Open Your Books to Profit

I wanted to post this here on my personal blog to see if anyone had any questions they wanted to submit. Here is the link to the article

I hear people discuss open book management (OBM) and feel that business owners are absolutely too hesitant to dive into this. What is the fear of using OBM? Some reasons include not wanting employees to know their income, or not knowing how to use the information to build a team spirit, or that the owners don’t understand a financial statement.

In addressing the last point, I feel it is imperative that business owners understand their financials. You cannot earn a consistent profit without understanding how every movement affects the bottom line. Financials provide a strategic map that outlines where you have been, where you are, and where you are headed. In turn, OBM provides a way to use financial information to get your team focused on being profitable. This isn’t a “buy-in” per se’, it’s a necessity to developing a team that is focused on becoming a well-oiled machine.

I can review any financial information and in a matter of minutes know both what is functioning very well and what problems a business might experience. Financials, when set up properly, with the right chart of accounts, following a percentage of completion philosophy, and using an annual comparative, enable business owners to have the right information to make the right decisions.

Understanding the numbers will let you know what areas of your business need improvement. You might have a high sales volume, but if you don’t understand your profit margins, you might be under-selling projects without realizing it. Your company might be most efficient at building additions, but often accept bath and kitchen projects that may not obtain your required profit margins. Your financial statements might reveal that your overhead is too high.

By itemizing the entire general and administrative accounts, you will have a more systematic and analytical look at the proper numbers, which gives you the opportunity to streamline your operations. If you see each line item on a monthly basis, you’ll quickly see where you are  spending your money and be able to make decisions on what expenses are increasing or decreasing and why. You can ask yourself, “can I save money on my phone service?” or “can I afford another vehicle?’ or “what can I do to reduce my insurance?” When you look at the numbers systematically, every month, you become more analytical and savvy in how you spend money.

Once you understand your financials, you can share them with your employees and help them understand what the numbers on a report mean. Open book management can build a culture of success. Having an accurate financial can help the team analyze a situation more thoroughly and present the decision makers with accurate information to make an educated and better decision. If an employee requests a raise, you can use the time to share information with him including material rates on his projects, labor rates, and profit goals. That very same employee might not ask for a raise if they knew the business missed profit goals by 10% or that the projects the employee was responsible for didn’t meet the desired profit margins.

There are so many ways to involve the team and team build. In my upcoming blogs, I’m going to take an in-depth look at OBM and will include a series of many true life examples and scenarios and answer questions to ensure that OBM is part of your growth. Submit your questions about open book management to me at tim@remodelbuddy.com.

As the ” Man in the Middle,” or person in the middle or being the owner, you are your company’s biggest asset and the best representative of your business.

Many business owners are more focused than ever on their marketing efforts. I have mentioned before that the definition of marketing that should be adopted today is about getting someone who has a need, to “know, like and trust” you. There is no better marketing plan than having the owner of a business visit his or her clients at their home and being involved in the project. So get out from behind your desk and be your biggest marketing asset.

When a customer hires you they expect that there will be consistent progress and quality workmanship to complete the project. These are their basic expectations and not anything they consider astonishing. What is astonishing? Astonishing is doing something no one else can do. When the owner of the company visits the homeowners and makes a concentrated effort to talk with them about the project and focuses on making their personal experience remarkable, then you are on your way to creating an astonishing experience.

If you want to learn something about your customers and the pulse of your business, visit one of your projects. Talk to your customers. Not only will you earn that “know, like and trust,” but you will learn more about your business, get to know neighbors, and develop relationships with your tradesman and employees. When your workers know you may be around the corner or on your way to their project, their efficiency and craftsmanship will reach their highest levels.

When I was operating my business, I would make daily visits to projects. I would review jobsite cleanliness and quality control, observe our workmanship and talk with the customers. When I visited the project and the customer was not home, I would leave a note that I was there and make written observations and leave them on the communications board. My clients knew from our first meeting that I would be very involved in their project. This was also part of my sales process. I wanted them to feel they had our team’s personal attention. I knew if I put forth this kind of effort that everyone on my team would and could be expected to do the same.

With regular visits to projects, I found that the quality of work, job staging and cleanliness of tradesmen improved. The most beneficial aspect of getting out from behind the desk was that our business was more “refer-able,” a key to success in today’s economy.

From time to time I like to look a different advertising pieces. This will be a review we do once a month, advertising pieces. The benefit of Establishing a Advertising Campaign that is effective is a business saver sometimes.

Having the ability to step on the gas to create revenue or ease off the gas when needed for your remodeling business can be a valuable vehicle, if the strategy is,…. and tactics are… done right. I do highly recommend using an experienced marketing agent to strategize, develop and implement your campaign, as trial and error can be costly.

Not only can trail and error be costly, but the money and time lost can stop you from venturing down this road again and ultimately prevent you from advertising, which can be the loss of a great vehicle for the right company to take advantage of to grow their business, when your budget allows. Also, the experience of negotiating for the proper rates can be a savings in itself and get the greatest value for your money, dollars and budget. The professional experience is negotiating is priceless.

Direct Mail Pieces

Val Pak

 

I would just like to give you general information and a description of Valpak, so you can understand how it is used. Personally, I have had extensive experience with Valpak in numerous metro markets throughout the U.S. For customized advice, please contact Remodel Buddy to arrange a plan for you business. Valpak’s PDF media-kit can be downloaded here;

What is Val Pak?

The Valpak sealed envelope contains a mix of ads from national, regional and local advertisers, delivered via mail in a sealed blue envelope. Remodel Buddy’s take: Valpak’s business advertisers the majority of the time, advertise with discounts on their ads or use coupons, as the Valpak audience likes to open and review the blue envelope looking for local specials. Depending on the marketplace, this can be a vehicle that will have more than one competitor in each Remodeling/Home Improvement field.

Val Pak describes itself as the following;

From savings alerts, special discounts and offers, to menus and more, consumers look to Valpak each month to deliver rewarding, relevant and reliable ads from neighborhood businesses and national brands. Advertisers can select from a full range of professional marketing services including campaign concept, design, printing, list acquisition and in-home distribution.

How Valpak is traditionally distributed.

The distribution of Valpak is through the mail, directly to the homeowners and or commercial businesses. When mailing your ad to the local area, here a a couple options.

Saturated List-

Each Valpak distributor is a franchise and will have a certain geographic area it targets for the mailing of the blue envelope with all the ads & coupons. For example, if someone is operating a remodeling business in Washington, DC., and wants to do a saturated mailing, the mailing will go out to everyone that is located in the zip codes that the Valpak franchise mails to. If you are in DC, the ad will go to everyone in the DC metro area and the list of zip codes they distribute to 100% coverage. Saturated lists are less expensive on a cost of per thousand mailed, per thousand reached( which is a common evaluating term for pricing -cost per thousand -cpm)

Targeted List-

this is exactly as it sounds, a specific demographic, income range, home owners, occupation, targeted zip codes only and can be used to focus on more of an ideal client. It is important to know your ideal client and their demographics anyway, when advertising as if you are reaching your targeted customer, you are more apt to achieve better results. Targeted mailings with Valpak have higher response rates, leads, inquiries etc, but also cost more per thousand.

Remodel Buddy’s take:

When choosing a direct mail piece there are quite a few things to consider when trying to capitalizing on the vehicles potential. First, consider the reason for the advertising purpose. Is this for generating leads for an event? The event could be an open house, a sale or special offer. Is this for branding? Some Remodeling organizations set aside a certain amount of their advertising for brand awareness, to get the name out and reach people they may not otherwise reach by, by using saturated mailings to a wider audience- everyone. A more focused approach for ideal clients and a better opportunity to earn business on each customer contacting you would be the targeted mailing. Even though the cost per thousand mailed is higher, the overall cost will be less on the budget, since less will be mailed.

Remodel Buddy’s Summary

We analyze the marketplace and review all the possible vehicles for direct mail advertising. Direct mail pieces more than likely come with a few or more competitors advertising in the same mailing on group pieces. Valpak is no exception. A good sales approach will be necessary to close these leads and make the cost effective. This is always a consideration when choosing what ads to run, when and gauging the response expected. Knowing your ideal client and their demographics etc,etc is a process Remodel Buddy can go through with you and will be necessary to maximizing success & making an effective advertising campaign. The message and content in the ad along with the creative artwork itself is just as important as every other step.

Effective marketing requires doing many, many, small things well. There isn’t one silver bullet that brings in qualified leads, but an effective strategy with consistent effort creates a solid foundation on which to build. Neglecting marketing is a death spiral in the long run.

One element of doing all the little things properly is staying in front of people. Top of Mind Awareness!

If you look at advertising and marketing today, you can see that traditional methods of reaching people are changing. TV isn’t as effective as it used to be and unless you have a big advertising budget, may not even be an option. My wife and I TiVo shows to watch later and fast forward through the commercials. How about radio? I have satellite radio and avoid commercials as do many people. When I’m in my car, I want to hear music, so if a commercial comes on I flip the station. I am not saying TV or radio cannot work, but not as well as it used to. I am always looking for effective and affordable means to market and so are many remodeling businesses.

In today’s world, e-mail has become a standard practice for communicating and is now an acceptable and convenient way to stay in touch with your clients. Part of marketing effectively is being in front of people and doing so consistently—you want to be in front of people when they are ready to buy. E-mail newsletters are a very effective way to reach people, stay in front of them consistently and do so very affordably.

To create an effective e-mail newsletter, you should send them on a consistent cycle, build a good list of recipients, and provide great content. Think beyond the topic of remodeling and have fun with the publication

Send them on a consistent cycle. Consider sending out a monthly newsletter and send it every month. The best practice is to send out your newsletter at a time of the day and week of the month that you feel gives the best opportunity to be opened and read. I personally like Sunday evenings and have had a good open rate with that time.

People are usually busy on Mondays and are inundated with e-mails, catching up with communication and may present a poor opportunity to be read. Most newsletter providers, such as Constant Contact or MailChimp, include open rate analytics, and allow you to view who has opened them and who has not.

It is a good practice to have people confirm they want to receive the e-mail and provide an unsubscribe option as well. This practice ensures the people that want to receive your newsletter will. Look at your statistics, track the results, and make adjustments as needed.

Build your list. Who should you send newsletters too? Send them to everyone! The more people on your list, the more people you reach.

If a client that didn’t choose your business for one product and gets your newsletter consistently, maybe they will get to know, like, and trust you for a later remodeling project. For companies that offer a handyman service and work with a client on a small project, if that client receives newsletters, they may see the range of projects you can do and call you when they are ready for a larger kitchen project.

Provide great content. Make sure the content in your newsletter is interesting and covers a variety of topics. Ned Overton, FW&D Remodeling in the DC metro, steps outside the topic of remodeling and writes about his favorite place to eat and selects new restaurants each month.

Ned writes a review, what he ordered, talks about the service and takes pictures of the server (with their permission), the outside view with the sign and sometimes the chef. Want to make it even more fun? Let them know you have a blog and are going to review their place and put it in your newsletter. Let them know you have a good following and ask if you can offer your clients a 10% off coupon if they print it and bring it in. Have fun with it.

Maybe you will bring them new business and maybe they will bring new business to you, too. WIN/WIN!  What a great way to connect with more people. Let your employees participate in the fun too. Need more content? Review a movie. Be the first one to see it. Choose a movie which is likely to appeal to your ideal customer.

Take the kids to see “Alice in Wonderland.” Did you get the tickets online to save time? Advise your readers on when to go, how it was and what your kids thought of it. Take pictures of the theatre or your kids eating popcorn with 3D glasses on. Ask your family and employees for their help. Write about or highlight local events. Did you attend one? Did your employees attend one? Maybe make a note that you will be at a certain event and would like to catch up with clients at the event.

Think beyond the topic of remodeling and have fun with the publication. Include a link to Facebook page and encourage your clients to “Like” your company page. Grow your readership as if your newsletter were an entertainment guide. Check the analytics of the open rate for the newsletter and try to improve it.

Referral marketing is about doing many little things properly and developing a system to actively market for referrals. Show you customers your referral process, identify the steps that will be taken when you receive a referral and build confidence in the people that want to send a referral to you. When you identify the steps on, “How to Refer” your business, you are telling the referring party that their recommendation will be handled professionally. Make the “How to Refer Us” document part of your marketing kit and promote it!

Identify Your Referral Process

Introduction We believe that referrals are the true measure of success and our clients satisfaction. It is a great honor to receive a referral and your confidence and trust in us. We believe it is important that your referral to us understands what we do, how we do it, and to establish great communication right from the start.

How Do You Send Us a Referral?

Let your referring party know the best way to contact you with a referral. Simply call (xxx-xxxx) or e-mail (your e-mail) the information to me, and I will personally contact them. Also, I recommend sending them to our website to learn more about us.

How Would I Spot Your Ideal Client?

Describe your ideal target client and be specific as possible. What do they need; Do they need a new kitchen, bathroom, addition, windows?

Geographic location; Where do they live in relation to the radius you cover in your metro market?

Demographic; Is your ideal client a family, young married couple or empty nesters? Do they live in older homes and plan on staying to raise their family, or are they busy people that tend to update their home instead of fully remodeling it?

What do they value; Is this potential client looking for a professional remodeler and appreciates craftsmanship, attention to detail and a team dedicated to customer service?

How would I best Communicate What You Do?

Describe how you would like your company’s team and expertise explained and how you are unique. What do you do best?

Your Client Referral Process.

What happens when your receive the referral? Tell them a little about how you will introduce yourself and your company to this referral prospect. When you receive this referral, how and when will you contact them? What will happen next?

I will personally contact your referral within one business day. I will engage in conversation with them and discuss their needs, desires and what they would like to accomplish. We will set a time and date for a consultation and I will direct them to our website case studies to review other testimonials.

What Others Are Saying About (Your Company Name). Share client testimonials and case studies.

Referral Rewards Program.

Have fun with getting referrals. Offer incentives that appeal to your ideal clients. Whether it be a night out for a fancy dinner, a gift card to Starbucks or getting creative by having a referral rewards program, the idea is to be creative and market you program. Make people aware of your referral program, your referral process and get everyone on your team into marketing.

Remember, whether you know it or not, you are in the marketing business!

What is marketing in a down economy? How About Marketing for any economy!

I have heard this term used a few too many times and am not sure what it really means. I think a better term to use is, Getting back to understanding what marketing really is by learning marketing in any economy, or Marketing effectively for consistent results makes more sense to me.

I like the phrase that describes marketing as, “Getting someone who has a need to know, like and trust you.” A future client needs to know, like and trust you, before they will ever buy from you, and ultimately refer you, and do repeat business with you.

Marketing in the remodeling and construction industry isn’t for the light hearted, as it takes a consistent, effective, a well planned system to get results. Most remodelers I talk with and work with are very busy in their business building, training employees and with production, so the marketing gets the last bit of energy…if any. This approach isn’t bringing results and the ones that have ignored marketing are feeling the effects. Negative effects. Just like anything that gets neglected, it definitely doesn’t do well…let alone thrive and bring positive results. This is what has changed…the need to pay attention to marketing. The growing companies, profitable ones and stable companies are making marketing as important as sales and production.

Also, I don’t think its todays economy has changed the look of marketing as much as just the way people are communicating and people’s expectations have changed. I don’t look at marketing as a newsletter and bam, my business is doing great now. Far from it.

I look at long time Remodel Buddy member, Paul Klassen of Pinnacle Renovations. He is changing his culture, becoming effective with every move and enhancing his customers experience in a very systematic and consistent way. He is focused on his ideal client. An ideal client is one that is profitable for one. A profitable project that you tell yourself,”if I had 5-10 more of these, life would be good.” The first element of an ideal client is they are profitable projects and the second is that they referred you.  Identify these people and find more of them. Develop your core marketing message to reach out and connect with them.

Building an effective marketing plan is about doing many, many little things properly on top of a solid foundation. There isn’t one silver bullet that makes everything click, but there is one element that makes it all possible….an effective strategy with consistent effort. Neglecting marketing is a death spiral in the long run.

The difference between cost and value has narrowed in customers minds, so the need to establish yourself as the “go to company,” “the expert in the industry,” and a remarkable process for delivering the entire project from A-Z ……will be the difference. Educate everyone with your marketing. Marketing that is unique & powerful, plus the ability to differentiate yourself from everyone else is the foundation that is needed to market in any economy. The only thing this economy has taught businesses is the realization that marketing cannot be the part of the business that is neglected anymore.

I was just working with a renovation firm in Calgary, Alberta named The Pinnacle Group. Paul Klassen is a smart individual and has developed one of Calgary’s premier Renovations businesses. His focus is on Building relationships with his clients and his team is dedicated to that vision. Our marketing efforts have been geared towards enhancing his clients experience, being unique at every turn and creating an advantage. We are tapping into the emotional aspect of his clients and how they make their buying decisions. Why this focus on the emotional aspect?

Many remodeling and home improvement business  owners, or sales people,  are  pre programmed or wired to prove they can be trusted to the customer. Company’s consultants or representatives may expend too much work and time trying too hard to impress others, and in trying to earn the trust factor with their potential clients, that they miss the whole essence of building the relationship with the potential client. We have to remember that remodeling is still an emotional decision and in order in develop a solid relationship with your client, like Pinnacle Renovations, there needs to be a focus on your client.

How many remodeling businesses are showing the cost vs. value report?

Is this really the direction you want to go right now? Is it really? Should we be talking about the investment value or the real reason people are remodeling today…..because they want to make there house a little more like home! An emotional investment. Emotion usually wins every time!

I read  recent article by Nina Patel, Senior Editor for  Remodeling Magazine. Nina pointed out some interesting research about  how people view their home these days, and  how the  long term investment value of home ownership has diminished. Here is the article and some highlighted   quotes from here article.

A researched the 1929 stock market crash. Assistant professor Anna Scherbina found that a decade before the crash, there was a booming real estate market in New York city that she says resembles the housing bubble of the 1990’s and 2000’s. She extrapolates from the research that “owning a house is not necessarily a lucrative long-term investment based on its long-term exchange value.”

Nina commented;

I’ll grant her that. During our most recent boom, many people bought and sold houses with the sole purpose of making money. However, most of the public and the government realize that ownership goes beyond making a quick  buck. Homeowners are invested in their neighborhoods and have a strong connection to the community. Buying a house also hits us on an emotional level. Some of it is scary–like the panic I felt right after my closing where I wondered “What did I just do?.” But along with the fear comes elation and pride. So researchers can review history and statistics all they want–the true value of buying a house is the enhanced quality of life. Successful remodelers understand that emotional value and use it to help clients create a place they love to call home.

Here is an excerpt from the grad school’s site about Scherbina’s research:

“In a recent radio interview, Scherbina discussed an index of home prices in Manhattan between 1920 and 1939 that she and Associate Professor Tom Nicholas of the Harvard Business School collected by hand from the Manhattan Public Library archives. This data set is informative because the housing market in Manhattan represented 5% to 10% of all the U.S. real estate wealth at that time.

According to Scherbina and Nicholas’ working paper, “Real Estate Prices during the Great Depression,” the prices for a typical Manhattan house increased 62% in a run up of the 1929 stock market crash and then lost 51% of that value by the end of 1933. By 1932 and 1937 the stock market showed signs of rebounding, but real estate did not, according to Scherbina.

A house purchased in 1920 would have lost 51% of its value (in inflation-adjusted terms) by the end of 1939. Scherbina and Nicholas report that it wasn’t until 1960 that housing prices recovered.The upshot for today, according to Scherbina, is that owning a house is not necessarily a lucrative long-term investment based on its long-term exchange value. She explains that given maintenance costs and fluctuations in the real estate market, it is difficult to profit financially.

Scherbina contends investors would do better investing in stocks and bonds because they can spread wealth across diverse investments and have the flexibility to sell some assets when necessary. Home owners, on the other hand, can’t sell some of their house when the economy shrinks, yet families do not value or think of their homes simply as a long-term investment.”

Should we focus on the emotion or cost vs. Value?

Nina Patel-

“So researchers can review history and statistics all they want–the true value of buying a house is the enhanced quality of life. Successful remodelers understand that emotional value and use it to help clients create a place they love to call home.”

My thoughts…

“Should we be talking about the investment value or the real reason people are remodeling today…..because they want to make there house a little more like home!”

You decide……….