A few years ago, there was a popular movie featuring Jack Nicholson and Tom Cruise called, “A Few Good Men.” In the movie, there is a famous courtroom scene where Jack Nicholson, a Marine colonel, is being questioned by a military lawyer, Tom Cruise, who says to the colonel, “I am searching for the truth,” and Nicholson forcefully replies, “You can’t handle the truth!”
Within your business, the truth may be more evident than you wish to admit. That is usually because if you admit this, you might be shamed by the avoidance for dealing with the truth. So, for the moment, let’s examine the truth of your business and what is happening therein.
The home improvement industry has endured major challenges and changes in the past 17 months (March 2020 to July 2021). Despite all the drawbacks, many wise entrepreneurs created survival tactics that became “thrival” tactics.
Many companies realized that homeowners were trapped in their homes, creating time available for in-home appointments. Wise home improvement product marketers also became aware that homeowners were accumulating spendable dollars once calculated for dining out, vacations, theater and automobile expenses, among others.
Inside each inconvenient setback lies opportunities.
These wise entrepreneurs discovered methods to acquire leads through the effective purchase of advertising, i.e., the absence of many regular advertisers created a major benefit for them; and they also re-evaluated their lead intake methods, as well as product availability from those who manufactured their featured products. Many manufacturers did little to aid home improvement contractors with their dilemma. With entrepreneurial genius, they created methods to utilize virtual presentations and respond to up-to-date customer buying methods.
The up-to-date owner/manager also perceived that homeowners were wisely valuing their home as their prime asset. Couple this with the wisdom of the finance companies, many of whom constructed special and attractive consumer finance programs and, eureka, 2020 became a bonanza for many companies large and small. So what could be the problem with this? The fact is the era that created those consequences and positivity has now largely passed.
To know and not to do is the same as not knowing
These same companies have a need to look at their operational methodologies now and realize the old saying, “That was then, this is now.” While much of what was being done was successful for that time, it may not fit the need of what they are facing today. An astute observer could be appreciative of what got these companies through the trying circumstance, yet now they have to look critically at the current cost for producing issued leads.
For many, that cost is more than $500 per lead issued. In some companies it is less, but the issue is the same. Depending on the company and the expertise of their marketing and sales departments, what percentage of the “intake leads” were turned into appointments? Once issued to the salesperson, what percentage of those leads never received a presentation? How many received a soft, often sped-up version of a sales presentation? And how many were not sold and received no follow-up? Many companies did not or will not perform the analytics that would give them these insights.
And what of the backlogs (contracts sold which have not been installed)? This problem alone will, if not already, affect positive cash flow. The proof of this statement would be to calculate fully loaded marketing cost (adding the costs of all marketing endeavors including showrooms and personnel, jobsite signs, direct mail and handouts, phone time for those responsible for lead intake, etc., to arrive at fully loaded marketing costs). Now, examine those dollars being offset by business sold.
For example, 13 percent marketing costs for every $1 million in backlog equals $130,000 of your company’s money. Many companies also advance 50 percent of the projected commission to the salesperson once the sale is approved. If the commission rate is 10 percent, this means 5 percent of $1 million—$50,000—is also invested. Together with marketing, that represents $180,000 on every $1 million worth of backlog. On a positive note, if everything gets installed with no problem, but many companies are now experiencing customer cancellation, increased costs for manufactured products and a shortage of installers. In the interim, there is $180,000 within every million dollars of backlog.
Another example: If a company sold $1 million each month and installed roughly the same amount monthly, that equates to approximately $12 million installed annually. However, if in this “thrival” mode the company was experiencing a 25 percent increase in sales monthly (in just 4 months) it would add another million dollars to its backlog. If their installations did not keep pace, see the table below.
We have clients who sell and install $400,000 or less per month, as well as those who sell $4,000,000 and more per month. Now, do the math on your own situation.
The law of cause and effect
Examining all the forgoing on the basis of cause and effect, the national health crisis was one of the causes, as was the failure to clearly react. What we recite here are the effects, and we haven’t even probed “customer dissatisfaction.”
The customer who normally waited four to six weeks is now expected to wait twice that amount of time (or more). All of which creates customer dissatisfaction. Much of which will be increased or reduced by what the salesperson is now telling the new customer in terms of the waiting period.
Often, this creates the basis for dissatisfaction, which causes us to examine a psychological premise that is occurring and what, if anything, is done about it or what if anything has been done to lessen it. We advise all companies to train on a verbatim for what to tell the customer. They are taught to utilize a print format that contains incentives in which the customer is informed of options and signs for their choice.
Much of accomplishing what needs to be done is based on the attitude of all those involved in the overall model of marketing and sales. The process is called cognitive dissonance, which essentially means unpleasant attention and anxiety caused by a discrepancy between an attitude and behavior (or another attitude).
It relates to the attitude of your company, then your salesperson and is based on the transmission of information and ideas, as well as the attitude that is left with the customer at the time a presentation and sale are made.
Conversely, if you refute this logic, you may well be putting yourself into an attitude of cognitive ignorance, which stems from either the lack of knowledge or the unwillingness to face the reality of it. The process can be very costly. Ignorance is often a matter of omission. Ignorance is often coupled by the lack of facts. If the facts are present and nothing is being done, that is definitely ignorance.
You cannot know what you do not know.
Cognitive dissonance can be corrected by examining what you do not know and then create an internal admission saying, “I do not know.” Now, once you have the information and look at it realistically in terms of your company, you have three options.
The first is to do something. The second is to procrastinate and wait for things to change or some intervention by a third party that will help you effectuate change. The third is to do nothing then wait for a societal, economic or business environment change. As in all things, the choice is yours. QR
Dave Yoho Associates (www.daveyoho.com) is the oldest (since 1962), largest and most successful consulting company representing the home improvement and remodeling industries. They are credited with the introduction of Step Selling, The Doorknob Close, and The Science of Successful In-Home Selling and Super Sales Training. They have a team of Account Executives who consult for large and small retailers, manufacturers, and service providers. They also offer training seminars and a full line of educational products. For a complimentary 30-minute consultation, contact them at (703) 591-2490.