The Mathematics of Home Service Business Marketing, Explained

I've been working with home service business owners for over eight years and we've generated close to $47 million in revenue across the companies we work with. And what I've learned is this, most owners don't know if their marketing's actually working because they're not looking at the right numbers. In this video, I'm going to give you the marketing math that actually grows home service businesses. And at the end, I'm going to give you a cheat sheet of exactly what to fix in your business based on how you're feeling about the numbers. There are four growth pillars that I'm going to uncover that grow a home service business. And then I'm going to talk about the four segments of marketing math that you need to know in your business in order to drive growth. And then I'm going to give you that cheat sheet at the end. So the fourth growth pillars are this. First is your booking rate. This is the number of leads that you have coming into your business divided by the number of jobs that you book. This is going to show you how many leads to jobs that you're booking, which is essentially your booking rate. The average booking rate is 42%. This is from a Service Titan study that found 42% is average. The high performing companies are at 62%. So in your business, you need to track how many leads you're getting and then how many jobs and then figure out your booking rate. This is one of those growth pillars. Number two is your close rate. How many estimates that you created divided by the estimates that you closed is going to give you your close rate. So 40% to 60% is the average. 40% below usually means that you have a sales problem or pricing and positioning problem in your business. 60% or higher usually means that you need to increase your price. 40 to 60% is a sweet spot you're going to know in your business, but around 50% is probably where you want to settle. The third growth pillar is average ticket. You could get all the booking rate in the world, all the leads in the world, all the estimates closed in the world. But if your average ticket is not profitable, then you're never going to grow your business because your revenue is not going up. So your average ticket, I can't really tell you what your average ticket needs to be. It's a combination of this, your sales process and your burden rate. Your burden rate is how much a technician costs you to have you out in the field, plus your overall sales process of upselling in the field. And then the fourth pillar is your customer acquisition cost. A good benchmark for this is three to one lifetime value. So let's say your average lifetime value of a customer is $10,000. You should be willing to spend around 30% in order to get that customer. Now, you don't have to spend that much. Usually you could spend around 500 bucks and get a customer. But that's some of the numbers. 3 to 1, 5 to 1, 10 to 1, but at least 3 to 1 lifetime value customer acquisition cost. Those are the four growth pillars. If you don't get anything else from this video, if you dial in these four numbers and you just tweak them a little bit every single month, you're going to grow your business. You increase your average booking rate, you increase your close rate, you increase your average ticket, and you drive down your customer acquisition cost. There's no way you can't grow your business with that. So knowing these numbers, and I'm going to tie the marketing math back to these numbers. Knowing these numbers, let's focus on these four segments of marketing math for home service businesses. And I'm going to break them down based off of getting new customers coming in and then getting returning customers coming back. So the first thing is you're posting free content and doing organic marketing online. So visibility without paying for clicks. The numbers that you need to know for this is one, your local website traffic. The reason I say local website traffic is because we talk to a lot of businesses and they say, well, my website is getting more traffic month over month and the SEO company is doing a great job. Who cares about website traffic if it's not local website traffic? So you want to make sure that you're dialing in local traffic. You don't want traffic from India, California, if you're in Florida, you get the point. You want local website traffic. So you need to know this number in order to grow your business. I can't tell you specifically. 500 people, 1,000 people. 5,000 people. I don't know your total addressable market. I don't know the demands. What I do know is that you want your local website traffic because it's going to drive your next number that I'm going to show you in a sec, which is your conversion rate. You get more traffic in your local area by getting more reviews, optimizing your Google business profile, creating service pages and service area pages on your website to show up in SEO. So people go to your website, you get more reviews, you post more content, more traffic to your site. It's pretty simple. Like you know, you got to do that stuff. But here's the actual number that you need to know which is your conversion rate. So you get all this traffic to your site. Who cares? You need leads coming into your business. This is the conversion rate. Traffic to leads is your conversion rate. So on average, home service businesses are converting local website traffic into leads at three percent. So you get 10 people to your website, then you're converting, let's say 100 people to your website, then YOU'RE converting three percent of those, so 30 people into actual leads or three people actually into leads. So three percent, not that high. Right. So our goal at Flash is to get this to 10% and I'm going to give you some strategies to do this. But if you have marketing company, you need to know this conversion rate, website traffic into leads. And the way that you drive up your conversion rate is you have more call to actions on your website and you meet people where they're at. A lot of businesses we talk to like we have a remodeling company, they do not want these top of funnel leads coming into their business. They just want people that are going to book a time on their calendar to go out and do an estimate. And that's okay. But that's like if you're on a dating app or something and you're just like, hey, just go here and schedule some time to actually, you know, go on a date. It's like no, people have questions, they want to get to know you. They might have a question about this or that. So here's some of the call to action that you need to have on your website. One is a chat widget. People want to know, do you service this area? Do you do this thing? They have a question on their mind before they want to actually book a meeting. So you need to be able to give them an outlet to book a meeting to ask the question. Which is a chat widget. Then you also want to have a seven second form on your website right below the first squirrel. Have a little form that says get an estimate. It takes seven seconds. Just put in your name, your phone number, your email address and click this button. It allows people right on your home screen to turn into a lead. One other very simple one for this is on mobile, which about 50% of your website traffic is going to be on mobile. You need to have sticky headers right at the top, sticky headers as you're scrolling that says call now get estimate right at the top. So as you are scrolling, they don't have to search for to turn into a customer. I'm sure you've been on someone's website before on your phone and you're like, I don't know how to get around on this thing. You need to make it super simple. And I'll give you one last bonus tip on this. Add a pop up to your website with a promo offer. If you run promos in your business, don't just leave that for your customer service representative. Add it as a pop up. When someone lands on your website, add a pop up, then they can get a promo. This will turn your conversion rate from 3% into 10% or even higher. We have some clients that are at 20, 30%. This is going to drive more leads to your business. When we go back to this thing, it's going to drive more leads to your business, which is going to allow you to book more people into your funnel. And this is why this is how this all works together. So conversion rate, how to drive it up. All right, number two, paid ads. Marketing math. This is a segment that is a black hole for most people. And I'm going to give you the numbers that you need to know for your business so that way you can figure out where you need to focus your attention on to fix it. You spent $2,000. You got 10 leads or conversions and your cost per lead is 200 bucks. This is what a traditional agency would show you. And if you want another lead, just spend 200 more dollars. And that's how you get more leads. This is wrong. Okay? This is not what you want. I faced this at my home service business and this was frustrating. This is why I'm giving you this math. You want to look below this line. You want to know the booked estimates, the estimates generated dollars amount and then the closed revenue off of that money and the return on ad spend. Of course you want to know this because I don't care If I'm getting one lead for $2,000. If I'm making $100,000, I'll do that all day. So the data below this line is what you want. I did four booked estimates out of 10 leads. That's a 40% booking rate. Then you have your estimate generated dollar amount of $20,000 and you converted 50% of them into closed revenue, $10,000. And your return on ad spend is 5x. Perfect math right here. Okay, let's break down what you do based off of these numbers. If you don't have these numbers, you should work with a marketing or drill down on them with your marketing company. This is something that I had an issue with, I solved and we help solve for our clients. You do it with your CRM, you build the reports and you tie this all together. But let's look at the actual numbers. So cost per lead is not the goal. Okay? I can't stress this enough. Cost per lead. This number is not the goal. Okay? The goal is return on ad spend. The goal is to spend this money and make this money, not this number. Okay? So here's what a good return on ad spend looks like for home service business. 3x is decent. 3x whatever you spent. So you spent $2,000 and you made 6,000, okay, don't kill it, but go back and keep iterating to try to make it better and better. 5x means do more. So if you have more bandwidth, do more of this because 5x return is really good and you should keep doing this. 10x means take all your money and put it all into this. Okay? Take everything that you're spending and put it into this. I'll give you an example. We had a plumbing company that we started working with and their numbers were pretty similar to this. They were $2,500, 10 leads cost per lead. They didn't have this backend data here. The first month that we ran this data, we found that they did 5x return on ad spend. So we said, cool, let's go up here and double your ad spend. So they went from 2,500 to $5,000 in ad spend. Then they generated a 7x return on ad spend. So basically they went from 5x to doing 7x. So we're like, just keep spending more. So then we went from 5,000 to $10,000 and their return on ad spend went up again. All that to say that if you don't know this data, it's really hard when you talk to your marketing company and they're going to say, just spend more on ads. And you don't know if this is actually producing revenue or not. That's why cost per lead is not the goal. Return on ad spend is the goal. And that's how this data looks. So if you have a high cost per lead, you can do two things. You can look at your ad and you can say, hey, maybe should I add an offer to my ad? Should I do a stronger offer? Should I do better targeting? So maybe you're targeting specific cities and one city in particular is a high cost per lead. Or there's not much available searches and that's driving Your cost per lead up. So maybe I get rid of that and then making sure your message matches. So, for example, let's say you're a plumber. If someone is looking for a tankless water heater, and then they go to your landing page, and your landing page is about installing a new toilet. The message is mismatched, so you need to make sure that it ties all the way through. This would help fix your cost per lead and drive that cost per lead down, because it's the right messaging to the right person with an offer. That makes a lot of sense, because these are. This is cold traffic. Okay? So that's how you get your cost per lead fixed. If it's really high and you're not, you know, it's uncomfortably high and this data's off. Fix your cost per lead first. Then let's say that you get leads coming in, but you're not getting any estimates from it. That means that you're getting leads and you're not getting appointment opportunities or estimates from it, just like what I said here. So the first thing you want to do is you want to audit your lead quality. Okay, so you got all these leads, but you're not actually getting estimates in your business. So what do I do? I need to listen to the calls, I need to review the forms, and I need to tweak the ads. So first you listen to the calls. Were these leads that this marketing magic company generated even good leads? Or were they people overseas? Were they Spanish speakers? Were they looking for jobs? You know, all the stuff that you felt? I felt that too. So this is what we do. Go back, review your leads. Are they good leads or not? Yes. Okay. Are the forms good? Are they actually like putting in information, sending pictures, you know, putting in their phone number, real email addresses? All of this stuff shows that this is good quality leads. Then tweak the ads. So sometimes the actual leads that we have coming in, this data is a little skewed, which means that we're getting a ton of leads, but they're not quality leads. So we need to add more friction into the lead process. Maybe ask them for a budget, ask them a little bit more about their project, but force them to give you more information so that it's better quality leads and not just junk leads like what I mentioned before. If it's people looking for a job or people that are not in your area, ask them more specific friction leads to increase the quality of the leads. And then the next piece is, okay, I went through. These leads are good. These 10 leads are good and we're still not booking the estimates. That tells me that we have a booking issue. So we need to install a speed to lead lead nurture sequence, which means when someone fills out a form, we need to text them and email them, ask them questions to get the conversation going. We need to evaluate the call script. So what are they saying when we call these people? Are we talking with them on the phone? Are we not getting them on the phone? Do we get one shot at it? Are we texting them and emailing them and nurturing these people? What's the follow up look like? And this is usually what it is. It's either going to be the lead quality is bad and or the booking estimates is bad. So we had another client that was spending $22,000 and we set up this return on ad spend tracking just like this, $22,000 and they generated $22,000 in closed revenue. So, so 1x return. So then we said, okay, well what does our actual process look like from a lead into a booked estimate? And when we listen to the calls, they were all good, but this process was terrible. They had no call script, didn't have any follow up. It was one shot at the call and then it was gone. So we implemented this system and then they jumped up to 2x and then it's an iteration back and forth on this. All right, now the next thing, let's say that we book estimates but we have low revenue. So we got some estimates here generated but we have low revenue amounts. Usually this is a sales problem. This usually means that your average ticket is not good and or your salesperson cannot follow up on anything and they can't close a door. So we had another electrical contractor we work with, we ran this exact same thing. We doubled the number of estimates he was generating and potential estimate dollars generated, but he still only closed the same amount year over year because he didn't have an estimate rehash program. We set up an estimate follow up process but he needed someone, a salesperson in his business to actually close deals. And he was the owner that was doing the sales and he was the bottleneck on this as well. So if you are booking estimates but you have low revenue, it's not that you need more volume, you don't need more leads, you don't need more opportunities. You need to go and fix your sales process inside of your business and usually means you have an average ticket problem, sales plus pricing match and then it's all fixed. All right, so when we look at the growth pillars, as I mentioned before, the booking rate, close rate, average ticket, customer acquisition cost, it goes hand in hand with the information that I just gave you. People go to your website, they convert into a lead, then you need to book that lead into an actual job, then you need to close the close them. Then you need to make sure your average ticket's good and then your customer acquisition cost, you get that. The data that I just gave you for this paid ads funnel, it doesn't matter if it's Google, LSA, Google search ads, Meta, Yelp, YouTube, mailers, home shows, whatever you're doing, this is the data that you need to know. And this is that paid ads funnel that you need to pull all the way up into your business to actually grow your business. All right, let's look at the next part for email marketing math. So email marketing math is the database that you're already paid for. You paid money, you got people in your funnel, whether they're past prospects, customers, anyone in your, in your data in your database, you need to send them some type of an email to keep them coming back in. So when we look at what is a good open rate for your emails, it's 20%. How do you get a good open rate? You use a subject line tester and there's a bunch of different subject line testers, but you can go to ChatGPT and say you're the best email marketer in the world. What's a good email subject line for this to get a 20% open rate. Some examples are try to keep it between four to six words. Schedule service. Now get $50 off something that's very specific but also not too revealing of what's inside of it. That gets them interested in opening it to see what it's about. So that's how you get a good open rate. Now the next thing is you want to click through rate. This is obviously most important. Who cares if they read your email? You want them to turn into a customer or a lead again. So you need a good click through rate. How do you get this? One, you have anchor call to actions right at the top of your email call. Now get estimated that way. When they click on the email and they're interested and they go to the email, you have your anchor call to actions right there. But two, this is very important is that you have a specific call to action for whatever your theme is of your email. And when I say specific, you want to agitate the problem. Let's say that you're talking about getting a fall Tune up for H Vac Fall tune up. The specific call to action would be, don't get left with no heat this winter. Schedule your fall tune up today. It agitates the problem and directly calls them to action. This increases your click through rate. All right, what should my home service repeat rate be? So this is the fourth segment here. You need to focus on not just getting new customers coming in, but getting repeat business coming around the back. So a good benchmark for you is that 50% of your contacts should repeat with you. 50% should repeat with you. Obviously this is subjective. If you do just a custom home builder, 50% is obviously unrealistic. But for most businesses that do some type of recurring business or repeat business or cross sell different services, at least 50% of your business should repeat with you. Which this is what the big point about this is 50% of your customers should repeat, which means 50% of your revenue should repeat. Which means if you need to go get more customers coming in, that shouldn't be 100% of your focus. Nine times out of 10, when I talk to a business and I ask them, where do you get most of your leads from? They say, oh, well, it's word of mouth and repeat customers. And then I ask them, well, how do you get repeat customers coming back in? And they have no game plan. Crickets. Oh, well, they just come back in. No, you need to do email marketing, you need to do text marketing, you need to call these people annually, you need to keep people coming back in. So you need to improve your repeat rate and you need to know what your repeat rate is of customers coming back in. So 50% is a good repeat rate. Email marketing, text blast, call them annually. You can't get lifetime value without a lifetime relationship. And this is why you need to have a game plan for your number one referral strategy of business coming into your business is repeat customers. All right? So I promise you that there's going to be a cheat sheet of what you need to fix first in your business. So I have that here. If your symptom is that you have no traffic, nothing coming to your website, and you feel like I'm not getting enough leads, then you need to do paid ads and create more content. SEO, get Google reviews, do paid ads, drive traffic to a website or a landing page. And then if your symptom is no leads, you need to increase your conversion rate. So you got to get traffic to your site or to landing pages and then you convert that traffic into leads via your conversion rate. If your symptom is that I'm getting all this traffic and all these leads, but I'm not having my jobs increase year over year or more bookings. Then you need to fix your booking process and your lead management plan. So if you're getting leads and no bookings, fix your booking process and lead management plan. If your revenue is low and you're doing all these things, I have traffic to my website, I have leads coming in, I'm running all the jobs, my jobs are growing year over year, but my revenue is not going up. This usually means that your average ticket is down and your sales process is not good, which means you need to fix this. And then finally, if you feel like you're always chasing new shiny customers and you don't have a repeat system in your business, then you need to build out email marketing and text marketing in your business. So that way you're not just running around trying to get new customers coming in, but you have the whole flywheel going on, which is new customers coming in through an optimized sales process and then repeat customers coming in the back end. So essentially, stop guessing and read the math in your business if you need help doing this. This is exactly why I built my company. Because I had all these same issues at my home service business. And when I started looking at CRM data and pulling out all these numbers, it illuminated what I needed to fix in my business to actually scale. So if you're interested in working with a marketing company that actually cares about numbers, I'll put a link down below.