Qualified Remodeler Magazine

JAN 2019

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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Calculate the square footage of your showroom versus the total square footage of your office. You can then determine what portion of your costs for rent, light and heat are part of assigned marketing costs. Once you collect and total all of these, divide the total number of leads (intake) into the total costs. Do the same again for the number of leads that you turn into issued appointments. No matter the size or style of your company, this defines your issued lead costs. More on this shortly; however, once you can clearly define the cost of an individual lead, you will soon see why we categorize the rising cost of lead development as obscene. The True Cost of Your Leads and the Efficiency of Those Who Use Them When fully loaded marketing costs equal 10 to 20 percent of gross revenue or when sit/presentation rates drop; and gross closings versus leads issued declines; and the response is to increase prices to build profitability, it creates a perfect storm. A well-developed plan to deal with these issues is critical. It needs to be consistent with a strat- egy to make your company stable and capable of weathering unanticipated changes. These chang- es can come from many sources, such as reduced availability of financing, changes in the economy or unemployment remaining as low as it is. Certainly, the sources you use for lead development and the effective use of leads by salespeople are important elements. In a survey taken in early 2018, the average cost of an issued lead (that is the fully loaded market- ing costs divided by the number of leads issued as appointments) hit an all-time high of over $375. Actual costs ranged from a low of $185 to a high of $595 per lead issued. Some companies only guess at these true costs. Some with an issued lead cost THE world of marketing for home improve- ment companies has changed dramat- ically over the last 10 years. There are many new methods for obtaining leads, processing them and distributing them in an efficient manner to the salesforce. All the while, this is hopefully being done within a system for viewing the metrics, in- cluding goals for the number of leads that turn into presentations and the number of presentations that become sales. In addition, these metrics also gauge customer satisfaction (and oƁen dissatisfaction) issues whether sales are made or not. The High Cost of Doing Business During 2018, revenues (sales) increased for most companies—in many cases far exceeding their projections. A byproduct of this success has been either a lowering of standards or neglecting the obvious. Costs for lead development have escalated for all forms of leads. Couple this with increased backlogs and the potential for cash-flow problems, all of which has reduced net pretax profit. Since the average owner of a home improve- ment company is an entrepreneur, certain import- ant issues regarding the operation of the business may be overlooked or ignored. Some prime exam- ples of this phenomenom are: • Determining fully loaded marketing costs, which includes all advertising, displays for showrooms or shows, and events. • Job signs, script creation, and personnel costs for manning showrooms, shows and events. Costs of cell phones and computers for marketing efforts. • Hiring and training marketing people for "incoming-leads" canvassers, plus managers and transportation related to these tasks. Arrest High Marketing Costs. They Are Killing Your Business By Dave Yoho, President, Dave Yoho Associates 44 JANUARY 2019 QR QUALIFIEDREMODELER.COM

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