Phil Risher shows why home-service businesses waste money on ads: they ignore booking rates and estimate close rates. Track these two metrics instead of just revenue, and you'll predict growth before it hits the books.
A lot of people get stuck in this hamster wheel where they just spend money on leads because they think that's how they're going to grow. And in fact, it just creates more chaos in their business and it's very expensive. What happened in my home service business was we wanted to grow. So the owner was willing to spend $3,000, $5,000 on different ad platforms. And then 3 months later, he'd look at the revenue and say, oh, it didn't go up. So that ad platform must not work. And what I said was like, well, what about all the stuff that happens in the middle? So what we started to look at was what's our booking rate? We got 100 leads. How many of those actually booked into jobs? Was it 50? Was it 30? Was it 10? Then we can know, is it our call script? Is it the lead quality? And then we looked at our estimate close rate. So if we sent out 50 estimates and we closed 25 of them, that's a 50% close rate. So that's pretty good. This was the leading indicators that predicted growth inside of the business. It wasn't the trailing indicator, which is, did my revenue go up or down? So if you want to spend more money on marketing and you want to grow your business, great. But if you don't know your numbers, you don't know your booking rate and your close rate, how do you know that those leads in the top of the funnel are going to ultimately help you grow your business if you don't know that the inputs equal the outputs?
