When Scott Hayes, owner of New York Sash, gets to the company’s office in Rome, N.Y., in the morning, the first thing he looks at is the call reports filed the night before by the company’s four sales reps. “I look at the sale, the salesman, the amount, the product, and the financing status,” Hayes says.
Owners of home improvement companies — companies that sell jobs with a limited scope of work installed in a day or a few days — sometimes describe their businesses as marketing and sales machines whose product happens to be roofing, siding, windows, or some other replacement product.
They typically have different management priorities and different information needs from full-service remodelers whose work may consist of 10 or 20 larger jobs — additions, kitchens, whole-house remodels — involving several subcontractors. Ask Jeff Moeslein, whose company, Legacy Remodeling, in Pittsburgh, does both.
“We have six additions, 10 kitchens, and a couple of custom decks scheduled,” he says. “So if I don’t sell another one of those in a few weeks, it’s no big deal.” What is a big deal, Moeslein says, is the $14,000 window job, installed in two days, or the $20,000 roofing job, installed in four.
Creating and tracking those short-cycle replacement jobs, the biggest part of the company’s business, is not something he could step back from for a few weeks or a few days. Moeslein needs to know what’s been sold, scheduled, installed, collected, and that new jobs are moving into the pipeline daily, to stay on top of cash flow and profitability weekly and monthly.
Because job size is smaller — averaging about $8,500 — and because replacement contracting companies install so many jobs, they can never relax when it comes to putting more jobs in the pipeline.
So knowing how many leads have come in is something most owners or general managers want to know every day — or even every hour.
Finished checking the previous day’s net sales, Hayes strolls into the marketing room to look at a whiteboard listing new leads by lead source.
Kristen Stammen, co-owner of Twin Cities Siding Professionals, says that leads and the source of those leads became a daily fixation for her after the Minnesota company increased its marketing investment from 3% of revenue to 8%, which doubled sales volume.
Besides where leads came from, owners want to know how many converted to appointments. “The most important thing I look at every day is how many appointments did we book” — i.e., leads converted to set sales appointments — “and how many sales did we make the day before,” says Charles Gindele, co-owner of Renewal by Andersen of Orange County, in California. In other words, “What was set today and what did we do with what was set.”
Leads are what owners want to know about before anything else for another reason: They’re not cheap. “We are tracking issued leads at $327 among our clients,” says Dave Yoho, president of Dave Yoho Associates, the industry’s largest and oldest consulting organization. Lead cost, Yoho says, has grown to the point that “depending on the product, it costs more to issue the lead than to pay for the labor to install it.”
So, for instance, in Yoho’s example, a company daily supplying two leads each to five salespeople is investing $3,270 every day, or more than $20,000 per week. “Owners want to know what they are getting for that investment,” Yoho says.
And what they want to know extends beyond the range of general information. Owners such as Bob Quillen of Quillen Bros. Windows, in Bryan, Ohio, ask not only how many leads marketing supplied the day before but “how many feet we have on the street” today. That is, how many canvassers are working to bring in new customers. They also want to know not only yesterday’s net sales, but how individual salespeople are performing — that is, how many leads it took to get a sale and how much of that closed business was retained. Particularly important is sit rate — the number of issued leads that result in a contract on the table.
Sit rate is important to know every day because if a company can produce more sales with fewer leads, it reduces overall marketing expenses. A salesperson with a high sit rate — say he gets in four and a half out of five houses — may be more useful than the guy who, with a 50% sit rate, sells more work but burns through almost twice as many leads.
Production Not an Afterthought
For many replacement companies, tracking production is not the daily priority that monitoring leads and sales is. A window job can often go in in a day, so there’s little need to know where the job’s at at the moment. But production numbers matter to good managers.
“Sales creates the revenue opportunities, but production redeems them,” Gindele says. A number he looks at daily is what percentage of scheduled jobs were completed on the first attempt, i.e., installed without delay. “That’s a very important number,” Gindele points out, because jobs that drag on and on delay final payment, which swells the accounts receivable figure that Gindele checks every week as part of a financial report prepared for him on Monday mornings. Today receivables at his company are in the $25,000 to $30,000 range. Monitoring “completed on first attempt” has helped reduce that from what was, typically, $400,000 10 or 12 years ago.
“Your income statement is a byproduct of the work you produce,” Gindele says. “Once you produce it, you’re in the right place with your revenue.”
All of it works in circular fashion. Moeslein says that he has learned to pay close attention to production and that he constantly updates the company’s work-in-progress spreadsheet, which tracks ongoing work and backlog. It’s the sum total of the work that’s going to be available that’s been sold, and it lists jobs running and percentage of completion. “That gives me a tremendous ability to project cash flow and profitability short-term,” Moeslein says. —Jim Cory is a contributing editor to REMODELING who is based in Philadelphia.