Ever since you were a kid you like building things. Maybe you went to tech school or learned your trade after you got out of high school. Then you made your bones fetching coffee and smokes your first couple of years until you moved up the rung and became proficient in your craft. Then one day the little voice inside you said you could do the job better and you started your own contracting company.
Fast forward five, ten or fifteen years
It’s been a long time since you were the lunch gopher and you have spent these years becoming an expert in your field. And things are going pretty well, sure there are ups and downs, but you’re usually busy, you have some people working for you, and you are relatively happy.
But there’s something that gnaws at you every day
Homeowners are constantly beating you up over your price and you are getting sick of it. You’ve spent years doing what you do and you deserve the prices you quote. But it’s a down economy and any job is a good job these days right?
Wrong… and here’s why!
I talk to contractors all the time who tell me they lose jobs because the client took a lower bid, and that’s going to happen, there’s nothing you can do about it. What you don’t want to do is give it away like a bridge and tunnel hooker. If you go back and check last year sales figures I am sure you will notice an alarming trend; I will bet you a cup of coffee that 80% of your profits came from 20% of your clients or customers. The other 80% were singles or doubles at best. The trick is to replace those singles or doubles with triples and home runs as much as possible.
How do you hit a home run every time?
You have to first understand scale. Scaling a contracting business is hard to do and here’s why. Let’s say right now you’re doing 15 hot water heaters a month. You are also doing 25 clogged toilets a month. Overall, you’re doing 40 jobs a month and making $15,000 but you are maxed out. In order to scale, or grow, you have to add more trucks, payroll, taxes, insurance… you get the idea.
So to grow revenue without having the added cost you have to throw the baby out with the bath water, or toilet water in this case, and stop doing so many toilets and replace those jobs with water heater jobs. In essence, firing some of your clients or customers.
Now, you’re doing 25 hot water heaters and 15 toilets and you just grew your top line revenue by $10,000 a month and didn’t have to spend a dime to do it. You accomplish this flip-flop by making your marketing about the jobs that are more profitable to your business. By creating a laser focus on the jobs (then the clients or customers) you want, not the kind you have been getting. And the best part is, this works especially well for contractors with tight ad budgets, and let’s face it, whose budget is isn’t tight these days?
So the next time you sit down to plan out your advertising remember the 80/20 rule and make your marketing about profits, then people.
4 thoughts on “Fire Your Clients or Customers”
Dareen, this is a great example on how loss leaders can affect your bottom line. It’s OK to ” fire ” clients.
Darren, found this very interesting. I’m not a contractor, but a tailor and have discovered that the same applies to some of my clients.
No more crappy little jobs that waste *my* time and *their* money!
Aahh! It feels so good to not take that stuff on!
Thank you very much for stopping by. You are in a unique situation where you get to play on people’s emotions and feelings about the most important thing to them…themselves. I can see it now; well Mrs. Jones, I can make you look like shit for $25, good for $50 and Angelina Jolie for $100. Actually, that seems like a pretty easy sale to me! 😉
Anyway, you are right, in a down economy, when the ability to scale doesn’t fit the business model at the time, the ONLY way to increase revenue is to either raise prices (very tough to do) or get better clients!
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