K&B Showroom [Update]

[mikegray]

I want to thank you all so much for commenting on my post the other day about the K&B venture. Quick update because I can’t reply back to everyone as we ended up with over 150 comments. I uncovered a lot of stuff today which explains the bleeding of the business and the lack of profitability.

• I dug deep through the CRM and ran some reports. Their lead costs were insanely high and the return on their marketing and lead gen was pitiful. I believe this to be the main contributing factor of failure. They had an average of a 20% lead cost since inception. Meaning they did $12.2m in sales since inception, and spent close to $2.5m in getting leads?! That is insanity to me.
• Angie’s list/Home Advisor: avg lead cost $200. Raw leads purchased 2920 for a grand total of over $584,000 for those BULLSHIT LEADS. Wanna guess sales? 2920 leads -> 98 sales for a whopping $2.2m averaging around $22k per sale, making the avg lead cost per job just under $6,000. Fuckin a. 26% lead cost. I cut Angie completely in December because I hate their business model, which is why we are in this position, but I didn’t know this is how they spent.
• A few other lead sources were 20%, 18% and combined sales were around $5m but cost $984,000 in lead costs. That is absolutely insane to me. I am NOT a marketing person, but would like to imagine that if even 10% of what they spent on leads for Angie’s and these other “lead Gen” sources, they’d have an unbelievable marketing budget and would have built an amazing brand with local recognition and respect. But they spent it all buying these bullshit unbranded cold call leads that less than 10% resulted in a sale.
• The BEST NET closing rate was from - you guessed it - branded ads, walk ins, and referrals. They close 88.1% of all referrals, 48.4% of all walk ins, 48.4% of all callers that heard us on the radio. These costs were minimal compared to the above (well under $100k over 5 years, and generated over $2m in business over 5 years). That’s a 5% lead cost! How no one caught this for 5 years is beyond me, and I am ashamed it took me since November to find it myself. IMAGINE the money that could have been saved (and made) if they allocated just a portion of those funds above to these avenues that return so much more per dollar.

 

[davew0958]

@mikegray Wow.. followed your original post and figured I’d post on this one.

Our agency specializes in home services and we tested Angi for one client - primarily because they wanted us to give it a shot despite our pushback. It took us less than 2 weeks to realize how truly pitiful the quality of the leads were. Forgetting the unbranded nature of the leads, the sheer quality was truly pitiful.

It sounds like you need a complete overhaul of where your leads are coming from, truly understanding your CPL (for QUALIFIED) leads.

My first word of advice is to get very granular on your lead tracking. A tracked phone number is good. A recorded call is even better in terms of tracking the qualification of a lead. We run 100k/mo ad spend accounts in the same vertical as you and we’ve noticed an alarming pattern with certain accounts. Our clients would look externally at the cause of poor leads, without looking internally. At the end of each month we would have our meetings to review CPL, success of sources etc, and at the end of every meeting we would play recordings of abysmal phone calls caused by their internal sales team. This helped them understand the internal causes of their poor conversion rates based on qualified leads.

My second word of advice is for you to invest in SEO. Your space is very competitive (I’m only assuming because I’m not sure where you’re located). Your CPC on Google will bleed you dry in the long haul if you don’t do anything to optimize your GMB and your overall website SEO. Your business is visual, invest in a 3D showroom walkthrough, invest in video testimonials, invest in keyword driven content. Remember PPC is a faucet and when you run out of budget, you’re turning off your lead faucet. PPC should work in tandem with SEO.

Truly wish you the best of luck as this is a tough spot to be in. As others mentioned in your original post, dig deep to see which expenses you can scale back to allocate towards sales / marketing until you’ve built up your pipeline again.

 

[mikegray]

@davew0958 Thank you so much for the response! The marketing company I partnered with will be issuing tracking numbers for any and all avenues of marketing, also including vehicle wraps, business cards, and worker’s apparel so when they are line at Home Depot and someone takes down the number off the back of the sweatshirt, we’ll know.

They also will be focusing on SEO, PPC and social. They have access to my GPB, all social accounts, website, etc. They will be working on driving people TO US, because they only get paid per lead that comes through. They track these leads via their tracking numbers, and they also monitor the calls, and do a monthly audit. so I will know if I my call center is a problem or not.

We use LeadPerfection CRM. It is extremely powerful and we are able to pull hundreds of reports, and customize our own report to generate as well. Every lead the company has ever received is in this CRM, and we have already started rehashing old leads that we met with and didn’t sell. I can’t believe it took me posting on Reddit to realize we should do this. Better late than never, just hoping not too late. A good portion that we’ve called already has already had their job done by someone else. Our sales person didn’t close them, someone else did. Some went the DIY route.

I am going to be implementing a customer survey and rehash program asap. Survey - follow up call the next day after an appointment from the office looking to ask a few brief questions about their experience with our sales rep that visited them yesterday. “Were they punctual? Were they professional? Were they knowledgeable?” But we will also be digging for information on this call. “Were they knowledgeable? ‘Yes.’ “Ok, great, So they explained the product thoroughly, and how did you like what they showed you?” And so on and so forth. Basically want to understand why they didn’t move forward without asking directly. But the main goal is to make sure our salespeople are representing our company in the way we want, and try to salvage missed sales. We will also know if the customer is serious or not.

Then we will be implementing a rehash program in which missed sales will be targeting within a short time (time frame TBD, 14-21 days? I’m sure there’s studies done that test rehash timeframe and success) and we try once again to earn their business (if the sales person and the survey phone call reflect that the customer is seriously considering this project).

 

[beta2]

@mikegray So interesting! followed your original post as well. Good to hear you're solving a lot of the issues.

Best of luck with your business!

 

[aslan3154]

@mikegray How’s it going now? Just curious..because I’m thinking of opening up a showroom. I’m a GC in SoCal

 

[mikegray]

@aslan3154 Hi. Things are going. Getting better each week, and am still hyper focused on creating repeatable systems in all aspects of the business, particularly my sales process, and my PM. And focusing on trying to market as wisely as possible.

Holiday season was tough! We made it through. I made a change in scheduling, and we are running 5 jobs at a time now. This helped tremendously with cash flow, but means that I run out of work sooner, so it’s a catch 22 and a constant work in progress.

I would say that having a showroom gives you an advantage over the competition, when prospects are in the hiring process. It gives your business validity, and can help justify slightly higher prices than your other competitors who do not operate at such a high level as you.