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Archive for the 'agency' Category

How to Profitably Scale Your Business Using a Salary Cap

Integrating and Implementing a Salary Cap in Your Business

Sports fans understand the concept of a salary cap because most of the major professional sports leagues have some version of a salary cap. In business the term salary cap is used to define a determined payroll limit that restricts the amount of money to be spent on wages and salaries for a specific period of time. Some restoration business owners do not think about how their business could benefit from establishing a salary cap.

As a restoration business owner your single biggest expense is likely labor– the salary/wages that you pay to your employees (including yourself) and the money paid out to subcontractors or vendors for labor. If you want to impact your overall success and your profitability, then you need to start by looking at your labor productivity as the biggest component in your business.

In a growing business, labor costs can quickly balloon out of control. When small businesses are making the transition to medium-sized businesses it is possible to fall into a dangerous feedback loop of borrowing and spending. As you scale your business, your costs will grow, and it is tempting to see break-even (your previous measure of success) as sufficiently safe growth.

Greg Crabtree is the author of Simple Numbers, Straight Talk, Big Profits, and one of the great ideas in his book is the recommendation that every business should self-impose a salary cap just like the one that NFL teams deal with every year.

How to Calculate Your Salary Cap:

To keep the math easy we will use an example of a business that generates $1,000,000 in revenue. In this example the business owner has determined that they want a 10% pre-tax profit from the business after paying themselves a reasonable market wage.

The non-salary costs were calculated by adding up all the fixed costs like materials and subcontractors, and operating expenses like rent, utilities, insurance, communications, and advertising, etc.  This would also include the cost of goods (less labor and management labor) for $1,000,000 in revenue. In this example the non-salary costs are $400,000. As you can see, that means the salary cap is $500,000, which includes all labor costs.

A simple calculation can help you determine the total labor costs allowable with your current revenues.

Labor CAP Formula:

LC = (total revenue) – [(0.1 x total revenue)] – (non-labor costs)

($1,000,000) – [($100,000)] – ($400,000) = $500,000

Here is an example:

If the current payroll expense is more than $500,000 (and the other numbers are correct) then this business is not going to hit the profit target and the business is at risk. That gets us back to the labor productivity idea- the key is to generate $1M in revenue from that $500,000 of labor, and if you want to be more profitable than 10%, then you either need to cut your salary expenses without impacting your productivity (do more with less) or grow your revenue without increasing your salary (again do more with less…or technically the same in this case).

At BDA, we believe that every restoration business owner has the right to expect that their company can deliver to them what they want out of life- freedom and the ability to create wealth.

Make it a prosperous month!  Stay tuned for next month’s article.

With Great Power…Comes Great Responsibility

In the beginning of their business, the entrepreneurial restorer is involved in all aspects of their company, from the operational side to the marketing of the business and everything in between.

As the business grows, their ability to continue this intense level of owner involvement becomes more and more difficult. As the company grows from Point B to Point C, the owner becomes faced with the responsibility and challenges that come along with the onslaught of complexities found in every growing business: the need for, the decision to, and the implementation of new processes, employees, strategies and more to get them to the next stage of the company’s growth.

In the article, “With Great Power, Comes Great Responsibility” by Business Development Associates’s President, Tim Miller, this subject will be discussed in more detail, including what not to do as the company grows.

Click here to read the full article, which appeared in the June 2013 edition of Cleanfax Magazine.

Business Development Associates, Inc. is a full-service marketing and sales agency specializing in the restoration and cleaning industries. We are helping restorers and other businesses grow their companies using proven and proprietary programs, systems and services that are generating millions in new business. If you’re a restorer looking to grow your business, visit us here to learn more or call us at 847-386-6556.

Insight Into The Customer Lifetime Value of Your Digital Customers

A recent study from marketing company Custora, who analyzes customer retention and acquisition, provided insight into the lifetime value of customers, based on the digital medium from which the customer came.

The study shows shows the varying Customer Lifetime Value of digital customers, with PPC (Pay Per Click), referral and even e-mail topping the list, beating out Facebook and Twitter in regards to obtaining a higher quality customer.

alt="Customer Lifetime Value Chart"

For customers seeking a product or service via the search engines directly (IE: Google) or click on ad specifically of what they are looking for, these results are easy to account for because those channels utilize the intent graph (the consumer is looking for something specific). Social media platforms like Facebook and Twitter will have to use their graph searches to redirect the customer to the product or service they seek.

Another result that came out of this study is that rural area customers tend to be more valuable and loyal over time, as their choices of vendors are more limited due to their living area. The Wyoming customer, for example, is 28% more valuable than the average American.

Tips for the Restoration Contractor:

While this study proves to have compelling information to help you see where valuable customers through digital efforts can come from, it’s important to incorporate a variety of digital and non-digital tactics to not only prospect for new business, but also, to make sure that they will be the kind of customer you want. The study makes a strong point for digital marketers to not put all their eggs in one or two baskets, in particular, Facebook and Twitter, who have made great strides to provide advertising, targeting tools and other strides in order to build a stronger (and more profitable) user community.

While SEO and PPC can bring in several to handfuls of leads a week, are you finding that those customers are jobs you are wanting to take on? Recently, we spoke with a prospective client who was receiving numerous leads a week through their PPC efforts, but 90% were the types of jobs they did not want, and thus, their return on investment was not what they had hoped for either.

On the flip side, we also have restoration contractor clients who see decent work come through their digital marketing efforts. But, it’s part of their overall marketing mix, and contributes as another source of business. As we mentioned before at the beginning of this blog…don’t put all your eggs in one (or two) baskets!

The most effective way to ensure a steady and predictable stream of work is to make sure that you not only have the right tactics in place (SEO, PPC, Direct Marketing Tactics, etc.), but also, the right sales reps in place and a dynamic way to hire, train, coach and manage them. Check out this article on “How Managing Your Salespeople is Different From Your Techs” to give you a flavor of what we are talking about.

And most of all, you’ve got to have a strategy as the foundation of your marketing plan, that supports the tactics and the sales force.

If you’re a restoration contractor looking to predictably grow your business, you should take a few minutes to visit us at www.gobda.com. While we’re not the perfect fit for everyone, we are a sales and marketing consulting agency helping restorers all over the country through proven and proprietary programs that help them to generate millions in new business. Now doesn’t that sound like an egg you want to have in your basket?

Will Proposed Insurance Bills for New York Backfire?

Insurers fear that a collection of nine different insurance bills up for consideration in the New York state senate will backfire, placing the state on the “worst insured markets” list.


Lawmakers, looking to help insured affected by Hurricane Sandy, have recently approved a post-Sandy insurance reform package that has several methods to better serve policyholders affected by Sandy and other related disasters. This includes:

-Establishing a “homeowner’s bill of rights”
-Creating standards for hurricane windstorm deductibles
-Restricting an insurer’s ability to cancel or not renew a homeowner’s policy
-Reducing time frames to settle claims

One group that has been vocal in the fight against these bills passing is the American Insurance Association (AIA). Believing the legislation is “misguided”, the AIA warns legislators and the public that this group of bills can create a scenario similar to that of legislation that passed in Florida after 1992’s Hurricane Andrew, also intended to help and further empower policyholders who suffer from catastrophic weather. Those laws backfired, creating a 40% decrease in insurers in the state of Florida and consequently, shrunk the insurance marketplace.

For New York, AIA warns that following in the same footsteps similar to Florida will create a tight marketplace where insurance will now come into a situation of high demand, low supply and increased premiums to the policyholder. Part of the increased cost to policyholders may come from the fact of putting more litigious power in the hands of consumers against insurers, which will get passed back down to the policyholder’s premiums eventually.

AIA also stated that insurers have closed 95% of all Sandy related claims with $5 billion going directly to New York with a 1% complaint rate, further defending AIA’s stance that this legislation is unnecessary.

With two weeks left in the legislative session, it remains to be seen if the Senate will bring the measures to the floor.

Don’t Miss These Upcoming BDA Sales & Marketing Seminars!

Don’t miss these upcoming BDA Sales & Marketing Seminars, where you can learn powerful strategies to predictably grow your business to the next level!

Contractor Connection 2013 Conference & Expo
May 21-23; San Antonio, Texas
Henry B. Gonzalez Convention Center
Tim Miller, President of BDA, Will Be Presenting the Course:
“5 Stages of Small Business Growth for a Restoration Contractor”
https://www.contractorconnection.com/contractorconference/Breakouts.aspx

Business growth often triggers other business challenges. Business owners tend to approach growing their company as one long continuum from the day they open to the day they retire. When in fact, there are distinct stages of growth, with different challenges, stressors, and potential outcomes. Growing companies can greatly profit from advanced knowledge of the challenges they are likely to face at each step.

This course will explore the five stages of growth for a small business while applying it to our specific industry. Detailed explanation of what each stage looks like, and suggested steps to successfully navigate those transitions, will be included in this course. Learn More About This Course By Clicking Here!

Sales Mastery For Restorers
August 7th; Columbus, Ohio
Cleanserv/Interlink Supply Classroom
Tim Miller, President of BDA, Will Be Presenting the Course:
“Sales Mastery for Restorers”
Hosted by: Totally Booked University/Jeff Cross, Senior Editor of Cleanfax Magazine

http://www.carpetcleaningrestorationmarketing.com/sales-mastery.html

This one-day course will teach show you how to increase sales by implementing a powerful, real world selling system that has been customized for the restoration salespeople and their targets! The course is hosted by Totally Booked University and Jeff Cross, Senior Editor of Cleanfax Magazine.

It has never been more important to maximize the ability of your sales team to deliver business. Most restorers agree that the average water loss is $3,000 with at least a 50% profit margin. That means that every sale you don’t bring in is costing you $1,500 or more! Plus, sales salaries and expenses add up quickly and you need to deliver a strong return.

Sales training isn’t new. But, sales training designed from the ground up just for restoration contractor salespeople is! There is no other program like this available anywhere! Click Here To Learn More About This Course!

If you have any questions about these upcoming courses and workshops, you can reach us at 773-777-9956 or email us at info@theBDAway.com.

We look forward to seeing you!

Property Claims Report: Severity and Frequency of Property Damage Increases, Yet Overall Customer Satisfaction Remains High

J.D. Power and Associates recently published their 2013 Property Claims Satisfaction Study, which measures the satisfaction level of 5,500 customers who have reported claims for property damage under their homeowner’s policy between May 2011 and January 2013.

Of the approximate 8% of homeowners that reported a property claim in the U.S. during that time period, the average settlement amount increased to $8,517 as compared to the prior year where the average claim averaged in at $7,937. Contents settlements have increased approximately $250 from year to year while the average repair settlement in 2013 came in at $7,844 compared to $7,151 in 2012.

Out-of-pocket expenses for homeowners nearly doubled, as the average amount in $1,945 increased to an average of $3,888 in 2013.

The survey covers five factors of their experience filing the claim: settlement, first notice of loss, estimation process, service interaction and repair process.

While customer satisfaction with the overall claims process remained high (despite 2011 and 2012 marking a historic number of claims due to catastrophic events) one aspect of the claims process represented a 9 point decrease in customer satisfaction as compared to previous years: the service interaction process.

This drop is being explained as being caused by the homeowner reporting claims through call centers (direct channels) versus directly through their agents. 68% of customers used direct channels in 2013 to report claims, up 11% from 2012.

For those that reported claims directly through their agents, satisfaction ratings were 50 points higher than those that reported claims through call centers. The decrease in or lack of personal interaction, attention and service helped contribute to the dissatisfaction amongst those that reported claims directly to the call center versus reporting the claim through their agent. (It should be noted that the study did find a few direct carriers that did have scores that were complimentary to those who made claims directly to their company).

Although the industry is showing a shift towards direct channels, can insurance companies bring the same personalized attention to the policyholder that will not only create overall satisfaction during the property claim process, but also enough to to retain those policyholders?

And, as the restoration contractor performing the work to bring the customer’s property back to pre-loss condition, you also play an important part in the claims process. Doing good work and being nice to the customers is important for any restoration contracting business. But, it’s not enough for people to decide to choose you as their restoration contractor, whether it’s the agent referring you or the policyholder deciding to choose you over the other two contractors that have given estimates.

If you are a restorer looking to find out more about how to position yourself more uniquely, check out this BDA blog entry that we posted at the beginning of the year.

If you’ve got goals that you have set (or still looking to set) for 2013 that are not on pace to reaching fulfillment, or, you’re still waiting on weather, good luck or program works to be the driving (and unpredictable) factor for growing your business, it’s never to late to redefine your company and gain a unique competitive advantage in your marketplace. (And for goodness sake, don’t wait until 2014 to do something about it!).

For those restorers who are looking to gain that unique advantage and are ready to predictably grow their business, you might be the right fit for the “The BDA Way.” To learn more about how BDA is helping other restorers secure millions in new business, visit us here to find out more information.

Climate Change High On The Radar for Insurance Carriers

With 2012 recorded as the warmest year on record in the lower 48 states and also noted as the second most extreme weather year in U.S. history, insurers have climate change high on their radar.

The recent Ceres report, Insurer Climate Risk Disclosure Survey, shows that while extreme weather is regarded as the new “norm,” many insurance professionals are just beginning to think about how this severe weather will change their business. Climate change is being seen as a major financial threat to the insurance industry. Insurance carriers are looking to put strategic plans into place to deal with the topic of climate change in the coming years as carbon pollution increases worldwide and contributes to the increased problem of global warming. These strategies are aimed to manage their risk from rising sea levels, extreme wildfire, more droughts and severe heat waves in the coming years and decades.

The survey explains that there are five primary motivations for insurers to take action on climate change including:

-Impacts on revenue and profits
-Emergent risks from the future events triggered by climate changes
-Exposure of their insured who are will be exposed to the effects of climate change, both personal and commercial lines

Developing CAT models that anticipate climate changes and the consequential effects, plus advocating and supporting the reduction of carbon emissions are among the suggestions to carriers from Ceres.

Other strategies could include rate hikes for both personal and commercial accounts in disaster-prone areas, especially if carriers feel they will have difficulty enforcing hurricane deductible clauses in their policies. Reducing the supply of policies available in a a given area is another avenue being discussed.

In the restoration industry, losses can originate from both natural and man-made causes. While counting on weather, programs or good luck is not a predictable way to grow your business, knowing how to “pay attention” to those that can refer you the work, and even more so, being prepared for those moments are key to predictably managing your business for optimal growth.

State Farm Fine-Tunes Risk Assessment, Decreases Rates

A.M. Best recently reported that carriers are looking at more than just rate increases to help them maintain profitability in a volatile property insurance market. Other risk-management initiatives that are being looked at include mandatory wind/hail deductibles, percentage hurricane deductibles and roof limitations based on the age and condition of the roof. Geo-coding and better understanding a specific home’s (versus an area’s) risk is also becoming a new trend in risk management practices.

Looking at “micro-zones” versus more broad measures is one way that State Farm in CA is able to manage the carrier’s risk while also offering more discounts to their client’s premiums. Beginning April 15th, State Farm, the largest homeowner insurer in CA, is dropping rates by an average 12.6% for more than a million customers. When looking at State Farm’s customer base in CA, that means 85% of the homeowners they insure will see an approximate $100 savings in their premiums. Renters will also see some savings upon renewal.

Instead of looking at just the zip code, State Farm’s new rate-setting system breaks down risk factors such as geology and fire danger, based on the exact geographic location of the home. This will position State Farm as having the ability to offer competitive pricing based on a fine-tuned set of risk assessments.

What Happens When the Predictable Becomes Unpredictable?

As we all know, last Sunday was the one of the most anticipated days of the year, the 47th Superbowl. And, in a blog from last week, we discussed the idea of unpredictability and that while in the 47 years of the Superbowl game occuring, you never know when something can go awry, or, when the lights may go out (pun intended here). Many have referenced Superbowl 47 as the “Blackout Bowl.” For advertisers, they’ll remember the Blackout Bowl as the event that almost turned the lights out on one of, if not their biggest, marketing expenditure of the year. (On a side note, kudos to the companies that took advantage of the opportunity and leveraged social media to create engagement during the blackout!)

But lights out at the Superbowl for 34 minutes? Most folks would think that would never happen. David Letterman, the famous late night talk show host, joked that his 9 year old son said the lights must have gone out because of Beyonce’s hair dryer. Others ventured conspiracy theories that the blackout was an opportunity for the 49′rs to make a comeback.

In our blog last week, we discussed how even something like the Superbowl, that happens like clockwork every year, is not 100% predictable. And there are companies that will spend a large portion of their marketing dollars on a significant event like this in hopes that it will be the turning point in their sales.

Ironically, something unpredictable did happen during the Superbowl that really drove the point of the blog home. So, what do you do when the predictable sources of business you count on become unpredictable? And to that, the “predictable” sources, when you really look at them, are out of your control. For the restorer, this can equate to:

-The weather (the old saying “you can always count on the weather” doesn’t always ring true in our industry)
-Program work that can be there one day and vanishes the next
-Fire chasing, which current legislation moving through the system may make this type of work no longer feasible

This is just to name a few of the “predictable” sources of business that we see restorers rely on. But more often than not, what they really want is to predictably grow their business. They just don’t know how. In that case, it’s important to seek out solutions will grow you to the next level. Plus, you will need to have the proper systems, procedures, people and processes in place to do so as well. If you’re looking to know more about the different stages of business growth, click here for more information.

You can also visit www.theBDAway.com for more information as well.

Wall Street, Restorers and How Social Media Impacts Buying Decisions

A recent survey by the Brunswick Group stated that 57% of the roughly 500 investors and sell-side analysts surveyed said they were most influenced in their investment decisions by the information they obtain directly from the company. 85% said that information directly from the company was amongst their top three most influential sources in their final buying decision.

Now, social media in regards to influencing their decisions is not totally off the table. About 14% of those surveyed said that digital and social media ranked among their top three influencers in decision making. That’s pretty powerful, but, it still points to the fact that social media has a long way to go in being the end all be all of decision making. But, it’s certainly something that should not be ignored.

The same is true with those deciding to do business with a restorer. We find that when talking to current and prospective clients, the question of social media will come up as well as other tactics and whether they are the right marketing method.

In the restoration industry, there are typically various targets that a restorer will go after: consumers, insurance professionals, plumbers and a slew of other folks that can refer business. And with anyone you are marketing to, especially those that are unfamiliar with your company in the first place, you’ll need a certain number of exposures in order for your message to break through the incredible amount of messages being received everyday by your prospect.

What was the traditional rule of “7” in marketing exposures varies now due to the rise of social media in our everyday professional and personal lives, and of course, the increased amount of messages the average prospects comes across daily. So, there’s no magic answer. Some still say 7, but others will also say 10 or even more.

The good news here is that social media can be one of the many ways you reach out to your customers in an attempt to gain brand awareness recognition. But, it’s important to take note of the Brunswick survey, as the principle of having key ways to provide your company’s message through direct means is crucial. This includes having a dynamic sales force in place to deliver your message correctly.

And, if you translate your message so effectively, consistently and frequently you can then reach what some might call the “holy grail” in marketing: immediate, unaided brand recall. For a restorer, that means that when your customer needs restoration services, they immediately think of your company and because you have done such a phenomenal job selling and marketing to them, you “own” that position in their mind of the “go-to” restorer.

So, does social media and putting all your eggs in that basket as a communications platform equal the end-all be all of reaching the holy grail? For now, no, but it’s definitely another platform that is rising in terms of influencing buying decisions, whether it’s a an IT firm trying to influence a Wall Street investor or an insurance agent or adjuster deciding whether a restorer’s services are right for them.



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