May 6, 2024

Direct to Consumer

I was on a consulting call with a peer yesterday who is entertaining the notion of starting his own business. He wants to remain small, and ideally work as an owner operator. As you all probably know, this is right up my alley. I have been working on this model now for almost 15 years, and I continue to find new ways to be more profitable, productive, and successful. That is not to say that it is not a difficult journey and some days are not a royal pain in my ass, but it has most definitely gotten easier. Without getting into every aspect of my business, I want this conversation to be focused on one thing. Why I prefer to sell directly to my customers.

I have always said that it would be extremely difficult to be a subcontractor. You are working for builders who have their hands very full, you are at the mercy of others, you rely on someone else to sell your work, and you are always needed yesterday. For me, the sub model did not work. I wanted to create a premium white glove service which is not a priority for most builders. I am not saying that this is the case with everyone, but oftentimes it comes down to price and speed when building a larger team. If your sales are funneling through someone or something that is extremely price-driven and schedule-driven, you are going to get squeezed.

I asked this caller a simple question yesterday. “What would be a more effective way of selling your services and your value? Having a conversation directly with a customer explaining who you are and what you do, or relying on a builder to sell your services through their product?” This would be like relying on your friend to get you a date with your dream girl. You have a better shot at selling yourself (assuming you are kind, caring, and confident). If you are looking to maximize your profit through quality and differentiation with an extremely small team, you must sell a different product than someone who has a larger team focusing on volume. It is very simple, if I am a one-man show, and I can only work so many hours a year, I must charge more per hour than someone who has ten guys and is making a smaller margin on those ten guys (or girls). They are making money on selling more labor, while you as the one-man (or woman) show are making money on selling more value or higher quality. 

In order to sell what I am selling, I must go directly to the consumer. I have been squeezed too hard pricing jobs for other contractors or designers. If they are selling something different than what I do (there is nothing wrong with that), why would the customer not choose someone who is less expensive. If the customer is not properly educated as to why TRG offers more, they are going to save the money on the budget and spend it elsewhere. This is why I prefer to sell jobs myself. When a customer contacts me, I vet them, I sell my value, and I pitch what makes me money. I cannot depend on someone else to do that for me. Everyone else has their own priorities and their own objectives. They are making things work for them. 

When you are a small company you are not making money on volume. You are making money on what you can provide that others cannot. Whether that is attention to detail, cleanliness, trust, quality, personality, etc. There are characteristics and traits that you possess that are unique to you and your company. There are people who will value this and that is your target customer. You only have 1,600-2,000 hours that you can work in a year and you need to capitalize on that small number. Larger firms may be able to earn a smaller margin on 16,000-20,000 hours spread across multiple employees, but with that comes a larger overhead, risk, liability, and in my opinion headache. I have found that if I want to maximize the small amount of hours in a year that I can make money, my best chance is to sell a higher dollar, higher value product directly to my consumer.