Tips for Improving Your Business
Question: A lot of folks talk about customer satisfaction but what does that really mean to most people and how do contractors really capitalize on it? What does a contractor need to do to make customers happy?
Answer: We have taught sales and marketing to contractors for many years. Our cassette program, How to Get the Job at Your Price discusses a lot of these issues. I believe one of the biggest marketing mistakes contractors make is that they think if they do a good job, customers will buy from them. This is not true for a lot of reasons. Some basic things to remember in customer service are:
1. People may not always know WHAT you do but they always know HOW you do it. Customer service is about how, not what. They do not know if you use the best ice and water shield type barrier under the roof or flashed into the wall. However, they do know if you are on time, called when you did not show up due to weather, had a friendly employee, etc. Having customers send in a business reply questionnaire on service can be good. If you do this, put all of them on the shop wall where everyone can see them.
2. Contractors confuse image and reputation. Image is perception and reputation is based on facts. Having a professional image makes it easier for people to pick your company but more importantly it justifies a higher price. Some things that are important include:
- Uniforms, attire, truck signage, job signs, phone manners, etc.
- Scheduling and calling if you are late due to weather.
- Lead employee training and policies.
- Logo, look and the general appearance of your company.
- Follow-up after the job with phone calls to check on satisfaction, customer reply forms.
3. It is also important to remember that a lot of people talk about service, but do you really know what it is? Most small business owners have an unrealistic view of their company, market share and image. Don't believe me? Pick up a phone book and start calling people to ask whom they would recommend for a roofer. See how many folks it takes to get someone to say your name.
4. Last, but not least, most customers will not say, “I am cheap so I will not pay more for your services.” Some people simply cannot afford you or do not value what you do. Target a market and go after high-end busy customers who are not as price conscious.
Question: I have been thinking about forming a partnership with a window replacement guy. He works for someone else, knows a lot about it but does not have the money to start his own business. I always wanted to be in the window replacement business and expand but was afraid to do so. What do you think about partnerships?
Answer: As a business consultant, most of the partnerships I work with fail. They fail because there is not a clear business plan but rather an emotional tie. It worries me that your dream has been to have a window business and that you have reached out to a knowledgeable technical person with no money. Who is the businessperson in this equation?
It is very important that this partnership be driven by a business plan. Start with a budget. How much capital will it take? Where will the money come from? Run the numbers. Let's suppose both of you want to make $50,000 a year from this operation, how many windows do you have to put in? What are the prevailing rates in your area? How will you generate the leads? The first thing you want to do is write a tough, numbers-oriented business plan that includes compensation for yourself. All business partnerships should start this way instead of technical abilities or desire.
Why am I being so tough on you? I have done a lot of bankruptcy work that started just the way you are discussing this project. Partnerships at best are hard to make work. As people get older, their lives change. As enthusiasm and lack of money wears off, the reality of the situation wears on day in and day out. If the numbers work, consider it, if not, don't. It is just that simple. Like a bad marriage, a partnership is much easier and cheaper to get into than to get out of. Here are some rules:
1. Go to a good lawyer. “What if” legal advice is always better than “oh no.” Make sure this is an experienced lawyer who knows all the problems that can occur and will help you get out of them.
2. Have clear terms regarding compensation, disability, buyouts, etc.
3. Have a clear understanding about siblings and spouses in the business.
4. Consider having a third party consultant or advisor act as an unofficial board member to help guide you and keep peace.
My co-consultant Russ Hahn and I disagree on partnerships. He has better success than what I see day-to-day. He also has a law degree and is a very precise writer and documenter of agreements. I tend to put the big picture together and not follow-up on the details as well. I think most contractors are like me with great intentions but not a clear understanding of what will happen in various scenarios.
Last, but not least, the most important thing in a partnership is integrity and character. Just like a marriage if you and your partner do not absolutely trust each other, you are in a world of trouble and should not have become partners.
Question: I have done much of what you have talked about in previous articles. I have a good accountant and try to work from a budget. My final hurdle seems to be people and employees. The lack of good people is just killing my growth. Is this common?
Answer: Yes, particularly in a business such as yours. Better financial practices will have an immediate impact on your company. Learning to sell will get you a job at a better price but you will not automatically be able to perform the job in the professional price you sold it for.
Development takes time. Some folks will tell you that you can buy employees but what does that get you? An employee willing to leave for the highest bidder? That may not be a great way to build an organization.
I also suspect that you did not pay people well in the past because you could not afford to do so. When the business is not making money, it is tough to hire and pay people enough. Now that you are more successful, you may need to evaluate your pay package. Paying more however will not ensure that you have better people. Think of this as if you were buying a ticket to a ball game, just because you buy a ticket does not mean it will be a good game but if you cannot afford the ticket, they will not even let you in to watch.
Many contractors have unrealistic employee goals. For example, take a moment and write down all your employees’ names. Beside their names, write down whether they will be a foremen or a fully skilled roofer one day. How do you know? Most of us can tell just after 30 days how an employee may or may not develop. What does your gut tell you?
I just worked for a company where half the employees were so undependable they would not even be at the company 30 days from now. If you have that kind of workforce, you need to constantly recruit and fill positions with better people and build from the bottom up. Try to look at your organization as a place to develop career people and a long-term organization. You will never be totally successful with perfect people but it is all about the law of averages. If you are willing to hire drunks and has-beens, how can you ever build a future?
Use the law of averages to help you. If you need better people, they are going to come from one of two places. You will either hire them or promote them from within. Be realistic about both options.