Choose Profit Over Volume

Next year looks like it could be one of the most difficult our industry has endured in more than a quarter of a century. Nearly everyone we've talked to — even the company owners who are not struggling to reach their 2008 volume goal — have confirmed that converting leads to sales has becoming exceedingly difficult, and it's eating away at profit margin.

The widely held solution during a time like this, of course, is to cut overhead. That's a great place to start. But because your sales operation is at the crux of the problem — even if this is a customer-generated problem — make it a high priority to take a long look at your sales process.

A lot of remodelers are blaming the media's coverage of the mortgage and real estate crisis for the slowdown in the economy. The fact is that our nation is heading into a recession regardless of whether the media sticks its head in the sand and pretends everything will be alright or whether they perform their duty by reporting facts.

The bottom line is that consumers are spending more conservatively and are slower to make decisions about high-ticket purchases and discretionary spending. Most remodeling jobs fall into both of these categories.

Your salespeople were the first to be affected by these realities. They have experienced the change in your prospects' buying behavior and patterns first-hand, which means they likely hold the key to any solutions that may exist for stronger future sales. Ask for their input.

By all means, hold the line on price whenever possible, and explain this strategy to your sales team so they don't get in the bad habit of underpricing jobs in order to reach their sales goal.

One of the biggest mistakes you can make is to sacrifice margin to keep work coming in and your employees busy. Did you realize that just a 1 percent price decline, everything else remaining equal, can lower profit by as much as 8 to 10 percent?

You have to find a way to sell jobs without giving away margin or gross profit, and that means selling on value over price more than ever. If this means sacrificing volume, cutting staff, trimming overhead and downsizing your company, so be it.

When the market comes around in a year or two, at least you'll still be in business. And then you can leverage your good name in your market, as you have in the past, to build your business back to a healthy level.

Contact me at michael.morris@reedbusiness.com or 630/288-8057

Converting leads has become increasingly difficult, and it's eating away at profit margin