Today I listened to a local radio station that was piped through the phone system as I waited on hold for my buddy at the local hardware store to tell me if the chains for my chainsaw had been sharpened yet. The advertisement talked about wasting money, and one line was a guy saying, “Honey, the toilet is plugged.”
Now, you and I know what to do when a toilet is plugged, but it is amazing the number of others who don’t know how to unplug the mug. Same holds true when it comes to doing work on their homes. They simply do not know, understand or care to get involved in fixing, repairing or building something new.
Why am I telling you this? Because it’s easy to forget. When you are on a sales call, you have to remember your audience. Don’t assume they know all the little contractorese comments you might throw into the conversation. One reason it’s important to ask questions (and listen more than you talk) is so you can determine their knowledge of their home or building, and you can know what level of detail you need to go into with them. Nothing happens in our business unless and until somebody (guess who?) sells something at a profit. They won’t buy if they can’t understand what you’re talking about.
As we roll toward the end of summer, construction-related companies that are doing a good job of advertising are keeping busy and making money. Good on you! With money coming in, keep an eye on how you are spending it.
This time last year, nobody was buying much of anything. August and September 2009 were probably the two lowest “discretionary buy something” months in construction in 8 – 10 years. Remember how you thought and even felt when you wanted to buy something then? Well, now is a real good time to feel that way again. You need to keep a tight clamp on the “I want, I want”. Here is a rule to follow: if you want to buy something, if you really have to have it, just can’t live without it . . . check your budget first. If it’s not in the budget you set last November and December for 2010, don’t buy it.
One of the biggest problems we create for ourselves is the need for instant gratification. I want it, so I am going to go buy it. I will figure out how to pay for it later. “Put it on the credit card”. Gang, if what you want was that important to your business, you would have had it in your budget for the year. If you didn’t put it in your budget, either you aren’t planning your business well, or your inability to control your emotions is overriding your common sense.
Take a hard look at anything that you think you really have to have. Wait at least 5 business days and then revisit the issue. Still important? Good, get your derriere out and sell something so you can pay for it.
I was talking with my son-in-law this week about securing new work. He just moved his family back to our area and has 6 mouths to feed. He did not and does not have time to wait for the phone to ring, he’s out hustling work every day.
He told me he went to see a potential customer last week. They had called seven contractors and he was one of two that returned their call and the ONLY ONE that showed up to look at the job. He got the job, they have already referred him to two other families for potential work. He told me this was the second time in two weeks this has happened to him.
Lee Iacocca, retired CEO of Chrysler Corporation said: “There’s no great mystery to satisfying your customers. Build them a quality product and treat them with respect. It’s that simple.”
Let’s assume that we can all build the same job. Are you treating them with respect when you don’t return phone calls? Or don’t bother to show up for an appointment?
The basic business rules are simple – I call them the Ten Cardinal Rules. If you ignore them you won’t last long in this business.
Someone asked me recently if I thought a salesperson for a construction-related company should help provide leads, and how many. My answer – yes, they should help provide leads, and how many depends on the company.
Let’s start by working backwards, considering the amount of money the salesperson wants to make each year. I’ll consider $60,000 a minimum. In today’s world, I would not want to hire a salesperson who didn’t want to make at least $60,000 as an annual salary. It’s difficult to feed and clothe a family on less.
If you are paying an 8% sales commission, they need to sell $750,000 per year to earn $60,000 ($60,000 divided by .08 = $750,000). If your average job sales price is $14,000, that’s 53.6 jobs (or 54 jobs) sold each year to reach that goal. ($750,000 divided by $14,000.) (Of course, use your own sales goals and average job price, not mine!)
If your salesperson sells one job in four, then they need 54 x 4 = 216 leads. That’s about the maximum number of leads you’ll want one salesperson to deal with anyway – as I point out in the Markup and Profit book, we did a study once and compiled the stats on over 30 sales people regarding how many leads they should take to generate the most sales with the highest profitability. Turns out the top sales people produced the best at 18 leads a month. 18 x 12 = 216.
The company will not always be able to generate that many leads – especially if the economy is sluggish. It is then up to the salesperson to get out and make up the difference by generating their own leads. If you reach the middle of the month and not enough leads are coming in to average about 18/month, the salesperson needs a plan in place to generate the extra leads they will probably need to meet their sales goals.
When I was selling remodeling, if I hit the 15th of the month and didn’t have at least 12 leads in, I started going door to door around the neighborhood of jobs I had working to generate more leads. I knew from long experience that doing this could generate one new job for about every 22 – 25 doors I knocked on. So, if I needed 4 jobs, I had a minimum of 100 doors to assault. Depending on the weather, I could do those 100 houses in 4 to 5 sessions. What was important was knocking on the door. If nobody was home, I left a door hanger. If somebody was home, I gave them a short talk about why I was there, then either went on to the next house or they invited me in to talk. It was a numbers game.
I also spent a lot of time sending thank you cards, something I still do when you order from us now. If the weather was bad, I made phone calls to old clients or made follow up calls on jobs that hadn’t sold yet. I made sure that I placed at least 10 calls each day. No stories, no excuses, I had a family to feed, clothe and support.
Your salesperson should be compensated for any leads they bring in. If they generate the lead and sell it, their commission should be increased by at least than 2%. That means they are paid at least a 10% commission on that job. Since your advertising budget should be a minimum of 3%, consider the extra commission part of your advertising expense. Extra effort calls for extra compensation.
Now, if your salesperson doesn’t like having to help generate leads for the company, my suspicion is there are other things they also don’t like to do. That of course, dumps the work on somebody else. Generating leads should not be an option. The only option is working for your company and helping your company and themselves grow and prosper, or finding a nice, quiet, easy, low-paying job with your competition.
Nothing happens until somebody sells something . . . for a profit.
If you employ a salesperson to help you sell something, for a profit, you need to pay them for their services. I am a firm believer in paying sales people by commission, a percent of the gross sales price of the job. Paying salespeople an hourly wage or salary gives them an excuse to lie in bed in the morning. That’s not calling them lazy, that’s just acknowledging human nature. And paying commission based on gross or net profit seldom works for long, because the salesperson has no control over how the job is built and isn’t able to keep watch on job costs. They can end up with little or no pay due to decisions outside their control. Straight commission based on gross sales is the best way to pay sales people. The sales commission is part of your overhead expense, it needs to be considered in your markup.
You must be fair and pay a commission that makes sense. In my experience, 8% of gross sales is about right, with the opportunity for bonuses based on performance. All the good contractors I know pay their salespeople at least 8% or more with bonuses that can add an additional 4% to that figure for a total commission of up to 12% of the sales price.
If you’re thinking, “I can’t afford to pay that much commission” or “They’ll make more than I do”, then you don’t understand or value what a salesperson can do. Sales are the lifeblood of your business. Worrying about the amount of commission you are paying can also be a sign that you are more worried about the sales price than you are about making a profit on the jobs you sell, build and collect. Thinking that way is not good for long term survival. A quality salesperson will earn every bit of what you pay them, and, nothing happens until somebody sells something.
Our next article will discuss whether or not your sales person should be generating leads – and how to compensate them if they do.
Interesting quote recently from Brian Tracy. He quoted Kenneth Blanchard, “The key to successful leadership today is influence, not authority.”
I have read this before said other ways, but it always gets back to the theme that the dictatorial manager won’t get the results they want by bullying or badgering to get things done “their way”.
My generation was raised by people fresh out of WWII. The military way of life was drilled into my father and other men of his generation. They figured they won the war with it so it should work for business as well. It did for many years, but today’s younger generation does not respond well to that method of management.
Now, there are some issues where the owner of a company has every right to set the standard. The question is how that standard is set and communicated.
If your staff is not getting things done the way you want them done, you might want to ask someone you trust to give you feedback on your management style. A word of caution. If they tell you that you need to make some changes, then you probably need to make some changes. That can be a tough pill to swallow. I have heard more than one owner declare, “It is my company and if they want to work here, they will do it or else.” That’s fine – if you can build your own jobs. But if you need the assistance of anyone else to get your jobs built, alienating them won’t serve your purpose. If you need to change, change.
What's your opinion on this?
Most contractors I talk to believe that sales in their neck of the woods is different. They believe their potential clients are more difficult to sell to than anywhere else in the country. This is seldom the case.
Many of them fall into the trap of letting the potential client qualify them. Instead, they should be qualifying the client.
When the potential client is qualifying you, they are asking the questions. They perceive you as being one of a group of people who can all do the same job, so their goal is to ask questions to find out if your price is the lowest. If you have not distinguished yourself from all the other companies they have called in, then they will naturally base their decision on price. It’s what anyone of us would do.
If you are on top of your sales game, you qualify the clients. You are soft and gentle about it but you ask the questions. You direct the customer through a series of steps to get the four basic questions answered. You show the customer at each step the difference between you and your company and the rest of the shade tree mechanics that might show up. You are not part of a group of people who can all do the same job – you become their contractor of choice. You set yourself as the standard that your potential client compares everyone else to. I cover this in our book, “Profitable Sales, A Contractor’s Guide“.
Want to know whether you are qualifying your clients or if they are qualifying you? The next time you leave a sales call, ask yourself, “Who asked the questions?” If they asked me a question, did I answer it or did I have a corresponding question that I asked them?
Over the past couple years, the topic I’ve been asked to speak on most often is how to generate leads. Contractors want leads – without leads, you can’t make a sale. Some think there is a magic elixir that will get leads in the door. Gang, that potion does not exist. It takes a focused, concentrated, long-term effort on your part to receive consistent leads for your company.
So I’m going to discuss the two flaws I see in most advertising for construction businesses. You’ve heard these before from me, but I’m going to cover them again, and maybe from a different point of view.
The first advertising flaw is not making it easy for potential clients to call. Your phone number should be big, bright and beautiful on all advertising. Your phone number is the address your prospective clients need. I’ll argue it’s the most important number in your business life, even more important than the number that shows up on the last page, last line, far right corner of your P & L. If prospective customers can’t find your phone number easily, they will move on to the next company.
Now some (many?) contractors believe that having a contact form on their website, or prominently listing an email address, is all a prospective client needs. And frankly, many contractors would rather deal with an email than a phone call anyway. Let me explain why that’s not smart. While some potential clients might prefer to send an email or fill out a form, others want to talk on the phone and you should make it possible.
They have a question and they want an answer, now. If they are thinking about building a deck or replacing their cabinets, they don’t want to fill out a form and wonder if they’ll hear back in 30 minutes or 2 days. They know their questions now, and they want their answers now. In 30 minutes they will have moved on, and your returned phone call or email answer is old business.
I know you might be thinking that some phone calls you really don’t want, they are a waste of your time. Or maybe you’d rather they not call because you’re afraid you will fumble the call and lose the lead – it’s better if they send an email. Let me suggest how you might handle this.
Answer their questions but softly move into asking your own questions. What kind of job do you want done? When do you want to get started or when do you want the job completed? Have you had plans drawn up yet? Have you talked with any other companies? Have you made selections yet? Do you understand the permit process? Has anyone created a job schedule? Have you had an energy audit of your home yet? Were you planning on living in your home while the work is being done? You need questions, of course, that pertain to your specialty and to the work being done, but be prepared to ask questions. Questions that make them think about the job and begin making decisions. When they make decisions, they start committing to you.
When you get them thinking about these things, they begin to realize they are going to have to be careful who they pick to do the job. These questions show you care about them and the job, and help establish you as the contractor of choice. I talk about this in the book, “Profitable Sales, A Contractor’s Guide“. You can’t do this with an email. You can do it on the phone.
I receive many newsletters from construction businesses across the country, and I’m pleased that many of you include us on your mailing list. But folks, without your phone number prominently listed, you are losing an opportunity. Someone recently pointed out a company on the east coast that is providing a newsletter outline for contractors. The newsletters are okay, but I have yet to see one with the company phone number on the front page.
Your phone number should be at the top of every page on your web site, right under your company name. Your phone number should be in a font that is at least 2/3 the size of the font used for your company name. Unless you put your phone number at the top of your advertising, you will never know how many calls you are missing. Make it easy for your customers to call and buy from you. Put your phone number where they can find it.
The second flaw. Almost all ads from the construction industry look, feel and smell the same. If you doubt that, open the phone book and look at the yellow pages. Google “Construction Companies” and look at the web sites that turn up. Is there anything that you are saying about your business that is different than any other construction company? Are you giving them a compelling reason to call?
From a client’s perspective, if all construction companies say the same thing, how do I decide who to hire for my job? Real simple. I will go with the cheapest price. Your clients are not in construction. They don’t know what to look for or what to look out for. Very, very few of them know how to find a good, reliable company.
Mike Jeffries, principal at Rivers of Revenue, LLC, has held webinars for us in the past on generating profitable leads. In one of his webinars, posted on our website, Mike says:
“Ask yourself these questions about your competitor’s marketing (or advertising pieces):
1) Do I expect my competitors to make those claims?
2) Are any other competitors making the same claims?
3) Is there anything really unique about any marketing piece from my competitors?
And most importantly,
4) How do my own advertising materials stack up?”
Take the time to watch this webinar. It’s worth your time. His second webinar with us is also available on our website.
Bottom line:
1. You must advertise 24/7/365.
2. Your ads need to be new and original, and enough different than everyone else’s so that you at least get a second look from the prospective client.
3. Your ads must make it easy for them to contact you – that includes having a prominent, easy to find phone number.
Getting busy and learning the basics of promoting your business will help you build up a good clientele that calls on a regular basis and that happily refers you to their friends and acquaintances. It’s a requirement if you want to staying in business.
NOTE: This article was originally published in our August 2 newsletter. To receive our newsletter, sign up near the top of this page in the right column (”Subscribe to our Newsletter”). Mike Jeffries also has a newsletter with weekly tips for your business. You can sign up here: http://www.closingsuccesssystem.com/referral
