Do You Have the 6 Equations for Marketing Success?

Garage door to be exchanged was a new door. Things are not working. The guy came and he said, oh, fixing is 120, but I can get 350. I can get a new one. I said, just do a new one, right? It's like it's old, 10 years old. Anyway, he did a great job and it was. Everything was great. Then my spring broke down. Now I'm saying is, I want that same guy. He was so good. They did not even leave a label on the phone number. I had to look through my emails to find the invoice. And I still. Most people will not go to that level. So. And I called him. I said, man, you should at least leave a sticker there.

That would be helpful. Yeah, sticker, a magnet. Maybe put me on a newsletter, an email list or something like that.

And that's the marketing part I was talking about. You speed up. Exactly. They say get them on a newsletter, right? They already bought from you especially. They're happy, so they'll be happy to get tips once a month from you. Then they need something or when they're referring something, because otherwise they don't remember. Many of these things are once every few years, right? So you warn them to come back to you, and they will happily come back to you if you've done a good job. So you're missing out that screen.

Hey, everybody, it is Jim Johnson, your host here on Contractor Radio with another amazing episode to help home service contractors. Because that's what we do. We're here to give you the information that you need so. So that you can work on your business instead of in your business and start to scale that thing the way you want to. Our goal here at Contractor Coach Pro is to help contractors lead better so that they can develop the processes and culture that they need so that they can scale their businesses by working on it instead of in it to find that personal financial freedom that they were chasing whenever they started their business. If that's you and you want to get to there and you want to get to there faster, then you go check us out@contractorcoachpro.com click on the Assessment button, take an assessment of your contracting business, and we'll do a free coaching call with you that'll give you the next two or three things that you need to do in your business. It's no obligation, but if you like coaching, hey, we're here for you. If not, at least we served you well that day. So in today's episode, we are going to be talking some marketing and like I told my guest I usually turn most marketing people down. There's a million of them. They all want to be on the show. And I should just do like the contractor marketing show if I was going to do that. But there's plenty of those out there. But we do like to get unique perspectives whenever we see them. And that was something that attracted me to this guy. I went and did my research like I normally do whenever I have somebody that comes across my radar. And he's a bit different. He looks at marketing as a bit more of a science than an art. It's. And he's got these six equations of the science of marketing that I want to talk about. He's got some software that he does for marketing. He helps automations. He has literally spent time to turn this into a science. So without further ado, let's go ahead and welcome in Avi Kumar to the show. Avi, good to see you, man.

Good to see you, Jim. Thank you.

And I did say that, right? Correct?

Yeah, absolutely.

Hey, I got it right. All right. That's good. That's good. And first things first. Just the red glasses, I mean, that's a marketer right there. Like, you like, stand out. Gotta be remembered. I dig it. They look great, man. It looks good, right?

Thank you. Thank you.

So.

Yeah. Yep.

So tell me a little bit, Avi. Like, it doesn't look like this is something new for you. You've been doing it for a while. Kind of give me a little bit of the history of Kuware and how you kind of gotten to where you are today. And let's see if we can help some contractors today.

Awesome. Great. Certainly. So first thing is the reason when you mentioned the science. So my background is I'm a PhD dropout in electrical and computer engineering and have MBA after that. So I'm all tech. So my previous career was working for companies like Intel, Motorola, making microprocessors. So when I came to Marketing World, which is now 16 years back, I was looking for. Initially it did not make sense to me that man there is. Everybody can build a website and they claim they do marketing and everybody's a marketer. How do you. What are they doing? Which is different. I mean, you know, the people who went to school versus didn't go to school. Everybody's a marketer. So I had a difficulty differentiating and I was moving from a hardware kind of a thing and I wanted to get into a little bit of this business. So initially I picked E Commerce. The reason I picked E Commerce, that Seemed closest to science. You could actually measure. You do the marketing, either you're selling or you're not selling. So we started doing a lot of E commerce and as things evolved we started getting into what you do, the contractor business, the local service businesses is what we started going towards. Initially I was very skeptical coming into this one because there is this perception that these are smaller businesses, what are you going to do for them? And I had the same, I'm coming from E commerce world, but I got exposed to this and then we started getting into more and more of this. But I brought the same rigor, if you will, that it has to be measurable. There has to be to track everything, everything has to be tracked. Everything there should be. And especially this idea of some marketers do that, hey, there is ad spend and for that you got this written. But we're not going to include our fees. So our approach was no, if you're spending money on marketing and advertising, you need to take that whole bucket and see what you got for it. Instead of just separating out oh, what we sent to Google, this is what you got. It needs to be the total money spent. You got to look at it from a business perspective, not a marketer's perspective, if you will. Right.

And so that's really good. It's actually some of our coaching advice like you can't, you can't just look at your ad spend versus the, the lead generation you get and the cost per acquisition and actually conversion. You have to include what you're spending on the marketer. Right?

Absolutely, absolutely. So that's the first thing we said, let's put it that way and then show that it is. So that's what we evolved with that started fine tuning it. And then three years back, as we were getting into this, three years back, I had an opportunity. There was a business for sale, Invisible ppc. They do Google Ads for agencies as Kubect. We were doing well enough that I said okay, let's acquire these guys and let's see if we can start this sub business which we'll be doing. And turns out Invisible PPC focuses primarily on local service business ads because that's where the Google Ads work really well. So when we got that suddenly we had thousands of accounts who we were doing for agencies behalf and doing ads. Now we had this additional data which was amazing because Now I have 12 years of data of looking at thousands of plumbers accounts, thousands of H VAC accounts and looking at oh, what was working? I said oh, this is perfect for us. Because now we can build tools around this, we can look at the stats and know beyond like my dozen accounts which I have, which I had that time, like, oh, just dozen accounts is not enough for me to collect data, but with thousands, I have statistical data that what it should be right where the numbers should fall. So then we can actually give a bound that if you're not within this range, doesn't matter which market, you're just not doing well as a marketing, that is not working because statistically just this is what the thousands of the numbers are saying. So that's really what it evolved to. And then even before ChatGPT and AI came, we started looking our data was so much we could not. So we started using deep learning AI to collect the data and feed to our systems to know which keywords don't work, which things don't work. And beyond just Google Ads, by looking at it more purely stats telling you that this doesn't work, it seems like it works, but it absolutely never works.

It seems like it should work, but it doesn't.

And there are a lot of things like that which as a business owner you think, oh, if you advertise this way, it should work. This keyword seems to like they should be typing, but turns out some keywords people type, people will type it, they will click it, but they don't never convert. There are a lot of keywords where you get the click but no conversion, right? And you want conversion, you don't want clicks. So we started collecting that data. So we kind of got deeper into the science of doing this. So now we kind of do it for multiple local service businesses. And, and those are the niches we cover with our tools and systems, which.

We use to do this a lot to unpack there. That's. I was right when I guessed correctly that I got a guy I want to talk to on this show. Because for me, when it comes to marketing, it's about a few different things. Measurables like, hey, what can we measure data that tells us whether those measurables are valuable or not? And then ultimately return on investment. Like, hey, I'm spending this much, what is my return? And so one of the big mistakes I see a lot of people make whenever it comes into return on investment, let's say they spend $5,000 a month in their advertising. Okay, let's lump it all together, you and them, right? It's $5,000 and they sell $100,000 and they go, oh, I'm spending 5%, my return on investment is $95,000. Right. But that's not true because the only thing that's the actual return on the investment is the. Not even the gross profit. The net profit, the final net profit tells me whether that. So I have to sell a lot more than just $5,000 to break even. If I'm, If I'm earning a. Just to keep it simple, 10% net profit, I have to sell $50,000 worth of services to say, hey, I broke even. And then I'm looking at these ideas of, well, how much do I have to sell above my investment for me to go, okay, I want to put more into my investment. Have you looked into any of those type of things?

Yeah. So that's equation number two, what you're talking about in the equation, which you were talking about. So basically the idea is simple. You take. First thing you need to figure out is your net margin. So I'm a marketer, but probably I'm talking your coaching. That's what I tell my business owners. And they will, some will tell me, why do you want to know my net margin? So one phrase I use many times is that I want to know about your business so much that I can start a competing business and beat you. So when I know that much, and trust me, I'm not trying to become a plumber or H Vac, that's not the plan. But once I get it, what ticks, what services work best for you and how much is your margin, then I can do good marketing for you. Otherwise I'm going to be just throwing marketing buzzwords at you, not real marketing. So once you figure out the net margin, then you can say out of this net margin how much I'm willing to spend on marketing and how much it gives me return. So that say your net margin is 25%. You take 10% of that. So spend that money and that 10% gives you how much more of that net margin. That's your true roi. So you said exactly what we asked you to do. In fact, we go further. We say, don't take the. So if you want to break even. So breakeven will be you spend all the money, you get the same back, right? Which is okay, model, if you're really in a growth mode. But even in the growth mode, we say only spend 80% of it. Because marketing could be wrong, right? Your calculation is working this month. Next month it could be off. So keep 20% and keep doing 80% if you are really in a growth mode. If you are more in a stable Mode, then only 40% of that. So that gives you this window of your net margin where you say, if you just want to maintain, you want to keep going, and your margins are good, you don't want to grow, you don't want to get one more set of crew, then stay at 40% of that. But if you really are in a growth mode, go 80%, but you never go 100%. So we never say, don't even talk about breakeven. Right. Because there will be variations month over month, and your marketing might not work as well. So get that buffer in and then measure after that. So when we calculate, we calculate finally the term a true cost of acquisition of a client. And it is a client who actually became a business for you, how much money it costs to acquire that client. Now, you can take that number and go back and say, hey, what is the average money net margin you make? If you're making more than the cost of acquisition, you're good to go. Keep going, Keep going. And you can keep doing this forever, and you can grow your business. But if not, if the true cost of acquisition is higher than what net margin you make on an average client, then it's not going to work. And it has to be average, because you've got to be. You got to consider there will be loss leaders. Right? There are jobs which are smaller, there are jobs which are bigger. So you got to get the average.

Yeah, I want to make sure I understand you correctly. So cost per acquisition is a. It's. It's a number. That's an average across the jobs that you've acquired. And for me, you know, I look at it as, like, marketing as one aspect of that. But I also look at, hey, I got referrals. I've got my guys out getting their own business and stuff like that. That kind of stuff. Separate those two. Marketing's over here. Now, if my cost per acquisition is equaling my net margin, I'm making a zero.

Absolutely.

I don't want to do.

You don't want.

I don't want to do that even on volume, because I'm not making it zero.

Yeah, yeah. So there is. So you want to be. You can go maximum. Your cost per acquisition needs to be 80% if you're really in a growth mode.

Okay?

So if you are. If you are, if your net margin you're making is, say, thousand dollars, just to simplify. And net margin is $1,000, you don't want to spend more than $800 to acquire that. If you're really in a growth Mode.

Yeah, that would be extreme for me.

That would be extreme. But there are. We do have customers who say, I'm ready to double. Right.

Right.

I've got the money and I want double. Then this is where you will go. For most others, I would say go to 40%. That right. So $400, now you're safe. You're making 600 times $600, every time extra. And that's what you're spending. That is the range. You can continue on forever and forever. In fact, one of the things I advise people is that even before you do marketing, see what you can do to increase your margins. Go, you know, figure out your business. Go to a business coach, if you will. Whatever is necessary, increase your margins.

You.

So you can afford marketing. And people think that marketing is the solution. No, your business has to run properly.

There's only two ways to increase profit. Raise your prices or reduce your cost of goods sold. One of those two things. So you're either going to cut people's commissions, you're going to save money on the materials you purchase, you're going to cut people's cost on what you pay for labor. Like, those are ways to increase your profit. Not the ones I would advise in most cases, except for maybe in that material thing. You probably have some room there. But then there's the other side. Like, is your stuff good enough? Is what you provide good enough? Is your service great enough to charge more than what your competitors are charging? Because it's worth it. And the homeowner understands that. And that is our coaching. Like, we help people create those systems. So thanks for teeing that up for us.

Absolutely. Because I said that we tell them that if you don't have that, marketing cannot solve your problem. It's a business problem you gotta solve first. Right. The other part is, which is purely marketing, is once they have come to you and become a customer, they have bought from you. I don't remember the stats, but it's like you might have this more that 60, 70% people do not remember their contractor.

Yeah. Actually probably higher than that.

Yeah. So what happens is. So when you are not. I mean, I just give you a very simple example. We had a garage door to be exchanged. Was. Things are not working. The guy came and he said, oh, fixing is 120, but I can get 350. I can get a new one. I said, just do a new one. Right. It's like it's old, 10 years old. Anyway, he did a great job and it was. Everything was great. Then my spring Broke down. Now I'm saying is I want that same guy. He was so good. They did not even leave a label on from their phone number. I had to look through my emails to find the invoice and I still. Most people will not go to that level. So. And I called him, I said, man, you should at least leave a sticker there.

Yeah, sticker, A magnet maybe put me on a newsletter, an email list or something.

And that's the marketing part I was talking about. You teed up exactly. That say get them on a newsletter. Right. They already bought from you especially they're happy. So they'll be happy to get tips once a month from you when they need something or when they're referring because otherwise they don't remember. Many of these things are once every few years. Right. So you warn them to come back to you and they will happily come back to you if you've done a good job. So you're missing out. That's free. Basically the cost of email newsletter is barely anything. Right. You have their email, you have their address. It's like it's a, it's a very cheap way to market.

Yeah, I always look at that as like this opportunity to stay top of mind. Uh, I want, I want to be, I want to be the first person you think of whenever that somebody says what it is I do. So whatever that may be. And so I'm going to have a really strong social presence. I'm going to be doing some of that. I'm going to create some ways to be remembered. There's lots of ways. You mentioned 1. Putting a sticker on whatever it is you do. That's a great way. A newsletter is a great way. But if somebody mentions Garage door, I want them to go, oh, Jim Johnson or Avi. Right. Like, hey, that's who you need to call. Is that part of what you do whenever you work with the companies that you work with? From a marketing perspective, yes.

The only part we don't do is so we will actually advise them on every aspect of getting new clients and retaining clients and repeat customers. So. So in fact, in our case, in our ad business, we listen to every call and we will go and tell give them back advice. We don't train the sales team people, so we'll tell them. But hey, you asked us to go after competition and you are XYZ Plumbing, and we got you ABC calling and your salesperson said, oh, sorry, wrong number, and they hung up. So we listen and we give them feedback that hey, either you tell us don't get competition. But if you're going to get competition, your sales team has to be trained enough to say, sorry, we are not abc. Hey, but if it's a plumbing thing, we can help you. Right? How can we help? So we go to that level to track, but beyond that we don't go anywhere. I mean, now there are companies who have asked us, can you help us with phone system? We'll recommend some. Can you listen into the. Can you vet our phone vendor? That's not our area. We just know technology. So, you know, and we've got some.

Great resources for that. Like Rilla voice is really good on that. Chorus is pretty good as well. The thing about that whole top of mind thing, and I think the reason a lot of contractors don't do it and I want to call it out is because a lot of times they're what we call high ticket home service contractors. So like you putting a garage door in. Come on, once every 10 years maybe. So they go, that guy's not going to do another garage door. So I'm not really too worried about it. Where if they were worried about it, it's not necessarily that person, it's that person who they know.

Yeah, I had friends come over and said, man, your garage door is really quiet now that person, I can tell them who installed that garage door. Right. So there are things like that which will happen. Right. So. And again, don't do very. Do something like a stick or a newsletter, a cheap thing. You don't have to spend. You don't have to spend a gift every year or birthday gift or anything. You don't have to do any of that. Just do basic levels so they know who you are and what you did. Right. For them and. Absolutely.

So there's one of these. So you got these six equations of science. Martin, we don't have all day to talk about them, but there is one that I. I would like to dig into a little bit. The one of hypergrowth is the first one you have listed there and it says hypergrowth equals profitable product plus solid strategy plus impeccable implementation. Can you explain what you mean by that?

Yes. So even to uplevel that before that equation there is a. I like to quote the business guru sinkh might be here. So Drucker is a 60s business guru, right?

Peter Drucker, Yeah, yeah.

And he's like kind of ultimate consultant for big businesses.

He wrote. He wrote the one minute manager, I believe.

Yeah, I don't think he wrote that, but he's got like oh no, he's.

The one that is associated with the quote. If it's not measurable, it's not improvable.

Yes, yes, yes. So he's. One of the things he says is that every business purpose is. Every business should exist only for two reasons. One is innovation. Other is marketing. Every business has nothing else but these two things. And it puts sales and all under marketing kind of a thing. Basically the idea is that what you do in the business, innovation could be how you do it, how you deliver it, are you good at it? Those things, right? And marketing is how you sell it. Get it across, right? And sell. So that profitable product part is you got to have your service figured out and you need to be good at that. You don't have that. No marketing can do anything. Basically the phrase we like to say is that, hey, it doesn't matter how much lipstick you put it on. Pig. Pig is a pig, right? There's nothing you can do, right. It'll be a very short term gain. Don't do it. I mean, I had a while back we used to do doctors and I had a doctor and he used to sell Amway to his customers and they were putting negative reviews for him. He was a general practice doctor. And he tells me, hey, I mean like I'm not getting these repeat. I said, yeah, you're a doctor, you're signing them up for. And they get mad, right? You are doing, I mean they're putting, have you looked at your reviews? So you got to fix that. No marketing can fix that for you. That's, that's a problem, your service problem, right? So get the, so going back to the equation that get a profitable, good product service figured out. Get the right people. You talked about product margins with the materials and whatever it is you need to have that. Then you need a strategy after that so there will be others doing it. Right? What is the strategy? How you going to be different than the others? What are the things which will separate you from the others? And then this is what I call impeccable implementation. Because that's where these are the nuts and bolts of implementation. Come in. You're doing email marketing, but you have not checked your delivery rate. Your emails are going to spam and you don't have a mechanism to check that how many actually deliver and you're not. So those are, that is the implementation part. That has to be right. Because that has to be exactly right. You have to know that those emails are getting opened and they're not going to spam. So every aspect of that part of the marketing or anything which you're doing, that implementation has to be impeccable. You combine this, that's the hyper growth. Otherwise you can just kind of be, okay, stay where you are. But for hyper growth, you need all these three going together. Right. And the strategy is what separates you from others. By. And strategy is not something magical. It is just a thing which you say, these are the problems, these are the challenges. How will I solve them? So a lot of time people think strategy is something you think. No, just make a list of problems and say, what are the Solutions? Write down 10 solutions for each. You know, maybe I'm getting in your space. Yeah, this is.

No, no, you're good. Like, you would like working with our clients because that's literally what we do. We build strategy throughout their entire business. And whether it's leadership, culture, process, marketing, like, we help them build strategy, but we don't do it for them. Right. We are a coach. We don't.

I did, I did not research you enough to know that this would be such a good things. I'm saying matches with what you guys do that much. So it's just a synergy by chance, basically.

Yeah, we. That's. That's our thing is like, hey, this is the strategy we want to. And I call it getting out of the contractor crowd. Right?

Yeah.

So there's billions of contractors out there. There's actually, I looked it up. I have a specific number I could share with you. There are 30. Let's see, there are 3.96 million construction businesses in the United States. I actually looked this up today. And so I look at that as like, okay, I'm going to the grocery store and there's a whole bunch of green beans. There's all over the place. And there's green beans. They all look the same. Nothing different about any of them. And so which one's the cheapest? That's the one I'm going to buy.

Yep. Yep. 1.

It's the one that goes out there and labels itself organic and pesticide free. Oh, I got some value. I'll spend a little more for that. Which I always find funny on the organic thing. Like, isn't that how it always grew in the first place? And we're paying more for that.

It seems odd and things like, I'm sure you get into this strategy that in a contractor or any complex business, if you explain to them when you show up, this is how it'll happen. This is the time. This is what we are doing. Just doing that laying it out properly. Enough of them just don't do that part, right, that this is, this is. I'm going to do. This is the problem. These are the solutions. This is how we're going to do. This is how we work. Just because most people don't know that, right. They don't have the idea that how will the process go, right. They feel so much, so much better. And in our marketing, it's the same way when we get customers, we tell them, first three weeks this will happen, two weeks this will happen, fourth week this should happen. Otherwise we are behind. We'll give you the whole thing. And that just assures them that this is not random. There's a process they're going to follow and things will happen. And it's the same for the contractor business, right? Just go and explain. And again, this is, I love to talk actually business more than marketing in some ways because that's really what is so important. People miss that and they think somehow some marketer, magic marketer will come and fix it. Can't, unfortunately.

Well, I think it's actually the reason that so many businesses do fail is because they don't know anything about business. They know a lot about what they do. So they might be really good at installing garage doors as the example that you use. They might be really good at that. They might be.