Monthly Archives: March 2017

Not Understanding How to Classify PROFIT Will Stop You From Becoming a Wealthy Contractor

I have been on the “inside” of hundreds of home improvement businesses, and I know that many – if not most – are not making anywhere near the kind of money they should be making.

For the amount of work and risk you take on being in a home improvement business, not only do I believe you are entitled to MINIMUM NET PROFIT of 10%, I also believe you are setting yourself up for trouble if you are making anything less than that. (NOTE: You are obviously only entitled to profit if you are providing real value, confidence and peace-of-mind for your customers, your team and your community.)

Why Profit to Grow Your Home Improvement Business?

You see, PROFIT is the fuel of your business. Without profit, not only does your family not eat… but, you don’t have the resources you need to grow your home improvement business. Sure, you can go out and borrow money to grow your contractor business, but many of us have learned the hard and painful way how bad debt can be.

When I started in business I kept a close eye on my profit numbers; I got excited when I made money. I had a little bit of debt, but it was very manageable. I used the profit my business earned to buy more trucks, hire more people, do more advertising. I even used my profits to start a new, complementary business. Everything was going fairly well until I put my eye on growth-at-any-cost versus calculated growth through strong profitability. I took on more debt than I should have. I risked our savings, our home and our livelihood. It was a gamble pure and simple, and I busted. Needless to say, I’ll never do that again.

REAL Profit = NET Profit

As I’ve said before, the purpose of The Wealthy Contractor Program is to help you build a successful, sustainable and profitable business so you can build real wealth for you and your family.

In order for your business to be successful, sustainable and profitable, we must first be very clear about NET profit. Net profit is what is left after everything and everyone has been paid. Obviously the goal of your business should be to earn a healthy profit. If it’s not… you probably shouldn’t be in business for yourself.

One big problem I see is that many contractors aren’t clear about what NET profit actually is. This article is by no means an accounting course, but here is a simplified way to determine NET profit:

COMPANY XYZ

$100,000 Income

-$50,000 COGS (Material, labor and sales commission)

-$40,000 Overhead (Office expenses, salaries, advertising, rent, insurance, etc.)

Net Profit = $10,000

Pay Yourself, You Deserve It

Now, just to be clear, if you work in your business in ANY capacity, salesperson, sales manager, general manager, installer… anything, your net profit is the number AFTER you have paid yourself a reasonable salary and/or commission for the job(s) you do in your business. Too many contractors mistakenly think they are making money when they really just have a job.

For example, I recently asked the owner of a $2 million dollar company how much his business made last year; the conversation went like this…

HIM: “about $150,000.”

ME: OK, I said, how much of the $2 million were you responsible for selling?

HIM: “About $1million”

ME: Did you pay yourself a $100,000 in commissions?

HIM: Yes.

ME: Was that part of the $150,000 you claim as profit?
HIM: Yes.

ME: Did you pay yourself a reasonable salary for being the general manager of your business?

HIM: That’s part of the $150,000.

ME: So, I hate to be the bearer of bad news but, your business made ZERO money last year. In fact you have a $350,000 problem in your business.

As you can imagine, at first he wasn’t very happy with me.

However, to his credit he also realized what I pointed out. You see, the reason the business made no money is because if he had to pay a salesperson to run his leads (which he should be doing by the way, but that is for another day), he would have had to pay them about $100,000, which would leave him with a “profit” of $50,000. But wait… he is also the general manager of the business and he deserves a salary for that also.

So, in the end, he has a $350,000 problem ($100,000 sales commission + $50,000 manager’s salary + $200,000 profit). Now, there are a number of strategies for fixing this problem, and over the next couple of months we’ll dive deeper into this topic.

For right now, make sure your business is set up TODAY to make a profit… at least 10%. Doesn’t matter how much sales volume you did last month, at the end of the month make sure you have at least 10% left over.

Remember, your business exists to serve YOU and your family first; the only way it can do that is if it produces a profit. So, take some time now to examine your NET profit and ask yourself – am I producing enough profit to become a Wealthy Contractor?

Could your business use a strategy to grow your business more profitably? Our team at gFour Marketing Group can help you create, keep and multiply your customers AND your profits. To request your free strategy session today, click here.

[Podcast] Episode 10: Lift Your Prices, Profits & Knowledge with Arry Housh

 

When you think of the ultimate “Wealthy Contractor”, one of the names that should immediately come to mind is Arry Housh of Arry’s Roofing Services in Tampa.

He’s a smart business owner who built his multi-million-dollar roofing business from the ground up and did it the right way – by providing his customers with the absolute best service possible.

On top of that, Arry is a great family man who is always there for his friends and his community – including all of us in the home improvement community…

Which is one of the reasons why he joined us for The Wealthy Contractor Podcast™ – to share some of the wisdom he’s gained during his 37 years in the roofing business with fellow contractors so that YOU can avoid some of the pitfalls in the industry and reach YOUR highest level of success.

You’re going to love this episode because it has some solid business insights regarding pricing AND some tips on how to grow as an individual and a business owner.

How Thanking Your Customers Will Get More Leads for Your Home Improvement Business and Boost Your Profits

One of the most significant jumps I’ve ever seen in any of my businesses was when I started implementing an Appreciation System in my handyman business.  It truly did help me get more leads for my home improvement business and grow my company.

My wife and business partner, Adi, had just come on board and noticed our low rate of repeat and referral customers Adi saw this as an opportunity for our business (and a personal challenge) and started visiting all of our customers at the completion of their projects, bringing them a mug filled with chocolates to say “thank you” for their trust and their business.

Suddenly, repeat and referral business for my contracting business  more than DOUBLED. We saw a huge jump in our profits. And all it takes is showing your appreciation to your customers to get more referrals for your contracting business.

Appreciation is the first and most important piece of the system we now implement for our clients every day here at gFour Marketing. If your customers don’t feel appreciated, they won’t use you again for other projects, they won’t post positive reviews about you online (they might actually post negative ones instead), and they certainly won’t refer you to their friends.  This is something to consider if you want more online reviews for your contractor business.  

However, if you consistently and systematically thank every single one of your customers in a special way, you are going to see your profits jump just like mine did, in these ways:

You’re going to KEEP more of your customers and generate more leads for your home improvement business.

Has this ever happened to you? You’re driving past one of your previous customers’ homes, and you see that they’ve had more work done to their home – but they never called you and asked you to do it?

Perhaps they forgot about you. Perhaps they forgot that you offered other services. Perhaps they weren’t even happy with the services your originally performed for them.

Sending a simple “thank you” note or gift after the “glow” of the new project wears off could have gone a long way in making you and your business more memorable. It also would have given you the opportunity to remind that customer that you can perform other services for them in the future. You would have also gotten the chance to make sure that customer was satisfied with the work you performed.

Instead, your competition is benefitting from your mistake.

To keep your customers coming back to you time after time and to be their Contractor For Life™, you absolutely, positively MUST thank each and every single one of them, every single time you perform a job for them. This will reinforce the sale, make them feel more confident about their purchase and leave them with positive thoughts about doing business with you. It’s a great way to generate more referrals for your contracting business.  

You’re going to MULTIPLY your customers and generate more referrals for your home improvement business.

There are SO many marketing methods available to you today – TV, Radio, Print, and the Pandora’s Box that is Internet Advertising – but do you know the #1 marketing method for the past 10,000 years???

Word Of Mouth.

It has ALWAYS produced more customers who close more easily and at higher prices than any other form of marketing.

This is why referrals are like GOLD in our industry. And in today’s connected world, online reviews are like modern-day referrals.  If you’ve asked yourself, “How can I get better online reviews for my contractor business?” this is one sure way!

After the job is completed, your customer might be happy and they might tell 1 or 2 friends about it, but why not turn that customer into a raving fan who is shouting your praises from the rooftops?

Use the law of reciprocity to your advantage. Just by thanking that customer, they will feel obligated and encouraged to tell even more people about how you sent them a nice thank you gift. And that might be in-person, or – even better – they may tell the whole world by sharing a positive online review.

If you took care of a customer and performed fantastic work for them, don’t let the relationship end there. Thank them after the job is over, extend that relationship, and they will want to share that experience with their friends, family, neighbors and co-workers – who will soon become your new customers.

You’re going to CREATE customers and generate more referrals for your contracting business.

It’s one thing to “Wow” your current customers by thanking them – but to become known as THE company in town that appreciates and takes care of its customers – that’s branding that you CANNOT buy.

Unfortunately, we all know that consumers have a very hard time trusting contractors. There are plenty of horror stories out there.

So if you’re known as the contractor who sticks around after the sale and appreciates your customers, that reputation will keep your phone ringing.

Become the contractor who thanks your customers, and you will also become your competitors’ worst nightmare and you will get more referrals for your contracting business.  

In the end, you should thank your customers first and foremost because they deserve it. They’re helping you live out your dream as an entrepreneur; they’re putting food on your table and money in your pockets so you can pay your employees and help them do the same.

But you should also show your customers you appreciate them because it makes business sense. By thanking your customers, you’ll also Create, Keep and Multiply your customers… and ultimately, you’ll Create, Keep and Multiply your profits, too.

If you want to find out how you can easily “Wow” your customers and supercharge your profits with a system that thanks your customers for you, join me for our next online training, 3 Ways Customer Appreciation Makes You More Money. Click here to register now.