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.