11 renovation business tips from RenoSummit, Vancouver
There's another RenoSummit underway right now in Calgary.
By Steve Payne
By David Godkin
Canadian Contractor and Remodelers Advantage teamed up in Vancouver yesterday to present a full day of essential business training to renovators and builders.
Here are some of the tips that were shared by the presenters.
Victoria Downing, Remodelers Advantage (Session 1)
Everyone plans, but what are the tools that will really help our businesses become profitable?
Tip 1 – Gross Margin Profit (GMP) gives you a simple percentage (revenues less costs, divided by revenue) to use as a target when determining profitability levels. A project that generates $15,000 less $10,000 yields $5,000 or a GMP of 33% (A good GMP range is 30-40%). Projects that fall below the GMP become quickly identifiable.
Tip 2 – When calculating labour costs be sure to add “labour burden” costs to wages paid, such as auto expenses of field staff, tool costs, cell phones, warranty allowances, stat holidays, etc. Labour burden can account for 25-50% of the dollars paid in wages. Miss that and you miss a chance to increase your mark up.
Tip 3 – Pay yourself a salary that is a non-negotiable. You take a lot of risks, you’re working hard in a complicated business, so pay yourself well. A rule of thumb is 10% of projected revenues in salary, plus 10% of the bottom line in net profit.
Paul Winans, Remodelers Advantage (Session 2)
Contracting is all about building relationships. A happy client will view you not as a salesman, but as a partner. But you have to qualify them first:
Tip 4 – PALO is an acronym for what you need to determine when a prospective client calls you on the phone: Purpose: are they looking for a good fit? Agenda: what questions do they have? Logistics: how long should we talk? 30 minutes? I hear a baby in the background. Reschedule to a better time? Outcome: do we move forward to the next meeting or part ways now?
Tip 5 – Use a lead sheet that asks good questions. Knowing where a prospect lives will tell you if it’s the kind of neighbourhood where you’ve been successful or whether the prospect can afford you. A key question: Have you remodelled before? Someone who has worked with a contractor will understand what’s involved and be less likely to balk at pricing than a first timer.
Tip 6 – Make sure they’re serious. Someone who has just sunk all their money into a new house is likely a poor prospect. People who have been “planning this project for 15 years” often are just wasting their time and yours. You’re in the contracting business, not the entertainment business.
Tip 7 – A client’s sense of urgency is a great sign. A pregnant couple wants that baby’s room built now. And offering a bride-to-be’s parents a process that ensures a firm price and eliminates worries about that living room upgrade is a real winner.
Victoria Downing, Remodelers Advantage (Session 3)
Marketing in the reno industry is key, but how should you allocate your resources?
Tip 8 – Try this: 10% on media ads, 30% reaching out to past clients and their neighbours, 60% on your “circle of influence,” i.e. other professionals such as architects and engineers, parents at your kids’ school, club affiliations such as the rotary club or chamber of commerce – anyone who can send business your way.
Rob Koci, Canadian Contractor (Session 4)
Negotiate like a pr0
Tip 9 – Avoid wanting a project too much. And when the going gets tough, remember: you have genuine strengths and offer real value for the terms you want.
Tip 10- Don’t get hung up on single issues. If you can’t resolve that kitchen or bathroom question, park it and come back to it later. Time has a way of changing people’s minds.
Tip 11 – Avoid negotiation fatigue. Watch for signs that you or the client is tiring. Projects are sometimes lost not because of your proposal, but because discussions simply went on too long.