Add business networking to your box of heavy-duty referral tools.

Source: REPLACEMENT CONTRACTOR Magazine
Publication date: 2009-09-09

By Jay Holtzman

Steven Smalley, owner of Exterior Home Improvement, in Indianapolis, doesn't run the traditional print, TV, or radio advertising that most home improvement contractors rely on for sales leads. "I dabbled in it a little bit, threw some money at it," he says, "but it never worked."

Instead, it was referral business generated through networking of one form or another that pushed sales over the $4 million mark last year.

For example, Smalley and seven sales reps sold some $600,000 (15% of total sales) through business networking — participation in various groups, which most contractors think of as "networking."

Another 40% came from Angie's List, the Internet-based, consumer word-of-mouth network. Some 20% came from past customers. Referrals from an informal network of contractors Smalley has cultivated contributed as well.

As Smalley's experience shows, you can network in many ways. Networking through business groups generally comes to mind first, yet not many contractors understand it. It is not the in-your-face, glad-handing of the stereotypical hyper-aggressive salesman. Rather, it is "working with other people and developing a relationship of trust and confidence in which we will recommend each other's business," explains Mike Macedonio, president and partner of The Referral Institute, in Rohnert Park, Calif., a referral sales training organization. It is also a skill and tool in the larger realm of referral marketing, he adds.

"In a networking group, in effect what you are doing is teaching the members to prospect for you," Smalley says. He belongs to a number of networking groups, including BNI ("the largest business networking organization in the world,") Rainmakers, and the Chamber of Commerce.

Of these, BNI is the most "focused and structured," Smalley says. At weekly meetings, each member has one minute to present his or her business, and in rotation one featured member gets 15 minutes. Over time, members get to know one another's businesses and build relationships. "You give leads and get leads in turn," Smalley says.

Tom Cardona, owner of Handyman Unlimited, in La Verne, Calif., says that he has received "well over 1,000 leads and done far in excess of $500,000" in business, participating in a BNI group. He also gives "a ton" of referrals, he says, adding, "that is huge because if you don't give, you are never going to receive."

Businesspeople such as Smalley and Cardona, who understand that they must spend time working on their business instead of in their business, are the ones more likely to be successful, says Ivan Misner, Ph.D., founder and chairman of BNI and author of nine books on networking and other types of personal marketing. "You are out there developing relationships, connecting with people, and setting up for business you are going to get down the road," Misner says.

Business networking has proven so successful for Smalley that he requires all his reps to belong to a networking group. "It's a condition of employment," he says. Smalley pays the fees, generally a few hundred dollars a year for each, which is a tiny fraction of the return he gets.

Other types of networking have an element in common with database marketing. But past clients are just one part of a contractor's database, Macedonio explains. "People get very myopic when they think of their database as clients and past clients. That just scratches the surface of what is available to any salesperson or business owner. They have vendors, suppliers, people they do business with, different organizations they belong to," he points out. All, he maintains, are a potential source of new business.

That's not to say that customers, present and past, aren't a great place to start networking. Consultants and contractors recommend that salespeople begin networking as soon as the job is sold.

And there are three or four peak times when asking for referrals is most productive, say contractors and sales trainers. "Referrals occur when the job gets started, during construction of the job, and at the finish," explains sales and marketing consultant Chuck Anton. That's when the consumer likes the salesman most. One device to prompt immediate referrals, Anton suggests: Add space at the bottom of the contract for the consumer to jot down the names of a few people who might be interested in the company's services.

"Sometimes the salesman doesn't ask for a referral after he's made the sale because he forgets or he is excited or he doesn't want to push his luck. But if you make it part of the paperwork of the sale, he'll ask the question," Anton says

Require that the salesman visits the client while the job is in progress, advises Jake Jacobson, vice president of sales for Premier Window & Building, in Owings Mills, Md. A client's emotions go on a "roller-coaster ride" during the course of a job, he says. They're high when signing the contract, then drop a bit, rise again at the measure call, descend again while waiting for the job to begin, and head upward as construction starts. Salesmen need to work those high points, and Jacobson reminds them daily.

"Every day we tell our salesmen which jobs are getting started and which are finishing. Those two happy moments are when you are going to get your repeat business and recommended business," he says.

You can "network" around customers geographically, too. Smalley's salesmen make "T" calls around each of their jobs, he says — knocking at three houses on either side of a current job plus seven across the street (to form the "T"). The salesman introduces himself to the homeowner or leaves a letter and his business card.

"You're not asking them to buy," Smalley says, "but are simply telling them, 'We're doing a job for your neighbor, and if you have any questions or any debris blows into your yard, call us.'"

Baltimore sales trainer Tommy Steele recommends distributing door hangers in any neighborhood where a job is being installed or where you see a need for your product. "Work the areas where you've had success," he advises. "Drive around the neighborhood and drop flyers. Go where the demographics stack up in your favor because you can't sell everybody."

Home improvement marketing and sales consultant Rick Grosso advises companies to maintain ongoing contact with previous customers to build a groundwork for future referral networking. Some 21% of homeowners buy 75% of the home improvements, he says, quoting a report from Harvard University's Joint Center for Housing Studies. "People who buy from you have pride in their homes, they spend the money on their homes, and they are the ones that keep buying and buying," he adds. Use their pride to your advantage. "People love selling their own jobs to friends and neighbors once they own it and are thrilled with it," Grosso says.

Adds Anton, "The salesman can go back out to that client three months or six months after the job has been installed and get permission to put a sign in the yard again." A Pittsburgh company, for instance, recently persuaded all its customers in a group of neighborhoods to post the company's job signs, even though some of the jobs were years old, by offering to enter them in a drawing. Making it worth their while can be as simple as offering to buy dinner when a referral becomes a sale, he says.

At the beginning of 2007, Tom Capizzi, owner of Capizzi Home Improvement, in Cotuit, Mass., multiplied the opportunities for his salespeople to network with past customers by creating a program of annual warranty inspections. He mails an official-looking certificate to customers, offering a free inspection to assure that their completed jobs are "in compliance" with company and manufacturer warranties, he says.

If a customer doesn't respond to the mailing, the company sends a second and third mailer, if necessary, then office personnel follow up still further with phone calls. If they fail to make an appointment, the salesman is required to call, yet again. The program has been a "major home run," Capizzi says.

"The customers love it, because it makes our company look incredible in their eyes at a time when you can't even get a callback on a warranty item from most companies," he says. In 2007, the program resulted in some $375,000 of additional sales for Capizzi Home Improvement.

A highly refined networking program boosts sales for Alure, in East Meadow, N.Y., contributing 15% last year ($8 million) to Alure's sales, according to Seth Selesnow, the company's director of marketing.

Customers and employees earn one point toward a Caribbean vacation for each dollar a referred customer spends on his first project in the company's Partner Points program. Earn 200,000 and customers are on their way to the Caribbean. The points never expire.

Alure promotes the program with quarterly "Caribbean Night" cocktail parties, open to all customers, along with a dedicated brochure and regular mailings.

Employees, on the other hand can earn their trip in two ways, Selesnow says. "Bring in $100,000 of networking business in a calendar year or $150,000 in any five-year period." Additionally, employees earn "lead money" — $150 to $300 — when they bring in new business from existing clients. The employee with the best total each month gets a $100 gas card, too. The Partner Points program is a topic at every company meeting, where employees learn about the cost of leads and how networking leads lower costs and improve margins, creating a "win-win" situation for everyone, Selesnow says. Employees receive monthly e-mail messages reporting their status. Snapshots of employees on the trip are posted on bulletin boards. "We try to build it into the culture here," he says.

"Constant communication and education," are vital for success, Selesnow points out. "Follow-through is a key ingredient. We have had periods when we didn't give it as much attention for six months, then we started to talk about it at every meeting and in e-mail and you immediately see the difference when it is top of mind."

Referrals through networking are an important source of sales for these and other contractors. They may be getting even more important now. "As the economy continues to tighten, more referral-based business is critical, and networking is a great way to generate it," Misner says. "When business is good, a lot of contractors aren't out there marketing. When business is bad, they are desperate, and desperation isn't referable."

—Jay Holtzman is a freelance writer based in Jamestown, R.I.