Misconception #2 – Common Contractor Misconceptions
Welcome back to our common misconceptions blog series. We work with a lot of contractors, and we’ve heard it all when it comes to misinformation about payment options. Last time, we talked about how everyone can benefit from payment options – even those who would’ve traditionally paid in cash. In today’s edition, we’re moving on to our next myth:
Misconception #2 — Contractor Financing Hurts my Bottom Line
One thing we hear a lot from contractors is that they’re worried loan fees will affect their bottom line. While we do have dealer fees, there are no hidden fees you need to worry about within your program. Basically, you’ll know upfront what a loan costs and that’s what you’ll pay.
To help cover the cost of your dealer fees, we recommend working with your accounting department to build your dealer fees into your general overhead. Fees are considered an operating expense, and it’s a normal practice to roll these costs evenly into your pricing.
Additionally, a study we commissioned showed that, on average, a customer’s spending increased by 44% when they utilized payment options*. This means bigger ticket sizes at fewer job sites, helping you to better manage your workload.
What is Average Project Size?
Your average project size is the typical cost that your customers are paying for their projects. To calculate your average project size, add up all your sales over a set period (a year is a good place to start), then divide that by the number of projects you completed over the same timeframe. It may seem like a simple number but keeping track of your average project size can help you better monitor the growth of your business and optimally allocate your resources.
Why Should I Care About Average Project Size?
Knowing this amount and tracking it over time can be a good indicator of the overall health of your business. A growing average project size may show that you’re gaining trust with your clients to take on larger-scale projects, or that your sales process is working well to get the right price for your projects. Larger project sizes can make your business more efficient by reducing the number of times you need to move from one project to the next, saving time and money in setup and cleanup.
Larger projects may lead to larger profit margins, meaning you can sell fewer jobs to get the same revenue. While there isn’t a magic number of what your average project size should be, knowing this data can help you understand your unique offering and where you fit in the market. For example, smaller average project sizes may mean you do quick and simple projects, so you may want to focus on investing in ways to be efficient while completing jobs without a lot of customization. Meanwhile, a larger project size may indicate your position in the market is highlighting the custom projects you complete.
We can also approve customers beyond the job estimate. Not only does this allow for scope changes in the projects, but it also gives you the ability to upsell your customers when it comes to the materials they use, helping you to increase your ticket size. There’s misconception #2!
Ready to increase your average ticket size? We’re here to help! Visit our website to get started.
*Brickyard Study, commissioned by EnerBank USA, 2018