How many times have you heard a remodeler say, “I don't need to market; I get all my leads from past clients and referrals”? Maybe you've even said it yourself. If so, you haven't yet “hit the wall.”

The wall, according to Ike Daughenbaugh of Heritage Builders in Minneapolis, equals that amount of sales automatically generated from good client satisfaction and word-of-mouth referrals; anything above that amount requires spending some money on marketing. Or as Daughenbaugh puts it, “The first 2 million is free; the third million costs $85,000.” The numbers may not fit your company, but the concept still applies.

During the past few years, when demand far exceeded supply, many companies didn't see the need to spend any money on marketing. Now that the economy is slowing in many areas, many of you will be scrambling to maintain sufficient sales to support your overhead and produce a satisfactory profit. It's never too late to make and implement a marketing plan to bring in the leads required to produce the sales you need.

MARKETING A PLAN The table illustrates three steps to a marketing plan:

  • Calculate a two-year average for the important variables — revenue, average job size, and lead-to-close ratio. The results tell you what you can expect if those variables remain the same.
  • Develop a marketing budget based on projected sales. Plan to spend at least 2.5% to maintain last year's standards. Increase up to 5% if necessary to account for planned growth or market slowdowns.
  • Spread the marketing dollars across three primary targets, putting most of your investment in past clients, a small amount in the marketplace in general, and the remainder in current prospects. (For more about target marketing, see Jay Conrad Levinson's book, Guerrilla Marketing.) Once you've calculated the correct amounts, build those marketing investments into the company budget.

    Marketing doesn't have to be expensive. Everything that increases awareness of your company qualifies, including uniforms or lawn signs, newsletters or postcard mailings, even client gifts. Community service, such as joining Rotary or serving on the local school board, is also a form of marketing.

    It's important, however, not only to decide what to spend the money on and when to spend it, but also to track the results. If something doesn't work, try something else. Spending now will protect the top line throughout the year. —Judith Miller is a Seattle-based construction business consultant and trainer specializing in accounting, finance, and computerization.