Was 2016 Really the Great Year That Might Have Been?

by Kacey Larsen

David Alan Yoho, senior account executive, Dave Yoho Associates

More Advertising Dollars May Not Result in More Business—or More Profit

Many companies increased their business in the last couple of years. They might have been the envy of their industry friends because their revenue was increasing at double-digit rates. Their “dirty little secret” was that almost every one of them suffered higher lead costs and lower conversion rates, which led to lower customer satisfaction ratings, fewer referrals, add-ons and sales to previous customers.

Advertising dollars are not a magic wand. The first dollar you invest won’t return for at least 90 days. The more money you spend—the higher your risk.   

Expensive Lead Generation

Many companies planned to increase show, event or showroom marketing. Marketing promoters had more opportunity (hours) to work; however, their hours per issued appointment increased. As their promoter staff grew, the company’s training, coaching, encouragement, recognition and general rapport declined.

Promoters reacted to the abundance of hours by handling leads with less intensity. Note: Few promoters function well after working at the right pace for more than four-hour shifts.

Many companies put too much faith in the number of events and the quality of the displays—and not enough in hiring and training a sufficient number of the right people to fill the job role.

Sloppy Lead Management and Insufficient Salespeople

Their sales departments failed to contact every lead with sufficient speed and efficiency. They also failed to control the timing or conditions of appointments.

When companies have too few sales reps, they have too many leads—and leads are more expensive than salespeople are. They then over-issue leads. Companies also tend to keep salespeople with substandard results when they have leads to give them.

Their Salespeople Had Less Skin in the Game

While the number of leads increased, salespeople became less involved in self-generation. They weren’t even following up with their customers after completion. This decreased add-on sales, referrals, customer satisfaction ratings and repeat customers. This increases the cost per lead and the risk of negative online posts.

The good news is that disciplined and effective lead generation, lead management and sales management can build a highly productive, profitable and enjoyable business when you execute the right plan.

Dave Yoho Associates

Brian Smith, senior account executive, Dave Yoho Associates

Unfortunately, there is the vicious cycle of our industry! Too many companies put entirely too much emphasis on top line growth and not enough on bottom line growth! When businesses are growing, management tends to take their eye off the ball—or more precisely, off the basic fundamentals that include adherence to the sales and marketing methodology. This may include poor planning on the operations side of the business. It also may include a failure to anticipate increased backlog or a proactive recruiting plan to ensure the backlog is turned. If management can remain disciplined to the fundamentals during growth, they can avoid the cost overruns and grow the bottom line with the top line!

Price increases are a fact of life and must be understood as normal. It’s up to management to teach it and preach it. When salespeople panic over an announced price increase, it is a sign that they are focused on the wrong things. Salespeople must be properly trained and frequently reminded about the need to understand the difference between selling price and selling value. 

Rick McIntire, account executive, Dave Yoho Associates

Owners of home improvement companies can often be duped into thinking that more top line sales translates into equal higher net profits, only to find out the hard way that this is untrue.

Growth is only a positive result if it is profitable. Before you set your sights on more top line revenue, make sure you have three things in order:

1. Price

Your pricing has to be formulated for profitability, not simply some magic multiplier. If you want to avoid the pitfalls we see constantly, you need a scientific, arithmetic approach to pricing that starts with a targeted profit margin. This will include every expense related to the cost of not only the labor and materials to do the work, but also the cost of getting the work (fully loaded marketing and selling expenses). Our proven and precise pricing system makes the sales and marketing costs a part of the direct costs. This does not affect your accounting; although, it will call for minor changes in your bookkeeping. Moreover, this will dramatically affect your selling price. Once you have your pricing in line you are ready to move on to No. 2. 

2. Installation Capacity

The ability of your production staff to meet the demands of your sales team is critical to your bottom line (backlog increases). There is zero profit in an uninstalled job. Failure to get jobs done on time has devastating consequences. Your cash flow can be restricted. You will lose customers to cancelation, you end up with bad online reviews, and your salespeople become less functional.

3. Management Systems

The only way you can be sure you are headed in the direction of profitability is if you are measuring the things that impact profitability. If you don’t know what fully loaded marketing and selling expenses are, they are right inside of your operating statement, probably treated as general and administrative costs.

Joe Talmon, senior account executive, Dave Yoho Associates

When costs increase while leads decrease, it is a sign of a failure for/by management. Once an effective system for lead generation is in place, it must be constantly reinforced and practiced until perfect, then continually utilized to maintain the level of delivery required for success. The failure to practice small sections to perfection on an ongoing basis is a major failure in proper training. Failure to maintain the disciplines required for a high level of success is also a failure. Owners looking for answers from their staff about the success (or lack of it) at a show receive the standard responses: low attendance, low interest, bad show … the real solution lies in management and execution.

Here are a few methods used by the most successful companies at shows/events.

  • Make it clear that the homeowner does not need to be ready to buy to schedule a visit with an expert who can provide helpful insight.
  • Enforce the use of a scripted presentation. Leave nothing to chance.
  • Have a sales culture in place that embraces the opportunity to find and solve homeowner problems and go on from there to earn their business.
  • Teach sales methods to promoters at shows and events. As an example, the timeline for buying is established at the end, not the beginning. Never qualify for intent on purchasing early. As Dave Yoho says, “The sale is the natural conclusion; the conclusion by definition is at the end.” |QR

Dave Yoho Associates is the largest, oldest (since 1962), and most successful consulting group representing small business in the U.S. Their exciting program on profitability in the home improvement industry will be examined together with workbooks and supports at a series of live seminars. For more information visit: hipsummit.com.

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