By Steven Knight, Creator of Solutions and Opportunities at Mosaic Home Services Ltd. — Building Canada’s Largest Home Improvement Franchise Network.
Finding revenue in any business is step one — without revenue, nothing else matters. But, in the hyper-competitive home-improvement industry, revenue can be hard to acquire without breaking the bank. Depending on your source, scoring qualified leads for home-improvement projects can grow to thousands of dollars.
Between the costs of trade shows, staffing, booths or the more modern online ad campaigns — securing the name and phone number of a client is an expensive endeavor. Entrepreneurs, thought leaders, marketing agencies and thousands of others have already commented extensively on the value of leads and how to bring the costs down.
In response, I simply ask: Instead of focusing on the cost of the next lead, why don’t more entrepreneurs think about the investment they’ve already made in the ones they have?
Setting The Scene
Let’s look at Tim, the 35-year-old entrepreneur with his own painting company. He has 10 years in the business now, and he has two paint crews working almost full time. But, his work pipeline is only full for the next week. He has time to do estimates, but the phone isn’t ringing. He hires a marketing firm that charges him $150 per lead, and he’s set up as a vendor in a local big-box store, where each lead costs him $380.
In the last five years, Tim has completed 304 projects for unique clients. His average job takes four days. His Google reviews are through the roof: He has a 4.9 rating and people love his business. Occasionally clients have called him back to do more work, and his referral program that offers clients $25 Starbucks cards for referring him to friends and family has been great.
Tim has five days to find a new project, or he’s in trouble. So, what does he do? He can call up his local big-box store, knowing that his next project will cost him $380. He can call his marketing firm looking for more leads, but he’s going to need to do at least three estimates to get a job, meaning it’ll cost him a minimum of $450 in leads alone. Those figures are enough to make any small-business owner cringe. Tim has spent a fortune in leads before, but will this cycle ever stop?
That’s when it hits him: Tim’s leads aren’t an expense; they’re an investment.
Tim can hire a local college student part time to call every one of his 304 past customers and simply ask, “What can Tim do next for you?” For some of these clients, it’s been five years since they painted. Trends have changed. Kids have taken their toll on the walls, and it’s time for a refresh. It’s on their “honey do” list, but calling Tim isn’t a priority. They need to be pushed. Tim pays this student $15 an hour, and it takes 40 hours to call everyone. It’s a $600 investment.
What Tim has stumbled upon is the key to finding revenue. Like many things in business, it’s incredibly simple — all he had to do was ask.
Tim did all the right things in his business — he had great reviews and a good referral program, and he was always focused on growth. However, the trap that entrepreneurs often fall into is that they’re always looking for the next sale, not the one they already have.
Your old leads are an investment, and you can do two very important things with them: diversify your revenue stream and make your revenue stream recurring.
Let’s say just 1% of Tim’s leads say they need a new paint job. He has three new estimates to complete. Because these clients already know Tim and like his work, he’s likely to win the work. Some don’t even ask for a quote; they just tell him to get it done. If Tim does 40 projects a year and repeats this pattern every year, he’s just built a recurring revenue model that accounts for 7.5% of his business.
Let’s say 5% of Tim’s leads say they don’t need painting right now, but they have been looking for someone to wash the windows for forever, and no one will call them back. Tim has ladders, so they ask, “Can you wash the windows?” It’s not in Tim’s wheelhouse, and it’s certainly not an area he wants to grow into, but the customers love Tim, and they’ll pay whatever he wants. They just want it done.
Tim talks to his painters, and they all say a resounding yes. After all, something is better than nothing. In fact, most of his painters have worked in window washing before, so they already know what to do. It’s not a big-ticket item, but now Tim includes a window-washing quote with every paint estimate, and people love it.
He’s not actively marketing the service anywhere, but he’s diversified his revenue stream with the exact same client base he’s already paying to get through the door. He’s just added one layer of diversification to his revenue mix in a highly profitable way. After all, he’s already at the customer’s home to paint.
The cost of acquiring customers is incredibly high. But, just like any other asset, if you treat it properly, it will continue to pay in perpetuity. Treat your leads like assets. Talk to them regularly, and don’t be afraid to ask, “What can I do for you next?”