Building a client base is a process that involves your entire marketing and sales system. After marketing delivers your message to the target prospects, the sales steps are like workstations on a conveyor belt; each one adds time, money, and energy to the initial marketing effort.
QUALITY LEADS Marketing attracts potential clients to your company, but not all leads are the same, and quantity is not the same as quality. A marketing message might generate what looks like a whopping number of leads every month, but if most of them want a screen door replaced or drywall patched and you specialize in high-end kitchens, they are of little value. Too many false leads like that and you might not have enough sales to meet revenue targets.
To help them decide whether or not to pursue a given lead, most successful remodeling companies use a weighted and scripted lead sheet. Only those prospects who pass muster are offered the opportunity to pursue a future together. After setting an initial appointment, the final steps in the process are to close the sale and contractually agree to work together.
COUNT VISITS To measure the efficiency of this process, many remodelers use a lead-close ratio. For example, a company that receives 100 leads and makes 25 sales has a lead-close ratio of 25%, or 1 in 4. Although this ratio helps measure how well your marketing efforts are working, it doesn't tell you much about your sales process. For that, I prefer to track the relationship between visits and sales. Following the same example, let's say that of the 100 leads you receive, you screen out 25 because they don't meet your criteria for promising prospects. That leaves 75 leads you will actually pursue by making a visit to the house. If you again sell 25, the visit-to-sales ratio is 33%, or 1 in 3. It looks better, but it's actually worse. Good companies typically sell more than 60% of the clients they visit, and great companies don't even set an appointment unless they're 80% sure they can sell the job at the right price and produce a very happy client.
The visit-to-sales ratio is important because once you decide to visit a client, you're committing additional time, money, and energy. The round trip to the site and the couple of hours you spend with the homeowners costs money, and it's just the beginning. Back at the office, you develop drawings, call trade contractors and suppliers, build estimates, draw up proposals, and all the rest. If you then fail to make the sale, you're spending a lot of money on lost causes.
To find out exactly how much you could save by following only the best leads and improving your sell rate, use a spreadsheet like the one on the left. (This and other Benchmark spreadsheets can be downloaded under the “Special Features” tab at www.remodelingmagazine.com.)
I can hear many of you saying that this is a futile exercise because of the changing economy and increased competition. But if you focus on ways to improve the complete marketing and sales process, you'll soon be able to stop chasing poor leads and focus instead on selling to prospects who are more likely to become life-long customers. — Judith Miller is a Seattle-based construction business consultant and trainer specializing in accounting, finance, and computerization.