Multi-Year Study of Cornerstone Clients Offers Insight
Whenever the Cornerstone team talks with HVAC and other home services companies that are interested in how we can help them grow, they ask a lot of questions. One we hear most often is “What can we expect?” They want to know how many leads they’ll be able to generate, what kind of cost per opportunity they’ll pay, and how much of a return they can expect from their advertising spend. Business owners like benchmarks, because they can instantly determine how well their efforts measure up against those of their peers.
Cornerstone Doesn’t Have a Crystal Ball…
The simple truth is that accurate predictions are impossible. After working with a long list of firms throughout the U.S. and Canada over the past three decades, we’ve learned a lot about how processes work. One of the most important things we’ve learned is that many factors contribute to a company’s performance – and we can’t control all those factors. We can make assumptions based upon a company’s brand strength, the degree of competition in its market, and the company’s ability to close deals that generate solid revenue, but even then, the best we can do is offer a range.
… But We Can Share Client Performance
Our team spends a considerable amount of time analyzing client data, because it gives us insights into what’s working. Even more important, that data informs our efforts to refine what we do to improve performance. Recently, we took a closer look at ten very different clients and compared their numbers for two important key performance indicators (KPIs). As you’d expect, the results varied pretty dramatically.
Tracking Two KPIs
We looked into two measures that provide insight into how efficiently home services companies operate. The first is what’s known as Cost Per Lead Call (CPLC). We use ServiceTitan’s definition of any call that comes into the business and lasts more than a minute as a lead call. The second KPI measures ROI based on what the companies spend on their advertising efforts, a multiplier referred to as Return on Ad Spending, or ROAS.
Cost Per Lead Call
For the ten clients’ CPLC, the average worked out to $103.80. Put another way, on average, bringing each lead into the business took $103.80. If a contractor wants to bring 100 leads into the business based upon that average, it will cost just over $10,000. Now, it’s important to remember that this number is an average. Among the ten clients we analyzed, their cost per lead call ranged from just $47 to $199. In other words, the cost for 100 leads ranged from $4,700 to nearly $20,000, depending upon the client.
Return On Ad Spending
The average ROAS for the 10 clients worked out to 9.916, so on average, every dollar spent on advertising produced $9.92 in revenue. Here again, there was a wide range. The client with the highest ROAS achieved a multiple of 20.75, while the lowest recorded just 4.3. So spending one dollar produced anywhere from $4.30 to $20.75.
Numbers Don’t Tell the Whole Story
At first glance, the variability in the numbers might create confusion. If our work with one client creates an ROAS of 20.75, shouldn’t we achieve the same results with everyone else? Well, every client’s company and market is unique. One contractor may be in a small city with few competitors, where media is comparatively inexpensive, while another may be doing business in a major market where advertising and online marketing carries a higher price tag. One business may have a customer service team that’s amazingly skilled at turning calls into appointments, and techs who convert a substantial share of repair calls into a replacement sales, while another struggles with both processes.
Aggressive Growth: Costly But Effective
The contractor with the highest cost per lead call wasn’t spending money recklessly. They were located in a highly competitive major market, and were committed to aggressively growing their number of new customers. Leadership understood that would require an expensive strategy that involved building a presence on local TV, but it paid off. In just over two years, their revenues grew from $8 million to $13.5 million. Their average ROAS was a respectable 5.6.
Solid Branding Lowers Costs, Boosts ROAS
But that doesn’t mean the contractor with the lowest lead call cost wasn’t also successful. That one has been in business for a long time and has prioritized the development of both a strong brand image and a large customer base. As a result, they were able to generate a 20 ROAS while achieving that $47 CPLC.
No Single Answer
There’s no ideal number for either CPLC or ROAS. So much of it depends on the nature of the marketplace, how aggressively a business targets growth, the strength of local competition, and the costs associated with media choices. A company’s brand strength also plays a significant role, because familiarity with the brand makes customers more likely to choose it when presented with options. Even more important is the efficiency of the company’s operations. If your business is great at booking calls and making the most of those kitchen table conversations with customers, your ROAS is likely to be substantially higher. (Hint: staff training is one of the best investments you can make to grow your revenues.)
What Can Your Business Expect?
As we noted, there are no across-the-board benchmarks to compare yourself to, and even the pair of KPIs we discussed can vary wildly based upon the nature of your business and the strength of your resources. We’d be happy to take a look at your performance and use what we’ve learned from working with successful home services business to help you see whether your company is a well-running machine – or whether you’d benefit from what our team knows and does. Curious how your performance stacks up? Let’s take a closer look together. mail kerryf@cornerstonead.com or call 317-804-5640 x108 to start a conversation.