A Simple Recipe For Contractors Part Two:

Referrals, Websites, and Social Media, By: Bobby Parks

In part one  of “A Recipe For Contractors” I shared views on the importance of a contractor’s building philosophy, choice of project deliveries, and messaging.  In this second segment, I’ll share my thoughts on additional ingredients with referrals, websites, and social media. It’s a combination of what I did as a former contractor and what I’d be doing in today’s market.

Prior to entering the business I had no sales or marketing experience, but yet I was able to sell and build a lot of projects with an emphasis on margin growth versus traditional production growth. It involved an effort of maintaining an awareness of what was going on in my market, but also what was not being done and where I could gain an edge. It was an effort to help set the trend instead of following it. For me, it was about laying simple but effective groundwork and creating the layers of credibility with a business recipe that allowed for success. This included implementing a strategy that provided leads through a combination of a website, referrals, and later utilizing social media. 

Leads Equal Opportunity 

The upside potential for contractors is directly affected by leads generated, the profit contained in each job, and production capability. The better the lead, the better the opportunity.  It’s also a numbers game involving a balance of quantity and quality of leads along with closing ratios. Although some brag about high closing ratios, for design-build contractors this can be a bad thing in that you’re likely leaving money on the table. It also comes down to production as most contractors have a certain “buildout capacity” that’s based on their labor availability. No matter how much they sell they can only deliver so many jobs in a year’s time. Depending on how well these projects are priced from a profitability aspect determines how well they do each year. Some stay busy, some make wages, and some are operating profitable businesses. 

Referrals, Website, or Social Media?

When it comes to customer leads and jobs sold, what is your best source? Website, social media, referrals, or another source? Of the first three, referrals are typically the best quality because they’re coming from someone that you’ve already satisfied that provides an actual testimonial referral to a friend or coworker. The fact that you’ve proven yourself to this past customer means this referral carries more weight than any other source. This provides you credibility going in and lowers the sales resistance walls that most prospects have. It also raises the prospects confidence level in you earlier in the game. To an extent it can lessen the depth of this potential customer’s due diligence efforts if they trust the person that referred you as they consider part of that process already completed. On occasion you may be their only proposal. The closing ratio is generally higher so from a lead quality aspect, all of us prefer good referrals over any other lead type.

Good and Bad Referrals

The good referrals come from past customers that you charged in a way that provided good profit margins. These customers communicate to the new prospect that although they paid a premium they consider it a sound value investment. They verify that the quality of the project and the delivery experience made it worth the price. This new prospect understands they’re going to have to pay so they’re not expecting any type of discounted deal therefore allowing you the potential profits you should be striving for.  

The bad referrals come from those where you lowballed a price and profit was limited. Some contractors who count on referrals only may have several quotes out there and they need a job to move to. They have to keep people busy and cash flowing. In order to assure they’re not going to come to a stop they contact the prospects with quotes and offer a discounted deal. This means that not only will you not be profitable on this project but the referrals that come from this customer won’t allow for good profit as well. If this  customer refers you they’re likely to communicate that the contractor works cheap and they should call them. This new prospect expects a deal same as the first so there’s no upside potential for profit. It’s another job you have to give a deal on and the process repeats itself. 

Referrals Only Can Limit Upside Potential 

Even with good referrals your companies profits can be limited if you work off “referrals only”.

On average, most organized contracting businesses that produce significant volume get 30% of their leads and jobs from referrals. This means that 70% of the leads and jobs come from other sources most of which are website or internet based. It also means that those working off referrals only are working off a fraction of the lead and quote opportunities compared to those with effective websites and internet presence. Because the ones with websites have this lead surplus they can afford to quote at higher margins and work off a lower sales closing ratio compared to the referral only leads. If you’re running referrals only you have to have a higher closing ratio as opportunities are limited by two thirds or more. Because the opportunities are limited the built in margin is likely to be lower.

The effectiveness of referrals can depend on the types of projects you deliver. For example as discussed in “Part One” your building philosophy regarding the kinds of jobs you’re known for factors in. If they’re lower end wood deck jobs that have weathered, your effective referral rate weathers with them. Whereas higher end projects with better performing materials that stand the test of time allow for longer referrals periods. 

Of course there is an argument over quality versus quantity which applies here but counting on the phone to ring and run a business by “word of mouth” from referrals creates an unpredictable aspect of reliable leads. No doubt many operate this way and many “stay busy” while some actually hit good profit numbers. A lot depends on your desired volume and the amount of buildout capacity you have.

Website Provides More Opportunities 

A website is the gateway and billboard for a company that communicates what you do and the types of projects you deliver. It’s your online headquarters that allows a display and communications of everything your company is about.  If done properly it establishes a strong layer of credibility prior to having contact with a prospect. Because online searches have become a standard process for today’s customers, without one you can be overlooked and unknown. Again, it’s a numbers game that funnels potential customers your way that far exceeds the numbers referrals only bring. 

My website for my former company focused  on two main aspects which were first impressions created by photos and simple messaging. The interior behind the scenes aspect was on optimization. It’s kind of like looking at a sleek looking race car. As good as it looks it’s what’s under the hood that makes it competitive. So regardless of your company size its important that most invest in one and that you use a professional to build and manage it.  You’ll compete with others that do so to try and go cheap or manage this yourself will likely result in an ineffective site that won’t have potential to accomplish the objectives. 

I Stay Busy and Don’t Need a Website

In my opinion many contractors that “stay busy” and don’t see the need to have a website are missing out. Why not provide yourself more leads that allow you to quote at higher prices? Why not add the layers of credibility that separate you from others? When you’re quoting from word of mouth only,  you have to be careful with the price tag as you could exhaust all opportunities and not have enough work on the board. If you have a surplus of leads that allows you to add to the price tag you have a better chance of filling up your job schedule with more profitable jobs. Because you couldn’t build out everything you quote, you can afford to take 2 out of 10 or less compared to having to hit one or two out of three from referrals. It more than covers your website investment as well as adding to your annual earnings. It does require an efficiency in terms of creating quotes which I’ll cover in a future piece.  

There are always exceptions and it is true for some that realize their value, charge good margins and fill their job board with profitable jobs. But in many cases this approach imposes a limitation on upside potential. There’s also the time aspect of being able to run more leads and provide proposals. If you’re working within the crew every day, how do you find time to do both? I’ll cover this in more depth in another piece but a lot has to do with creating a quick quote system so you avoid doing takeoffs to quote every job. It requires models for expedited pricing that allows you to do several quotes in the same time period it may take to do one. This is a necessity to operate efficiently. 

Social Media

Although FB and Instagram can produce leads and can show up in searches, in my opinion these serve more as an expanded internet presence providing social media content and secondary branding purposes. They work in conjunction with a website which is the foundation and mothership for localized leads and prospects. Social media is an enhancement tool and pathway to a site and not the same as having a truly optimized website that shows up in local searches that displays your work and messaging. It’s more likely your peers and followers who are spread out across the rest of the world will see you on the social media platforms but it’s the website that provides you a set up that communicates with local prospects. It’s where your messaging and galleries are.  FB and IG can produce feathers in your cap and add another layer of credibility. It’s a way to directly communicate with others but at the end of the day it’s the prospects in your market that you must connect with and illustrate what your company is about.  

Many businesses such as millworks, subcontractors, and other trades can be connected with builders and remodelers as FB and IG serve as a networking portal. It’s an advertising platform within the building community. It’s like a national builders show compared to a local home show. For the most part they have different audiences. I’m sure some do obtain work through these outlets but counting on social media alone is likely to limit the upside potential. To grow and be selective with jobs and attach a premium price tag, the percentages are going to favor a website.

Work With a Blended Approach

There are exceptions for every aspect here. Some contractors can hit their numbers and maximize profit off referrals only. Some may actually do the same with only a social media presence. A lot depends on the volume required and an individual’s effort in each area,  but in most cases these two aspects alone won’t provide the necessary upside opportunities. Neither replaces an effective website that allows for a better sharing of messaging and photos with local search advantages. Even if you’re a one crew operation with limited buildout capacity you can benefit. It’s not about selling more but more about filling up your job board with more profitable jobs and providing the necessary opportunities to accomplish this. It’s about not operating on hope and prayer. Most will benefit from a balanced three pronged strategy because one day the referral leads that have always seemed to arrive in time to keep you busy may slow to a point that even staying busy is a challenge. Having this balanced plan will produce more opportunities with better predictability providing for a smoother operation and better profits. It’s an investment that some may believe they can’t afford but I would argue you can’t afford not to. It’s an investment in your business and should be part of the plan. For me it was a key ingredient of my recipe. 

Bobby Parks / Instagram: @Bobbyparks007

Copyright Bobby Parks – March 11th, 2020

A Simple Recipe For Contractors. Part One – Your Building Philosophy, Deliveries, & Messaging

Part One of a Series By Bobby Parks

Why Should a Customer Choose You?

When a prospect accepts proposals from three different contractors why should they choose you? What makes you different or better?  What benefits do you offer that others don’t and what impressions are you making that increase the chances you’ll get the job? What kind of credibility do you reflect and what kind of risk do you represent?  Why would a customer choose you to do the job?

If you’re ranked in the top 50% of contractors in your market the customers decision is  likely based on price. If you’re in the lower 50% you’re probably already on your way out of business. Being in the top half puts you in the “average” category as just one of many. Average efforts provide average returns and will not provide financial stability, business rhythm, or consistent profitability. 

Creating layers of credibility and working to position yourself to be in the top 10- 20% of your market can provide all of these benefits and more. As a member of this category you’re being chosen for reasons other than price. Most can begin to charge 5% to 15% more than they do now once these simple ingredients are added. In this five part series I’ll share the approaches that made the difference for me in how I grew my business with a focus more on margin growth instead of production growth. This is the simple recipe that I utilized while operating in a very competitive Atlanta Georgia market. It’s a recipe for a simplified approach that allows for a smoother operation and can allow you to charge 5%-15% more than many do now. 

Being in the top 10%-20% is not about company size or big fancy jobs. It’s about the quality of a companies’ delivery history, reputation, and capabilities. Its about an established short and long term reputation. Its the perception and image created in a market of who stands out as one of the best and who most would choose if they can afford to use them. It’s those who can illustrate and communicate who and what they are about and back it up with how they perform. It’s for those who want to better themselves and not just go through the motions and be average. 

Simple Approach To Business

Unfortunately a lot of good deck builders and remodelers aren’t making the kind of money they want. Many are able to pay themselves a salary each week but have nothing left beyond that at the end of the year. A 5% to 10% increase can change that significantly by increasing net profits. If you could add $25,000 to $50,000 profit on a $500K year by incorporating simple operational elements to what you’re doing now would you do it? Although many believe its too big a stretch to sale that $20,000 job for $21,000 to $22,000, I assure you its not. This recipe is an alternative way to grow your business from a monetary standpoint without adding to the headcount and production. 

Rising in the rankings doesn’t have to be complicated as there are simple elements that working together move the needle in your favor. It requires a focused approach of fine tuning communications of your image, brand, and reputation in a market. For some it may require an adjustment in their building philosophy in terms of what they offer and how they deliver it. It’s a simple recipe that requires you to work more on your business than within it. 

If You Appear to Be the Same You have to Charge the Same

The key is to not appear to be like everyone else, to create separation from others, to creat excitement with design and options, and to stand out in the right ways.  It’s about creating a scenario where the credibility and confidence levels are extremely high and any associated risk using you is zero. Less risk equals more dollars. 

If you appear to be like everyone else you’re pricing will have to be similar as there’s no justification for it to be higher.  If a prospect is trying to decide who to use for a job and there’s no noticeable separation between contractors it becomes a decision primarily based on price. In their minds the chances for a successful outcome of the project and the risk associated with each of the contractors they’re meeting with are the same so it comes down to who they can hire at the least cost. Competing on cost is a race to the bottom.

Ingredient # 1: Building Philosophy and Messaging

Your building philosophy is your contractor identity and what you as a contractor will be known for. It’s your foundation and the bowl all other influential ingredients are mixed into. It’s the motto of operation that you’ll build from that includes  your style of details, products, and process. Once it’s determined it has to be communicated through messaging and through other ingredients that will be discussed in following articles. It’s your elevator speech of what your company does and stands for. All contractors are builders but if someone ask what your companies about, and you have 30 seconds to explain, what is your answer? It doesn’t have to be complicated, just honest and make sense. But whatever it is, it’s what’s recorded in a prospects mind. Simple messaging is used on websites, and when you’re having that first phone conversation with a potential customer. Its one of the first of two impressions you make with a potential customer.

Mine was: “We don’t build that raw wood stained deck and porch that’s accepted in our market. We combine products that we believe will perform and stand the test of time. We design and build projects that look like true extensions of the home and that we know will reflect well on our reputation for years to come.”  It’s a simple message but it communicated what I wanted heard in that first 30 seconds when I spoke to them or on the website. Other details about the company can be communicated as the process continues.

What Kind of Projects Does Your Company Deliver? 

Quality craftsmanship and customer service have to be a given with any company to even begin to compete. Its like qualifying for a race. You have to achieve this basic milestone before you pursue the checkered flag. Realizing that markets for upside opportunity vary and many contractors are at varying levels of experience or maturity,  the goals should be to improve over time with how you operate and what you deliver. Being progressive and not complacent is required. 

Questions to ask yourself are: Are your past deliveries helping or hurting your reputation? If you build using lower grade materials does your customer experience buyers remorse after a summer or two? If your customer has a dinner party a year or two later with guest viewing your delivery, what kind of impression will it make? Have the joints opened up and has the decking warped and checked up? Has it weathered out and lost that new look? When they ask who built the job, are these guest going to be impressed enough to give you a call or do you get checked off the list of potential contractors they’d be interested in meeting with? Unless  you’ve used material and techniques that stands the test of time and delivered the job to this past customer in a quality manner you’ll never know the conversation occurred. 

Where Do You Rank in Your Market?

You as a contractor have to decide where you can best compete and where your best upside potential is. You have to decide if you want to shoot for ranking in the top 20% of your market or just coast in with the 50% group.  No longer providing the lower grade options for customers is a big first step. If you want cheap you go somewhere else. 

Many never leave their comfort zone but almost all of us need to in order to raise our game and find stability as a business. Otherwise we are just one of many. Higher end details or basic high end standards don’t have to be complicated. The jobs are generally more complex but if you have capability to deliver and price them properly,  they can provide not only better profitability but build a much better reputation. The better the reputation, the easier it is to sell. Part of the trick is for you and your crew members to become use to what is considered custom details to the point they become standard details. And jobs don’t really have to be complicated. Offering simple designs along with combining quality products as a standard and not an option will raise you up in the rankings. 

Easy Doesn’t Pay

I look at it this way: Whether you’re a contractor or an employee the easier a job is to do, the more people that are qualified to do it, so the less it pays. Your job offerings are the same so the types of projects you deliver immediately separate you or make you the same. What you deliver effects margin, reputation, and brand.  Understanding that markets and demand vary, the easier and simpler a project is to deliver, the more contractors have the capability to do it. In most cases these job types offer the least amount of profit compared to a “better and best” approach. You have to decide what you’re building philosophy will be, what you’re comfortable delivering,  and what you want your reputation to be in a given market. Again, Its not about the size of a company but more about the quality of a company. This means a combination of an organized process, using quality materials, good communications, and a professional delivery of projects. 

Can You Really Charge More?

So would a customer really choose you to do the job when you’re at $31k while another contractor seems to be offering a similar size project at $28k?  Would they really pay you 10% more? There are risks associated with any contractor when a customer makes a choice. Often a customer has multiple proposals and it’s the contractor that’s makes the strongest impressions that if price were equal they’d instantly choose.  But price isn’t the same so they have to weigh the investment risk element with contractors and cost. If they’re talking with a contractor that’s low in cost but doesn’t show or communicate a strong delivery history of the job types they want, the risk associated with this contractor factors in. Maybe when its all said and done they might have what they wanted but it could be a nightmare. The customer hopes and would like to think  they can save money with this lower priced contractor, but hope is a risky decision factor when choosing contractors. 

Using a contractor that illustrates multiple layers of credibility with the ingredients that I’ll put forward in the next several pieces removes the risk factor for a customer. Many will not want to gamble and would prefer to make the safe investment with a contractor that they have no doubt will deliver what they want if they’ll spend the $31,000 instead of risking $28,000. What would you do?

Nothing discussed in this series of articles requires a significant amount of your time to implement. Motivation levels vary with contractors so what you do will be determined by your personal makeup. 

If you incorporate the simple ingredients of the recipe many customers will be willing to pay you more. They’ll know that if they go with you, there is no risk and their investment is safe versus taking a chance with a riskier contractor.  The higher the job investment number the more this applies. So yes many will pay you 10% more to remove the risk of a bad investment. But like any good recipe it takes all the ingredients working together to provide the desired results. Stay Tuned.

Bobby Parks / Instagram: @Bobbyparks007

Copyright Bobby Parks – February 25, 2020