We don’t need to tell you how important it is to regularly assess the overall health of your home improvement business. We really don’t have to tell you that, right? 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 your marketing program. 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 positive reviews in your marketing.
How important are reviews? When the Federal Trade Commission offers advice to consumers about hiring contractors on their website, their first two suggestions are:
Check with friends, neighbors, or co-workers who’ve used a contractor
Look at sites you trust that post ratings and reviews
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.
Strengths, as in what are you good at?
Weaknesses, as in what are you not-so-good at?
Opportunities, as in new markets, better sales strategies, new technology
Threats, as in competitors, economics, Zombies (probably unlikely, just wanted to be sure you’re paying attention)
Begin by simply listing items that fall into each category and see where that takes you. Do your own research to find the right tools for your business. The links below will get you started:
Here’s a basic article on SWOT analysis by Hubspot.
From Shopify: How to Conduct a SWOT Analysis: Examples, Strategies, and Templates.
Let’s Talk about Money
A comprehensive business assessment must compare revenues (aka sales) to expenses (aka spending). A review of your costs can reveal hidden traps, such as forgetting to include taxes and worker’s comp insurance premiums in labor costs.
Items to review on the revenue side include pricing, accounts receivables, and cash flow. Even a simple math error can be costly. This article from Home Advisor Pro identifies a mathematical error many contractors make when calculating their selling price.
Here are some additional items to keep in mind:
Revenue goals. Do you have them? What are they? Are you meeting them? For example, what actions can you take to increase your close rate and average job size? Speaking of which...
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. You should track them and react to changes.
Cash flow. Do you have the cash you need to pay expenses? 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.
The views expressed on third party pages linked from this blog are those of the author and do not necessarily reflect the views of GreenSky, LLC, its management, or subsidiary companies.