I am told by many construction company owners that they close only 2 of every 10 jobs they bid.
How can you grow your construction business with such a dismal conversion rate?
In residential construction, homeowners are generally unsophisticated regarding how to pick a contractor. So, when there is no understanding the selection is made at the least common denominator – price! One contractor said that no matter how well he specs the jobs for material and labor, and adds only a modest profit margin, there is still someone who will underbid him by 30%-40%.
What should a business owner do?
The future for successful contracting is not in lead generation, but in referral sourcing. This is a very very important statement and you should pause for a moment and let it sink in.
Lead generation through Angie’s list, HomeAdvisor, the many internet lead generating sources, website SEO, and others will continue to produce what it has in the past – 2 out of 10 leads converted into jobs, and Two Men & A Hammer will continue to take the other 8 by undercutting your qualified bids by 30% – 40%.
Can you live with this? Most of us can’t!
Referral sourcing is different. Instead of putting your time into the many ways of getting cold leads, you focus on identifying sources that bring repetitive warm opportunities to you.
Gaining new jobs from referral sources will dramatically increase your conversion rate from 20% to 50%, or more, and dramatically decrease the number of qualified opportunities you need to meet your annual budget.
The difference is that when you gain a lead by referral the source has already laid the ground work for you. There is already a favorable bias on the part of the customer to use you because you have been referred to them by someone they know and trust. These referrals are much more powerful an opportunity than a cold lead, and can dramatically change your growth trajectory.
What are some of the most common referral sources in your marketplace?
1.Water damage only companies that don’t do reconstruction can always use the help of a competent General Contractor that is easy to work with.
2.Referrals from a number of government agencies provide homeowner grants ranging in size from $7,000 to $70,000 per job. Now all the homeowner needs is a qualified contractor to do the work. Wouldn’t you like to get in on this?
3.Insurance carriers are a source of nearly unlimited work by direct assignments. Basically, when you get the assignment, you get the job. Now that's the kind of referral we all could use.
4.National niche contractors who specialize in HOAs, assisted living facilities and other niche markets compete on a national scope for work, but do work on a local level. In other words, they are in constant search for competent and qualified contractors to sub their work to as local contracts are awarded to them. They are at work in your city. Do you know how to find them?
5.Many general contractors add roofing to their service offerings making them eligible to receive roofing assignments directly from TPAs or insurance carrier programs. Additionally, many roofing-only contractors need help from a general contractor to complete additional exterior repairs. Gutters, siding, stucco, trim, windows, doors, paint, decks, and fencing are all trades needed on many hail and wind damage repair insurance claims. Perhaps an alliance with one or more roofing-only contractors might provide additional referrals.
6.In every city there are sources for fire services such as board up, victim assistance, contents cleaning, and reconstruction services. This could easily add a cool $1 million in annual services. You just need to know where to look and how to present yourself.
7.Insurance agents can be a good source if you approach the relationship right! I am not referring to part-time moms who drop off candy to each insurance agent. The approach my company took led one agent to send us $300,000 of work in a single year, and we never once had to ask for it. This is only a beginning list that can be more fully developed based on your company’s competencies and your local market. But I can tell you this – I have not a doubt in my mind that the typical, well run construction services company of $500,000 or so in gross revenue can double or even triple their top line by focusing upon referral sourcing, rather than lead generation.
I really mean it!
Know the trends, and follow the trends. They lead to opportunity and growth!
Gaining access to these referral sources and more to help generate new revenue for your company is only a phone call away.
Call me today! No matter what your needs, we promise to deliver objective, informed advice, and actionable plans for increasing your profits and sustaining long term revenue growth.
Share this blog with others who may need to hear this message of hope and encouragement, and visit our website for additional resources or to download my FREE eBook How to Grow Your Restoration Business at http://www.growmyrestorationbusiness.com