As a small remodeling operation, I need to be working in order to make money. I am not able to leverage the labor of a large full-time crew to earn a profit. I do not make money through volume. My value is provided through efficiencies, streamlined communication, scarcity, and processes, and my earnings are a direct reflection of that.
Early on in my career, I worked ten to twelve hours per day and then met with potential clients or performed “estimates” after work. I did this Monday through Friday, week in and week out. I exhausted myself and grew more and more frustrated with the state of our industry. Most of these estimates and my efforts tended to fall flat on their face. I had no systems in place for vetting customers, I did not know my own business, I had no idea who my customer was, and I would chase any and every lead that landed on my lap.
I bent over backwards for potential clients, only to be let down or not receive as much as a “thank you” for coming to their home, measuring their space, and providing a comprehensive estimate for their verbal scope of work. Shoot, I even provided designs for some of these leads. After chasing my tail for at least five years, spending no time with my growing family, and being extremely frustrated with the status quo of our industry, I elected to make a change. I had become resentful and soured to the price-driven commoditization of the residential building industry. Even if the rest of the industry wanted to give their time away for free, I was not willing to do so.
I read an article in JLC Magazine that explained the author’s process for charging for estimates. I implemented some of the ideas immediately, and to my disbelief they worked! I experimented with others with modest results, and some were left off the table from the onslaught. The last seven years has been a very organic evolution of ideas and processes that has led me to what I am willing to offer today. My business model affords me this luxury, and you must understand that if your model does not support scarcity, low-volume, or the basis of these ideas and principles, you may have to evolve or modify your approach. This is not a one-size-fits-all, dig your heels into the ground type of system.
I immediately realized that I had to offer something that other contractors were not willing to offer. A product, an experience, a service, communication, speed, volume, quality, etc. If you offer the same product or service as five other contractors in your area, you have nothing to differentiate yourself. You are a commodity and it comes down to numbers. Clients are engaging and/or hiring you for the wrong reasons. I want to be clear; high-quality/attention to detail does not need to be the differentiator here. Many people do not want that. Some people value speed, and if that is your strong suit, then market/sell the hell out of it! I cannot offer speed to my customers, so if you are able to do so, you should be getting every one of these jobs, not me. This comes down to knowing your product and knowing your customer.
The early days of going on estimates, providing every customer with a quote, and bending over backwards for leads that were not my customer were entirely my fault. I did not ask the right questions and I did not understand my customer base or my product. If I was a one to two-man show focusing on low-volume and quality, then why did I feel the need to entertain five leads per week? I could not handle that volume, and I did not want that volume, so I should have adopted a system which classified the leads in order of importance or fit. I needed to start asking questions. I needed to start saying “No!”
I began vetting my customers at the point of contact. As soon as they inquired, I would ask if they had a design, if that had given thought to a budget, when they wanted to the work completed, if they were interested in bidding the project, if they had worked with contractors before, what they valued in a renovation, where they live, and how they heard about my company. I will elaborate below.
- What if a customer does not have a design in place? I question how serious they are about the project and realize that there is nothing to actually price here. All bidding would be done from a verbal scope which does not promote apples to apples bidding. On the other hand, am I willing to offer design service which other contractors are not willing to offer as a foot in the door? The lack of design affords me two things. One, to rule them out as a potential lead because I am not willing to quote a verbal scope. Two, to use this as an opportunity to provide a service that other contractors are not willing to offer.
- Have they considered a budget? If they are not willing to disclose this, they may not trust their contractor or you. I want a trustworthy relationship, so this is a bit of a red flag for me. I do want to note that you must establish and earn trust, so this is not a reason to close the door immediately, merely keep it in mind. Now if their budget is unrealistically low, I know that they are not my customer, and I saved myself the time and effort of additional engagement. If they do not understand what their budget should be, I can use this to benefit me by educating them on this matter. This may differentiate me from someone else who is not willing to take the time to do so. Lastly, if their budget is inline with what we do, it may qualify them as a viable lead and illustrate to me that they have done their homework.
- Timeline. If they want the project completed in three months and my turnaround is six months I cannot work for them. They value a quick turnaround, and I am not able to provide that, so they are not my customers. On the other hand, if they want it done in a year, this may qualify them as a fit. Again, this is understanding who I am as a contractor. I have also learned that if you have a customer who is willing to wait six to twelve months for work, this is an indication that they want you and only YOU to do the work. An ideal situation.
- If this potential client has not worked with a contractor before, they may not know what they value, and nine times out of ten they are not my customers. Typically first-time customers are reading online how to hire a contractor or inquiring with friends as to their experience. I want a well-educated customer who knows exactly what they want. It should be noted that I may be turning down a potential customer here, but I have to play the numbers. I only have so many hours in a day, and I want to allocate my time to the highest qualified lead. Again, I do not need volume.
- Truth be told, I often ask for an address. This is not to be demeaning or condescending, but typically the customer who values my services posseses a specific type of lifestyle. They are not necessarily looking for a financial return on their investment and they have some disposable income. If I google their address and they live in a $250k house, I can surmise that they are most likely not willing to spend $150k on a kitchen or $60k on a bathroom (my ideal customer). Again, I may be closing the door on a potential client and there are exceptions to every rule, but I am playing to percentages here.
- Asking where a lead came from can be extremely telling. I understand where most of my leads come from and the probability of them being a fit based on these parameters. Google does not produce a high-quality, high-percentage lead for me. Social media typically yields more quality leads, but when looking at the volume, the percentage is still low. A word of mouth referral is a high-probability lead. They have spoken to a customer of mine who advocated for our process and product. A lead from a designer, or architect is also another high-probability lead. They have engaged the services of a professional designer which proves they are committed to the process.
- Are they looking to bid out the project? At this point in my career I generally do not competitively bid projects. This is not out of arrogance or ego, but rather a desire to work with people who fully comprehend and value what I do. If I can only do four larger (for me) projects a year, I want to work for people who unwaveringly want my product. This yields the most lucrative and enjoyable projects for me.
I hope that the introduction to my pre-construction process has proved to be insightful thus far. Next week I am going to elaborate on what my actual process looks like, and what systems I have in place for doing so. I really wanted to use this week as a precursor to that blog. I need you to understand why I have implemented these systems, and the motivations for doing so. The big takeaway here should be that it is critical to understand who you are as a business, what separates you from the competition, and who is your target customer. To spend my time entertaining leads and attempting to sell work to someone who values something we cannot deliver or does not value what we stand for is a spectacular waste of time. See you next week!