Author: KEITH LEWIS

ROI measures the amount of financial benefit you receive from a particular marketing investment.

We all make marketing investments in our business:

• Some contractors spend $2,000 or more on monthly Google AdWord campaigns. How many jobs does that produce, and how much revenue is earned? Dividing those two numbers yields your ROI for that effort.
• Others hire direct sales staff and pay $60,000 in annual salary and benefits or more. What do you get for what you give?
• Contractors frequently tap into lead generation services. Leads may cost $300 – $400. What return does this produce?
• Many contractors market plumbers and pay anywhere from $300 – $600 per lead or more. What ROI do you get from this activity?

Contractors should carefully monitor their marketing costs against the number of jobs received, and the amount of revenue earned to calculate their ROI for that particular activity.

If the ROI is positive, the activity may be worth continuing, but if it falls to near neutral, you may need to look for another investment that produces better results.

What marketing strategy produces the most significant ROI?

COACHING!

First, consider the cost.

I have coached hundreds of contractors and have found that the typical range of return is 50 – 100 times. In other words, for every $1 invested in coaching, makes between $50 and $100 in return.

No other marketing investment comes close to this ROI.

Second, consider what you get.

With typical marketing efforts, the return stops as soon as you stop paying. The two are tied directly together – you pay, and you get. Stop paying, and you stop getting.

Coaching is different. Coaching provides strategies, systems, procedures that continue to make you money long after you have stopped paying for the service. It exemplifies the adage, “Give a man a fish and feed him for a day. Teach him how to fish, and you feed him for a lifetime.”

What’s the comparative value of coaching and other marketing efforts?

1. Coaching produces a much higher return on investment, providing a 50 to 100 times return.
2. The coaching investment continues to produce positive results indefinitely.

If you want to build a better business … if you’re going to double or triple your business in 18 – 24 months … if you want to maximize your personal wealth building … NO investment is more profitable than business coaching.

Take a look at the astonishing results claimed by others https://www.growmyrestorationbusiness.com/successes

What I have done for them, I can do for you!

CALL ME TODAY for a FREE 30-minute consultation to learn how coaching can help you grow your business. Call 800-655-1598 or email me at Jack@growmyrestorationbusiness.com to schedule a phone call.

We all want referral work!!

In our restoration industry, we call National Managed Repair Programs Third Party Administrator Networks (TPAs). These National groups administrate property claims in conjunction with the carrier, including assigning them to network contractors.

We crave referrals from the mouth of satisfied customers, referrals from insurance agents, from plumbers, property managers, and realtors. We all want referrals from those typically amongst the first to hear of a water damaged home.

If you want a lot more referrals, why in the world are you not getting them from TPAs?

Some grumble over program requirements or unfair insurance adjusters. Get over it! You can’t make money you don’t have. Most contractors have way too much capacity just sitting on the sidelines, and most would love to have reason to hire more staff to handle more work. Contractors are trying to keep crews busy, especially during those frequent downturns in volume.

Why not juice it up, get more work than you can handle, make more money than ever before, and HIRE MORE STAFF!

TPAs are the definitive, quintessential referral source with more work to hand out to you than any other source! Get more work, make more money, hire more staff, and build a larger, more prosperous business.

NOTHING, NO NOTHING, AND NO COMBINATION OF SOMETHINGS can produce a more sustainable, dependable, consistent volume of work than a handful of TPAs sending work directly to YOU

So, do you grumble over the trash talk of others, or do you want to grow your business and prosper?

CALL ME, and I will help you get dialed in.

If you’re not, I don’t blame you! There were days when I boasted of a single insurance agent bringing me over $300,000 of work a year, year after year. Those days are gone for most of us. Why?

1) Insurance agents don’t see the value of getting involved in the claims process. They write insurance policies, don’t they?

2) They are instructed to “stay out” of the claims process.

3) They are told NOT to make personal referrals.

4) They are instructed to send all claims through channels. This means to the Claims Center, and then on to the company’s TPA.

5) They don’t like being marketed by contractors with candy, pens, and magnets who interrupt their day and staff unannounced.

6) IF, they make referrals, they already have a contractor to whom they refer.

7) You have to compete against all the other contractors doing the very same thing.

8) It takes a lot of time to convert a new relationship into a referral relationship.

9) Who’s going to market insurance agents? The owner? Who has that time? One needs a dedicated person to do it, and that costs a lot of money. It looks like there are many reasons to NOT market agents.

Reference: The Revenue Generator – The Ultimate Revenue Booster for Your Business Sales Growth

The rule of thumb is contractors should spend 8% of gross revenue on marketing. $1 Million in revenue requires $80,000 of marketing to ensure you maintain your current level of earnings. $80,000 of marketing money could provide a full-time marketer and some internet activity. Not bad! OR, $80,000 could be spent on fees to TPAs and additional admin support to manage that work.

What’s the difference? Right here! You can spend marketing money on work you hope to get, or spend your marketing dollars on work you have completed. Intuitively we like the sound of paying only for work completed. Do the work, and then pay for the referral received. Direct sales staff are known for underperforming and underproducing. There are all kinds of factors that go into a successful sales staff that are absent in most of them. The bottom line is this, you may not get much for your marketing dollars if you hire marketing staff … but paying for what you have already done is guaranteed ROI. I like doing business this way, not the other way!

Reference: The Revenue Generator – The Ultimate Revenue Booster for Your Business Sales Growth

It Helps You with Customer Acquisition

How do your customers find you?

If you have a good marketing strategy, there are probably a few different ways that you’re targeting new clients.

• Paid Ads
• Referrals
• Local Listings
• Search Engine Optimization (SEO)
• Email Campaigns
• Social Media

But if your answer is “word of mouth” or “through our website” when your website doesn’t get much traffic? Then you might be in for some dry spells when your current work load dries up.

Marketing your business, and doing it well, is one of the best things you can do to acquire new customers.

Few businesses can grow without new customers. And strategic marketing is how you reach those new customers.

It Helps Build Your Brand

Hearing your commercial on the radio, not only introduces you to new customers, but it keeps you top of mind for those who already know you. Marketing reinforces your brand and your reputation.

Customers searching for a service are much more likely to go with a business that they’ve heard of, than another random competitor.

It Helps You Keep Up with the Competition

If you still need one more reason why you need to be marketing your business, remember that your competitors are doing it.

The easiest way to lose business to your competition is to not be in the running. When potential customers search for services in their area, do you show up as an option?

If customers can’t find you, they can’t pick you.

But It’s Always Evolving

Improving your marketing, is a great way to grow your business. But what’s gotten you to this point, may not be enough to get your business to the next level.

Marketing is always evolving as customers change and find what they’re looking for in new ways.

If your marketing strategy hasn’t changed in the last 20 years, or you don’t even know where to begin, give us a call. We’ll give you a free 30-minute consultation to discuss how The Restoration Entrepreneur can help your business reach more customers.

The key to job profit is controlling material and labor costs. However, we all know the larger the job, the smaller the profit. But, do you know why? Because we lose control of the job!!

I coached one restoration company known for its high volume of large-loss jobs. Sure, they knew how to reel it in, and how to get it done, but not how to make a profit. One job I found that Xactimate paid $80,000 for labor to complete the scope of repair. The company, however, spent $120,000. Not only did the project manager spend every nickel the company was paid for labor, but then took another $40,000 right out of the wallet of the owner and spent that too.

That’s what I mean by losing control of the job. When we lose control, the objective is to “get ‘er done.” We throw bodies and money at the job to get it done and off our plate. That might be OK for project managers, but owners want it done with a reasonable profit margin. We don’t break the bank when we buy 15 sheets of drywall instead of 10, or when we pay more for paint than we are paid. But, when you don’t know your labor numbers and don’t control those costs – you will lose your shirt and break the bank!

Reference: The Business Transformer – Double, Even Triple Your Business in 18 – 24 Months

You Can’t Grow Restoration Business By Just Breaking Even!

I talk with hundreds of contractors and find that many seem satisfied with just breaking even. I say this because they admit they don’t do much to put an end to their profit killers and begin making more money.

Particularly with rebuild services you should expect a 50% profit on every job nearly every time. I understand that the larger the job, especially with large losses over $100,000, the lower the profit margin. But this too occurs mostly because of poor job management. Contractors lose sight of material costs and recklessly throw workers at the job just to get the job done while profits slip away.

The result of all this is we just break even. Breaking even in the damage repair business means we make little more than Overhead and Profit. That 20% is a given and is automatically added to the costs of the repair bill and is just about all the profit many contractors expect to receive – they just break even!

So where are potential profits hiding and where are most commonly profits lost?

#1 – We lose profits on flooring.

Flooring is just too much of a hassle for most contractors so they give it away for a pittance of a profit compared to what they should earn. Flooring typically represents about one-third of a normal repair bill charges. Many contractors give away the flooring for a few measly hundred dollars.

When you get it together and really take control of flooring you should earn about 15% of the 50% you are trying to earn on the entire job. That makes flooring a huge factor in profit management. You get this by earning 45% – 50% profit on flooring material and labor.

How do you do this? You buy the flooring material at wholesale pricing and you pay a reasonable wage for installation. I can show you how to do both!

So here it is – you have a $10,000 typical repair bill and a 20% profit margin given to you through Overhead & Profit. Flooring could add another 15% profit lifting you to an overall 35% profit per job. By taking charge of this single repair you are nearly at your per job 50% profit goal.

#2 – We lose profits on daily material purchases.

The issue here is that for many contractors they have NO controls in place for quantity or unit price material purchases. Every day and in every city contractors send their crews or subcontractors to buy materials for a job with nothing more than the personal estimate of how much drywall is needed or how much they should spend on that sink replacement.

What does this produce? 15 sheets of drywall when the estimate called for only 10 and $210 for a kitchen sink when the estimate pays only $105. Each of these situations and so many more like them results in profit flying out the door and what is worse, nobody even knows it due to a lack of controls.

This is a terrible profit killer and it needs to stop. This is the single biggest reason that contractors just break even with little more than Overhead and Profit for each job completed. And this is why contractors struggle every day with cash flow and cash reserves. They lose a lot of money that they should be earning.

#3 – We lose profits on taking subcontractor bids.

How do most contractors determine what to pay a subcontractor? Most often they don’t, the subcontractor does! The sub tells the contractor what they are willing to do the job for and when this occurs the contractor loses every time.

Imagine a world where the contractor knows exactly what they are being paid – what the going rate for a particular combination of trades is for their area – and figures out exactly what they should pay for the type and amount of work to be completed? Welcome to the world of Xactimate. I would love to show you how to get that information and how it can help you take control of your subcontractor relationships and labor costs.

The bottom line is that once you have received your Overhead & Profit and your 15% profit on flooring you don’t have to save much more on material and labor costs to add another 15% and hit your 50% per job profit goal.

It just isn’t that hard but it does take know how, personal discipline and consistency.

Why else are you in business if not to make a profit and if you are going to make a profit why not make it the largest profit possible?

Stop accepting less and being content with just breaking even. Step up, figure it out, take charge, and make some money!

Email me today to set up a time for a FREE 30 Minute Consultation and let’s talk about what it will take to accelerate your sales and improve your profit. You can reach me at 800.655.1598.

Visit me at my website where you will find FREE eBooks such as HOW TO GROW YOUR RESTORATION BUSINESS and STOP YOUR PROFIT KILLERS DEAD IN THEIR TRACKS, and lots of other free material designed to help you on your way as you grow your restoration business at www.growmyrestorationbusiness.com.

This statement is about your future and it should begin directing your steps today! The matter is vitally important to you, and I hope you read this carefully!

To the 25,000 Restoration Company Owners, I ask you, “What size must your business be to retire?”

50% of Restoration Companies earn approximately $500,000 in annual revenue. THAT IS NOT ENOUGH!

It is never too early to determine how much is enough, and set that as your goal and begin working toward building a business that is enough.

So how much is enough to retire on? Most owners would expect no less than $1 million from the sale of their business to take them into retirement.

So what does it take to get $1 million from the sale of your business?

You need a business that does $3 MILLION in annual sales, and it needs to earn a 20% NET PROFIT that produces $600,000 of net profit at the bottom line. Net Profit or EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization) is your operating profit. In other words, the amount of money left over after all bills are paid, but before depreciation and taxes, etc.

Net profit is important because its average over three years multiplied by 3 equals the most common formula for a restoration company to determine its fair market value.

So here’s the formula – $3,000,000 X .20 = $600,000 (assuming this is the average net profit for the past 3 years).

$600,000 X 3 = $1,800,000 fair market value. Its not top-line revenue that determines market value, but the bottom line earnings.

Since you will have current accounts payable and perhaps some debt to pay, and a discount to the price (no one pays full price to buy your business) less subtract 25% from the fair market value.

1,800,000 x. 25 = $450,000.

$1,800,000 – $450,000 = $1,350,000 (proceeds to you from the sale)

We’re not quite done because you have taxes to pay. Some taxes will be calculated as capital gains, and another portion will be taxed as ordinary income. Let’s assume the combined tax rate is 30%.

$1,350,000 X .30 = $405,000

$1,350,000 -= $405,000 = $945,000. We don’t even quite get to our $1 million goal.

You can see getting to a $1 million retirement goal requires no less than a $3 million business that produces a 20% net profit is barely be enough to reach that goal.

Lessons learned:

• The typical $500,000 restoration company needs to get at it right now because you have a long way to go to reach the goal of a sellable $3 million business.
• Most owners will never reach the goal because they are content with having created a job for themselves rather than a business to sell. They will reach their “crap out” date and just close or fade away, or go do something else without a sale at all.
• A 20% net profit enables you to take annual distributions. Imagine taking $50,000 or more annually as a distribution on top of your salary. Wouldn’t that be sweet? You should be doing this regularly!

How do you get from where you are to where you need to be?

• Realize you are not going to get to $3 million revenue as a mitigation only company. At an average size mitigation job of $3,000, that would require your company to complete 1,000 mitigation jobs a year. That isn’t ever going to happen!
• The only way to reach $3 million in revenue is as a full-service company. You need to get at this NOW, and not wait for some distant hope and dream. You need to do it NOW!
• Growing from $500,000 to $3,000,000 will require a lot of changes along the way. Most owners are good technicians but not so good owners and managers. You will need some help, so get it NOW!

Decision

You can create a job for yourself and one day just “crap out” with nothing left of the business you built, or you can commit yourself to grow your company into a business someone will want to buy. Only the latter will give you enough!

You need to get to it NOW!