foremost contracting consultants and members of the Service Round Table heard his tips for becoming an ultra-successful contractor at the group’s International Round Table here.

First, Smith said, you really must want to be that person. Ultra-successful contractors report annual growth in revenues; they report annual double digit net profit; and they maintain a pleasant work environment, a place where the employees tell others that it’s a good place to work and that they should work there.

Determine your competitive advantage, Smith said. You don’t need to be big or sophisticated. You could be a one-man shop that devotes his personal attention to every client and that’s your advantage. Everyone has a story, Smith said, and they’ll all work as long as it’s not about low price.

Determine geographically and demographically your three market areas. First, the area where you want to have dominant market share and people think of you when they think of a contractor so your competitors have to live up to your reputation. Second is your reactive area, the region where you’ll go if you get a call but you’re not there proactively yet. The third is an area where you’re not going to go because it’s just not worth the windshield time

Next, decide what business or businesses you’re going to be in — plumbing, heating, hydronics, air conditioning or, best yet, the total indoor environment business?

Create your portfolio of products and services and always look to expand it so you have more things to offer. Determine the pricing strategy for all these products and services. You’re going to have different pricing strategies for drain cleaning versus trenchless pipe replacement or installing a ductless split. Develop an annual budget for both revenue and profits for individual departments and products.

You have to translate those dollars into units that everyone in the company can understand and then report results to coworkers in those units. For example, say you want to do $800,000 in air conditioning and your average sale is $7,980 so can get in front of everybody in the company, not just your financial people, and say we have to sell and install 100 replacements. Figure out how many you need each month because January sales and July sales will be different. If your average closing rate is 38%, you can tell everyone in the company that you have to make presentations on 263 leads. Write your goals for the week on a big board in those units and then at end of each week show the actuals compared to budget so everyone knows how the company is faring.

The owner or top manager must understand and facilitate the “Three Cs” of customers, coworkers and the company and how they all relate to each other.

Your culture should be marketing driven but customer focused, Smith said.

Focus all coworkers on the service agreement program, Smith emphasized. It is the most important product that you sell. Smith consults for a number of contractors.

The companies for whom he consulted last year had 29 “comfort consultants” and Smith asked them to track sales for customers with service agreements versus those without an agreement. Those salespeople told him that they closed 31% of presentations with those customers that did not have an agreement, but closed an astounding 86% of the customers with an agreement. Sell service agreements, treat those customers well and the replacement sales will fall into your lap.

All coworkers participate in the sales process in one of three different ways, Smith said — they can make sales directly, create sales leads, or they can talk positively about the company out in the community. If they can’t do at least that, then they can’t stay with the company.

The mission is to always get new customers while retaining the ones you have, so make your company convenient to do business with.

  • Have real people answer the phone.
  • Offer consumer-financing options to let people buy by the month.
  • Offer extended hours of operation. Steve Miles, Jerry Kelly Heating & Air Conditioning, St. Charles, Mo., is open 24 hours, seven days a week. Miles charted his sales volume and found there was little difference for any of the seven days of the week.

Train your techs and installers to practice value added. For example, if you install a new system, the customer gets exactly what he thought and he’s satisfied. But if you throw in something extra, even if it’s just a case of filters, the customer is delighted.

There are two reasons for not being successful contractor, Smith pointed out. The first is a deficiency of knowledge. The second, and the much more common reason, is deficiency of execution — not doing what you need to do.

Additional information about Ron Smith is available at his website, www.ronsmithhvac.com.

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