Running a Profitable (or More Profitable) Home Improvement Business in 2017

by Kacey Larsen
Dave Yoho Associates

By Dave Yoho, president, Dave Yoho Associates

The owners of home improvement companies are entrepreneurs who invest time, energy and capital. They also invest in bringing new products to market while facing vast competition, over-burdensome government regulations, hiring and training new personnel and rising administrative costs. If they are lucky, they get sufficient contracts to offset their overhead, complete the work, deal with uncooperative weather and overcome mistakes, which might otherwise put the business in peril. The fact is that even some of the best-run companies in the business do not make the net profit to which they are entitled by virtue of the investment in time, energy and the risks involved.

Do most home improvement companies make sufficient profit to offset the risks, increase the capital in the business and reward management for the effort and risk involved?

Let’s be clear, gross profit is an accounting term describing the difference between your direct costs and your selling price. It is subject to the cost of marketing and sales, plus administrative expenses. What’s left is net profit, that which you’ve earned before paying taxes (pretax net).

If yours is a specialty home improvement company (siding, windows, roofing, bath refitting, etc.) a 10 percent pretax profit should be a minimum. The better run companies exceed this. Exceptional companies often earn 15 percent or more. A full-line remodeling company’s goal should be 7 percent pretax net. The better-run remodelers may exceed this.

Review without cost or obligation a recent webinar featuring one of the most successful home improvement companies in the U.S. on the subject of Pricing & Profitability for

David Alan Yoho

By David Alan Yoho, senior account executive, Dave Yoho Associates

In 2017, your profitability will improve if you hire the right people—and keep them.

Recruiting, hiring, training and keeping personnel is a key profitability issue. The cost of advertising for and then phone interviewing applicants who are hired is expensive. It is seldom identified as a separate item on an operating statement. In the case of salespeople, add in costly time spent training. Then examine the number of leads issued to the new hire and the cost to you. We recently completed a survey and white paper on The True Cost of a Mis-Hire. It made us more aware of how hiring and training for small businesses can severely affect profitability. (Email and request a FREE copy of The True Cost of a Mis-Hire.)

The job of a recruiter starts with defining what you want the hired party to do—then creating an ad or job posting to gain inquiries. Next, use a script to perform telephone interviews. The job of a recruiter is like that of a salesperson. There has to be a system clearly defined and used to create a telephone interview. When you sell the job by effectively asking questions, you will more clearly define the skills of the applicant. The goal is to get them to want an interview.

Successful recruiters also conserve time and money (which transmits to bottom line profits). They use an electronically generated “profile,” which enables them to create a more effective interview and determine A) Can the applicant do the job? B) Will they do the job? C) Do they fit the organization and the business model?

These instruments enable a recruiter to challenge someone during an interview, i.e., “Convince us you are the right person for this position” versus “We like your background; let’s give it a try.” Unfortunately, the less you know about professional interviewing and the use of instruments, the chances are you will experience abundant mis-hires and dramatic turnover. We’ve been using profiles for over 40 years and have found that with proper use they save time, vastly improve the amount of information gained about the applicant, and reduce turnover. I will be happy to email you a completed profile without charge. (Email with subject, “PROFILE”.)

On the subject of “no shows” after phone interviews: Ten years ago, industry statistics indicated that only about 50 percent of scheduled candidates showed up for their interviews. Now, many of the companies who contact us or whom we meet through seminars indicate that the number of candidates who show up is down to 20 to 30 percent. The companies who understand how to recruit, interview and hire use a method that includes scripting for both telephone and in-person interviews, and many of them average 70 percent of their appointments showing up for an interview.

A few tips: Do not schedule interviews beyond 48 hours. Certainly, some candidates may have a good reason. But most of the time they hesitate because they aren’t sure they want to invest time in meeting you. When/if they hesitate, determine if, in fact, they aren’t certain they want to visit you. Ask directly for their concern. Again, use a script.

A strategic error is made by recruiting under deadlines. That makes filling the position more important than finding the right person. You are more likely to make a mistake that wastes even more time, costs you more money, affects your company’s morale and potentially damages customer relationships. Decide today to improve your hiring skills and watch your company prosper.

Brian Smith

By Brian Smith, senior account executive, Dave Yoho Associates

For improved profitability in 2017, manage your salespeople properly.

It creates dividends. It is important to see and hear your customers, their language habits and values from their perspective. Modern selling is not telling, fast-talking, being liked or outthinking your customers. It is a science that enables owners, managers and representatives to create a cooperative environment, acting in consort to fulfill both the wants and the needs of the customer. At the same time, provide the right products and services at prices which are affordable to the customer and profitable to the company.

Great managers understand their sales reps and their customers. Their role is to hire and train salespeople to make presentations, not prejudge or qualify based on their own values, but to make presentations regardless of what they think about the quality of the lead or the opportunity.

A sound sales methodology is designed to sell virtually everyone when executed correctly. Great sales managers understand that their role is to train their salespeople to execute each step of the presentation with precision 100 percent of the time.

One of the great sales managers I was privileged to work with put it this way: Stop whining about price buyers and tire kickers—and start concentrating on how to present the value of what you are proposing.

If you measure sales (close rate) versus leads issued and a salesperson runs 10 leads, completes seven demonstrations and makes three sales…they have a 30 percent close rate. What if they were to make one more demonstration per week? How many more sales would that be each month? The contribution to your “bottom line” is enormous.

Lastly, no one should ignore the opportunity to recontact leads, which did not receive a presentation—or were presented and not sold. At least 20 percent of a top-producing great sales rep’s business is A.R.C. or Add on, Referral and “Self-developed” leads.

Your plan for 2017 should include methods for taking your organization from good to great in sales management.

Brad Yoho

By Brad Yoho, director of marketing, Dave Yoho Associates

To increase profitability for 2017, here are some important issues regarding lead development and control.

Marketing costs for this industry increased drastically in 2016. While the quantity and quality of leads remained high, costs in many cases exceeded value. Despite high costs, many companies still made a profit, though probably not what they could have earned with a more efficient approach. Unsold leads where a presentation was not made are still leads. Every lead had some degree of interest; otherwise, it wouldn’t have become a lead.

Follow up on a consistent basis with email, direct mail or personal visits with prospects who have expressed an interest, yet remain unsold. This includes past customers. Be sure to check “Do Not Call” regulations for your market. There are usually time-restrictive recontact provisions, even when the customer contacted your company. The more successful companies rehash every lead and follow up on every sale for additional business and referrals. They often find that salespeople unintentionally mishandled the contact, the presentation and/or the price. Following up is a great customer satisfaction tool.

Rehashing is not about cutting your price or offering a lesser product at a reduced price. Carefully scripted, it can provide a revisit. In addition, a rehash program supports your sales department. It helps management train, retain and redirect salespeople while increasing their sales.

An unsold lead has the same value (costs) as when it was issued, yet it produced no revenue. Someone will sell it someday—why not you instead of your competitor? With proper planning and execution, rehash can represent 7 to 10 percent of your gross revenue in 2017.

Dave Yoho Associates is the oldest (since 1962), largest and most successful consulting/training group representing this industry. Dave and several of his senior account executives will be speaking at the forthcoming Qualified Remodeler conference “Top 500 Live” March 15-16 in Baltimore, Md.— The ad for which is featured elsewhere in this publication. Dave Yoho’s account executives will also be performing at a series of live seminars in Dallas, Chicago and Washington D.C. at

Leave a Comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More