Priorities That Drive Profitability
Focusing on These Three Factors Could Make the Difference between Thriving and Surviving
Years ago, I read a statistic on Walt Stepenwolf's website that said, "90 percent of contractors who start a business today will be out of business in five years; 50 percent in the first year."
When I share that with roofing contractors it’s often met with head nods and affirmations about just how difficult it is to be a successful contractor.
Rather than focusing on the rea-sons why small businesses fail, I think it makes better sense to focus on the priorities that are critical to the success of every remodeling contractor. It’s my assertion that placing focus on the three following areas will better enable you to enjoy an even greater level of success and (hopefully) have a little bit more fun while you’re doing it.
IRE Session FR12
One of our top our priorities is to make sure that we generate enough leads to support the sales and profit goals of the business. This involves much more than sim-ply advertising and earning referrals. We need to recognize that the impressions we make will deter-mine how the customer sees and compares us to all of the other con-tractors in the marketplace.
Where I see many contractors go wrong is when they communicate a message that positions them-selves as being no different than any of their competitors. They use platitudes that promote the fact that they are “fully insured” and offer “free estimates.” This is the same language used by almost every contractor in the industry — which compels the reader to adopt a price-centric buying strategy.
This is why I suggest that con-tractors try to create an engaging marketing experience that invites the shopper to get to know you and learn about the factors that differentiate you from your competition. One suggestion is to create short videos that describe various aspects of your service and addresses the customers’ biggest concerns. Your goal is to boost your know, like and trust status in a way that positions you as the contractor who represents the least amount of risk. In other words, show them all of the ways you bring white-collar professionalism to an otherwise blue-collar industry.
Sales & Selling
The second priority speaks to sales and the contractors’ ability to convert leads into signed con-tracts. I’m always amazed at how many roofing salespeople have never had any formal sales training. When you consider the high costs of leads, doesn’t it seem odd that we’d continue to hand those opportunities over to someone who has no understanding of the sales process or how to move the prospect through that process?
One of the biggest mistakes salespeople make is being unprepared and moving too quickly through the sales process. You must not underestimate the critical importance of establishing rapport and earning the customers’ trust. It goes without saying that the customer will not buy from you if they don’t trust you, but salespeople must plan on how they’ll earn and reaffirm that trust as they move the prospect through the selling process.
Salespeople should also recognize that the majority of their prospects have never been involved in a re-roof project and those who have were probably not happy with the outcome — or they would’ve called the same contractor back to do the job. This reality makes it that much more important for the salesperson to educate the home-owner on all aspects of the re-roof project. Roofing contractors are all using similar products, so you would be well advised to show your prospects how you intend to use those products to ensure a successful outcome. Talk about the weather and the steps you will take to ensure that the home’s most vulnerable roof areas are protected. I trust you’ll find that these extra steps will go a long way in helping you differentiate and position your-self as their contractor of choice.
Budgeting and Pricing
The final priority speaks to the importance of creating budgets and metrics that allow you to evaluate performance and monitor your path to profitability.
I’m always amazed by the number of contractors who don’t have an annual overhead budget. If they don’t know what their over-head is going to cost them, how do they know the markup needed to break even and make a profit?
It’s also important that contractors have the means and discipline to monitor budgets and compare against the “actuals.” I remember Aaron Santas, then with Guardian Roofing in Seattle, was doing a presentation at the 2011 Best of Success conference. He used the bathroom scale analogy, asking the audience why we don’t like to get on the scale. In some cases, it’s the same reason we don’t look at our budgets — because we’re afraid we might not like what we see.
But isn’t it better to have visibility that gives us the opportunity to make the adjustments necessary to stay on our path to profitability?
Assuming that many contractors are already overhead savvy, the next challenge is to departmentalize the overhead costs to get a clearer picture of the investment needed to support each department’s revenue and operating goals. You might learn that while your annual overhead is 38 percent of your total sales, the overhead used by your residential service department is actually more like 48 percent, which may result in a negative operating profit.
Contractors that do this will be better equipped to evaluate the performance of each department, and that becomes particularly valuable when developing profitable-pricing strategies.
In the end, the fine line that separates the businesses that sur-vive and those that thrive often comes down to our unwavering focus on these three areas.