Contractor Cuts

The Art of Pricing: Tailoring Your Strategy to Different Lead Sources

• ProStruct360

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Strategic pricing based on lead sources and client types can dramatically improve your contracting business's profitability and success rate. We explore how to tailor your approach and pricing for homeowners, investors, and agent referrals to win more jobs and maximize your margins.

• Three main types of residential clients: homeowners (focused on quality and experience), investors (driven by price and ROI), and agent referrals (reputation-focused)
• Homeowner clients need guidance on the "contractor's triangle" of time, quality, and cost—they can only prioritize two
• Understanding why homeowners are renovating helps determine appropriate upgrades and pricing
• Referral leads deserve mid-to-high range pricing as they already trust your value proposition
• Google/internet search leads need competitive pricing with emphasis on process and communication
• BBB leads often come from clients with higher expectations who need more reassurance
• Paid referral services like Angie's List typically require the lowest pricing and fastest response
• Tailoring your sales approach to each lead source dramatically increases closing rates
• The key is building your estimate around what each specific client values most

If you want to learn more about optimizing your contracting business, visit ProStruct360.com and schedule a 30-minute conversation to see how our coaching and software can help your company become more efficient and profitable.


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Speaker 1:

Welcome to Contractor Cuts, where we cover the good, the bad and the ugly of growing a successful contracting company. Welcome back to Contractor Cuts. My name is Clark Turner. Thank you for joining us again this week. So today is another Coaching Cuts episode.

Speaker 1:

So what we are talking about today are lead sources and types of leads that you're getting in. Where should your price point be, depending on where the lead comes in, and how do we build those estimates around the specific lead to make sure we capture as many jobs as we can? So let's talk about that. So, first off, there's going to be three different types of main leads in residential contracting. Number one you've got your homeowners. You've got the people that are improving for, maybe to live there forever, to live in the house, or maybe they're trying to improve it to sell in five years, but they want to enjoy it while they're living there. Understanding the process and the reasoning behind what they're doing is going to help you determine what the estimate should look like. Right, if I am trying to build value in the property to where I know that they're going to sell in five years, I'm not going to be doing some of the upgrades that they might want, and so I'm going to help guide them through. Hey, if you're selling, let's only do things that return us a return on investment. When it comes to the property, I like to assess the neighborhood. I like to assess what kind of the top value of the property in the neighborhood can be. If they're in a neighborhood, maybe get a realtor involved that they have one that might be listing the house in four to five years whenever they're looking to sell. But I need to know where is this money going? Do they need the money back out in five years, or is it the building and renovating the home to be their permanent place? Right, if they are not ever going to move, it doesn't matter if they're spending money on something that might not be a good ROI. What's important is that that homeowner is getting the exact property that they want to live in. So first, understanding that on the homeowner side helps you guide them, helps you lead them, helps you be an advocate for them as they are building and developing the estimate and kind of the scope of work that we're doing out there.

Speaker 1:

But for a homeowner, these people are looking for perfection, really good quality, really good communication, a lot more of a experience than necessarily the bottom dollar, the cheapest cost. Cost is important, right. But when we talk about the big three and the triangle, you've got your time, you've got your quality and you've got your cost right. But when we talk about the big three in the triangle, you've got your time, you've got your quality and you've got your cost right. And which two of those do you care about? Right, if I want high quality quickly, it's going to cost a lot. If I want low cost but high quality, it's going to take me a long time. Right, you can pick two of the three. You can't have all three at the same time. So with a homeowner, I'm thinking through that. Which one of those two of the three things do you want and which one of those are you going to sacrifice? Once I start having those conversations, this isn't me as a contractor, selling them a product. This is me helping them achieve and build exactly what their dream is and what their vision is, and helping them kind of realize what that is.

Speaker 1:

Now, investors if you have an investor client coming in, that's totally different. It might be a fix and flip. It might be someone building to rent or buying to fix and then rent and turn into a rental property. There's a number of reasons that investors are in there, but number one for an investor is going to be price point. Right. If they've got a offer in on a property and they say I've got $85,000 to renovate this property or it's not worth it on paper to buy, obviously I'm now working backwards on how do we get this property done for $85,000 or less, right? And so the quality and the speed. They might probably care about speed and they want decent quality, but we don't have someone, a homeowner, living in it, so they're okay with cutting some of those corners to be more focused on how quickly and efficiently can we spend that money and get in and out so they can list the property, get a renter in the property, but, more importantly, I want it safe, I want it looking nice, but I don't need high-end finishes. I really want the best bang for my buck as an investor.

Speaker 1:

Last group of people that you're gonna be probably working with are agents, whether it's a real estate agent that's referred you business, an insurance agent that's referring you business, any sort of third party that is representing that customer or the owner of the property and connecting them to you. Now, these clients, what we care about is carrying their reputation right. When a real estate agent offers you up as a general contractor to their customer, they care less about price, they care less about speed, they care less about quality. Even. They care most about you protecting their reputation that you're not going to screw their customer, that you're going to take care of them and that you're carrying the mantle of this real estate agent. Put their name on my back and so I've got to act accordingly, right? So, with whether it's a referral from insurance and an insurance agent saying, hey, this is a contractor that I definitely use for, maybe put back. Or a flood, or a real estate agent saying, hey, I know you're buying this house, this is a really good contractor that does kitchens, you should call these guys. No matter what, the number one thing I care about is a customer experience at that point, because whatever I do, or more I don't do, it's going to reflect on the person referring me that business and if that happens, that water source is cut off, you have no more faucet of incoming jobs from that real estate agent or their insurance agent. So those are really the three different apps. Now that person again, it's going to be more of a homeowner when we're looking at quality versus the price, versus the speed. But, more importantly, those three things, like I said, when it's a third party referral, I care about the experience and carrying that person's name along with me that they've put, that they stamped on my back saying, hey, these guys are good, you should use them. Um, I'm really doing it, a to make that client happy, but also for the next 20 jobs that they might refer to me. I want all of those jobs that also come through our door. So that's the three different types of main types of clientele that you're going to get on the residential side.

Speaker 1:

Now let's talk about referral how to bid price-wise for different types of lead sources. Number one the biggest lead source that we want is a referral from somebody else. We want a referral from an agent. We want a referral from someone that's used us before. We want to repeat customer. Any sort of referral where someone stamps their name on you and says, hey, I've used these guys, they're awesome. Hey, these guys did my neighbor's house and it looks beautiful, you should use them. Any sort of referral lead source. What my price point is going to be medium to high, like what my value is is they understand it and so I don't have to upsell them and show them how how good my value is. On my sales side I've already in the door with these guys are good, they're quality and they're worth paying a little bit more for. So on a referral lead, I'm going mid to high range of my price points. Again, I'm I'm understanding the quality, what they're looking for, but I don't have to discount it down to try and land it, because they're usually not bidding against too many people, sometimes against nobody. So referrals are my favorite lead sources because, a it's built in, they trust me, and B I actually can charge our value because they're willing to pay for the value, because they've seen the value from somebody else.

Speaker 1:

All right, my next tier down for referral, my second best referral, is an internet search finding you through Google. Maybe you got some Google ads running or a Facebook ad, but it's someone coming in finding you on the internet. They might visit your website first, might see your Google page first and then call you up. Now, this person you're probably bidding against three or four other contractors. They don't know you from Adam, but they also love what they saw on your website. It was a good presentation. It seems like you're doing projects that's right in their wheelhouse that they're looking for, and so this is going to be my standard pricing.

Speaker 1:

This is my mid-grade. I've got to be competitive with my price, but also I've got to earn their respect and show them that they can trust me. So this is where I lean more heavy into the client engagement agreement that we do, where I try to get them sitting in front of me in a computer to do a CEA client engagement agreement as soon as possible, because the more value I can build on the customer care, on our processes, and I show them behind the scenes of how we operate, they're more willing to trust me. And normally these guys don't go with the highest price or lowest price. They want to go with the mid-rate guys. So I'm going to give them my best price first time, every time, and I'm not going to put any fluff in it. I'm going to make sure it's accurate and exactly what I want to be charging. But on the referral fee you can have a little more fluff to be able to spend a little extra. Buy them a bottle of wine at the end of the job and say, hey, thanks so much for working with us and go above and beyond, because you've got a little bit of padding built into that.

Speaker 1:

But with a Google, with an internet lead that comes in, someone fills out a form on your website, we need aggressive but accurate pricing where we cut the fluff out and we walk them through. And we really got to build a lot of value in us being their advocate, being their representative, saying, hey, listen, I'm going to renovate this property Like it's my own. What if we spend your money doing this? What if we do that? And so I'm spending a lot more time on sales, showing them how we operate, showing them how we as a company, how they're going to experience this company, how, what if I can help them envision what this renovation is going to be like for them in the midst of the stress and chaos, and show them how we handle that and what they can expect. Then they start building that trust with you and they're going to go with you. But again, price points a little more important to this person than maybe a referral. A referral, uh, that you got from somebody, all right.

Speaker 1:

The next level down from there is like a, b, a better business Bureau. You know that's a, that's a lead source that I separate out from Google. Whenever I see someone coming from our BBB page, they've you know, we've got an A plus on on better business Bureau. But these leads have higher expectations. They are the ones checking BBB because they care about not getting screwed, about having someone that does what they say, and that's great. We're that company, we are A plus on that. But I'm going to build in a little bit more fluff because it's going to be needed With this type of a client and when they're coming from BBB. Again, this is a generalization. If you find companies on the Better Business Bureau and you're not that way, please forgive me, but for the most part, clients coming from Better Business Bureau in my experience have a higher level of expectation, higher level of perfection and a higher expectation of communication, which they should expect it from us.

Speaker 1:

But I also need to make sure that I'm building in enough money to be able to hold them more hands. Right, I've got a. I'm going to spend more time with this client than I would just a referral and building the trust and holding their hand and verifying everything. A lot of times these are people that have been screwed and burned by contractors, so they're trying to do all their due diligence to find the best of the best. So I'm going to have a little bit higher of a price point for this client. But, that being said, I'm going to do my same stuff. My client engagement agreement is really tempering their fears, going through their walking through the estimate, really helping them feel like I communicate, I'm a big advocate for them and I'm a leader on their project. Right, those are our three big tenets of our core values communicate, advocate and lead. And I'm showing them and trying to impress them with all of those things happening before we even sign a contract. If I can get them to do that, that higher price point is going to give me more budget to just cover things when they go wrong. But yeah, the BBB referrals is a special one because there's a lot higher of an expectation and they're willing to pay a little bit more usually for the really good service that they're going to get from an A-plus contractor. That's on Better Business Bureau, all right.

Speaker 1:

The last kind of referral source that can be coming in are the paid referrals, like Angie's List, all of those type of paid referrals where you're literally paying to get someone's name and number. I hate these. We don't do these. I understand companies that are small, just getting going trying to get something in the door. They might have to go this way. I've not found it valuable. I've not found it worth it. Some people have. I've talked to guys that love it and that's great. That's great for a GC.

Speaker 1:

It's a lot more difficult if you're a, if you're a tradesman. Sometimes it's easier on the Angie's list because you're uh, you're kind of the base base price. But when we were on Angie's they were giving us all sorts of leads and selling us all sorts of leads and I think we landed one out of 10. Because a lot of times people are looking for the lowest, cheapest price and they're selling that client information to five, six, seven different contractors to hunt that person down. So what's difficult about those type of leads is that it is a price point game.

Speaker 1:

It is a speed game. It's who can get there first. It's who can start impressing. It's like it's like a speed dating, right Like I've. It's not a one-on-one date where we figure out if we work well together. I've got 30 seconds to impress you or not. I've got to jump on the lead right away. I got to be ready to jump in my car and come to the estimate. It's a lot more of a ground game. It's a lot more of almost out of desperation, without looking desperate. I got to get this, I got to chase it, I got to go get it, I got to be the cheapest one there. So I don't love those referral sites. I don't love paid leads like that.

Speaker 1:

If you're going to spend money, I prefer doing some Google maps placement and some other things like that that we work with you on. If you're in in our coaching program, you'll work with Emory on setting that up for your company and how to do it the best spend. Whether you're spending 500 bucks a month or $5,000 a month or anywhere in between, we want to make sure that we spend that money for our best bang for our buck and we kind of have a tiered way that we do that. Anyways, all of that being said, the goal is to understand what leads are coming in, what lead sources that are sending you those leads, how to price it and how to approach those clients. If you are looking at every lead that way, as opposed to just kind of cookie cutter where a lead comes in, I just treat them the same way.

Speaker 1:

This is a sales game. This is building your sales around what the need of that client is right is building your sales around what the need of that client is right. If I've got a farmer coming in to buy a truck, he's going to have different needs than that dude that just wants to drive it around downtown, right? And so I'm going to sell the same truck to two different guys, two different ways. One guy's getting gas mileage. One guy's getting you know how it looks and how you can upgrade and how you can do it. The other guy's getting powertrain and the durability of it and all that stuff. You're selling the same product to two different people, two different ways, and that's what we're trying to do here with.

Speaker 1:

When the leads come in, who are they? Investor, homeowner, real estate agent? Where are they coming from? Did they find you on Google? Did someone refer them to you? Did Angie's List sell you that lead? Did they come through BBB? All of that information is information I need before starting the estimate, because that's gonna help me frame how to sell it, who I'm dealing with, how I need to price it, and really kind of allows me the ability to form my sales pitch around what that specific client is needing.

Speaker 1:

If you wanna talk more about this, I would love to chat with you. If you go on proshark360.com and go to the contact us, you can sign up on my calendar to do a 30-minute conversation with me. I love to hear about your company, tell you about what we do, see if we can work together. One thing that I love doing with new contractors or interested contractors is kind of diving into their numbers and seeing if I could prove that I can pay for myself and then someone make the money. I like to look at how your operations are running and see if the cost of coaching and consulting can be made by making your inefficiency super efficient. If I can help make your company efficient, I will pay for myself tenfold. So that's what we try and do on the coaching side and consulting side. If I can build value in your company to where I pay for myself, maybe it's a great partnership.

Speaker 1:

Sign up for a call. I'd love to talk with you about that. If it's something that you have a question about and how you're doing your company, sign up for that too. I'd love to help you out. For me it's a long-term relationship, so sign up. Let's have a conversation about it, even if you're not interested in coaching today. And finally, if you need software, proshort360.com. It's a fantastic software. It's got built-in processes and procedures from first estimate to final invoice Definitely something that's worth trying for your company. It's two weeks for free. You just go on, sign up, try it out for a couple of weeks and, if you like it, it's a month to month fee, anywhere from $89 to 199, depending on what your needs are. I'd love to help you on board with that as well. All right, thanks so much for listening today and we will talk to you soon. Bye-bye.

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Clark Turner

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