Construction Sales Is a Numbers Game

What business activity makes the most money for your company? I bet you didn’t say: “Sales!” To most contractors, their total sales effort requires no more than picking up a set of plans from a customer, estimating the job, turning in a bid and then waiting for the results. They rely heavily on price to sell most jobs. 

As the economy has gotten worse, and work is harder and harder to get, many company owners have thought about how to increase their sales. Some have even decided to hire a salesperson to increase company revenue. But then what? These frustrated owners don’t know how to manage a salesperson to get the results they need or want.

Construction Sales Is Easy

It’s a numbers game. When competent salespeople make regular sales calls on good prospects who need what you offer, your company will get its share of the business. When you don’t make the calls, you won’t get the business. It’s like professional hockey-the team that takes the most shots usually wins the game. The more sales calls, the more business.

Most business owners don’t like to make sales calls, so they try to encourage their estimator to make them. But, most estimators are not built to sell. They are built to analyze a set of plans, use calculators and computers and put a price on a specified amount of work. Like business owners, estimators also don’t like to get out of their comfort zone, go out and make sales calls and spend a majority of their time selling. So, in tight markets, small business owners often want to hire salespeople to solve their lack of revenue problem.

Why do Construction Companies Struggle?

A major reason small- to medium-size companies struggle is a lack of a systemized, focused sales and marketing plan. They mainly rely on reputation to earn the right to be awarded enough work to make a reasonable profit. This works in good times, but not during a slower economy. Successful companies must have written sales systems and marketing plans that help salespeople proactively and aggressively look for new customers, targets and contracts.

I’ve noticed a common thread among the successful subcontractors our general contracting company use. They have a plan to find and attract new customers and follow it diligently. Every week, they come by our office as a part of their sales route to meet with our project managers and build relationships with our employees. They are always in the selling mode and ready when we have an opportunity for them. The majority of subcontractors wait until we call them, but the successful contractors are already there waiting for an opportunity to attack.

A proactive sales plan starts with a business owner or general sales manager who will hold his or her salespeople to a required standard of performance excellence. These required standards can include the number of calls per day, number of customer lunches per week, number of face-to-face meetings per week, number of proposals and total proposal volume per month. To know how you’re doing, you must keep score.

Keeping score with salespeople is often difficult because they typically don’t want to be tied down to a set number of required calls. They like to let their instincts take them through the day. They don’t like to be held accountable to a minimum standard, and they don’t like to track numbers. They also usually don’t like to write, don’t like discipline and don’t want to follow a written plan. They generally feel their gift of gab will get them through and reap enough results. But without numbers to hit, most salespeople will fail and not meet your expectations.

Sales Information to Track:

• The type of customers you want
• The markets you want to attack
• The project locations you like
• The project sizes you want
• The minimum fee per job
• Sales calls per day
• Leads from calls
• Face-to-face meetings per week
• Proposals from leads
• Proposal follow-up tracking
• Proposals or bids hit
• Referrals from customers
• Average job size
• Average profit margin

What’s Your Sales Success System?

To win more jobs, you must know your numbers and keep track of your weekly sales efforts. Every Monday, you must sit down with your sales, estimating and project managers to review the sales progress from the previous week, and lay out a sales plan for the four upcoming weeks. Without a weekly construction sales meeting, everyone stays busy doing their jobs-working with existing customers, bidding, building projects, etc.-and doesn’t put a top focus or priority on winning new contracts.

Laying out a sales plan starts with determining how much business you need to cover your overhead and meet your profit goals. Follow this example to review how tracking sales numbers works:

Acme Construction Company

1. Annual Overhead – $500,000
2. Annual Profit Goal – +$200,000
3. Total Overhead + Profit Goal – $700,000
4. Average Gross Profit Anticipated –  20%
5. Annual Sales Required to Meet Goals –  $3,500,000
6. Average Job Size – /$350,000
7. Jobs Needed – 10
8. Average Bid-Hit Ratio – 10%
9. Annual Bids Needed – 100
10. Bids and Proposals Needed Per Month –  8.33
11. Warm Leads Conversion Rate – 33%
12. Warm Leads Per Month Needed – 25
13. Face-to-Face Meetings Needed Per Month – 25
14. Sales Phone Calls Per Appointment Made – 25%
15. Sales Phone Calls Needed Per Month – 100

In this example, Acme Construction needs to do $3.5 million in construction sales to generate $700,000 in overhead and profit for the upcoming year. (See No. 5 in the example.) Based on their market and track record, they are averaging awards on one winning project for every ten they bid. With an average job size of $350,000, they need to be awarded ten jobs this year. This requires 100 bids or proposals for them to hit their goals (see No. 9 and 10 in the example).

To convert your business plan into a sales plan, follow the rest of Acme Construction’s tracking example (starting with No. 11). For every three warm leads they generate that appear to be real opportunities to bid on, Acme converts one into a bid or proposal. This converts to twenty-five warm leads needed every month to keep their sales pipeline full. In order to convert a warm lead into a bid opportunity, someone from Acme needs to meet with twenty-five potential customers per month. For every sales phone call made, one in four convert to an appointment or a face-to-face meeting with a customer. This exercise requires at least 100 sales phone calls per month to generate enough revenue, bids, proposals and activity to meet Acme’s overall goals.

The question is how many calls can a salesperson make, or how many salespeople does it take to keep this sales plan working? In most companies, a portion of new work opportunities come from existing customers and lead sources. And another portion must come from your sales effort. How many sales phone calls, face-to-face meetings and appointments can a salesperson make in a week? The best way to find out is to ask your salesperson and then keep track. You’ll find that at a minimum, a good salesperson should average a minimum of two to four phone cold calls per hour and at least two to three face-to-face meaningful meetings a day. That doesn’t sound like much, but it will be enough if they are calling on the right customer targets.

Based on the Acme example, twenty-five meetings are needed every month. If a salesperson makes two face-to-face meetings a day, they should be able to meet the company’s goals. Based on Acme’s needs, I would set the salesperson’s performance goals as follows:

• Sales phone calls per week– 25 to 35
• Customer meetings per week– 7 to 15
• Bids and proposals needed per month– 8 to 10

Construction Sales Tracking Report

In order to keep your salespeople focused on the right projects and new customer targets, you will have to manage the process. Every Monday, review every construction sales lead, phone call and customer meeting with your salesperson. Review which customer targets were attempted and which are still needed. Create a new list of leads to attack and keep the salesperson focused on the big targets.

This meeting will ensure your sales efforts continue. Over time, some salespeople tend to stop going after new accounts as they get comfortable on their route of customers they know. The tracking system will keep them on track with both existing and new customers to call on.

Sales Tracking Log Items

• Date
• Customer Target
• Contact and Information
• Opportunity
• Follow-Up
• Type

The “Type” refers to the type of contact your salesperson had with the customer. It could be a phone call, meeting, meal, event, bid or proposal. I am a firm believer that phone calls and e-mail are tools to set meetings with your customers. In hockey, you don’t win the games making good passes, only by taking good shots at the goal.

In sales tracking, I don’t give salespeople credit for phone calls. Only face-to-face meetings or appointments count. On the phone, customers don’t always tell you everything you need to know about the potential project. In a face-to-face setting, you can start to build a relationship, read your customer’s body language and get to really know them. The more meetings, the more success will happen. 

Frequency is the key to unlocking success in your sales team. As J. Paul Getty once said: “Rise early, work late and strike oil!” To be successful in sales: “Rise early, work late and strike often!”

Construction Business Owner, May 2010