Every Dollar Counts, Now More Than Ever

If you are closing more jobs then ever at the same price level as last year then skip this column.

Customers still have the itch to improve their homes, some if not most, are scared about committing large amounts of their money during these uncertain times. Your choice, you can push for your normal sale, maybe even offer a large discount “to keep the cash flowing” and see a decrease in your close rate. Or, after careful consideration you could, like many successful remodelers around the country, choose to reduce your average sale by offering partials or offering your lower priced products first, thus potentially raising your close rate and preserving your profit margin.

The reasons for preserving you margins and broadening your customer base are quite simple. If a company is going to lose revenue, it must be done in such a way that there is still margin left over to position your company for significant growth as the recession ends. The No. 1 reason that companies fail is that they did not change their business when the market changed. That may sound simple but ask yourself, “Have I changed my business in the face of this changing market?”

Consider this example:

Company A:

Holds fast to its premium product as the main offering to customers. Close rates go down and costs go up as discounts increase. Here is what happens to the numbers.

Company B:

Changes tactics during recession to offer customers partials or offer their lower priced products first. Close rates hold steady. Margins are the same. Note that lower cost leads are an important but not necessary part of this approach.

A simple plan for change: Lower your costs first. Your previous customer list is your best chance to generate leads that are low cost and high quality. Approach them with your lower priced products or partials of your premier products. Offering partials with require retraining of your sales force. Partials need to make sense to the homeowner. Breaking down how the rest of the home will be taken care of over the next few years on a schedule is a good start. Remodelers must carefully plan out the best way to break apart a job. As an example siding contractors need to decide if a particular customer’s needs are best met by offering just the front of the home or offering to side the entire job and them come back to complete the soffit and facia as part of another contract.

Remodelers that offer multiple products are best positioned to make a change. Servicing each of your past customers with an additional product has been the single best way to maximize a lead. The great news: Even if you do not offer multiple products, many companies offer additional product lines in a turnkey fashion. When choosing your next product line, consider products that have lower lead costs and are not luxury goods. The economy will reward those that provide lower priced products that fit more into the need category than into the want category. These tactics have not been suggested or tested or, for that matter, succeeded without much forethought. The companies that succeed and grow their business in this recession will be poised for intense growth once the economic environment improves.