Follow the Leader

By Tom Ryan as featured in Construction Today

Increase your customer base by taking care of your reputation and the needs of your existing clients.

Perhaps the best measure of a construction company’s reputation is how many repeat customers it has. A returning customer is a satisfied one, and most contractors would probably agree they’re the best kind. Running a close second are referral customers, or new business sent to a contractor by existing clients. What business owner wouldn’t love to have more of them? Unfortunately, most don’t know how to go about increasing the valuable customer base. But there is a way to ramp up one’s repeat and referral business, and it’s well worth the effort.

The first requirement is for contractors to change how they view their customers. This involves a shift from short-term, “by-the-job” attitude to one focused on building longterm, “customer-for-life” relationships. Such a change starts with setting strategic, specific and attainable business goals. Second, every employee needs to be on-board with the new approach for it to be a success. This enables the business to become system-reliant rather than owner-dependent.

Realities Work Against Profitability

Although most contractors are good builders, many fall short as business managers for the following reasons:

  • A prevalence of “the next job” attitude among contractors – This happens when managers are so focused on finding new work for their crews that they neglect the customers they already have and fail to build lasting relationships with new ones.
  • Inadequate sales and marketing – Unless advertising is targeted, consistent and strategic, it is simply a waste of resources.
  • Reliability issues throughout the construction industry – In all fairness, many of these problems are not the fault of the individual contractors. However, the contractor is ultimately responsible for addressing them, and, for better or worse, is the face the customer sees.
  • Inadequate customer service – Dealing with customer problems and complaints is time-consuming, expensive and sometimes painful. What many contractors don’t realize, however, is that providing excellent customer service – even in painful situations – can be a powerful sales and marketing tool when it comes to building trust and earning repeat business.
  • A highly competitive marketplace and little customer loyalty – With so many contractors to choose from, customers rarely form lasting relationships with contractors. One reason for this may be that no one has ever explained to them the benefits of doing so.
  • Failure to use technology to its full potential in marketing, sales and customer service efforts – Contractors have been traditionally slow to integrate computers and data systems into their operations. Contractors have also been behind on the curve in adapting to the Internet, e-mail marketing and electroni customer contact strategies to develop longterm relationships for future business.

Simply stated, the deck is stacked against contractors who aren’t solid, proactive, modern business managers. One excellent way to start along that road is by building and maintaining long-term repeat and referral-based customer relationships.

Customers for Life

Winning a customer for life requires moving from the next-job mentality to focus on high-quality work combined with an overall positive customer experience. Just like any healthy relationship, good communication is essential. That means addressing the customer’s needs, questions and expectations before, during and after a job is completed.

What makes repeat customers so valuable? For starters, their business costs far less to acquire than new clients. When they refer other clients to a contractor, they become a lucrative source of completely new business. Another benefit to contractors who increase their volume of repeat business is greater profitability. This occurs first through the saving accrued in reduced marketing expenses. Moreover, contractors who systematically maintain repeat business and referrals tend to work with greater over-all efficiency.

For Joe Percario, president of Joe Percario General Contracting in Roselle, N.J., repeat business has been a cornerstone of the family business from its earliest days. “When my dad, Joe Percario Sr., founded the business in 1953, his motto was ‘A satisfied customer is our best advertising.’” Percario recalls.

The senior’s dedication to that principle has carried over into the second generation. It infuses everything the younger Percario does. “You have to court the relationship with each customer,” he says. “They have to see you. It means keeping your business noticed and making sure it’s getting noticed for the right reasons.”

Doing quality work is essential, but it’s just the beginning. “The courtship can never end,” Percario says. “Years of good work for a customer can be ruined by one bad experience. Keeping those credentials and your reputation pristine take a lot of hard work.”

The real challenge comes when a small company experiences success and begins to grow. “Too often, businesses outgrow their own shoes,” he says. “Problems arise, things get complicated and you forget the basics.” It’s an extremely difficult transition and many businesses simply don’t survive it. How did he manage?

“The first thing to do,” Percario says, “is define your funfundamental vision – what made you successful when you first started out?” This is important because once a business grows and adds employees, the owner’s role needs to change from a hands-on builder to hands-off supervisor. He refers to it as “firing yourself up the ladder.” There simply isn’t time for an owner of a rapidly growing construction business to continue doing the things that led to its initial success. Instead, that becomes the job of each employee, Percario says.

In addition to a vision, a business needs to set specific goals. “One of our goals was to obtain 50 percent of our business from repeat customers and referrals,” Percario says. Another was for the business to earn 10 percent profit, averaged from quarter to quarter. To achieve goals such as these, “You have to get your employees to think and act like you did on your very first job. Percario accomplishes this through a system of employee bonuses and incentives tied directly to quarterly profits. This creates an environment where every employee is invested in improving individual performance as well as the overall efficiency of the company. “It gives employees a sense that they’re in charge of their own destiny,” he explains. “It also helps the company grow because our customers are happy, our employees are, too.”

From Owner-Dependent to System-Reliant

After setting goals and establishing a company’s basic model, Percario says, the next step is to install a data and tracking system that allows an owner, “to get out of the way and let the company manage itself. My job today is to manage the business by the numbers. I collect and measure data and share it with the people who can actually make a diference—my employees,” he adds. The sales figures and other date become the basis by which Percario helps individual employees improve.

“Employees don’t believe this will work until they actually experience it happening,” Percario says. Once that happens, however, everything changes—the employees become the company’s chief sales and marketing force, not the owner.