HOW TO RECESSION-PROOF YOUR INSPECTION BUSINESS
28 Apr

HOW TO RECESSION-PROOF YOUR INSPECTION BUSINESS

Though there is some debate as to who actually said it, most of us at one time or another have heard the quote, “If you fail to plan, you are planning to fail.” For the home inspection business owner, there is little more important than this simple concept.

Whether an inspector is just starting out – building a brand, determining pricing structures, establishing a website, launching marketing efforts, forming a customer base, and much more – or an established inspector who is looking to grow their two-inspector firm into a thriving, multi-inspector business with sustainability power and an eye on a future acquisition, both inspection business owners MUST have a plan for how to turn their vision of success, into an assured reality. Without that plan, well, you know.

THE STATE OF THE ECONOMY & OUR HOUSING MARKET

There’s a lot being said right now by all sorts of “experts” regarding our economy. And of course, there’s plenty of speculation on what will happen with the housing market, and the impacts we’ll ultimately feel on our home inspection industry. Let’s review the topline.

The economy: A recent poll from Reuters found that one in four economists believe the U.S. will experience a recession this year, with that number rising to 40% over the next 24 months. While a recession is far from inevitable, there are several reasons why economists are increasingly leaning in that direction.

America’s economy unexpectedly shrank in the first quarter of 2022, with our GDP declining at an annualized rate of 1.4% between January and March. The Federal Reserve has been steadily tightening its monetary policy to tame surging inflation. Which, as of this writing, hovers around 8.5% – the highest US inflation since 1981. One method for tightening monetary policy has been to increase interest rates, which the Fed anticipates raising six more times this year. After the announcement about future interest rate hikes from the Fed on April 22, 2022, the Dow fell about 980 points, or 2.8% – signaling that investors are more worried that an interest rate spike will slow consumer spending and the housing market, ushering in the next recession.

Speaking of investors, they’re also jittery because of the war being waged in Ukraine. And rightly so. With the energy markets having to adjust to life without a supply of Russian oil while US gas and oil prices soar.

Our housing market: So far this year, the housing boom has continued from 2021, with home prices up over the past 12 months a staggering 19.3%. That’s impacting the available housing inventory, which is down 53% from pre-pandemic levels. However, rapidly increasing interest rates and inflated housing prices are beginning to drive more and more homebuyers out of the market – softening the home-buying frenzy. But maybe a bit too much.

Back in December, the typical American household would have to spend 24% of its monthly income to make a mortgage payment on the average-priced U.S. home. Today, that number is 31% – the highest reading since September 2007.

Few housing economists project a dreaded housing bubble this year, but most do feel a “correction” of sorts is coming – where sales will drop, and prices will follow in certain parts of the country.

PANIC IS FOR THE UNPREPARED

People. We tend to worry. Probably more than we should. Case in point: One in four economists believe the U.S. will experience a recession this year while 81% of adults said they think the U.S. economy is likely to experience a recession in 2022. The reality, like most things, is probably somewhere in the middle. We’ll see.

For inspection business owners, the possibility of an economic downturn is just another unfortunate bump in the road of being an entrepreneur. One potential reality that must be faced and dealt with – like so many others along the path to success, or downfall.

For any inspector, there are going to be great years for your business – years where you “feast” on the volume of business and the profits that positively impact your growth. Conversely, for some, there will be challenging years for your business – years of “famine,” where inspection volume is down, selling of ancillary services has declined, and business growth feels like ancient history.

A recession might happen. A downturn in the economy and the housing market might happen. But what separates the most successful inspection business owners from the rest is how they prepare for uncertainty, and certain difficulty. First, they don’t panic. They are equally as prepared for the feast as they are for the famine. They have a plan. So, no need to panic about failure – as any storm can be weathered.

FIVE STRATEGIES TO RECESSION-PROOF YOUR INSPECTION BUSINESS

While the following is by no means a comprehensive list, it does include some of the more important and impactful solutions for any inspection business owner looking to weather a down economy, a softening housing market, or even a full-blown recession.

1. Take a Build-to-Sell Approach

Not every home inspection business owner starts off with the intention of selling their company someday. Though many do. However, there are a lot of advantages to applying this mindset.

Very few inspectors we have met and worked with over the past 20+ years tell us they have no desire to grow their business – adding at least one or more inspectors along the way to increase profitability and gain more time back to do the things they want to do for themselves and their businesses.

That’s why the majority of inspection business owners should be building and operating a “business brand” and not so much a “personal brand.” A personal brand is built around you, the inspector – your personality, your expertise, your lifestyle, and your interests. That’s fine, right up to the point when you bring on other inspectors who aren’t you. If you are your brand, then it becomes more difficult to sell in the services and expertise of your employees that aren’t you.

On the other hand, a business brand is built around an identity you create for your business. You’re still inextricably tied to the business, but not in a way that creates doubt in a customer if you’re not actually performing the work. It also doesn’t create an unnecessary barrier to the future sale of the business.

If you take a “build it to sell it” approach to your business, that means you are truly focused on building a successful brand that doesn’t revolve mostly around you. It means you understand your business, your brand, the customers you serve, and what niche you fill. You’ve stepped back far enough to understand what systems and processes you need to put in place to make your business run optimally. And if you’ve done all that, you’ll be more than prepared to weather any financial storm that’s thrown at you.

2. Don’t Dial Back Marketing. Dial it Up!

Marketing. It’s often the first thing to go when a business is looking to cut costs in an economic downturn. In the aftermath of the recession in 2008, ad spending in the U.S. dropped an average of 13%. This, despite the fact, that decades of studies have continuously revealed the advantages of maintaining or even increasing ad budgets during a weaker economy. Those advertisers that maintained or grew their ad spending actually increased sales and market share during a recession and afterward.

The urge to trim on marketing when times are tough can be a strong one. Resist the urge. During an economic downturn, the noise level gets turned way down in our home inspection industry. This is the time to let your brand and message push the front of the line by gaining more awareness and ultimately gaining more market share. See it as an opportunity. Because it is.

The cost of advertising often drops during a slower economy – creating a “buyer’s market” for an inspection business. Take advantage of cheaper rates and consider creating promotions that incorporate partial discounts on your inspection services that might appeal to those also on a tighter budget.

During an economic downturn, people will still be searching for inspectors to do home inspections and perform other ancillary services. So, it will be critical to keep your brand top-of-mind with your current customers while still marketing to new targets. You don’t have to spend a ton of money to do it – just make sure you do it.

3. Strengthen Your Customer Relationships

Your current customers. When things start to get a little worrisome in the inspection industry, a loyal customer base can be the one thing that stands between keeping the lights on and shutting the doors. While it’s always smart, strategic, and necessary to seek out new customers, it’s equally important – perhaps even more so during a down economy – to keep the ones you already have.

Now is the time to think about the customer experience. What can you be doing to make sure your current customers are feeling like your inspection business is the ONLY place to be when they require the services you provide? How can you boost referrals? Talk to them. Really focus on building loyalty with them.

Show your customers they’re a priority by adapting your services to really suit their needs better, as well as offering them incentives. To give loyalty a little boost, consider the after-sales service. Think about what more can you do to thank them for their business while gently reminding them why they should continue to support you over your competition.

4. Take Control of Your Cash and Give Yourself Some Credit

If you are an inspection business owner that doesn’t have a good handle on your cash flow, you’re not alone. Sadly, some don’t even know their numbers. So, is it any wonder that in a study by U.S. Bank, it was discovered that 82% of businesses fail because of cash flow issues?

A lot of entrepreneurs conflate revenue with cash flow – not realizing that to grow and thrive, even during an economic downturn, it’s not so much about revenue, but profitability. Sure, you have to earn enough revenue to cover all your costs, but it’s how you think about profits throughout the lifetime of your business, and how they are applied to your vision of success that makes all the difference. This is your profit plan – a key ingredient to the larger financial plan.

Having a profit and financial plan, and being able to adhere to them, means you know your numbers right now, and are in an informed position to expand or contract depending on market conditions, and without jeopardizing the future stability of your inspection business. If you see there are likely some stormy waters ahead, like now, it’s not a bad idea to start building a cash reserve. Most business analysts advise on having at least six months’ worth of essential business expenses tucked away. For small business owners, that may sound like a lot. If so, then it’s probably time to get up close and personal with your business spending habits. Are there ways you can cut costs without sacrificing quality? Can you renegotiate contracts with vendors and suppliers? Identify strategic and nonstrategic spending. Where can you selectively trim costs to improve the return on operating expenses?

Finally, don’t wait until you are really in a cash crunch to look for additional financing. We are just now wrapping up an extended period in the U.S. of relatively “free money” from lenders. We all enjoyed the zero or next to zero interest rates while they existed, but that time has quickly passed. So, before lending standards tighten too much, secure new financing for your business. Even if you never touch it, it’s better to have it and not need it, than the other way around.

5. Refine & Strengthen Your Approach to Customer Experience Management (CXM)

Here are a few statistics to get you thinking about the state of customer service these days and the expectations of your average consumer:

  • 80% of customers say the experience a company provides is just as important as its products or services – McKinsey & Company
  • 70% of buying experiences are based on how the customer FEELS they are being treated – McKinsey & Company
  • 67% of customers say they would definitely be willing to PAY MORE for a great customer experience – McKinsey & Company
  • 51% of customers will never do business again with a company after just one negative experience – Forrester Research
  • 33% of Americans say they will consider switching companies after just a SINGLE INSTANCE of poor service – American Express 2018 Customer Service Study

Most home inspection business owners understand the concept of providing great customer service and the benefits that come from its application. However, the customer experience – the perception of your customer on all of their interactions with your company – is a little harder to wrap your noodle around. Because it involves how your agents and clients perceive your brand from the moment they first interact with it, all the way through the inspection lifecycle process – including the final delivery of the report, that last follow-up email, and a thoughtful holiday card. That’s the “experience.” How you effectively manage that experience is what separates the average to good inspection businesses, from the truly exceptional.

And it ain’t easy! Because the inspection industry has been changing. A global pandemic and seismic changes in where (and how) people work, have all contributed to a massive rethinking of commerce and how people interact with businesses and brands. Add to that the challenges we’re currently facing, and it’s no wonder that the quality of customer service is down across the country. In fact, according to the American Customer Satisfaction Index (ACSI®), customer satisfaction in the US is at its lowest level in 15 years.

Experiencing a more than decade-long stagnation in customer satisfaction means opportunity! Take time to really think about the experience a customer has with your brand. Ask yourself some of these questions:

  • How often are your agents referring business to you? Has that been increasing over time or decreasing? Either way, do you know why?
  • Does your website give the impression you will provide them with a great experience, or does it overwhelm them with details?
  • When their call is answered after a few rings, does a friendly voice greet them, giving the time to answer all their questions about one of the biggest purchase decisions they may be making in their lives?
  • Are your marketing materials friendly and engaging?
  • Are you handling leads, offering your services, and booking inspections in a helpful, easy manner?
  • Is handling special requests a non-issue?
  • After the inspection, how would you describe the reaction of your customer?
  • How are you addressing questions or concerns they may have?
  • What are you doing post-inspection to make sure the agent and client received the best possible experience?

Customer Experience Management requires a fair amount of thought and effort. However, with most businesses placing too little importance and applying too little attention on developing a solid approach, it leaves plenty of opportunity for those inspection business owners, willing to go the extra mile, to gobble up market share – growing and thriving, even during down times.

5 PROVEN MARKETING TECHNIQUES THAT WILL HELP GROW YOUR INSPECTION BUSINESS THIS YEAR
25 Mar

5 PROVEN MARKETING TECHNIQUES THAT WILL HELP GROW YOUR INSPECTION BUSINESS THIS YEAR

Starting a new home inspection business is no easy task and requires a lot of time and effort. And even after you’ve achieved some success from some steady, reliable clients who kick you some business on the regular, it can become difficult to get to that next level of growth. You need to perfect your inspection service offering, select the right sales channels, research your target customers (no, you can’t simply default to “realtors”), and more.

However, no matter how good your inspection services are or the expanded ancillary services you provide, people won’t know about your business unless you market it. That might seem like a no-brainer, but marketing is an essential part of establishing your brand and generating sales leads for your inspection business. In this post, we will discuss a few of the best marketing techniques that will help you grow your inspection business both in size and reputation.

1. Tell Your Brand Story. Be Authentic. But Maybe Not THAT Authentic.

This may be the most important technique to remember from this post. For any business, it is critical to connect with its target audience and form a distinct brand image. Telling your brand story is one of the best and most effective ways to achieve that.

Brands that are authentic – honest, transparent, up-front, and proud of their unique(ness) – and have a good story about how they came to be, are often more memorable and form lasting impressions. So, if you want people who hear about your brand for the first time to remember it, tell them your brand story.

Let’s be clear though. Brands are like people. And just because someone is “memorable,” that doesn’t necessarily mean they are memorable in a good way.

For example, we all know that guy who is loud, often over-the-top, sometimes crude, fun to hang out with occasionally, but just not for everyone. We’ll call him “Bob.” It probably takes a special type of person to tolerate Bob for any extended period of time, and even those more charitable individuals grow weary of Bob’s antics and behavior after a while. However, there are a lot of colorful stories Bob tells. He doesn’t really care what people think – he’s just “keeping it real” and being his authentic self – and while we cringe, roll our eyes, and occasionally chuckle during Bob storytime hour, we’re really laughing more at Bob than with him. This is bad memorable.

Conversely, we all know that other guy. Let’s call him “Tim.” Tim is kind, responsible, funny, always positive, and you just feel great being around him. He also integrates well into your network of family and friends. He’s thoughtful – calling or sending a text on your birthday, picking up the occasional check for lunch or dinner, and giving you his full attention when you’re talking. Tim has some colorful stories too – equally entertaining as Bob’s – but he never crosses any inappropriate lines and he’s careful not to throw other people under the bus to make himself seem better in some way.

Now, if you think of Bob and Tim in terms of a brand, which do you think will appeal more to a broader audience? Tim of course.

So, when you present your brand and tell your brand story, do it in a way that is authentic and memorable, but not in a way that is “too colorful” or off-putting. Think about your broader audience and provide details that place a spotlight on what makes you and your business unique, but only in ways that generate a positive lasting impression. This is the feeling you want your audience to have – and when it’s done well, and you combine that with great overall service – you will have increased your leads and the desire for repeat business. Be like Bob!

2. Build an SEO-Friendly Website

The first thing any inspection business needs is a website where people can learn about your business and buy your products or services. If you build a website that is optimized for both the search engines and conversions, then you’ve already crossed the first hurdle. Way to go!

Now, getting organic traffic to your website should be your first priority before you start investing in other marketing tactics. NOTE: This isn’t always an easy task. So, unless you already have some experience here or are a gifted wordsmith and capable of generating quality, relevant content that connects with your audience, you probably want to get some outside assistance.

Here are some things that you should consider:

  • Create good-quality content on trending topics in your niche.
  • Do extensive keyword research before creating your website content.
  • Incorporate your primary keywords into all your website landing pages, titles, meta descriptions, etc.
  • Use structured data to get better SERP rankings for your web pages and make your SERP listings stand apart from others.
  • Focus more on local SEO and long-tail keywords.
  • Don’t forget to take care of technical SEO aspects like page-load speed and website design.

There is a lot that goes into building an SEO-friendly website, but these tips should get you started on the right path. However, if this all sounds like Greek, don’t be afraid to call in the experts!

3. Leverage Social Media Marketing

As a small-business owner, one of the cheapest and most effective forms of marketing that you can invest in is social media marketing.

If you’re willing to invest time and effort into it, you can do this in-house with minimal expenditure. And, as your business grows, you can start leveraging social media marketing tools to manage your accounts.

Just remember to keep your brand in mind at all times. It’s easy to default to a more relaxed or casual approach to marketing on social media. That’s not necessarily a bad thing, but don’t let relaxed and casual translate to sloppy and inconsistent. Whatever you post, make sure it’s consistent with your brand image, identity, and the messages you wish to convey to your target audience.

Here are some social media marketing tips to get you started:

  • Select the right platforms where your target customers are active.
  • Find your brand voice and stick to it.
  • Be regular and consistent in posting social media content.
  • Use high-quality, eye-catching visuals to attract audience attention.
  • Add your website link in your social media bios.
  • Use tactics that drive social media traffic to your website.
  • Use popular and relevant hashtags to reach more people.
  • Create your own branded hashtags to track your campaigns.

For any home inspection business, there can be a lot that goes into formulating a winning social media marketing strategy. These are just some tips to get you started. Once you have mastered these, you should dig deeper, upskill yourself, and try more advanced social media marketing tactics.

4. Establish Your Expertise in Your Niche

Not all home inspectors are created equal. That’s right. We said it. Some inspectors have years of experience while others are just inspecting their first dark and dreary crawl space for the first time. However, determining how to establish your expertise in the home inspection industry is one thing that can help you distinguish yourself from other inspectors and their businesses while building your brand image. Everyone else is probably using the same marketing tactics as you are; so, you need to find additional ways to set yourself apart.

Focusing on establishing yourself as an industry expert is one such tactic.

Here are some of the ways in which you can do that:

  • Start a blog and create informative and useful content on topics within your niche.
  • Join community forums like Quora and answer questions there.
  • Engage in discussions on industry association sites like InterNACHI or ASHI.
  • Engage in discussions on social media on relevant topics within your areas of expertise.
  • Host webinars and podcasts on useful and relevant topics. Invite other experts to get more visibility and reach.
  • As you start making waves in the inspection industry, people will start inviting you for interviews and podcasts. Make time to participate in these things as it further enhances your reputation.

5. Create and Promote Explainer Videos

This tactic, while relevant for most businesses, is especially important for home inspection business owners looking to spread brand awareness.

Even the best of businesses with amazing products and services can struggle to gain that initial momentum and get people to learn about their brand. And, if you launch an innovative product, then it is even more difficult to make people understand what it is and how it can help them.

Just as we said earlier that not all home inspectors are alike, neither are all home inspections. We know that comes as no surprise, but it’s often frustratingly true for too many inspectors who really want their customers to understand everything that goes into performing an exceptional home inspection. And how much potential time, money, and headaches a great inspection and report can save anyone looking to buy that most expensive and personal of investments – a home.

For inspectors, some great explainer videos can really help to remove any of those initial hurdles where most businesses fail to make their target customers truly understand the value that they’re providing. And these videos are a great way of demonstrating an inspector’s knowledge and understanding of the home inspection process – while also giving a little exposure of the people involved in the process and the thinking behind it.

Two examples of inspectors doing a great job on the explainer video front are Christopher Murphy with A-Action Home Inspection Houston and Rose Buckley with US Inspect.

Christopher and his team have been providing explainer videos, and a host of other video content, for several years now. Here’s a taste of some of that great content

Rose established her presence in the industry several years back – expertly creating and distributing her video content, which has helped to serve as a critical foundation for her growth and brand awareness. You can see some of this great content HERE

Bottom line, if you’re not creating and using explainer videos for your business, it’s time to start. And don’t get frozen into inaction overthinking your videos need to be Oscar-winning pieces of content. They don’t. They do, however, need to be short, to-the-point, on-topic, and have relevant value to your audience. Focus on the latter and you’ll be surprised by the positive reactions and boost you get from their production and dissemination.

What Next?

If you have a small home inspection business and are struggling to meet your marketing goals, try the tactics outlined in this post. These are tried-and-tested marketing techniques that can give you the push you need to ace your marketing game.

Try these out and see the results for yourself!

13 Business Metrics Every Home Inspector Should be Tracking [Part 2]
05 Nov

13 Business Metrics Every Home Inspector Should be Tracking [Part 2]

[PART 2 OF 2]

In part one of this post, we explored some of the key business and financial metrics that can directly impact different aspects of your business and ultimately your profitability. Much like the previous recommendations in part one, the following front office, sales and marketing metrics are the base recommended metrics for a home inspection company. They are not exclusive – and if you have others that you track and you see value in that process, you should continue.

As a refresher, let’s briefly touch upon what exactly are business metrics, why they really matter, and what kind of an impact the tracking of specific metrics can have on your home inspection business.

First off…what are business metrics?

Depending on your experiences in the business world, business metrics can mean different things to different people in different situations. In the case of your home inspection business, it is a quantifiable measure of components of your business. They are used to track and assess the various aspects of your business – providing you a good sense of how your business is performing and if you are meeting your business goals.

Why the heck are they so important?

There are three key reasons why metrics are important to your business.

A. It will improve…

Your decision making with business decisions. Often business owners rely on their instincts when making decisions, which can be led by emotion and not objective reasoning. By looking at the data, you can avoid, or at least minimize, the emotional bias with key decisions. By relying on the facts and the data behind them, rather than an opinion, you will make better decisions that will increase the success of your business.

One example is with your pricing. Do you have data that says you cannot increase your prices 10% or more, or are you relying on your gut? By tracking a few items in your business, you can make a change, see how it impacts your business, then adjust accordingly, rather than guessing change is bad, artificially limiting your ability to grow your revenue.

B. You can track

Your progress towards your goals. Many business owners are tracking their inspection volume, which gives them a map that both tells them where they are and the path of their home inspection journey with the number of inspections. But if you are looking to grow, by setting goals and tracking your progress in other areas (Sales and Marketing, for example) you will be able to see progress you are making and see if you may need to take other actions if improvements are needed.

C. It allows…

You to catch problems. Looking at the data over time will allow you to identify trends and spot a problem before it damages your company. For example, you notice while inspection counts are stable the number of agents using you has declined. What would happen if one or two of those top agents went away? By finding these trends early you can dig in and try to find and resolve the underlying issue before it impacts your company’s bottom line.

What should you be tracking?

As mentioned before, the recommendations below are the base recommended metrics for a home inspection company. The focus is on key metrics that can directly impact different aspects of your business and ultimately your profitability.

Front Office/Sales Metrics

7. Sales Target / Quota

If you are a one-person business, you are your sales team. As you grow, you will bring on partners (like ACC) or go through the process of hiring and managing an office staff to handle your calls, emails and texts to educate your customers to ultimately upsell and book inspections for your business. Setting targets for your team for the number of inspections performed in each month, along with the revenue generated by those inspections, allows you to know if you are on track to reach the revenue goals you have established for your business.

8. Close Rate

As experienced business owners know, not every customer contact (call, email, text, etc.) is an opportunity to provide a service to a customer. The close rate is the percentage of actual opportunities you were able to turn into a sale (revenue). To calculate your close rate, first you must be able to track and categorize your customer contacts for a given month, then simply divide by the number of inspections booked for that month.

Close rate percentage = (Total number of Sales / Total number of opportunities to sell) * 100

For example, you booked 20 inspections in the month, had a total of 150 calls of which 25 were categorized as opportunities. Your close rate would be (20/25) * 100 or 80%. Note that in this industry it can take multiple contacts to book a single inspection, so you do not want to include any additional calls past the initial outreach.

Tracking at a company and individual basis will help you identify opportunities for your company. If your close rate is high, great, you are effective at closing! If not, it is probably time to evaluate your sales process and adjust.

9. Missed Calls

There are several ways to measure this, but the simplest is “how many calls went to voicemail?” More advanced would be “how many calls were dropped after ringing for XX second?” During typical business hours for the real estate world, if a potential opportunity call goes to voice, odds are the caller will reach out to the next inspector on their list.

After tracking this metric, if you discover you or your team are seeing a significant number of missed calls, you will need to explore why. It could be a capacity issue during peak call times (too many calls, not enough people to handle them) or even something as simple as you your phone system not being able direct calls during high volume times.

10. Average Price per Inspection / Additional Services per Inspection

These metrics tend to go hand in hand, and by tracking them you will be able to see how well you and your team are able to upsell your additional services which has a direct impact on the bottom line. If you see changes in performance at a company or individual level, you will be able to take corrective action once you understand the reasons behind the changes. It might mean changing how your team approaches upselling, running promotions in your market for your additional services or evaluating if your competition is doing something new or different (for example, offering services with a package discount).

Marketing Metrics

11. New Agents

In the residential home inspection industry, revenue growth primarily comes from acquiring new clients. Those clients are typically referred by real estate agents. To make sure your business has a broad customer base and is not susceptible to a few agents changing their minds and using a different inspection company, how many new agents have you started working with every month?

Setting a goal around new agent acquisition, then tracking it, will help drive your marketing programs and better guide those investments. While this is referring to agents that have not used your services in the past, agents new to the real estate profession are also a great opportunity to “get in early”. While transaction volume with newer real estate agents is typically low, if you can find them, then help them, they will see you as a valuable partner on their team.

12. Agent / Customer Distribution

Knowing where your business is coming from is key in understanding the health of your business. This is where your business management software should make it easy for you to see this data via built-in reporting. Once you have the data, compare it to your goals for your business.

  • Do most of your inspections come from a few agents? If so, focusing on expanding your agent base should be a priority, in the event one of those agents stops using you for any reason (retirement, moving, you upset them…)
  • Do you have a broad base of agents using your services? If so, great! The next step is to see how the clients are distributed across those agents and see if there are opportunities to gain more of an individual agents’ business.

Combined with the other marketing metrics, this will help you focus on where you need to spend your marketing time and dollars to make sure your business is on a stable footing and ready to grow.

13. Return on Marketing Spend / Breakeven

Simply put, for every dollar you are spending on marketing, advertising, etc. how much revenue is that generating?

Return on Marketing spend = (Sales from Marketing – Marketing costs) / Marketing costs) *100

For example, you run a direct mail campaign to new real estate agents that generated four inspections from new (to your business) agents. If the revenue from those inspections was $1,600 and it cost $400 for the campaign, your return is:

(($1,600 – $400) / $400) * 100 or 300%

You can also use this a simple way to evaluate different marketing campaigns by building up your assumptions around them (how much will it cost and the potential number of inspections generated) and then comparing them.

Breakeven is another simple way to determine if the opportunity makes sense. For example, your average revenue per inspection is $400 and your gross margin is 70%. An opportunity arises for you to spend $1,000 with a local real estate agency to become a “preferred vendor” (a marketing expense) for a year. Your break-even is:

Investment / Profitability per Inspection = Number of inspections to break even

$1,000 / ($400 * 70%) = 4 inspections

If you think the arrangement will bring in at least 4 inspections during that year it is probably worth the investment but should be compared to your other marketing.

Conclusion

For new business owners, this can initially be overwhelming; so, having a business management system, and spending the time to learn and use it, is critical to your business success and growth. And even for experienced business owners, it is important to not spend your time only collecting or analyzing the data without using the insights provided by the data to actively manage your business.

The list above, and in the previous post, is a starting point for making sure you have good visibility into your business’s performance, and you will want to take the time to tailor the metrics to fit your particular needs. Having the appropriate business metrics in place ultimately allows you to steer your company towards achieving the goals you have set.

13 Business Metrics Every Home Inspector Should Be Tracking [Part 1]
10 Aug

13 Business Metrics Every Home Inspector Should Be Tracking [Part 1]

[PART 1 OF 2]

First off…what are business metrics?

Depending on your experiences in the business world, business metrics can mean different things to different people in different situations. In the case of your home inspection business, it is a quantifiable measure of components of your business. They are used to track and assess the various aspects of your business – providing you a good sense of how your business is performing and if you are meeting your business goals.

Why the heck are they so important?

There are three key reasons why metrics are important to your business.

A. It will improve…

Your decision making with business decisions. Often business owners rely on their instincts when making decisions, which can be led by emotion and not objective reasoning. By looking at the data, you can avoid, or at least minimize, the emotional bias with key decisions. By relying on the facts and the data behind them, rather than an opinion, you will make better decisions that will increase the success of your business.

One example is with your pricing. Do you have data that says you cannot increase your prices 10% or more, or are you relying on your gut? By tracking a few items in your business, you can make a change, see how it impacts your business, then adjust accordingly, rather than guessing change is bad, artificially limiting your ability to grow your revenue.

B. You can track

Your progress towards your goals. Many business owners are tracking their inspection volume, which gives them a map that both tells them where they are and the path of their home inspection journey with the number of inspections. But if you are looking to grow, by setting goals and tracking your progress in other areas (Sales and Marketing, for example) you will be able to see progress you are making and see if you may need to take other actions if improvements are needed.

C. It allows…

You to catch problems. Looking at the data over time will allow you to identify trends and spot a problem before it damages your company. For example, you notice while inspection counts are stable the number of agents using you has declined. What would happen if one or two of those top agents went away? By finding these trends early you can dig in and try to find and resolve the underlying issue before it impacts your company’s bottom line.

What should you be tracking?

The recommendations below are the base recommended metrics for a home inspection company. They are not exclusive and if you have others that you track, fantastic! The focus is on key metrics that can directly impact different aspects of your business and ultimately your profitability.

Business/Financial Metrics

1. Total Revenue

This metric tracks the amount of money your company is bringing in. Simply put, without revenue you do not have a business and fortunately this tends to be one of the easiest to track. You will want to look at this from a month-over-month perspective (MOM – which accounts for the seasonality of the inspection industry), year-over-year (YOY – to see how your business is growing) and year-to-date (YTD – to help you with your goals).

2. Overhead – Fixed Costs

A home inspection company is generally a low overhead business when starting out and often increases as you grow. Fixed costs are those expenses that you pay to run your business, even if you are not doing any inspections (those expenses – variable – are covered below). Rent, employees (typically non-inspectors), vehicle payments and insurance are considered fixed expenses. If you do an owner draw this would be a fixed cost as well. You will want to look at this on a monthly and annual basis as a percent of your revenue.

3. Variable Costs

These are expenses that relate to delivering your services (the home inspection and ancillaries). An example would be inspector commissions on services performed. Other expenses that are only incurred because a service was performed would include lab fees, sample costs, etc. You will also want to look at this on a monthly and annual basis as a percent of your revenue.

4. Profit / Gross Margin

Subtract your fixed and variable costs from your revenue and you have your profit. At the most basic level you want your revenue to be higher than your expenses, else it is hard to run your business (unless you are just starting out, then you should have goals in place to get to break even by a certain date).

In addition to tracking your overall profit you should track your gross margin. This will tell you how much profit you are making from each sale. There are several options for calculating it, but for your business keeping it simple is better.

The simple formula is: Gross Margin % = ((Total Revenue – Total Costs) / total Revenue) x 100

For example, if your annual revenue was $100,000 and your total costs were $30,000, your gross margin is 70%. 

Gross margin goes together with profitability, and typically as your business expands (bring on new inspectors, expanding your partnerships) you may see your margins decrease a touch while profitability increases. That is okay! When planning you should use both to decide where you may want to invest to grow your business and you should look at this at a monthly, annual, MOM, YOY and YTD basis.

5. Inspection / Services Volume

In addition to tracking the number of home inspections by type, it is important to track all the other services you provide as well. This will help identify trends and areas of future focus. Are you seeing a change in the number of Radon tests associated with a home inspection? Do you see an opportunity to grow your new sewer scope service? How many of your inspections include ancillary services? As the industry is typically cyclical, seeing the trends can help you adjust your marketing efforts to build awareness of other services during the slower times to help maintain your revenue stream.

This will also provide data if you may need to adjust how you are selling your services. Bundling services into different packages may increase ancillary sales if there is perceived value. Based on the trend data there may be indicators that it is time to revisit your pricing. Having a good pulse on all of your services may also help you identify future growth areas.

6. Agent Lifetime Value

Many businesses track customer Lifetime Value (LTV), but due to the nature of the real estate industry the customer is typically a real estate agent, with the client being the home buyer or seller. For a variety of reasons, data shows that the average length of home ownership has increased to over eight years (ipropertymanagement.com). So, unless your client is an investor, the typical lifetime value of a client is the price of a home inspection. Real estate agents, on the other hand, are now averaging 10 residential transactions per year (NAR). The reality is that some agents are doing a lot more than 10 per year, while others are doing significantly less (in some regions there are many part-time agents where the average might be one transaction per year or less!).

Knowing your agents, how many transactions they do a year and how many inspections they book with your company will give you guidance on projecting future revenue and helping hone your marketing strategy. To formula to calculate Agent LTV is:

Agent Lifetime Value (LTV) = Average inspection cost x Number of inspections ordered per year x Average Agent lifespan (recommending capping at 5 years) x Gross Margin

For example, if you have an agent regularly bringing you five inspections a year, averaging $500 per inspection, assuming a 5 year “lifetime” and gross margins of 75%, the LTV of that agent is $500 per inspection x 5 inspections per year x 5 years * .75 or $9,375.

Why is this useful?

  • It can help you decide how much to spend on attempting to acquire new agents.
  • It can help you decide where to invest with your existing agents.
    • You will be able to see which agents provide the most value to your business.
    • You will be able to see which agents have potential to provide more value to your business.
    • If you have an agent who has only ordered one inspection from you, but they are a top producer, building that relationship to attract more business will increase the value of that agent and generate more revenue for your business.
  • You will be able to see where you should shift your investments to get the greatest return per agent.

In part two of this post, we’ll explore seven other business metrics every home inspector should be tracking, including critical metrics associated with sales and marketing.

How to Keep Growing During Busy Season
07 Jul

How to Keep Growing During Busy Season

[ This article, authored by ACC President Paul Zak, originally appeared in Working RE Magazine ]

Your inspection business is booming, and you are finding yourself stuck between a rock and hard place – you want to grow, but there is not enough time in the day to do anything but work your business and maybe get some sleep.

What is consuming all of your time? Typically, all aspects of the inspection lifecycle, as you are focused on delighting your customers during every step of the process.

  • It is critical to answer the phone, might be a future client!
  • It is critical to book the inspection, spending the time to make sure you get everything you need while educating and upselling your services.
  • It is critical to travel to and perform the inspection.
  • It is critical so spend the time to review the findings with the client.
  • It is critical to produce a high-quality inspection report.
  • Again, all the while trying to keep the agent and client happy.

[For a refresher on a customer-centric focus, check out our blog here (How Customer-Centric is Your Home Inspection Business? – America’s Call Center (americascallcenter.com)]

So how do you find time to do something different when you are already spending 12+ hours a day, 7 days a week working your business? The first thing you need to do is make a conscious decision to do something different. Invest your time and money in the short term to get the benefits long term.

You have decided to make an investment to grow. Great! So, where do you find the time?

You could try working even more hours, but that is difficult to sustain, especially if you are doing 2-3 inspections a day. Instead, block off time on your schedule (typically an existing inspection slot) to specifically work “on” your business instead of “in” your business. Yes, you will be losing that inspection revenue, but the return on investment will make it worth it in the long run!

You blocked off some time, now what? Start by thinking about how you are going to repeatedly find the time to do something different. To oversimplify, the options generally come down to:

  1. Work harder
  2. Work more efficiently (saving time)
  3. Offload / delegate some of your current responsibilities (buying back your time)

All while keeping in mind your priorities…

  1. You must keep the business running,
  2. While always providing your agents and clients the best possible service,
  3. As you are trying to grow your business.

If you are doing things in your business that do not fall within those priorities, stop doing them!

Work Harder

This might be an option for some, and this can take on a couple of different forms. The simplest is to add some extra hours to your workday not slotted for inspections. Just keep in mind that family and sleep are general viewed as important 🙂 Or spend some time on your day off to spend some of that time working “on” your business, identifying ways to eventually buy that time back.

Work Smarter

This encompasses looking at ways to become more efficient and effective in running your business, which is essentially saving or buying time.

Have you optimized your inspection process and maximized the capabilities of your report writing software? There are many extraordinarily successful inspection businesses that provide high-quality, on-site or next day reports. Even if on-site is not a part of your business model, if you can have most of your report done on-site you could save hours or more a day. Have you optimized your comment libraries or are you writing custom novels for each report? (And sorry to say, very few people are willing to sit through a 120-page report – it is hard enough to get agents to read the summary!) Are you using the native capabilities of your device for photos, etc. so you are not having to waste time simply moving data around? If you do not know how to optimize your report writing software, you should take advantage of the software’s support team and the various community forums that are available.

Are you taking advantage of your business management software? Have you automated all your agent and customer notifications? Have you automated your invoicing and integrated with a payment processor? Do you have secure, automated report delivery? Are you taking advantage of online scheduling? Are you using your business management software to help drive your marketing activities? There can be a good amount of effort required to initially set up your business management software, but once up and running that can save you even more time during the day, as you are not having to spend your precious time on details that can be automatically handled. Taking the time to learn and utilize the tools you have available now will reap many benefits down the road.

One subtle time killer, that many inspectors do not consider, is an overcomplicated pricing structure. How does this impact your time? If you have 5 different water quality options, 4 different air quality options, different prices for add-on services based on base inspection types, etc. that builds in unnecessary complications in having to understand or explain the differences. In most cases the client or agent does not care, they just want what they need. While there are some areas that are highly price sensitive, most consumers are willing to pay a little more for simplicity. Offer packages, keep your non-mainstream services off your online scheduler and have commonality across add-on service pricing. These are all ways to simplify, saving you time and possibly even increasing your average inspection fee.

Now look at where you are spending your time. If you are making $100-$150+ per hour per inspection, doesn’t it make sense to hire out some of the job functions that are important but probably would not cost you $100 per hour?

But “nobody can do it as good as me!” Ah, yes. That argument. Prepare for your balloon to be deflated because, guess what – that just is not true. While another person might not do it exactly the same way you do, there’s plenty of proof out there that others can do just as good a job as you and sometimes better. There are countless inspection companies in our industry that are extraordinarily successful who do NOT do it all themselves. If you are an “only I can do it” person, you will always be your biggest limiting factor. And unless you get past that, you will be greatly limiting your growth.

Hiring People and Partnering

You recognize that there are resources out there to grow your business. So where do you start? The easiest “go-to” is to hire another inspector to increase your capacity. You will have to make sure you have enough volume to keep them busy, have a plan for a training and a compensation program, and a good general rule of thumb is that if you are repeatedly at 80% capacity or more, you should start hiring now. And as the new inspector ramps up and starts working on their own, you should have more time to further work on your business. Though recognize this also comes with some overhead – as you must find the right person, train them and actively manage them. While in principle it sounds easy and is very necessary, be aware it can consume quite a bit of your time at the start. Talk to your peers who have been successful at this and borrow as many of their processes as you can that make sense for you.

The biggest return you will get is trading your time to find and engage the right partners. For example: Do you have somebody helping you with your taxes? Do you have somebody helping you with your insurance? If you are running your own business, the answers should be “Yes!” which means you already have a couple of business partners.

You have already made the decision to not spend your precious ($100+/hour) time on those activities, now think of where you are spending time in your business that does not absolutely require you to do the work. What might be helpful is to put it into context.

  • Would you pay someone $100 per hour to handle your marketing on a regular basis?
  • Would you pay someone $100 per hour to handle your website, social media, etc.?
  • Would you pay someone $100 per hour to answer your phones, handle your emails?
  • Would you pay someone $100 per hour to book your inspections, handle access, etc.?
  • Where else are you spending your valuable time on activities not generating $100+ per hour?

There might be some items that you are not willing to give up (like marketing), which in some cases could be okay, but be cautious. Remember, it is about the ROI. Far too many people fancy themselves marketing “experts;” when in reality, someone can do just as much harm as good by engaging in the wrong marketing activities and spending limited advertising dollars on tactics that simply don’t pay off. The best-case result from this is simply wasted time and money. While the worst-case result could be damage to the brand and your bottom line.

As the president of ACC, I can say without hesitation, that in my 20-plus years of experience in the home inspection industry, one of the other most difficult things for inspectors to give up is answering their own phones and managing incoming leads. Again, the most common argument is “nobody can do it as good as me!” And that very well may be the case; but how can an inspection business grow if the owner never relinquishes that part of the home inspection process lifecycle? Bottom line – they can’t.

However, after two decades of refining our process at ACC for home inspectors, I’ll comfortably put any of our talented customer service agents on the front lines for our inspector clients and their businesses. Because our customer service agents know this industry and they utilize our proven customer-centric growth approach. In fact, our customers see an increase of 15% – 30% in revenue after starting services with us while only paying an average of $2 – $5 an hour for those services. Sure, I’m clearly biased, but that’s a huge value for the dollar.

ACC isn’t the only solid ROI partner out there for which inspectors should seek to engage if they want to grow. There are plenty. Just make sure you spend the time to find the “right” partner. Start by asking yourself a few key questions:

  • Do I have reasonable expectations of my partners?
  • Am I willing to invest in making the partnership successful?
  • Am I looking at a “quick fix” or a long-term partnership that can grow as I grow?
  • Am I willing to adjust my business to get the benefits of bringing in a partner?

Too often new business owners (and even some experienced owners) bring a “only my way is the right way” mentality when developing a new partnership – which is unfortunate. They do not look at it from a perspective of “this potential partner has been doing their specialty for 5, 10 or even 20+ years; I might be able to learn something from them.” Not viewing the potential arrangement as a partnership puts the partnership in a death spiral from the start, as more than likely the partnership will be deemed a failure with the first potential mistake, probably based on an unreasonable expectation.

If you approach it from a perspective of “I want to find a strong, experienced partner who will work with me to grow” and “I need to figure out how I can take the best advantage of the partnership, even if it means change” you will find an abundant return on your investment. It does not mean that there will not be hiccups along the way, but when they are encountered, how you and your partner work through them will set the foundation for a solid, long-term partnership that will more than pay for itself over time.

Lastly, once you have developed a partnership, make sure to give it enough time to draw the right conclusions. It probably took longer than a month or two to dial in your business processes and to get your phone ringing off the hook. So, make sure you give any partners you decide to work with the same grace you gave yourself. If there are obvious signs that this new partnership simply is not a fit, then by all means call it quits quickly; but otherwise, realize the partnership is an investment on both sides. Consider reviewing your partnerships on a six-month basis, evaluating if you are saving time, saving money, and/or even making money with them. If so, great! If not, are there things that you or your partner can be doing differently to turn that around?

So, what’s next?

Your time is your most precious commodity, so you need to use it wisely. Make sure you are focusing on the bigger picture (remember, return on investment) and are intentional about your business goals. Then make the decision to find the time to work more “on”, and less “in”, your business. Once you have made that decision, are you going to work harder or smarter? Going down the smarter path means you will be bringing on people or partners or both. While they have different sets of challenges, the partnering path (outside of actual inspections) can help bring you positive returns more quickly than hiring, as you are gaining the advantage of having an experienced team you do not have to directly manage. As a business owner, asking for help is a sign of strength, as it shows you want to see your business be successful. If you are content with your state of your business, you probably would not have made it this far in the blog, which is also an indication you are ready to invest in your growth. And with opportunity abounding in the world of home inspections, now is the time to do it!

STOP MARKETING. START BRANDING. – Part 2
06 May

STOP MARKETING. START BRANDING. – Part 2

Part 2 of 2


In part two of this two-part branding post on why it’s important for home inspectors to start thinking “brand first,” we’ll explore the key elements required to build a strong brand, discuss the pros and cons of establishing a personal brand vs. a business brand, how personal branding and business branding can go hand in glove with each other, and share how to put your brand into action now.

Read more »

STOP MARKETING. START BRANDING. – Part 1
29 Apr

STOP MARKETING. START BRANDING. – Part 1

Part 1 of 2


We are knee-deep in the middle of a global pandemic. And as we continue to navigate this current landscape and uncharted waters amid coronavirus, a lot of businesses are finding themselves in challenging situations. For home inspectors, many of you have begun to see a significant dip in your booked home inspections. In other, more severe situations, your business has been completely shut down due to stay-at-home orders for your state. Whatever your current situation, it’s impossible to ignore the reality that during a time of year when home inspection business begins to really boom, the opposite is actually occurring. Read more »

Not so Fast Revenue… Profit is Just as Critical for Your Inspection Business to Succeed
15 Feb

Not so Fast Revenue… Profit is Just as Critical for Your Inspection Business to Succeed

Every business owner knows revenue is vitally important to the success of any business. Without revenue, there is no ongoing business or continued growth, no way to pay the costs of running the business…and ultimately, without sufficient revenue, no viable business to speak of at all. Read more »

Success and the Home Inspection Business Life Cycle
23 Aug

Success and the Home Inspection Business Life Cycle

The very moment a home inspector makes the decision to start their own business, the life cycle for that inspection business has begun.

While there are variations in the business life cycle phases for smaller businesses vs. larger corporations, the concept is still the same. The business begins, it grows, it reaches a maturity, and then it experiences a rebirth/renewal or simply falls into decline.

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