4 Strategies Contractors Must Master to Thrive After the Covid Boom (Ep. 212)

Too many business owners have forgotten what this business was like pre-COVID, and as a result, a reckoning awaits. In the next 24 to 36 months, we'll witness a sobering reality check for many companies. However, these cycles always provide opportunities on the way up as well as on the way back to more normal conditions. Now is a time to quickly determine who you are going to be in the post-COVID landscape. Are you going to be proactive or are you going to be reactive? Are you going to make excuses or are you going to make money? Hey everybody, welcome to the Wealthy Contractor Podcast. Brian Kaskavalciyan here, and I'm going to say it. I'm going to say it out loud. You're not going to want to hear it, maybe, but I got to say it. The COVID boom is over. Sorry to be the bearer of bad news or to be the one that says out loud what most of us are thinking, but it's kind of my job. You know, at The Wealthy Contractor, we're all about tough love and hard truths. And it's not because of my ego, but because the only way we get better is by acknowledging the truth. Good, bad, ugly. So once we acknowledge the truth, then we've got to adapt to our new conditions and we've got to keep moving forward. Now, let's be honest, as an industry, we benefited big time from COVID Demand for home improvements soared to unprecedented levels, and as a result, companies were flooded with with leads. Like, never in my 30-plus years in the home improvement industry have I ever seen so many businesses do so much revenue so fast. However, as they say, all good things must come to an end. For those of us who have been through these boom and bust cycles, this is nothing new. I mean, personally, I've been through more of these than I care to admit. However, These cycles always provide opportunities on the way up as well as on the way back to more normal conditions. Now, over the last few years, I've watched companies that worked hard for 20-plus years to get to $10 or $20 million in sales all of a sudden skyrocket to $50 and $120 million in sales. I watched as companies that just opened their doors in 2018 or 2019 go to multi-millions in sales in less than 3 years. Just about everyone in our industry, including owners, salespeople, installers, benefited from this unprecedented once-in-a-lifetime phenomenon. Now, it wasn't sunshine and rainbows for everyone. At one end of the spectrum, we saw companies that not only managed to add substantial revenues, but also earn significant profits. And as a result, many great companies were acquired, making the owners rich. And in some cases, like really rich, like fantastically rich, like private jet rich. I say good for them. I know many of them, and I know how hard they worked for years to develop strong pricing models, profit models, value-add selling models, while developing great people, reliable and repeatable processes, and valuable customer relationships. Now, conversely, we are going to see a lot of companies go out of business in the next 24 to 36 months. I know that is a horrible thing to say, and it doesn't give me any pleasure saying it. However, remember, I'm only speaking about hard truths here. My intention is not to put anyone down, pass judgment, or stroke my own ego. It is to help people create more success, more wealth, and more freedom from their business. Too many business owners have forgotten what this business was like pre-COVID, heck, pre-2016. And as a result, a reckoning awaits. In the next 24 to 36 months, we'll witness a sobering reality check for many companies. It's not a pleasant forecast, but it's a necessary truth to confront. So here's the harsh reality we're facing today. A lack of effective and diversified marketing strategies, an overreliance on aggregator leads, sloppy lead management, careless management of the selling system. Neglecting long-term customer relationships and putting off profitability for the sake of growth will prove fatal for many businesses. Now is a time to quickly determine who you are going to be in the post-COVID landscape. Are you going to be proactive or are you going to be reactive? Are you going to make excuses or are you going to make money? Are you going to roll over, slow down, give up, and be eaten up by your competition? Or are you going to get up every day with the right attitude and focus on becoming the best entrepreneur you can be? Your choice. Now, if you're going to take this head on and not just survive, but thrive and live the life of the wealthy contractor, Here are 4 key areas I believe you need to focus on right now. Number 1, leads. Leads are the lifeblood of any business. Demand for home improvements has slowed down, in some cases way down. Many companies are already feeling the crunch of lower lead flow. Your ability to generate enough leads to keep your sales team active and deliver enough sales to make money is one of the leading responsibilities of a successful home improvement business owner. From my experience, and almost without exception, every single home improvement millionaire, wealthy contractor if you will, I know is a master of marketing. Whether they want it to be or not, they figured it out. The next couple of years will be a test of your marketing skill, your ability to effectively manage lead flow, and maximize your marketing opportunities through lead efficiency. For the last few years, there's been an overreliance on aggregator leads and abdication of responsibility to internet marketing companies for passive lead flow. There were so many leads in the system that you could essentially outsource lead generation, but this is not how the game is won. Like it or not, you're going to have to take control of your lead generation and diversify your lead mix. Now, don't get me wrong here. I'm not saying you shouldn't use aggregators or internet marketing companies. What I'm saying is your reliance on them for more than say a third of your business, 30 to 35% of your lead flow is a recipe for disaster. So starting today, you have to do an audit of all of your lead generation activities. You have to look at how many different lead sources you have. Generally, the more you have, the better, the profitability of each source and whether or not you can scale that source. So how many lead sources do you have? What is the profitability of each of those lead sources and whether or not you can scale that source if it's a good one, if it's a profitable one. The best-in-class companies will have dozens of lead sources. In fact, my friend and Success Society success coach Charlie Gundel urges companies to push themselves to get 20% of their lead flow from new sources each and every year. Now, today, if you're relying on less than 5 lead sources, you are potentially going to run into trouble if it hasn't found you already. Now I have a map that lists over 60 different lead sources that I'll give you access to at the end of this episode, but you're going to have to start testing different avenues of lead generation, like direct mail, print events, and more. You are going to have to think about how you are going to manufacture leads yourself. Every single day rather than relying on others to deliver them to you. Now, along with diversifying your lead generation, you're going to have to manage each and every lead with an iron fist. During the COVID boom, it is incredible to me how sloppy many got with lead management, but that's what happens when there's an overabundance of leads. As lead costs escalate. You can't afford to mismanage any leads. Every single lead matters. You can no longer afford to be complacent or passive. Appointments must be masterfully set by trained representatives. Speed to lead is the name of the game here. The goal is to get in the house within 48 hours, ideally within 24. In addition, best-in-class companies make it clear to their salespeople that the house owns the lead. And in most cases, they get one shot at selling it. And then it goes back to the house for follow-up and recovery. It is shocking to me how many companies do not have a recovery or rehash process in place for unsold leads. You may have gotten away with that in recent years, but not going forward. Today, you have to make the most of every single lead. So that's number 1, lead attraction. Number 2, lead conversion. The health of our US economy is nowhere near where it was just a few short years ago. Disposable income is being eaten up by runaway inflation. Personal savings has fallen to the lowest levels in years. Credit card Debt is higher than it's ever been. Interest rates are through the roof and loan defaults are at an all-time high. Not to mention we're in a presidential election year. I'm no expert in economics, but I think it's going to get worse before it gets better. Now, even if someone in Washington starts to intelligently deal with this death spiral economy, it won't be like a switch from bad to good. No, the US economy is a monster and it could take a year or more to right this ship. So all of us have to be prepared for potentially turbulent, definitely uncertain, and possibly recessionary times ahead. It may not sound like it, but there is a silver lining. Most people can't afford to move. So if they have a job, decent credit, and payback ability, They will continue improving their homes. As company owners start losing control over their businesses, you will hear a lot of companies complaining about market conditions. Owners will blame their people, the lack of leads, the lead providers, tire kicker customers, and competition for their woes. What they don't realize is that it's time to put on their big boy pants and look to the only place that can actually make a difference in their results. Yep, the mirror. In my book, The 7 Secrets to Becoming a Wealthy Contractor, secret number 2 is about taking responsibility for every outcome in our lives and not allowing blame or excuses to rule our world. Never will that be more important than right now. None of us have any control over the decisions made in Washington. Interest rates, or inflation. However, what we do have control over is our attitude and our effort. Regardless of what is happening with the broader economy, the wealthy contractor will choose not to participate in negativity, and they will run their own race. So just like every lead matters, every sales opportunity matters too. And because we can't afford to squander any sales opportunities, the wealthy contractor will get to work making sure they are maximizing every sales opportunity. Every wealthy contractor I know uses a value-added step selling system that is meticulously crafted, expertly trained, and relentlessly managed. In most cases, they'll ask for the order on the first visit. And look, you may have gotten away with email estimates or going back a second time or a third time in the last few years, but no more. Today, you can't afford to have salespeople that are inexperienced, poorly trained, too timid to ask for the order, or lack the professionalism and dedication required for success. I've always said that you should think of your sales team as if they were a winning NBA team. And just like the operation of an NBA team, regular training, practice, role-playing, accountability, and mindset work must become an integral part of your company culture. As the leader of your organization, it is up to you to set the standards that the rest of the team plays by. If you allow lazy, complacent behavior, it will show up in your bottom line. You may have gotten away with it in the past few years, but no longer. Today, you must hold every department and every person in your organization accountable to results, including yourself. Additionally, financing is used to help customers afford their projects. The majority of Americans make major purchases on a payment plan. By not offering this option in every sales opportunity, you are leaving a considerable amount of money on the table. Make no mistake, sales are getting harder to make and harder to keep. So you must use every tool available to you to make jobs affordable for your clients while preserving your profit margins. Best-in-class companies offer financing on every job and will ultimately finance between 60 and 70% of their jobs. Financing has been proven time and time again to increase closing percentages and average order size. Now, an aside here, many of you will face increased competition from a very unlikely place, and it will add a new layer of potential complications to your business. This competition will come from your subcontractors. Think about it. They've been so busy over the last 5 years depending on you for work that they haven't had to go out and look for work for themselves. But now that you've slowed down, they need to eat too. So some will set up shop and start to compete against you. The threat here is they don't have the overhead you do. They don't have the sophistication you do. And as a result, they will compete in the only area they can. Yep. Price. You will lose sales because of price, and this will hurt. As a wealthy contractor, you are going to have to increase your levels of sophistication and the value you provide to your customers. Social proof, clear statement of value, differentiation from everyone else in the market, and a deep understanding of your customer's real needs will help you overcome the price game. Again, every sales opportunity counts. And the only way to beat low-priced competitors is by telling a superior story. So, 1, lead generation. 2, lead conversion. Number 3, delivery on your promise. For years, I've talked about the importance of customer experience and relationships. And every time we have a boom time like this, many companies will ignore and neglect their customers to focus on just driving new, new, new, more, more, more. Then what invariably happens is when leads start to slow down, companies will start to desperately reach out to their past customers trolling for work. This works sometimes, but more often than not, if you've ignored your customers for 9 months or more, they've likely forgotten who you are and will be unresponsive to your requests. To make matters worse, you'll start to find out about some of your customers having likely already done projects you could have done, but instead they did it with your competitors. And it's not because you didn't do a good job or because they aren't loyal. No, they're just busy. And it's not their job to stay in touch with you. It's your job to make sure they never forget who you are. So starting today, just like every lead counts and every sales opportunity counts, So does every customer count. If you don't have a customer relationship marketing program in place, better get one in place immediately. Now, my company, G4 Marketing, we talk about the 4 pillars of relationship marketing. So if you want to do this right, here are your 4 pillars. They are appreciation, feedback and reviews, 3 is a referral process and program. And number 4 is keeping in touch to stay top of mind. Now, very quickly, this starts with the customer experience. Every job is an opportunity for you to create a raving fan. And that begins with the customer's experience with your people and the process you put them through. Communication throughout the entire process is key. You have to make sure your people understand the importance of being polite, respectful, and clean when dealing with a client, and especially when you're in your customer's home. Once the job is completed, you want to show your appreciation and say thank you, send a gift, a handwritten thank you card, something that helps you stand out. Obviously, you'll ask for reviews. As a rule of thumb, you want to get at least, at least a third of your customers leaving you a 5-star review on Google. But obviously, the higher this number, the better. Next, you want to introduce them to your referral program and constantly be reminding them about it. One of the biggest challenges, one of the biggest issues I see with referral programs is that they only last a day or two. So you've done the job and you say to the customer, oh, hey, by the way, we have a referral program. You may even have like a one-sheet or a brochure or something. You hand it to them in the closing job package. Well, what happens with that closing job package? Yeah, it gets filed away or it gets thrown away either in the square file box or the round file box. And so if that's what you're relying on to get referrals, I'm sorry, but that ain't enough. You've got to constantly be reminding people about who you are, the solutions you provide, and why they should continue to work with you. Now that goes in line with the last piece, which is staying in touch to stay top of mind with your customers. Now at G4, we use email, we use direct mail, we send out informational relationship-building emails, not always asking for more money. Now, the ultimate in customer retention and engagement is a company newsletter. To me, this is the tool that most companies are missing, and without it, you are potentially leaving a ton of opportunity, a ton of money, and a ton of profit it on the table. Now with a company newsletter, I've always encouraged people to use both an email version. A lot of people will cheap out and just say, well, I just want to do an email version. Okay, well, that might work a little bit, but what's going to work better is email and print. Print, mail, stamp, mailbox. People have to pick it up. They have to touch it. They have to interact with it. It's not like email where it can just get thrown out, deleted. Okay. They have to pick it up and they have to look at it. Now, ultimately the goal here is to put like an iron fence around your customers so that when the opportunity for a referral or another project comes up, you are there top of mind and you get a shot at that business. So there's your first 3. Number 4 is about being profit-focused. Profit-focused. In times of economic contraction, like what we're potentially in right now, cash is king. Profitability reigns supreme. For the last 10 years, I've been screaming from the rooftops about creating a profitable business, not just a big revenue business. I even created an annual event focused entirely on the mechanics of profitability with my good friend Mark Curry from Revelaire Home, which, by the way, that workshop is happening in September, September 10th and 11th, right here in Miami. Too many people in this business still treat profit as an afterthought and as a result, accept low and inconsistent profits. They do this, they forego profitability for the sake of growth, but they mistakenly believe that if they just sell enough, that they'll somehow magically start making money. Too many people in this business still treat profit as an afterthought, and as a result, accept low and inconsistent profits, or worse, mistakenly believe that if they just sell enough, that they'll somehow magically start making As I said earlier, over the last 5 years, I've seen companies grow to millions and millions of dollars in revenue at lightning-fast speed. And yes, many have made money, but too many have been running the hamster wheel, basically working harder and longer. But when it comes to building cash reserves and real wealth outside of the business, they've been running in place for 2 or 3 years with not much to show for all of the additional work and headaches and liability. And because we were never really taught how to make money in this business, we've relied on bookkeepers and accountants that are not familiar with the construction industry to give us accurate financial statements. Most don't understand the difference between cash accounting and accrual accounting and don't realize that our businesses must be on accrual in order for us to get accurate financial statements. In a recent survey, I asked business owners how many get a profit and loss and balance sheet by the 15th of each month for the previous month, and nearly 50% said they did not. Again, not to be judgmental or put anyone down, but shame on you. Your profit and loss is not only your ultimate scorecard as the owner of a business, but it also a tool for making important business decisions. As a result of this focus on just selling more and driving revenue, I hate to say it, but much of the work done over the last 2 or 3 years was done at a gross profit margin that didn't leave enough room for a healthy profit. When you have accurate financial statements, you can make right pricing decisions so you can protect your gross margin and your net profit. Additionally, there was so much business created that it strained our suppliers and installers, and as a result, companies piled on millions of dollars in backlog. Now, for the last 18 months, I've seen a lot of companies relying on their backlog for revenue, and that has given many a false sense of security. As backlogs are coming back down now to more normal levels, you have to be increasingly vigilant about your sales versus install levels. When your monthly installation numbers exceed your sales numbers, it can seem like you're making more money than you really are. But beware. Mark says this all the time. Your business is most profitable when you're going out of business. Okay? When you're going out of business and when you're installing more than you're selling. Sorry, but if you don't right that ship, you're on your way out of business. This again is where having accurate financial statements and a deep understanding of what those numbers tell you will help you navigate the uncertain times ahead. But rest assured, there is a formula and a framework for making money in this business. And let me be clear here. I believe a healthy profit in this business is somewhere between 15 to 20% of installed revenue. And by the way, here is how we define profit. Profit is what's left over after everyone and everything is paid, including you, for the job or jobs that you do. But again, too many company owners have been willing to forego profit for revenue growth, mistakenly believe that if they just get big enough, they'll start to be profitable. From my experience, this couldn't be further from the truth. I pose this question to people all the time. If you haven't figured out how to make money, 15 to 20% net profit on $2 million in revenue, what makes you think you'll make money at $5 million or $10 million? I have talked to more business owners than I can count about what they really want from their business. After I get past the superficial answers and I peel away a few layers of the onion, I'll undoubtedly get to answers centered around freedom, around money and time. That is, as entrepreneurs, we want to make lots of money and we want to be able to control our time, have freedom over our time so that we can pursue whatever the best version of our life is. And so in every single case, the only way you truly get what you want from your business is by being very, very profitable. But what they're doing in their business is not getting them any closer to their ultimate goal. In fact, in many cases, it's taking them in the wrong direction. Just the other day, I spoke with an owner that is doing $40 million in revenue. His net? 4%. Now, I don't know about you, but that is a lot of work A lot of risk and a lot of liability for such a small net profit. It's shocking to me that the majority of owners doing multiple millions, even tens of millions in revenue, are making less than a 10% net profit. And yet all they want to talk about is revenue growth. Let's just get bigger. Let's add more locations. Let's add more products. Ugh. That's what I say. Ugh. Screw that. I've been there. I've done that. Today, I'm in business to get richer and freer every day. The late Rick Grosso always used to say, revenue for vanity, profit for sanity, and no truer words have been spoken. Every wealthy contractor I know focuses on profitability, not just revenue. The number one reason companies go out of business is that they run out of money, period. And make no mistake, there will never be a more important time for you to commit to profitability than today, right now. In most cases, my advice to those earning 10% or less in bottom line profit is to actually slow down top line growth and focus on the bottom line. Think about it. A 4% profit on $40 million is only $1.6 million. Now, I know what some people will say here. Yes, that is a lot of money. Okay. But you don't need a $40 million business to make $1.6 or even $2 million. You can do it on a well-run business half that size. So back to the 4% net profit. If that owner continues with the same profit model in order to produce $400,000 of profit, they have to install, sell and install $10 million of work. Now, I don't know about you, but that is again way too much work, way too much risk and way too much liability for $400,000. What I'd rather do is figure out, well, why are we only at 4%? And then put in a plan to net 15% on the same revenue or even less revenue. Now, most people don't have a $40 million business. So let's take this down to a $5 million business. 4% is $200,000. but 15% of $4 million is $600,000. Okay, so triple the profit on 25% less revenue, less jobs, less people, less risk, less liability, less headaches. Oh, and by the way, for those of you that are thinking about selling your business, that business, by the way, the $600,000 net business, even though it's only doing $4 million, is much much more valuable than the $5 million business that's netting $200,000. Now, some of you will say, well, but wait a minute, Brian, that doesn't make any sense. How can you make more money on less sales? Again, I will say there is a framework and there is a formula. One of the keys lies in your gross profit margin, which is tied to your pricing model, which is then tied to your selling system. The reality of it is a business needs to be engineered to make money. A business engineered for profit is a business built to last. So starting today, you need to develop a profitable financial model for your business and relentlessly work to the model. It's a simple model, but it's not always easy to execute. As the owner of your business, it is your responsibility to generate a healthy profit, not just for you, but for your family, for your team, and for their families. If you're not making what you believe you should, make a decision today to change. There are resources and relationships that will help you expand your understanding of profit. There are models you can implement and follow, but ultimately you have to decide how important it is for you and what you are willing to do. If you want to take this on, then achieving high levels of profit requires operational excellence, which is what I think we should all strive for anyway. But it also requires a healthy mindset around money and wealth. You've likely heard me say this before. I think your business exists to create wealth and freedom, whatever each of those things mean to you, to create a business that is fantastically profitable, that leads to real wealth for your family and security for your team. In order to do this, you must work on your wealth mindset. I push every one of our clients and members in our Success Society to accumulate $1 million in their personal bank or investment accounts. People always are surprised when I tell them it's not about the money. Don't get me wrong, the money is great, but what is more valuable than the money is what it makes of them to achieve it. It's about the person you become, because the journey, the journey on the way to having $1 million, to becoming a legitimate millionaire, Demands discipline, financial knowledge, resilience, problem-solving skills, integrity, networking abilities, and goal-setting skills. And what's awesome is when you do achieve the goal, you'll feel an incredible sense of accomplishment and you'll find yourself with a new level of confidence in your ability to be a successful and wealthy business owner. So while the road ahead will be filled with challenges, it is also full of opportunities for people bold enough to act. I've laid out 4 key areas that I believe deserve your attention as an owner. The question is, will you do the work required to not just build an extraordinary business, but use that business to fund an exceptional life. I sincerely hope that as you're listening to this, I'm just reinforcing all of the great stuff you are already doing in your business. I've said it here before and I'll say it again. You are the hardest working person I know, and I believe in you. Even on those days that you may not believe in yourself, I believe you deserve to be successful. You deserve to be wealthy, and you deserve to have a business that works for you. Again, whatever each of those things means to you. The COVID boom may be over, but your potential for success remains limited only by your imagination, your attitude, and the effort you're willing to put forth. The choice is yours. Will you be a passive bystander, or will you emerge smarter, stronger, and wealthier and freer than ever before? Now I put together a list of resources for you to help in each of the key areas I've outlined for you in this episode. You can download it from our website for free. On this list, I've included resources for marketing, for sales, and finances for profitability. I always tell our clients that you don't have to figure everything out on your own. There are successful models you can follow, resources to implement, and relationships you can develop that that will help provide shortcuts to success. So go to thewealthycontractor.com/covidisover. Sorry, I couldn't think of anything better. Go to thewealthycontractor.com/covidisover. I would also challenge you to set some time aside every single week to work on your own personal growth. The older I get and the longer I'm in business, the more I believe that up to 90% of our success is rooted in our mindset. It's about growing as a person and as a leader. Now, one of the resources I'll give you access to is the 4 Numbers Exercise. I developed this as a tool for myself years ago to help me get crystal clear on what I wanted to get out of my business financially so I could live my version of my best life. And once I knew how much money I needed, then I was able to focus and go to work every day, convincing myself that the money was not just on its way to me and my family, but that I deserve to become rich. I know it sounds funny, but you really have to work at being rich. Money can only come when you are ready to receive it. That's why I challenge all of our Success Society members to accumulate $1 million. Again, it's not because of the money. Money, but the mental gymnastics required to achieve the goal. Because from my own experience, once you get past those initial mental gymnastics and prove to yourself that you are worthy and that you can do it, a whole new world will open up for you. Too many people are stuck in the same thinking from yesterday and last week and last year, even the same thinking from 20 years ago, and they wonder why they can't or they haven't got ahead. From my experience, it is because they haven't done the most important work of all, which is to work on themselves. So I hope this has been helpful. I hope this was valuable for you. And we're here for you. If you need anything, just go to thewealthycontractor.com. We've got a bunch of resources there. Reach out to us. We're happy to help. We have the Profit Workshop coming up. Accelerate is happening in February of 2025. We've got our Success Society. There's a lot going on over here and a lot of resources available to you. Many of them are free, are at no charge. And so I wish you all the best. Put your head down, get to work. We'll all get through this together. This is a great opportunity for the right people. Take advantage of it now. Focus in on these 4 key areas and you will do great. In the post-COVID landscape. Until next time, this is Brian Kaskavalciyan, and this is the Wealthy Contractor Podcast.