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The Ultimate Guide to Growing Your Service Contracting Business
In researching how to grow your contracting business, you’ve probably noticed that advice on the topic is plentiful. But with so many different tips, tricks, and strategies to consider, it can be hard to know where to start.
Just as with any other process, breaking it down into steps can make it more manageable. On this page, we’ll cover everything you need to know about growing your business, from financial planning to sales growth and beyond.
Business planning is an essential process that helps you create a roadmap for the future, gain clarity on your overall business goals, and make informed decisions to reach those goals. Among other things, business planning usually involves setting SMART goals, identifying buyer personas, complying with laws and regulations, and optimizing your tech stack for scalable efficiency.
Whether you're just getting started with your business, revisiting your business plan, or just starting a new fiscal year, setting goals will help you decide what success looks like and keep you moving in the right direction. Goals can also help you make intelligent business decisions; for example, maybe you’d like to hit a particular quarterly revenue goal before you move to hire a new team member.
Each goal you set should be SMART — specific, measurable, achievable, relevant, and time-bound — to ensure that you can focus your efforts and use your resources in an efficient manner. Consider setting both short- and long-term goals as well as in-between goals to keep you motivated along the way.
A quick look at SMART goals
Specific – Consider the details. What exactly are you trying to accomplish? Who does this goal apply to, and which processes at your company are involved?
Measurable – Establish how you’ll track progress and determine whether or not you’ve met your goals. It’s best to use hard numbers like jobs completed, dollars billed, and proposal/bid success rate.
Achievable – If you set your goals too high, you set yourself up for disappointment and discouragement. Find a balance between ambition and feasibility.
Relevant – This is the “why” of your goal. How does achieving this goal align with your broader business objectives?
Time-bound – Again, achievability is important here. Think about what can be realistically achieved within a particular time frame.
Review your goals often! They may change over time for various reasons, and if you find a goal isn’t reasonable, make adjustments.
Defining your ideal client
In service contracting, being busy is generally a good thing. That said, there’s no time to waste on jobs that aren’t aligned with your expertise or what you actually want to do. When those factors don’t line up, jobs tend to take longer, be less profitable, and be unduly challenging.
With a clear picture of your ideal client, you can narrow down your marketing efforts to the most relevant audiences and keep working toward your goals.
Here are some questions to ask yourself and your team:
- Who do we cater to now?
- Which kinds of jobs do we take most often?
- Which kinds of jobs are the easiest to complete? Which are the most challenging?
- Are the more challenging jobs also more profitable? If not, what factors are contributing to this incongruity?
- If we could cherry-pick only the best jobs for us, what would they look like? What steps can we take to appeal to that audience and secure (more of) those jobs?
Use those questions as a starting point for developing around three or four personas that you’d like to focus on.
Once you have your personas, do some research to get to know them. What are they looking for in a service contractor (e.g. price, experience, speed)? What are their pain points? Do your services meet their needs?
If your services don’t currently align with your ideal client, it will make growing your business more difficult. Keeping your SMART goals in mind, determine whether your ideal client will need to change to better align with your services or vice versa.
Complying with laws and regulations
As your business grows and you’re able to take on larger jobs, you’ll likely be taking on more legal risk as well. Every state is different, and you should continuously research which laws apply in your area and your specific trade.
Here are some important types of laws you should be looking out for:
- Contract law
- Approvals, licensing, planning
- Property law
- Employment law
- Worker’s compensation
- General negligence and torts
- Payment laws
- General litigation
- Alternative dispute resolution
Optimizing your tech stack
In order for your business to grow and thrive, you need to make sure you're leveraging technology that empowers and optimizes. Does your current software have the features you need?
Your tech stack is the set of technologies your business uses that fit together nicely with little waste or redundancies in features. It should support a wide range of business functions, such as proposal creation, contract management, and project scheduling. Consider leveraging a combination of the following software or one software to rule them all:
Estimation software – Helps create accurate and professional estimates for your industry and turn them into effective proposals.
CRM software – Tracks pipelines, stores contact information, and enables communication with clients in one platform.
Project management software – Helps you manage tasks for your team, set and keep up with schedules, and allocate resources.
Financial tracking software – Tracks incoming/outgoing invoices, measures profits, and provides detailed reports.
Profit planning is an essential part of growing your service contracting business. After all, there’s little benefit to winning more projects if you can’t ensure that they’re profitable.
Profit planning requires an understanding of cash flow, budgeting, and forecasting to ensure that you have the resources to maximize profits, minimize risk, and achieve your goals. By taking the time to plan ahead, you can make better informed financial decisions for your business’ future.
Here, we’ll focus on two of the most important aspects of financial planning for service contractors: pricing jobs and tracking your cash flow.
Pricing jobsNo matter your trade, deciding how to price a job as a contractor is likely one of the most important — and challenging — aspects of your profitability. Underprice, and you’ll end up breaking even or losing money on jobs. Overprice, and potential clients will walk away to find more affordable services.
To avoid lowballing your services or leaving money on the table, it’s time to start pricing accurately. Consider these factors when pricing:
- Job location and site size
- Potential risks
- Time constraints and timeline
- Customizations or special requirements
- Material costs
- Labor costs
- Your profit margin goals
Wherever possible, draw on your experience with previous jobs to identify services for which you may need to give your business more wiggle room, and price those services accordingly.Creating professional proposals
To write accurate, professional proposals, keep these tips in mind:
- Don’t rely on only one team member to complete estimates. Establish a repeatable, teachable process for creating estimates so multiple people can create estimates with confidence.
- Understand the differences between estimates, quotes, proposals, bids, and invoices.
- Use software to help track measurements and counts, describe what’s being worked on, and flag anything that may go beyond your standard job.
- Be clear about the scope of the project to avoid scope creep.
- Calculate and communicate your costs with as much specificity and transparency as possible. Make a detailed list of the amount of raw materials and tools needed for the job, and provide a clear breakdown of costs for the client.
- Carefully review which resources will be available — and which may be tied up with other jobs — as you determine the project timeline.
- Don’t start from scratch for every estimate. Using a proposal template as a starting point is a great way to save time and maintain consistency.
- Use historic data to more accurately understand how your team works and provide accurate allocation estimations.
- Complete a risk assessment to understand the financial risk associated with each project.
Monitoring your cash flowTracking cash flow over time is essential for making financially sound business decisions. During times of good cash flow, it’s less risky to make process changes, hire new employees, upgrade equipment, and make other moves that will grow your business in the long run.
Your cash flow will likely fluctuate by season and according to trends within your specific trade. For example, many roofing businesses experience better cash flow over the summer when weather conditions are clear and more jobs are being completed. Roofing contractors can use this information to optimize their financial planning for each season.
To understand your cash flow, you’ll also need to understand some key metrics:
- Days sales outstanding (DSO) measures the average time it takes for your business to receive payment for jobs.
- Accounts receivable turnover (ART) measures how well your business manages collections.
- Working capital measures the capital you have available by calculating the difference between your business’ current assets and current liabilities.
- Debt to equity ratio measures how much of your business is owned by creditors. A debt ratio of greater than 1.0 (or 100% when expressed as a percentage) means a company has more debt than assets.
Use these metrics as a starting point for SMART goals related to cash flow, and track them over time to ensure you’re moving in the right direction.
Tip: Bottlenecks in the invoicing process often contribute to cash flow challenges. Digital invoicing and payment solutions can simplify the process and help your business reduce DSO.
You can’t grow your business without growing your sales. But what does a good sales growth strategy look like? Hint: it’s about more than just marketing.
Earning more jobs
Having trouble securing contracts? Here are some steps you can take to improve your odds and grow your sales:
Make your proposals look professional.
Penciled-in numbers won’t impress potential clients. Creating polished, easy-to-read proposals and delivering them instantly via email is a better way to build trust and convey your professionalism.
Be specific and transparent in your proposals.
As mentioned above, vague cost breakdowns can make potential clients feel uneasy. They’re more likely to sign if they know exactly how their money will be used.
Use your customer relationship management (CRM) system to your advantage.
Depending on your CRM’s features, you may be able to send automated follow-up emails once a new proposal has been sent to a potential client. You might also consider reaching out to previous clients with news about special offers or new services you’re launching.
Maintain a website.
In 2020, 93% of consumers used online searches to find a local business, and 73% did so weekly. At the very least, it’s vital for your website to list your services and contact information; even a simple site is better than no site at all. That said, if you have the resources to make a more polished website, go for it — 48% of users cite website design as the main factor in deciding a business’s credibility.
Optimize your marketing strategy.
Targeted social media ads, Google Search campaigns, and organic social media content are all great ways to reach your target audiences and expand your client base online. Depending on your trade and location, placing ads in local papers or magazines can also be effective.
Ask for referrals.
Encourage satisfied clients to tell their friends and colleagues about your business. Implementing a double-sided incentive system (incentives for both the referrer and referee) can be particularly effective.
Build business relationships.
Attend trade shows and industry conferences where you can network with businesses whose services complement your own. For example, if you own a painting business, you might aim to connect with architects, realtors, interior designers, and construction managers, who are likely to have clients who need your services.
Using consistent processesConsistency is essential for any business that wants to scale. Even if you’re increasing your number of leads, inconsistent processes can stifle your growth by limiting your team’s capabilities, confusing clients, and generating internal disarray.
For example, if every team member creates estimates and creates proposals differently:
- You’ll be reluctant to let certain team members do estimates, which will reduce the number of estimates you can complete within a given time frame.
- You’ll lose client trust when they notice inconsistencies in how jobs are priced, or when their projects go over budget due to inaccurate estimates.
- Inconsistency will make forecasting more difficult and less reliable.
On the other hand, if you build consistent processes that are easily teachable and repeatable, you’ll be able to trust your team members to carry out tasks correctly. Additionally, clients will see your business as more reliable and trustworthy, and you’ll be able to keep tighter control of your costs — all important ingredients for scaling up.
Providing great customer serviceGood customer service is the key to earning both repeat business and positive word-of-mouth marketing.
Many service trades (construction and general contracting in particular) are plagued by poor customer service and low consumer expectations. Providing high-quality service can be a big differentiator, and some clients are even willing to pay more for great customer experiences.
Customer service is an immense (and immensely important) topic — one that’s too complex to cover in-depth here. But here are a few best practices to consider:
- Keep frequent and consistent communication throughout the job. Next steps and timeline updates are especially vital to communicate.
- Let customers get in touch with you in a way that’s convenient for them (e.g. email, phone, text), but be sure to protect your boundaries.
- Collect feedback in a timely manner so you can take action when needed.
- Establish a policy around guarantees.
Tip: Many people look to review websites like Yelp and Google to find reputable service businesses. Stay on top of both positive and negative reviews, and demonstrate your commitment to customer service by offering amends to anyone who didn’t have a good experience.
Growing your team
As you earn more business and start meeting more of your goals, there will come a point when you’ll need to hire more team members in order to keep up. But the work doesn’t stop once you’ve added to your team — you’ll also need to scale up your communication efforts.
Recruiting and hiring
While looking for qualified candidates, consider both hard skills (i.e. technical skills and experience in your trade) as well as soft skills like interpersonal communication, leadership, and creative problem solving. The best teams are made up of people who have complementary skills and areas of expertise, not people who are carbon copies of one another.
Once you’ve found your first-choice candidate, you’ll need to make an attractive offer. Keep in mind that most candidates are not just looking for competitive pay and benefits — they also value career development opportunities, a workplace culture that aligns with their values, and perks like flexible working hours.
When a business has just a few employees, keeping everyone in the loop is relatively easy. But as you grow, take on more work, and add more team members to the mix, things get complicated fast.
Poor workplace communication can lead to numerous issues, including high stress, low morale, and missed deadlines, so if your business is growing, your internal communication will need to scale up alongside it.
You can maintain open lines of communication by holding individual and group check-in meetings, providing clear expectations for each team member, and creating a culture where people feel comfortable asking questions — advice that applies to any business, regardless of industry.
But for service contracting businesses in particular, having a single source of truth is perhaps the most important component of team communication.
Consider investing in a platform that enables your team members to view proposals and project details, track project progress, view and sort tasks that are assigned to them, and reach out to clients (where appropriate). This will cut down on inefficient back-and-forth communication and ensure that everyone is on the same page.
No matter where you are on your journey, Estimate Rocket can help you grow.
Business growth can be tricky, especially if you’re being held back by frustrating bottlenecks and process challenges. Software that scales with you can set you up for success, both in the present and in the long run.
Estimate Rocket is an all-in-one, cloud-based platform designed to help service contracting businesses grow. Here are just a few of the features it has to offer:
Estimating, sales automation, and invoicing to help you produce consistent, profitable estimates that close deals faster.
Job management to keep all project information — including job profitability — organized and easily accessible.
CRM tools to help you organize client information, automatically follow up, and more.
Scheduling tools that allow you to plan appointments and integrate with other programs.
Team collaboration tools to keep your team connected across devices.
Profitability and Financial Tracking to help you keep tabs on your profits and easily export to QuickBooks or other accounting software.
Power up your contractor customer service.
Get in touch with Estimate Rocket today.