Note: This chapter was written before the coming of Internet Marketing for Contractors
In this chapter I am going to go over the various ways to find a customer. Don’t worry about how to sell to customers yet. That’s taken up in a later chapter. For now, let’s just work on how to find them.
There are lots of ways to find customers. Potential customers are everywhere because new construction, repairs, and remodeling are underway in so many places. The challenge you face is figuring out which customers are going to make you a profit and how to find them in a way that won’t cost you too much money.
THE PROFITABLE CUSTOMER
Let’s start with determining what kind of customer is going to make you a profit. Here is a list of things to look for:
- HE IS HONEST
- HE IS EASY TO WORK WITH
- HE KEEPS PAY AGREEMENTS
- YOU LIKE HIM
I have found that the more a customer meets these four requirements, the more profit I make. I have also found that the more a customer does not meet these four requirements, the more money I lose. It is sometimes difficult to tell at the beginning of a business relationship exactly where a customer stands on these four points, but with experience, it gets easier to quickly and accurately judge.
An important thing to keep in mind is that it’s a lot easier to not start a job with a customer than it is to not finish a job once you have gotten started. Also keep in mind that there are plenty of other good customers out there.
For some contractors, finding customers is the hardest part of their job. Fortunately, it need not be. There is a certain thing that you do, and after you do it, you have customers. What is this thing that you do? You advertise.
NOTE TO READER: When I first wrote this in 1990, ADVERTISE was the term most commonly used for what is more commonly referred to in 2010 as PROMOTION. In this booklet, the terms can be used interchangeably.
“ADVERTISE” MEANS TO GET THE ATTENTION OF THE PUBLIC SO THAT YOU CAN SELL THEM SOMETHING
There are many ways to advertise. But, they can be broken down into two basic categories: advertising you pay others to do for you and advertising you do yourself. This chapter goes over ways of getting paid advertising first, then the ways you can do it yourself.
NOTE TO READER: When I first wrote this in 1990, there was basically no internet marketing going on. Twenty years later, internet marketing for contractors is rapidly becoming the dominant way for contractors to market their companies in larger population areas. In my opinion, a contractor today without a website is like a contractor in 1990 without personalized invoices or business cards. I’ll probably write a whole series of articles about internet marketing for contractors in the near future, but for now, here’s what was happening in 1990…
WARNING – THIS “PAID ADVERTISING” SECTION IS 20 YEAR OLD MARKETING ADVICE THAT MAY NO BE LONGER RELEVANT. Please read this section for historical reference only!
This is the kind of advertising that you buy in phone directories, newspapers, mailings, and fliers. When you buy advertising, your job is to decide whether you are going to make enough profit from the new customers to justify the money you are going to spend on the advertising. For years I have used a simple method to figure this out. It works for any kind of paid advertising. Here is what you do:
ADVERTISING EVALUATION METHOD Find other contractors that do work similar to yours who have used the method of advertising and the advertising company that you are considering. Ask them if they are going to advertise again in the same way and with the same company. If their answer is yes, ask why. If their answer is no, ask why not. This should give you a pretty good idea of what to expect from your own advertising.
If you are thinking of advertising in a particular newspaper, for example, get some recent issues of the paper and call up the contractors who advertised in those issues. Are they going to advertise in that newspaper again? Why? Why not? This works equally as well with phone books and magazines.
If you can get them, check the back issues of whatever publication you are considering advertising in. Compare the current issue to the back issues and see who continues to advertise over time. These companies were willing to pay for the ad over and over again, probably (but not necessarily) because the ad worked for them. If any of these companies are similar to yours, this is a good indicator that your ad might be successful for your company.
With fliers, mailings, and many small publications you will probably have to ask the person trying to sell you the advertising for a list of contractors who have previously advertised with that company. If they can’t produce a list of contractors, you’re probably not going to get a good result with that publication.
Now let’s take a closer look at the different kinds of paid advertising:
NOTE: FOR MY OWN LOS ANGELES BASED CONTRACTING COMPANY, AS EACH YEAR WENT BY THE YELLOW PAGES BECAME LESS AND LESS EFFECTIVE. I STOPPED ADVERTISING IN ANY YELLOW PAGE BOOK BY 2005 AND INVESTED IN INTERNET ADVERTISING, WHICH PRODUCED A MUCH HIGHER RETURN FOR MY ADVERTISING DOLLAR.
AT THIS TIME (2010) YELLOW PAGES MAY STILL WORK FOR CONTRACTORS IN SMALLER POPULATION AREAS, OR FOR CONTRACTORS WHO ARE WILLING TO CHARGE CUSTOMERS ABOVE-MARKET PRICES FOR THEIR SERVICES (to cover the high cost of the Yellow Page advertising).
TELEPHONE DIRECTORIESI have found YELLOW PAGE ads in phone directories to be a good way to get new customers. I have always make a profit from the YELLOW PAGES. The only drawback is that you will have to pay money in advance of the book’s publication, and you will be obligated to make monthly payments regardless of whether or not you are getting enough customers to justify the cost.
An increasing number of companies publish YELLOW PAGES. Each offers several different sizes of ads. Generally, the bigger the ad you put in the book, the more you are going to pay. In theory, the larger the ad, the more customers your ad will attract. One way to decide what size ad to get is to call contractors who advertise in the same phone book. In other words, just use the ADVERTISING EVALUATION METHOD outlined earlier in this chapter.
NEWSPAPERS One advantage that newspaper ads have over YELLOW PAGES is that they are cheaper. You can run a newspaper ad for as little as one day, whereas you generally commit to an entire year with a phone book. If the newspaper ad is not bringing in enough customers, you can always change or discontinue it.
If you find you are getting a good customer response and you are thinking of running the newspaper ad indefinitely, you can compute its yearly cost and compare this to the yearly cost of a phone book ad. This should give you some idea which will give you the best customer response for the money. Also, you may find that you are getting such a good response from both, that you will want to use both of them all the time.
FLIERS / MAILINGS Fliers are printed advertising distributed by hand. Mailings are printed advertising distributed by mail. There are many kinds, and each has it’s own benefits and drawbacks. The way to sort out any questions you have about them is to apply the ADVERTISING EVALUATION METHOD.
T.V. / RADIO As a general rule, in larger cities, T.V. or radio ads are too expensive for all but the largest contractors. But, in smaller cities, this kind of advertising may prove worthwhile. You will need to determine this, again by using the ADVERTISING EVALUATION METHOD.
PAID ADVERTISING IN SUMMARY These are the basic kinds of paid advertising. Any particular kind may or may not be the right kind for you. The final proof is whether or not it makes you a profit. If it makes you a profit, it definitely is the right advertising for you.
ADVERTISING YOU DO YOURSELF
You might think that the more money you pay, the better the advertising will be. This happens not to be the case. Some of the very best advertising is free because you do it yourself.
Here are some of the ways you can get lots of business without having to spend much, if any, money. Remember, nothing valuable is really going to be free. The trade-off for not spending money is that you will have to spend time.
GENERAL CONTRACTORS A good way to get work if you are a subcontractor, is through general contractors. General contractors do their own advertising, and this benefits you. A successful general contractor is already taking the necessary steps to make sure that he has customers. As soon as he sells a job to a customer, he is going to hire subcontractors to get the job done. So, once you establish a good working relationship with a general contractor, you should be able to count on a continuing supply of work.
It’s easy to locate general contractors. Probably the easiest way to find them is to just pick up the YELLOW PAGES and look them up. So, it’s not really a question of how to find general contractors, but how to find the right general contractors.
Let’s review the list of what makes a good customer:
- HE IS HONEST
- HE IS EASY TO WORK WITH
- HE KEEPS PAY AGREEMENTS
- YOU LIKE HIM
This list applies to general contractors just like to any other customer. As a matter of fact, it can be even more important to follow these guidelines with a general contractor. The reasons for this are covered Chapter 7 on collecting, where I go over the different kinds of customers. Here is a good way to find the very best general contractors:
Call up any general contractor. If you already know some, call up the best one you know. Talk to the person in charge of selling jobs to customers. In a larger company, ask for the estimating department. When you find the right person, tell him what kind of work you do and ask him if his company ever needs work like this. If the answer is yes, give him your name and number. Sometimes you can get a job right then. It has happened to me more than once.
Before you finish your conversation with this person, and this is the most important thing of all, ask him to give you the names of his three best subcontractors. Now call up these three subcontractors. Tell them that the general contractor you were just speaking with recommended them as among their best subcontractors. Ask them to rate the general contractor you originally called. Ask these four questions:
- IS THE GENERAL CONTRACTOR HONEST?
- IS THE GENERAL CONTRACTOR EASY TO WORK WITH?
- DOES THE GENERAL CONTRACTOR KEEP PAY AGREEMENTS?
- DOES THE SUBCONTRACTOR LIKE THE GENERAL CONTRACTOR?
You can decide if you want to work for the general contractor based on the answers you get. Now ask the subcontractor one more question — Who are the three best general contractors he knows?
The answer to that question will give you nine more general contractors to call (because you talked to three subcontractors). Now you can call those general contractors. Ask them if they have any work for you and also get the names of their three best subcontractors.
In theory, you would now have 27 subcontractors to call, and from these 27 subcontractors you would get a list of 81 contractors. In reality, this will not happen. First of all, not every subcontractor will know three good general contractors. More importantly, however, before you can ever call all these contractors and subcontractors you will be too busy working!
Not only will you have found some new general contractors to work for, you will have found the best general contractors. The only expense to you for all these new customers will be the time you invested and the cost of the phone calls.
Another way to contact general contractors is to mail out a promotional letter. Again, the easiest way to find a list of local contractors is in the phone book. Just start with “A” and go on down the list. The address is usually printed right after the name and phone number. As a general rule, I keep my promotional material short and to the point.
Also, when you send out the letter, it can be extremely effective to include a ROLODEXTM card with your company name and telephone number on it. Often, people won’t take the time to read the letter but they will put the card in their ROLODEXTM card file. You can also include your business card with the promo you send.
LIST COMPANIES Another way to get a list of general contractors or a list of some other kind of customer you want to promote to is to buy a list from a list company. You can find companies that sell these lists in the phone book. Look under the heading “ADVERTISING.”
ARCHITECTS If you are a general contractor, you can often get work through architects. Remember, customers go to architects before they do the actual construction. Often a customer will ask his architect if he knows any good general contractors. If you introduce yourself to a number of architects, they may start referring their clients to you.
THE BEST ADVERTISING
And now I am going to tell you about the least expensive kind of advertising of all. It takes no money, and it takes no time. But, it is the most powerful and effective advertising there is. It is not only free, you actually cannot buy it. The only way to get this kind of advertising is to earn it. It takes no time because other people will do the advertising for you, and they will be extremely good salespeople. This kind of advertising is known as WORD OF MOUTH. All you have to do to get this very valuable advertising is treat your customers honestly and well.
If you have done a good job and your customer is happy with you and your work, then he truly will be your best advertising. If you expect to build a successful contracting business, you will do well to understand this. After only five years of making sure that each of my customers was happy with what I did for him, my company had grown from two men to twenty men. My company has done well because I knew two very important things about happy customers:
- A HAPPY CUSTOMER IS A REPEAT CUSTOMER
- A HAPPY CUSTOMER REFERS YOU TO OTHER CUSTOMERS
There are many things you need to do if you want to have a successful contracting company, but nothing is more important than doing good work and having happy customers. Without happy customers you will probably do poorly in the contracting business. With them, anything is possible.
- PROMOTE WHEN YOU ARE SLOW This is obvious, but it deserves mention. If you don’t have enough work, then what you need to do is — promote for more work! The basics of how to do this are outlined earlier in this chapter. Really, it’s very simple — if you want more work, PROMOTE.
- PROMOTE WHEN YOU ARE GOING TO NEED WORK SOON This is often overlooked by many contractors. If you want steady business, the time to promote is before you run out of work. There is almost always a time lag between when you first promote and when you start the work. So, if you are going need the work soon you had better start promoting now.
- PROMOTE WHEN YOU ARE MOST BUSY Suppose that you were given a large job to do and you had to hire two employees in order to get the job done. The job is now going fine and it will be finished in three weeks. The question that you need to ask yourself is this — WHAT AM I GOING TO DO WITH THESE TWO EMPLOYEES WHEN THIS JOB IS DONE?If you haven’t lined up more work for them, you will have no choice but to let them go. If you have arranged for more work, they can continue to work for you. Assuming that the more employees you have, the more profit you make, it would make sense for you to have more work ready for these two.When a contractor has more work than he can handle and he wants to build up his contracting business, the first thing that he should do is hire enough employees to do all the work that he has. Then, even though he may now be more busy than ever before, if he wants to maintain his company at it’s new size, he must now PROMOTE for even more work.Remember, there is a time lag between when a contractor promotes and when he will actually be able to start. So, if a contractor promotes when he is most busy, he will continue to have more jobs ready for his employees to start as they finish the old jobs.
- PROMOTE FOR MORE WORK THAN YOU NEED If you want to do well as a contractor, it is important that you do not get involved with bad customers. Often a contractor will recognize that a potential customer has one or more of the characteristics of a bad customer, but he will still agree to do a job for that customer. The main reason for this is that the contractor needs work, and this customer is the only one who has a job for him. He feels that he must do some kind of work, so if the only work that he can get is with a potentially bad customer, he will have to take his chances.The solution to this problem is for the contractor to PROMOTE FOR MORE WORK THAN HE NEEDS. The idea is to have customers offering you so much work that you can pick and choose from the best. What you need to do is study this chapter on FINDING A CUSTOMER and then just do it!For some contractors, getting enough work is a big problem. But it doesn’t need to be. It really is simple — the more you promote, the more work you will get. So, if you find yourself settling for second-best work from third-rate customers, make your life a lot happier and your business a lot more successful — PROMOTE !
- NEVER UNDERBID WORK There is never a good reason to underbid work although customers will do their best to convince you otherwise. Here is one example of something that a customer will tell you in an attempt to get you to lower your price: “Give me a low price on this job because I have lots more work coming up.”Hey, that’s great! If you lower your price, not only will you loose money on this job, but you will also get the opportunity to loose even more money in the future!Anyway, I have never found it successful to give a customer a lower price than I believe it will take to make a profit. An amusing aspect to this is that the best paying customers will usually turn out to be the most competent, which means that you will probably spend less time and money to get their jobs done. So, it generally costs you less to work for customers who will pay you the most, and it generally costs you more to work for customers who will pay you the least.
- NEVER OVERBID WORK It can be tempting to overbid work that you think you are going to get anyway. Don’t do it.Sooner or later your customer will find out, and he won’t like it. There is no better way to ruin a good relationship with a good customer than by taking advantage of him in some way.There is another situation where you might want to charge more than usual for a job — when you think that the job is going to be so much trouble that it will cost you more than usual. But, in this case, you aren’t really overbidding, you are just correctly figuring out what the extra expenses will be, which is not only justifiable but necessary if you intend to make a profit.But, if you find yourself raising your prices to your best customers, sooner or later you will find that you have lost them. And usually sooner than later.
- THE BEST CUSTOMERS ARE THE HARDEST TO GET Really good customers are honest, competent, easy to work with, and easy to communicate with. Good customers pay you well for the work that you do, and they pay you on time.Obviously, you should get as many customers like this as you can. And when you do get customers like this, you should give them the very best service — they deserve it. If you service them well, they will reward you by continuing to use you instead of one of your competitors.You may be unaware of this, but there are a lot of good customers out there. The problem is, because they are such good customers, they already have good contractors who do just what you would do — service them very, very well.For this reason it is not easy to find the very best customers. It can be done, however. Occasionally, for some insane reason, their regular contractor will start to take advantage of them. The good customer, being extremely competent, will immediately look for a new contractor. If he contacts you at this time and if you immediately handle whatever work that he needs done and if you do a good job, he will use you from then on. Once you get a really good customer, never let him go. If you treat a good customer well, then he will also treat you well.Good customers know other good customers. Often, one good customer will recommend you to others. It will take time, but if you treat every good customer well every time, you will find yourself with more and more good customers.
- THE WORST CUSTOMERS ARE THE EASIEST TO GET For precisely the same reasons that the best customers are the hardest to get, the worst customers are the easiest to get. After a contractor has done one job for a bad customer, he is unlikely to want to do another. This means that bad customers are constantly needing to find new contractors.Let’s say that you send out a thousand introductory letters to a list of customers. Over a one year period, thirty customers respond. Maybe one or two will be really good customers, and fifteen or twenty will be O.K. The remaining customers will be poor or really bad.This is not to convince you that you should not send out letters to customers. As a matter of fact, I have had great success with this method of promotion. The point is, you need to realize that while the majority of customers who respond to your promotion are average, there are going to be some really bad customers looking for another new contractor to take advantage of.This is particularly true among general contractors. Really bad general contractors need a constant supply of new subcontractors because they can’t keep the ones they have. So, be especially careful when you are about to do a job for a general contractor that you have never worked for before. If every other subcontractor on the job also has never worked for this general contractor before and the general contractor claims to have been in business for many years, ask yourself this question — HOW COME THIS GENERAL CONTRACTOR HAS TO USE ALL NEW SUBS ON THIS JOB?Knowing the true answer to that question may save you a lot of grief. It is strongly recommended that you find out before you start the job.
One way to qualify a customer, particularly a general contractor, is to check out his credit history. You can either join a credit checking organization or, if you have a good relationship with a wholesale material house, ask it to check out the customer for you. After all, if it is about to give you expensive material for the job, it is definitely in its best interest to know if the customer is likely to pay you.
So, don’t be afraid to take on new customers. Just realize that most or your customers will be average customers, that you need to be on the lookout for the really bad customers, and that it will take some time and effort to collect a large group of really good customers.