A typical profit and loss statement is the worst way to review your business results.
That’s something that you won’t hear from most accountants.
In fact, most accountants will die on a hill to ensure the sanctity of the income statement is not defiled.
But the truth is, if the profit and loss is the only thing you look at, you’re going to die on that hill with your bean counter.
Typical profit and loss statements only tell the government how much income you’ve made, and lack any actionable insights for you.
The statements also force business owners to think in a certain way.
The biggest issue is that promotion and marketing are buried with operational costs that we actively try to eliminate.
I used to think that little to no marketing expense was a good thing.
But that is a narrow and stagnant approach.
Marketing is one of the few costs that is actually the best investment you should make.
Marketing investment returns extend well beyond the month in which the marketing dollars are spent.
Your Insurance, rent and telephone costs cover you for a certain period. Nothing more.
But promotion and marketing, when executed correctly and consistently, yield massive returns on investment for years.
Many contractors and builders never invest in and benefit from marketing because they want to save a few bucks.
So, when I work with my contracting clients, I always do two things:
- Separate promotion and marketing from the other operational, necessary evil, expenses.
- Break down the expense category, so the ambiguous marketing expense becomes an actionable trigger.
How you treat promotion and marketing is the best indication of what types of customers you attract and the profit margins you’ll secure.
Two Main Marketing Expense Types
Here’s how to break down your marketing expense:
1. Branding
Branding is not logo design and color, but what your prospects think about you when they see your ad, a lawn sign at a current project, or your online reviews.
I know branding can be abstract. But step back and try to see how prospects see ‘the feeling’ of your company.
I came across this post on Instagram:
How your customer ‘feels’ about your brand will be how they decide if your bill was worth your service.
Are you a discount provider, the lowest price in town?
Or are you a quality provider, the best work in town?
I know many of you do quality work, but to be ‘competitive‘, you try to be the discount service provider to land more jobs.
This is how some contractors and builders are investing in branding:
- Gather Market Perception – Get customer feedback, online presence audit and reputation checks.
- Defining Their Desired Brand – what should clients always expect? Clarify and then paste it everywhere to be known for that.
- Invest in Professional Marketing Assets – High-end photos and videos of completed projects create credibility and brand. Customer testimonials (not just reviews) can help prospects see themselves working with you.
- Establish Market Perception – Improve the touch points for customers, by upgrading your business partnerships (architects, designers, builders), improve appearance with vehicle wraps and clothing, and change how you communicate with customers and maintain jobsites.
These activities will NOT generate leads immediately. And they’re hard to measure the return on investment for.
But they build and reinforce your brand.
A social media ad may land you a job, but a strong brand is your engine for generating consistent, repeatable profit.
2. Lead Generation
These are the activities that get customers.
They are the tactical stuff that we measure.
And they’re what many contractors spend all their money on.
I’m not going to spend too much time on what lead generation is, because there are many vendors offering it.
But the key takeaway is: Lead generation is an ongoing activity that must piggyback on your brand.
Every converted lead can be either a brand advocate or a colossal missed opportunity.
Each lead should ‘experience’ what it’s like to work with you.
If you have no brand and the customer experience is not memorable, you’ll be fighting to land that exact same lead (and their network) next time they need your service.
Don’t ever fight for the same lead twice.
Marketing Expenses
Here’s how to set up your marketing and promotion expense types:
- Branding – Market Research
- Branding – Promotional content
- Branding – Vehicle Wraps + Clothing
- Branding – Client Events + Networking
- Branding – Reviews and Testimonials
- Lead Gen – Social Media Adspend + SEO
- Lead Gen – Referral Program
When you can see how you’re investing in your brand and spending to generate leads, you’ll have better control of how much revenue you make.
