How to Assess the Health of Your Home Improvement Business

It goes without saying that it’s important to regularly assess the overall health of your home improvement business. The question is: How do you go about it? 

Here are some insights based on expert advice and our own research. Choose from among them to create an assessment you can perform at regular intervals to identify items that need attention. 

Start with the Basics 

Enter your company’s name into several search engines. Pay particular attention to Customer reviews. Good reviews are critical to your success, and bad ones can potentially undo the credibility of your Business at least to some degree. You should do this regularly and react quickly to negative reviews. Also, don’t forget to ask for a review after every successful project. Include testimonials and positive reviews in your marketing. 

How important are reviews? Among other tips offered to consumers, the Federal Trade Commission suggests reading reviews with a close and critical eye, getting contractor recommendations from people you know and trust, and checking with local home builders' associations and consumer protection groups.  

Call in the SWOT Team 

To make highly informed Business decisions, go beyond the basics. Many experts recommend SWOT Analysis. The idea is to reflect on the positive and negative factors that can affect your Business. 

These are: 

• Strengths – what are you good at? 
• Weaknesses – what are you not-so-good at? 
• Opportunities – new markets, better sales strategies, new technology. 
• Threats – competitors, economic factors.  

Begin by simply listing items that fall into each category and see where that takes you. Do your own research and ask peers to help identify the right tools for your Business.  

Let’s Talk about Money 

A comprehensive business assessment must compare sales to expenses. A review of your costs can reveal hidden traps, such as omitting taxes and worker’s comp insurance premiums in labor costs. 

Items to review on the revenue side include pricing, accounts receivable, and cash flow. Even a simple math error can be costly.  

Some additional items to keep in mind: 

• Revenue goals. Have you identified them? Are you meeting them? What actions can you take to increase your close rate and average job size?  
• Close rate and average job size. Do you know them? They relate directly to your bottom line, and there are low-cost ways to improve them. Tracking and reacting to change is essential.  
• Cash flow. Do you have the on-hand cash you need to cover expenses, even the unplanned ones? Use a spreadsheet to create a basic cash flow budget that predicts when you will incur expenses (such as labor and material costs) and work with Customers to schedule partial payments – in cash or from their loan account – to cover them. To go beyond the basics, you may need to explore some tools. 

Evaluate How You Sell

The industry faces a severe shortage of skilled tradespeople, and you need to avoid a similar situation on your sales team. Keeping your best people around means understanding their needs and helping them to be successful. 

Do you have a formalized sales process and are your team members following it? This article outlines the advantages of a sales process. If you can formalize a process that increases your close rate and average order size even a small amount, the results can be substantial over time. 

Have you eliminated unnecessary paperwork and hassle? Even highly complex processes like Customer relationship management and financing can be automated. These processes should be fast, easy, and paperless. If you can make their work less cumbersome, your salespeople may stick with you longer. 

Ongoing sales training is essential. Things change constantly. Ask vendors and partners to provide training on their latest offerings. This goes beyond the products you install to include things such as warranties, services, and financing. 

We’ve presented some basic steps to help get your Business assessment underway. The key to success is consistency. Whatever assessment plan you create, you must carry it out regularly so you can make timely comparisons and plan corrective actions.