Sales challenges are different for every industry.
Accountants and attorneys have a completely different set of sales challenges then contractors or retail stores. We differentiate these challenges for each industry based on the demographics and socio-graphics of their current client or customer base and whether or not it is a lead generation challenge or a sales closing challenge. Focusing on the contracting and building industry we have begun a case study on a local general contractor specializing in custom basement finishing.
Centennial Construction located in Parker, Colorado has been building custom basement finishes since 2002. In that time they have completed over 110 custom 
basements, ranging from the finest most elegant basements for custom homes down to the budget minded buyer. The average basement finishing project runs about 1000 to 1200 ft.² and comes in at around $40,000. The high-end homes typically call for more detailed high-end finishing techniques and the average size is around 2500 ft.² priced at about $150,000. With such a large variance in square-foot costs it makes sense to sell differently to the two different subsets of customers.
Centennial Construction historically worked off of referral leads. Leads that came from the satisfied customers in the past. But faced with the challenges of today’s economic times, the lack of lending, the difficulty in selling homes, Centennial Construction has found that they must reach out into marketing areas they have not pursued previously. These marketing areas include new website design with on-site optimization, off-site search engine optimization, search engine marketing, and social media pages. All of this is tied together to create an online lead generation system.
For most contractors lead generation means typically buying leads from companies that generate thousands of leads and sell them to multiple contractors. The typical cost of a lead is somewhere between $35 and $100 each. An average contractor will close approximately 25% of his leads with an above average contractor in the 50 to 60% range. So closing 25% at say, $50 per lead means typical contractor is paying about $200 per closed sale. This is an acceptable level of expense for a lead because it is just added on to the actual cost of the basement finish.
So the trick for an average contractor like Centennial Construction, is to increase their closing rate on the leads they already have to not only lower their lead expense but to increase the number of jobs that they have working in any given month. So while lead generation is an important factor because the number of leads generated directly effects the number of projects sold each month, closing ability has a much higher effect on sales. This is because without increasing the number of leads each month an average salesperson with the right closing tools can double the amount of sales just by improving his closing percentages. This also reduces the cost of leads by simply closing more instead of purchasing more.
Our recommendation for Centennial Construction and any small contractor is to begin by analyzing their current customer database, reaching out to those totally satisfied and happy customers and asking them to refer friends, business acquaintances, and family for basement finishing work. We recommend a customer referral program based on the referral becoming a paid customer and giving a small percentage of the overall new sale to the referrer. We understand that most contractors don’t like paying a percentage on materials for referrals were leads because there is typically no markup on materials, however clients don’t understand that. They think when you sell $100,000 basement finishing job that everything in that price is marked up. So we recommend you play along and give one half to one full percentage point to the referrer.
The customer referral program cost is part of your marketing and lead generation expense. If you currently earmarked say 5% of your sales dollars to marketing and lead generation then a 1% you pay to a referring customer is simply 20% of your overall marketing budget. This is not new money that you have to add on to the cost of the basement finishing project it is already earmarked to be spent to bring in leads.
Step one is increasing the generation of leads and sales closings. The next steps will include a better presentation, a presentation book, marketing materials, and sales closing techniques. but, again step one is always asking for referrals from happy customers. This is because people trust referrals from friends and family, they trust when they say this guy will do the job right for you, they trust when they’re told the price will be right. Nothing is stronger in sales than a personal referral from someone you know.
Start that sales referral program today and let us know how that works for you in the first 30 days by leaving your comments below or e-mailing us with your own case studies.
