Our family has a cat, but I grew up a dog lover and considered cats unpredictable, moody, irrational, aloof and self-centered. Plus, they have the annoying habit of transitioning from a calm state when being petted to an agitated state, which often results in your hand being pierced and arm being scratched. Usually cats do this just to prove they can — then they meow for attention. Thus, there may be a link between “men” identifying with dogs and “women” identifying with cats, but I'm not even going to bring it up. You think I want my eyes clawed out?
Gary, the cat, has no tail. He had a little automotive mishap, we think. He also has one eye, a result from a brawl with another cat over — you guessed it — a female. As if the loss of an eye wasn't bad enough, he was neutered at the time. This is like getting into a knife fight over a margarita and then remembering you don't have any lips. Or something like that.
My wife referred to this last little “modification” as “being fixed.” If you asked Gary, I doubt he would agree he'd been “fixed,” but in fact horribly broken. This is all the evidence we'll ever need to determine that the first veterinarian was female. In short, Gary functions OK, but not nearly as well as if all his systems were at 100%.
The thing is, we know what systems Gary is lacking, but with your business “systems” that's not readily apparent. Some things may work OK, but they are being seriously hindered by flaws elsewhere. Well (and it pains me to say this), great marketing can't help you if you don't have the technical skills to get the job done. And if you're running great techs into the ground with leads, but are under pricing jobs, you're still going to lose money. However, you won't have any techs if the phone's not ringing. A balance of strengths ensues.
We have many contractors call here for marketing help saying, “We need the leads,” “We want to boost our image” or “We're losing too many customers.” We counsel them to make sure they're ready for this change within the other systems. Here are the four business systems that every owner needs to check:
Circulatory System: This means the sales and marketing of your business. It's the lifeblood of your company. It includes generating leads, closing sales, keeping customers and getting referrals. Otherwise there's no such thing as customers, profits and money for education, marketing or additional staff. If you're not generating sales (as opposed to “waiting”), your business is anemic and a target to be picked off. We're seeing higher than average failure rates (new construction meltdown, housing market crash and financial market crisis) among contractors unwilling to market aggressively. Change is required.
Prognosis: Did you generate more leads in 2008 than 2007? Did you have a higher or lower close rate and average transaction value? Did you have an increase or decrease in “recurring” revenue (service agreements)? All are trailing indicators of progress or decline. Our top 10% of clients are doing better in 2008 because of stringent marketing and picking up sales from failed companies.
Nervous System: No - I'm not referring to the part of you that freaks out every time you review the books. I'm talking about the brains of the operation - that's you and your staff. A poor staff equals a poor image that equals poor service that equals poor sales that eventually equals the death of your business. How's that for holiday cheer? You must invest in your team if you want things to flow smoothly. That means training your staff, and even yourself, to drop bad habits that drive away customers and replace them with healthy habits.
One client near San Diego rocketed his business from just over $3 million, where it was stuck at for eight years, to more than $6 million in three years. How did he do this? “By letting experts do what they're good at,” said the owner, Greg Gill.
Gill hires a sales trainer at least once a year. Closing ratios and margins pay for this training many times over. His staff gets tech, phone and software training, plus, bookkeeping instruction. He even gets marketing coaching — he is always moving forward. By the time his competition tries to catch up, he's already moved.
If you can't hire a sales trainer like Gill does, you can change the small stuff at the business by dropping the bad habits, so the next time you hear someone say “I'm sorry, that's company policy,” calmly instruct them that your company policy is to make customers happy. Tell them what you can do for them instead of what you can't.
Prognosis: Compared to the best service company you know, how do you rate? Have you called yourself lately? What's the weakest and strongest area of your customer relation process? If you invested 2% of your gross in training, don't you believe it would add a multiple of that in return? Free Report: Fax, email or call for a copy of “Customer Service is the Front Line to Your Bottom Line.” See the end of this article for contact information.
Respiratory System: Breathing fills your body and blood with life-giving oxygen. It's your “feel good” system. Your staff must feel good about the job they're doing; your customers need to feel good about being your customers and referring others.
A 2005 poll clearly indicated that today's work force values environment and self-worth over compensation. Also, our figures show that 71% of your “lost” customers left because of your lack of appreciation to them. This is not a coincidence and has nothing to do with whether you're a good contractor. It has everything to do with how doing business with you makes customers feel. Appreciation and benefits beyond the measurable are the new economics.
Customer retention programs among contractors are soaring. Programs have increased more than 300% in the last four years. Why? Last time I checked, customers do all of the buying, renewing and referring. It makes sense to make them really yours. Yet if they only use you once — and that does not make them a customer — you're probably losing money on the single transaction and definitely losing on their lifetime value. Read: “What Customers Really Want” by Scott McKain.
Do you want mediocrity? Then copy the majority. Do you want stellar staff and customer retention? Then copy the market leaders. You'll end up with the majority's best staff and customers as a result.
Prognosis: What benefits have you added to your hiring program in the last year? Do hiring candidates come from referrals from your current staff? What percent of your sales came from existing customers? Is this figure higher or lower than last year? What percent of your sales came from referrals? These are indicators of good or poor morale. Each carries their own momentum.
Skeletal System: This is your business structure, so “planning” is the backbone. The first of the year is a perfect time to do this. A quickie for your marketing:
Determine your sales goals in service and replacements. Just write it down, no one is grading it. It's up to you.
Assign a percentage of those numbers to your marketing budget. The average in plumbing is 4.3%. Aggressive companies can spend up to 10% while slow to no-growth mature companies may only spend 2.5%. (Side note: they can get away with this only because of retention.)
Using the four-quarter system, figure your percentage of sales for each season. You have four “points” on your calendar. What sells more in each season? What can be promoted just before that need? What training and ads need to be in place? Get it done.
From this, you can quickly determine the timing for promotions for each season, using the percentage of sales per item as a basis for your marketing.
Prognosis: Does your year “just happen” or do you make it happen? Are you using a “shotgun” approach to acquisition or a “rifle” approach? (That is targeting instead of hoping.)
Two more free things to help: Our number one marketing question is, “What do I do?” The second is, “When do I do it?” Both questions, plus which media to use, what messages to send and what to cut back on are answered in our brand new 2008-2009 marketing calendar. See the end of this article to get it.
It's better to think of your business as systems comprising a whole - not just separate “parts.” You've just seen how sales, marketing, training, retention and planning all work together as a whole. So while you're planning, plan for success. Your biggest competition and reward is what you become in the process.
Remember Gary, the cat? He didn't need to win the lady in his battle, and we haven't seen his aggressor in four years. Maybe Gary is just permanently winking.
Adams Hudson is president of Hudson Ink, a creative marketing firm for contractors, and author of the recently published “Contractor Marketing Secrets.” Readers can get his free contractor-marketing newsletter and other items in the article by faxing their letterhead with the request to 334/262-1115 or email to [email protected]. Please specify your request. Also call 800/489-9099 or check out www.hudsonink.com for other free marketing articles and reports.