Written by: Will Watrous
The Right Business Strategy Creates Long-Term Profitability
Most contractors start their company out of passion for what they do. Roofers love roofing. Deck builders love designing home decks. They’re experts in their field.
Yet contractors often mistake successful projects for a profitable company. The misconception that contractors can succeed without solid business strategies can lead to a downward spiral that is hard to escape. The good news is—a business plan that includes marketing and finances can drive sales and revenue.
Business owners don’t have to do it all themselves. Smart business strategy leverages experts in finances and marketing to build an unbeatable sales pipeline—and lasting success.
Will Watrous, owner of marketing agency StructureM, recently spoke with Jeff Prager, owner of the CFO Project about their partnership to bring actionable marketing and financial approaches to contractors. Jeff created the second-largest privately owned building company in the U.S., while Will runs a knowledgeable team of marketing experts to help contractors overcome “feast and famine” cycles and achieve lasting success.
Here are some of their insights into how marketing and financial planning can work together to help contractors generate greater revenue.
Finances: The Foundation of Successful Business Decisions
Many contractors don’t see consistent financial growth because their accountants “are not giving their customers the right message,” Jeff explains. The right message, he says, is, "Here's how to make more money. Let's work on that first."
Turning Numbers into Business Strategy Breeds Success
At the CFO Project, Jeff helps small business owners make sense of all the numbers that accountants generate, and then make smart decisions to increase profits.
“Very often,” Jeff says, “there's this enormous disconnect between the accountants who are generating all these numbers and how that affects the business owner’s behavior on a daily basis.”
It’s easy for contractors and other business owners to focus too much on the basics — income, expenses and profits. But that’s only a part of the overall picture of what’s happening in a business.
The Missing Piece: Marketing Strategy
“All your business numbers are interrelated—and that's what a lot of people don't know,” says Jeff.
“As a result, business owners don't know where they are, because they're not looking at the whole business bundle. They're looking at a piece of it, and everybody's in a silo. We come in and say, let's look at the big picture and then figure out what silo needs to be improved first. And usually it's marketing.”
Marketing: The Key to Increasing Business Success
Unfortunately, many contractors don’t begin a strong marketing plan until they’re already experiencing a downward spiral.
“Their revenue is down or it's flatlining,” says Will. “They suddenly realize they need to do some marketing, so they'll scrape whatever money they can and throw it at marketing in order to generate leads and hopefully increase revenue. The problem is that more leads, more sales, and more revenue alone won’t fix the problem. They have a leaking funnel. They can keep throwing money in the top, and all it's going to do is leak out faster.”
Create a Marketing Approach with the Long Term in Mind
To make better marketing decisions, Will recommends that contractors take into account 7 essential financial numbers. Build marketing around these numbers to drive increasing revenue and a consistent sales pipeline.
1. Number of leads generated
The first thing to ask is how many leads your company is getting. “It takes straight up marketing initiatives to generate leads,” Will notes.
2. Conversion rate
Your conversion rate is the percentage of leads that become sales. “If you generate leads but none of them turn into sales, then something is wrong with your marketing engine. You’re generating the wrong kind of leads,” says Will.
3. Customer retention rate
Are you keeping your customers happy? “The customer experience is a vital part of the customer journey, which is a part of marketing,” Will explains.
4. Number of transactions per customer
Do homeowners who use your business for one service come back when they need other services? Marketing should encourage satisfied customers to come back, providing ongoing revenue.
5. Average ticket per transaction
Since one of the key resources you have is time, contractors should concentrate marketing on converting leads for services that produce the greatest profit in the least amount of time.
6. Variable costs
These are the elements of a business budget that change each month — such as sales income.
7. Fixed costs
These are the costs that are consistent, such as insurance premiums and payroll.
Knowing your fixed and variable costs can guide business decisions that lower costs and ensure your business is creating a maximum return on investments.
Marketing Strategy Works Hand-in-Hand with Financial Planning
Many business owners assume marketing will cost more than they can afford. But marketers can determine effective approaches to fit most business’s budget. It’s a matter of combining profitability goals with current finances—and that’s where a partnership like the one between StructureM and the CFO Project becomes highly productive.
“In order to build a successful business, it takes a team,” says Jeff. “You need guidance. But the team has to work together also. Whoever's giving you advice is looking at it through their lens. What Will and I are trying to do is say that there's a bigger lens to look through. And together, we can bring that to your business.”
Get Marketing from a Company that Really Knows the Contracting Industry
Business strategy that successfully blends marketing, sales, and finances for maximum revenue takes careful planning. At StructureM, we believe contractors and business owners should be equipped to make savvy marketing decisions that deliver results they can count on—so you can enjoy a profitable, stable business.