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Lifetime Value of A Homeowner (Contractor’s Edition)

Updated: Sep 8


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If you’ve ever bought a cell phone plan or a razor with replacement blades, then you’ve done business with a company that knows the lifetime value of a customer.


The same goes for someone in the real estate or contracting industries.



In terms of return on investment and overall profits, one-time purchase is great.


However, good business owners understand that getting that initial customer to make another sale is a major business driver.


To start, you save money by not having to market your product completely to a new customer.


Any profits that a business makes on an initial sale can go back into leveraging that customer for a lifetime value.


By focusing on the long-term value of a customer, a contracting company can really maximize its profits.


 

Understanding What Lifetime Value Means as a Contractor



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Just like Sprint Mobile or Gillette razors, business owners in construction, real estate, and home contracting should see the value in a repeat customer.




Whether you are continuing to work with the same individual or that individual loves your work so much that they refer business to you, attempts should be made to grow new customer relationships into fruitful partnerships.


When you think of lifetime value in terms of your contracting business, this means that you are able to seek great profits and/or better business opportunities by working with a single customer/client/business partner for a longer period of time.


The profits and business opportunities grow because the customer/client/business partner is continually seeking services to improve their life.


When you look into the contracting business model, you know that many of the services that you provide come about because of referrals or one customer continually needing repairs.


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Perhaps you have landed a client that is doing renovations and you have the ability to provide solid handyman services.


In this case, you would be called in for small jobs every time a renovation is happening.


The same goes for partnerships.


If you’re in the business of plumbing, but you don’t do septic, then you could have a septic guy on hand to help you with the septic if you have clients who regularly need this support.


If you are consistently reliable and provide effective services, then your clients will come back again and again. And over time, they will become a regular client and call you for whatever they need.




Why Homeowners Make Great Long-term Customers


As a home contractors, homeowners can make great long-time customers. The same goes for property managers, although their projects may be more complex.


Nonetheless, you should consider partnering with a real estate agent as a go-to handyman recommendation for new homeowners.


Whether they are new or regular homeowners, people who own homes regularly need work done around the house. Depending on your skill or trade, these homeowners might be ready to call you for even small jobs.


It may be as simple as working through an issue on the circuit breaker. But if the homeowner is too busy, doesn’t know much about electrical, or the electrical issue is part of a bigger issue, then you could be called in more frequently than you expect.


The long-term value of a homeowner is exponential. Homeowners might:


  • Need help on a current property

  • Purchase a second, third, or fourth property in the area and need help with those properties as well

  • Have friends and family members who also need your contracting services

  • Have ongoing renovations and upgrades

  • Not know how to fix much and regularly reach out to you for your services


Depending on how you have your business set up, you could have a network of contractors that you have on call for other projects. If you subcontract each of these contractors or businesses, then you have the opportunity to set the rates.


This is part of a business opportunity that you could work out with those contractors; they would do the same for you in return!




Calculating the Lifetime Value of a Homeowner


Needless to say, a homeowner has great lifetime value. Calculating the lifetime value of a homeowner is a simple matter of math, although each factor depends on the services that you provide and the available opportunities.


If you land one client and they have you regularly performing a task, then you’ll want to calculate the profit off that job.


And for jobs that are completed after that, you can average out the profits of those jobs. If you already have clients within the same price range, then you can get an average of the profits that you get from a single client.


Know that every time you have to get a new client, then your profit goes down. This is because you have to calculate marketing expenses, operational expenses, the time and effort it takes to land them as a client, and the stress of getting new clients.


You can also estimate average profits based on the type of job:


  • Renovation

  • Ongoing maintenance

  • Preventative maintenance

  • Major repairs

  • Installations

  • Assessments

  • Retrofitting/upgrades

  • Subcontracting

  • Referrals to another contractor


Once you have an idea of how much each job profits, you can start to see the future potential. If one homeowner has you in for ongoing maintenance, they could very well request any of the listed items.


Let’s say that you profited $5000 solely in ongoing maintenance over the course of 1 year.


If that client wants to upgrade a system, then you can easily add the cost of profit for an upgrade on top of regular ongoing maintenance. The same goes for a home renovation, installation, or major repair.


The longer you are with a client, the more work that they will naturally need to happen. Machinery gets old and needs upgrades, major improvements, new installs, and so forth.


Now if you have one happy client, that happy client might refer you to their friend, family member, or coworker. You can start to see the dollar signs add up.


Once you identify how much more you profit with a homeowner, then you will want to reinvest in these relationships with better work, better tools, more time, better subcontractors, and so forth.




Tapping into Homeowner Lifetime Value


Contractors should funnel their marketing campaigns toward finding homeowners. There is a range of ways that this should be done:


  • Make sure that your online presence is fully fleshed out. You should have a website, Google My Business listing, the Google setup (including Google Analytics, Local Ads, Google Ads, and Search Console), a business email, a business phone number, and a professional name.


  • Consider hiring or subcontracting people to support your business. This could be in the form of an executive assistant, administrative staff, accounting/payroll, and automation and technology.


  • Conduct cross-media and omnichannel marketing programs, which means firing your marketing campaign on all cylinders. Use email marketing, social media marketing, video and images, and marketing automation.


  • Tap into lead generation platforms for homeowners and contractors to connect. While these platforms can be costly, they usually provide decent leads.


  • Start to funnel some of your marketing money towards PPC and local ad campaigns for more sales-qualified leads.


  • Follow up with your clients after a sale to ensure that they remember you and their service for repeat business. Make sure the transaction follow-up is clean and respectful. You can send gifts, satisfaction surveys, and more.


While you may find yourself working “hard” to land homeowners as long-term clients, you will soon find that it is worth the effort.


In smaller communities, this type of reliability and renown is often passed around between neighbors and partners. So being a great contractor and providing seamless service could go a very long way!


 

Rationale


By focusing on the long-term value of a customer, a contracting company can really maximize its profits.


As a home contractors, homeowners can make great long-time customers. The long-term value of a homeowner is exponential. Homeowners might:


  • Need help on a current property

  • Purchase a second, third, or fourth property in the area and need help with those properties as well

  • Have friends and family members who also need your contracting services

  • Have ongoing renovations and upgrades

  • Not know how to fix much and regularly reach out to you for your services


You can better understand potential profits by going through each of the potential jobs that a homeowner would request for your services and averaging out the profits on each.


Once you have an idea of how much each job profits, you can start to see the future potential.


If one homeowner has you in for ongoing maintenance, you would be their go-to contractor.


 

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