Qualified Remodeler Magazine

NOV 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.

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Another culprit is the rising cost of leads. From the outside, one would guess that the ow of leads would be higher and easier to get. But there are signs that increased competition for leads, particularly those gen- erated from the internet, is also placing limits on both revenue and prot. When asked to identify their top lead sources by percentage of revenue associated with those sources, the HIP 200 credited internet leads for nearly 20 percent of their revenue, up from about 15 percent last year—a big increase. Increases were also notched for referrals (15.5 percent of revenue) and re- peat customers (14.4 percent of revenue), as well as web-based referral services such as Angie's List, Home Advisor, Houzz and others. Across the HIP 200, many rms are worried about the high cost of leads, particularly those generated on the inter- net. Some rms now see good, old-fashioned radius market- ing and canvassing as a more cost-e‰ective way to generate leads, and they are investing more in those programs. But again, canvassers are hard to nd, hire and train. Še primary source of ris- ing costs for leads are those generated by pay-per-click via Google and other search en- gines. Šese gures vary from market to market and by key- word, but it simply costs more to be No. 1 in certain categories, reports Todd Bairstow, a founder of Keyword Connects. Bairstow says challenges to the model are com- ing from many directions but, in particular, they are coming from Google. Over the last 18 to 24 months, Google has ramped up the number of metro areas where it has introduced its own challenger to home improvement companies— Google Local Services. It has also expanded the number ome improvement professionals are real- izing that along with all the benets of selling jobs in a hot economy, there are challenges as well. Šis year the 200 larg- est replacement contractors and home improvement rms billed $3.99 billion on 696,773 jobs. Še surprise is that these numbers are down slightly from the year prior, when billings were $4.2 billion on 749,000 jobs. Yes, you read it correctly. After growing at a break-neck pace in 2015 and 2016, the largest 200 home improvement contractors as a group billed less year-over-year. According to Dave Yoho, a long-time home improve- ment industry consultant, many rms are reporting an increase in their cycle times due to a number of factors, but primarily a lack of labor. Firms are unable to produce fast enough to meet demand. Higher cycle times also trans- late to higher overhead and lower protability. Numerically, the majority of rms were able to grow, but the labor headwinds are real. Among the HIP 200, "nd- ing and retaining employees" along with "nding and hir- ing trade contractors" were cited as top challenges by 53.2 percent, which is about the same as last year. Šere was a big jump, however, in the percentage of companies who reported prot challenges, which goes directly to Yoho's point. Last year only 1.5 percent of HIP companies reported "reduced prot due to operational ine¢ciencies" as a top challenge. Šis year that same gure popped up to 4.5 percent of HIP companies who cite ine¢ciencies as a challenge. Še limitations placed on rms by a shrinking or stagnant labor pool is certainly a culprit. LABOR AND LEADS The two things home improvement pros need most are harder to get. Meanwhile, demand for services is strong as revenues are facing limits. By Patrick O'Toole H ĘåBF{Ɨljlj credited internet leads for nearly ƗljŞåųÏåĺƋŅüƋĘåĜų ųåƴåĺƚåØƚŞüųŅĵ ±ÆŅƚƋŏăŞåųÏåĺƋ last year. 32 November 2018 QR QualifiedRemodeler.com 2018

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