Your Business as a Machine – Part 2
In order to lead and manage your business, you need a way of understanding it; a structure for how it should function that you can break down, measure, train others on, and improve. We call this model your “Business as a Machine.”
In this second of 4 articles, we’ll discuss the how this model for running a successful home performance business works and each function in more detail.
Referring to the Business Machine Chart, you see seven “gears,” representing the different functions of your business. This machine is how a Home Improvement Contractor should work, and is the structure we use at Dr. Energy Saver to help our dealers to greater success.
Last month we discussed the structure of the Business Machine: each department is represented by a gear, with a manager; the person who is responsible for that function. Each gear has KPI’S, or “Key Performance Indicators.” These are the numbers you need to keep track of to measure the department’s performance.
We start the business process with an investment in advertising into the first gear, the Marketing Department – which creates leads that go the next function – the Appointment Center. The Appointment Center’s job is to fill all the “sales slots” you have available to maximize your revenue potential.
The Sales gear is as equally large as the Production gear in our model. This is because nothing happens in any home improvement business until a sale is made, and money isn’t collected from homeowner customers until the work is installed to the customer’s satisfaction.
The KPI in sales is ADL, or Average Dollar per Lead. You calculate your company ADL by taking your total revenue for a period of time and divide it by the number of leads run during that period. It tells us how much money, on average, a sales call is worth. This is an important number to know for many reasons.
First, ADL helps you determine what you can spend for lead generation. For example, if your ADL is $2,000, and you want to invest 10% of your revenue to generate leads, your budget for a lead, on average, is $200. This gives your marketing team a clear target to hit for cost per lead, one of their KPI’s. And, of course, a higher ADL lets you invest in more marketing. Second, letting your Appointment Center team know that each lead that is booked to an appointment is worth, say $2,000, will motivate the team to book more leads, improving their KPI! Starting to see how the Business Machine works?
You can also measure individual sales peoples’ ADL by taking their sales revenue and dividing this number by the number of leads that specific sales rep ran. In lean lead times, ranking your sales people by their ADL allows you to leverage your investment in marketing by assigning appointments to the sales rep with the highest ADL, and letting your lowest ADL sales people feed themselves leads. How your salespeople’s ADLs improve will also give you a direct indication of the impact your sales training efforts have on their results.
The output form the Sales gear is sold jobs that are given to the Production gear for installation, and that the Office gear schedules and manages. In next month’s article, we’ll take on the Production gear and the impact your installation crews have on your entire business results.
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