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Referral/Repeat -vs- Advertising?

Discussion in 'Business Operations' started by SprinklerGuy, Dec 19, 2001.

  1. SprinklerGuy

    SprinklerGuy LawnSite Bronze Member
    Messages: 1,778

    Does anyone here know the average percentages one should shoot for as far as referral and repeat business? Those of you who do monthly maintenance might not have the same issue.....but, what is the percentage of our work that should be referral/repeat? Anybody?

    Also, does anyone have any idea of what would be considered a success in advertising? I just finished up this years "referral spreadsheet" and found my main advertising source to be bringing in approximately 18% of our business. Our repeat/referral biz is around 65-70% of our gross revenue.

    also, the advertising generated approximately 4.5 times the amount of revenue as it cost us. Is this okay?

    Thanks in advance.
  2. Kent Lawns

    Kent Lawns LawnSite Senior Member
    from Midwest
    Messages: 870

    The have an edifying conversation, we'll need to separate renewal from referral.

    Then we'll have 3:
    Renewal: Should be 70-95% of your last years' depending on nature, size and price structure of business.

    Referral: This would be a wildcard number in relation to total sales because of your advertising program. Also they're a referral for only 1 year and then they're a renewal.
    10-20% annually in this box.

    Advertising: Totally depends on budget and growth orientation of company. May only be 10%, may be 50%. 10-20% would seem healthy here.

    So, here might be a healthy situation for a small operator:
    In 2000, you did 100,000.
    In 2001, you renewed 90,000 of 2000 revenues.
    New referrals: 13,500 (15%)
    New customers from advertising 18,000 (20%)
    (advertising cost = 4000.00)
    2001 Total revenues: 121,500 or 21.5% growth.

    4.5x your advertising cost depends on the business. If it's a repeat business, you'll continue to generate additional revenues from those advertising dollars for years to come.

    Most of the guys I admire in business seem to grow at 20% or so. The fast growth companies seem to flame out like dot.com companies and the low or no growth means something's not right.
  3. SprinklerGuy

    SprinklerGuy LawnSite Bronze Member
    Messages: 1,778

    I appreciate the time you spent on your post, HOWEVER, I do not ever renew people, they call us on a 'as needed' basis like a plumber.

    As for my definition of referral etc. here it is:

    We use different advertising vehicles
    several yellow pages
    direct mail

    Those are not referral, I call those advertising

    As for referral, they are the ones that "got your name from mrs. so and so"
    They can also be LCO''s giving us their clients names
    They can also be property managers giving us addresses

    Repeat business is always a customer that used us once before, usually they become repeat after the 3rd visit or after a year whichever comes first.

    One of the problems with defining some of this stuff, are the lawn maintenance companies referrals actually referrals or are they repeat business? Might be a different house but he same guy is calling us to go do the work.

    Really the question was more directed at the return of investment needed on advertising. Is 4.5 okay or should I expect more?
  4. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Messages: 1,712

    I'll think about the 4.5 and try to examine my own stuff. Interesting.
  5. Kent Lawns

    Kent Lawns LawnSite Senior Member
    from Midwest
    Messages: 870

    Part of what makes a irrigation business profitable is service contracts.

    We average $203.26/year for a service contract.
    The average man/hours is 2.68
    That's over $75/hour and parts are additional.

    The beauty of this is most of the time, we can do service work at our descretion. We can deploy manpower to service when installs slow down.

    Anyway 4.5x revenues:advertising cost ratio is somewhat lower than we generate, but some advertising vehicles are more effective than others.
  6. SprinklerGuy

    SprinklerGuy LawnSite Bronze Member
    Messages: 1,778

    KENT!!!! Help!!!

    You said the magic word, service contract! I have been trying for years to start one. Went so far as to buy a service contract design kit from a guy name Grandy and Associates. He actually designed his kit around the HVAC industry but it was very helpful.

    Another guy on here Harold Foxx is from New Jersey? New york? and he and I have conversed on this same subject.

    Here in AZ we don't get to do blowouts and turn-ons so that eliminates 2 sure visits. Because of that I have had trouble in my own mind justifying the benefits. Any ideas? Willing to share?
  7. Matthew Morgan

    Matthew Morgan LawnSite Member
    Messages: 45

    As I was reading, the blow out/turn on thing camr to mind. Being that you are in the "valley of the sun", you have no "real" reason to return unless something is wrong. Maybe a check up on system operation? 4 or 6 times per year? I would think that as time goes on, parts would wear. Maybe a regualr check up could save the customer money with water bills?? I am really guessing here, but trying to help. I just take care of the lawn/landscape and I love you guys because you keep me going in dry times, but there must be something to get you in their property on a regular basis. Be creative??

  8. SprinklerGuy

    SprinklerGuy LawnSite Bronze Member
    Messages: 1,778

    That is the problem, most people only want to fix it if is broken. But, I have had service agreements in the past and when under contract, those same people called ALL THE TIME because it was under contract. The way I worded it the last time ended up costing me. I need to have a creative way to get there a few times a year yet not be liable for all the LITTLE problems that are so big when they think it is under warranty. Funny how those same problems are no big deal if they have to pay the whole service fee?

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