Qualified Remodeler Magazine

AUG 2018

Qualified Remodeler helps independent remodeling firms to survive, become more professional and more profitable by providing must-have business information, namely best business practices, new product information and timely design ideas.

Issue link: https://qualifiedremodeler.epubxp.com/i/1017161

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Page 80 of 91

only "guess" at these true costs—some with an issued lead cost of $500 or more take a "so what" attitude because business has been so good. Examine this example: Suppose a company has an issued lead cost of $400 (not uncommon) and issues a sales- person an average of seven leads per week. Do the arithmetic: that's $2,800 for those sev- en leads. In a month, that's $11,200. That's over $134,000 annually. Now examine, how much profitable business did that salesper- son provide for your investment? This may require, at the very least, an adjustment in the sales compensation. When business is good and leads are abundant, issues such as "presentation rate" for the company and the individual salesper- son plus the "close rate" (the number of con- tracts received measured against the number of leads issued) are ignored or accepted as revenues increase. For small, moderate and even large size home improvement companies the cost is "obscene," even when it is profitable. ISSUE NO. 3 THE COST OF HIRING, TRAINING AND MAINTAINING PERSONNEL FOR SMALL BUSINESS IS INCREASING. Unemployment is at an all-time low. The ease of getting a job, even for those with low skills or limited experience creates workforce turn- over, borderline mediocrity and increased personnel costs. In the throes of this great economy, these three issues can become quicksand for small, closely held companies. This country's rising economy, increase in consumer confidence and disposable in- come creates a two-edged sword; the glow of increased revenue clouds the judgement and reduces the caution necessary in issues such as lack of staffing, mis-hires and/or mis- managed personnel. In our most recent survey on hiring sales personnel, we have numerous case studies of "others" reacting in the same manner—until increased labor costs wipe out the net prof- itability of the transaction. Has your company examined the use of a 401(k) (for W-2 employees) or a SEP IRA (for 1099 labor) as a bonus arrangement? Consider other benefits or "perks," which might attract and hold the labor provider, taking care in the case of "independent contractors" to stay within the provisions of various laws. (There are lots more.) ISSUE NO. 2 MARKETING COSTS CONTINUE TO SKYROCKET. The world of marketing for home improve- ment companies has changed dramatically in the last 10 years. The advent of many meth- ods for obtaining leads, processing them and distributing them in a logical manner to the salesforce, all while recognizing the need to constantly view the metrics which determine the number of leads that turn into presentations and the number of presenta- tions that turn into sales. These metrics will even uncover "customer satisfaction" issues whether you make a sale or not. Costs for lead development have escalated—for advertising, internet, shows, events, and self-developed leads, including canvassing. Couple this with the backlog and cash flow problems—all are issues—which reduce profits and stymie growth. A well-developed plan to deal with these issues is critical. It also needs to be consistent with a plan to make your company stable and capable of weathering unanticipated changes, which can come from many sources: reduced availability of financing, changes in the current economy, unemployment remaining as low as it is, the sources you use for lead development increas- ing in cost or decreasing in effectiveness, etc. In a survey taken earlier this year, the av- erage cost of an issued lead (fully loaded mar- keting costs to date divided by the number of leads issued as appointments) hit an all-time high of over $375 average. Some companies successful and profitable companies, which create this concern. An example: Case Study H-593 (18) A successful contractor of roofing, windows and re-bath products with annual revenue in excess of $10 million. They employ nine salespeople, plus a sales manager and are considered a well-run, successful business with high revenue and above-average profit- ability. Their owner was astonished with the outcome of the "audit" for hiring, training, managing and turnover (for 12 months). Costs for the first 30 days (A & B) A. Basic recruiting costs, job posting, phone interviews, in-person interviews (including management time), total costs (1 year): Average $917 each new sales hire B. Training (managers, trainers, time), plus "two weeks in training" salary or advance for trainee: Average $912 each Total at 60 Days C. Costs of leads issued: 50 at $470 each Net good business sold: $131,300 Commission at 10 percent: $13,130 Total costs, including (A) & (B) = $38,459 Represents 29.3 percent of revenue. n [Note: For a "condensed" printout of this survey at no cost or obligation, email admin@daveyoho.com with subject "Request Case Study H-593(18)".] Joe Talmon is a senior account executive with Dave Yoho Associates with over 30 years' experi- ence with "in-home" sales and sales management. He has developed programs for many of the larg- est and successful home improvement companies. He is featured in the popular video training series, Super Sales Training, supersalestraining.com. Talmon is considered a leading expert on the man- agement of successful home improvement com- panies. He is a featured speaker at the "Sales & Marketing Executive Symposium," hipsummit.com, October 9-10, 2018, prior to the Remodeling Show. QualifiedRemodeler.com QR August 2018 | SPECIAL SECTION: HOME IMPROVEMENT PRO 81

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