Wolseley PRO Pipeline Blog
The best businesses, regardless of their industry, generate a significant portion of their revenues from repeat business or reorders. They long ago realized that the real value in their businesses is getting customers to return again and again. Sounds simple enough, but it doesn’t just happen. It requires some effort.
“I’m in the heating and cooling business” or “I’m in plumbing business” are perfectly suitable response when explaining your work to external customers or strangers and technically correct. However, when talking with our staff, we should be reinforcing that we are in the reorder business. Yes, it may sound like it’s just semantics or a play on words, but it’s more than that. It’s an attitude that once adopted can significantly increase your profits with minimal effort.
By embracing the reorder philosophy and making it a top priority for every employee, it will go a long way in reducing stress and keep work orders flowing in, because everyone will be looking for opportunities.
Are you a Hunter or Gatherer?
When helping contractors, I like to use the example of being a hunter or a gatherer. Simply put, a hunter is someone who’s business is dependent on them finding new customers everyday, otherwise you have staff standing around with nothing to do and that can get expensive. It’s a constant challenge and it’s exhausting trying to keep the order books full. It’s like being on a treadmill. You’re running hard, but you’re not really moving your business forward.
On the other hand, a gatherer is much like a farmer who does the heavy lifting at the beginning of the season, like planting the initial crop or in our case, getting the first order. Once the crop is in and established, the farmer can now continuously harvest from the crop. Those contractors that understand that they are in the reorder business, make it a priority to continuously harvest revenue from their existing customers.
But if we are to be honest with ourselves, there’s a great thrill in getting a new customer (hunting), especially if you beat out a competitor, it’s a high! Now compare this with a repeat customer calling in for a service call (gathering). Admit it, although you appreciate the call, it rarely gets the blood pumping. But we need to get excited about these reorders, and this needs to be reinforced with every member of our team.
A loyal customer doesn’t consider alternatives
The first step in becoming a gatherer requires us to adjust our attitude and give equal focus to generating reorders as we do to new orders. Doing so will get you off the constant need to go hunting every day. Just think, wouldn’t it be wonderful knowing that at the start of every year you can confidently anticipate 25-35% of your revenue will happen because of customer reorders?
So instead of assuming that the value of a new customer as a one time sales, consider them as having the potential to generate future revenues of upwards of three to four times the value of the initial order. Every house or business has multiple mechanicals that either need to be serviced on a regular basis or will need to be replaced some day. By creating an ongoing relationship with them, you’ll be the first one they call because a loyal customer doesn’t consider alternatives.
Things to think about
In addition to my tips in The “No New Customers” Approach to Running a Plumbing or HVAC Business here are a couple of more to get you thinking.
For those of you that do any new construction, how many of you follow up after the owner takes possession? I know a number of contractors that do hundreds of new construction HVAC installs every year, yet never once consider these homeowners a potential customer. For sure, they all slap their sticker on the furnace and figure the customer will call, but they rarely do.
What if instead, you asked the builder for the contact information of the new owner and 90 days after they move in you contact them. At that point you tell them you want to stop by to check if everything is running well and you would like to replace the furnace filter at no charge. That way you get to connect with the homeowner, explain the warranty and also investigate if they are looking for any additional upgrades i.e. A/C, humidifier, etc. Don’t forget that most warranties require annual maintenance.
The same applies for plumbing. Stopping by to do a quick check on the fixtures gives you the opportunity to let them know that should they be considering any upgrades or need help installing the new dishwasher, you are available. When you consider how many new homes only have a rough-in bathroom in the basement, this visit might just set you up for a future call.
One other thing to consider is that most hot water tanks (HWT), should receive periodic inspections. Granted, many HWT are rental, but there are many more owned by the homeowner. Keep in mind, most warranties state that regular maintenance of some sort is required. Flushing the tank and checking and/or replacing anodes should be considered an annual or bi-annually scheduled service call.
Taking a few moments to investigate your potential reorder opportunities could make your life a little less stressful and put some extra cash in your pockets.
Greg Weatherdon is a small business expert and author of Get More LIFE Out of Your Business. He also produces The Small Business Minute Podcast that available on all major platforms including iTunes, Google Play and Spotify. Visit www.gregweatherdon.com for more information