Referrals
Let me use a Contractor I know of to illustrate how this referral system enables you to get endorsed to 200% -2000% percent more quality
referrals. I live in a neighborhood of million dollar homes. The contractor that built out my neighbors’ basement did an impeccable job. My
neighbor gladly paid him over $60,000 for his efforts (of which almost $10,000 was profit). When finished, the contractor went onto the next job in
another city. By now I expect that you are saying – “NO! Wait, he is leaving a ton of money back at that neighborhood” - Exactly!
There are 49 expensive homes just in my neighborhood alone (and thousands of others in the Chicago area). Fully 90% of which will absolutely
build out their basement, 75% will hire a contractor, spending an average of $50,000 each. Which means they must go through the painstaking
task of identifying several contractors, weeding through the poor ones, calling their references and then hoping they are available.
Therefore, my neighborhood represents a potential of $1.8 million in basement build-outs alone! This does not include other work the contractor
can get from these homeowners.
Expanding Customer Purchases
A Contractor can stay in contact with their customers and suggest home improvements that would enhance the client’s home. If they had done a
large job initially, they should have good insight on the customer’s needs and potential wants. They can also suggest a patio cover for the patio
they previously put in. Or offer to screen their porch. Finally, they can suggest installing a built-in entertainment center in the basement.
Strategic Endorsements (a.k.a. JVs)
Let’s go back to our stone installation contractor to illustrate. What if the pool company suggested every customer incorporate some stone work
into their design”. What a simple but awesomely powerful statement! By the pool company simply raising the question of stone work to their
customers they stimulate the buyer’s imagination, and in turn cause a percentage of them to add this feature?
If the stone guy positions it right, he ends up being a consultant to the pool company. He does not charge the Pool Company for this $100,000
idea, but only hopes for reciprocation in the way of referrals. How is that for win-win? Applying a real life example to this, my neighbor installed a
pool at the same time we did and decided to add $15,000 in stone work after seeing our plans. Now in this case, I was the one that did the cross
selling. But if the pool guy had employed our strategy, he would not only have gotten my neighbor to purchase but several other customers as
well.
Do you see how the Stone Business can provide valuable benefits to the Pool Company that makes them different from all other stone
companies? If he also taught them how to up-sell; how to get continuous revenue by securing the pool maintenance agreement; how to implement
active referral systems; how to increase customer retention; and how to increase purchase frequency, don’t you think the pool contractor would
actually feel honor bound to enthusiastically endorse the Stone Guy! Don’t you already have a specific, simple tool for doing this in the form of
this business growth program?
By the way, the Stone Business in this case is the endorsee, that is, he is being recommended by the Pool Company, the endorser. The other
side of this coin is that the Stone Contractor becomes the endorser and recommends the pool guy. How does the stone guy know what prospects
would be interested in a pool? Good question. Do you think that people who would put in a pool would also want to landscape as well? Do you
think that people ever start off landscaping and later decide to install a pool or plan a pool initially but are waiting until they can afford to do it? If
so, do you think that perhaps they may be clueless about who they would use for a pool down the road? What if our Stone Company built a
strong relationship using our customer retention techniques and followed up until the customer was ready to do a pool? Might they call him to
both get more stone work done and ask for a recommendation on a Pool Company as well?
Also, do you think that someone looking to install a pool ever meets with several pool companies and perhaps then decides to do stone work?
Might they call a Stone Company to get design ideas and cost estimates? Doesn’t this give our stone guy an opportunity to endorse a particular
Pool Company – especially if they motivated him to do so? Now I am really firing off a lot of examples and going really deep to stimulate your
imagination for your own applications. Remember to constantly ask yourself how these examples can apply to your business. My goal in this
introductory phase of each growth session is to stimulate your mind so when we get down to designing your custom program you can do so easily.
Going back to our stonework contractor example. Let’s assume that he had strategic endorsements with few pool installation companies that did
say 100 pools a year. Let’s further “guess” that of those 100 installations, 10 people decide to add stone work as a result of their own preference,
and as a result of the suggestion by the pool guy. Let’s further “guess” that they spend an average of $5,000 each. Ok, that’s equates to $50,000
in found business, and say $7,500 in profit for being an endorsee. Make sense?
Now, let’s “guess” that the stone guy directs 10 of his customers or inquiring prospects to one of those pool companies. Since the average pool is
say $40,000, 5% of this is certainly fair – that equates to $2,000 referral fee per pool or $20,000 in his pocket for being an endorser! So the total
in his pocket profit from these strategic endorsement relationships is $27,500 - Not bad for just 3-4 arrangements.
And remember that is just for one year, the lifetime value of these arrangements over say five years is $137,500!
Other Ideas
1. Think about a "big idea" that will attract some media attention. For example, what is the record in your state for the most number of homes built
in a one-month period? Can you organize a program to break the record? For example, "30 Homes in 30 Days". The PR you might gain from this
would be worth much more than any advertising you could buy.
2. Send a direct mail campaign to sub-contractors and potential clients, focusing on the benefits to them, not on just how great you are.
3. Look for the manufacturers' reps of other businesses who are serving your target market and contact them to make arrangements where your
company could install the equipment that these reps are selling.
4. Create a "back end" or a joint venture with a sign company. Either set up this business yourself, or get a good company to work with. A lot of
clients will need signs when the job has been completed. You can either add this as a "value add" to your job to give you the extra edge to get the
client, or you can up-sell the client on the signs and make additional profit.
Contractor