5 Strategies for Growing Your Home-Services Business

Post date :

Feb 7, 2024

As you look at your plans for 2024, how are you planning to grow your business this year? Many business owners in the home services industry are focused on how to grow year-over-year. But the key question is how?

First, take the time to consider several important questions about your business. If you can involve your team and your customers in this process, that's even better. It's important to know this information before making any major decisions or changes. 

  • What are your strengths and weaknesses as a company and as a team?

  • Do a review of the market(s) you are in. Are there any available opportunities you can capture? Are these markets growing? What industries are over/underserved? 

  • What is your role in this growth strategy? How can you focus your efforts on promoting your growth? 

Once you've taken stock of your business, here are five growth opportunities to consider.

What additional products or services naturally fit with your existing business? 

Some products have a natural overlap in both their delivery model and in the perception of the consumer. Lawn and pest can have this synergy, as can plumbing and HVAC and other ‘mechanical’ offerings. The goal of expanding your product and service offering is to capture more share of your clients' wallet and allow them to consolidate their spends to a single vendor.

Another benefit of expanding your product line is that you (ideally) already have a group of customers to sell into, and you won’t have to go find new ones entirely. Your brand name is already known, so you aren’t starting from scratch. You may also find an opportunity to improve route density with clients in a smaller area who now each pay you more. This is sort of a ‘pack your revenue into a tight geographic area’ play where you are trying to become a multi-faceted vendor for the homeowner vs. going for as large of a geographic area as you can on a single product line. 

However, one risk to consider in this approach is that you want to make sure that you're able to deliver the new product/service at a high level. Tossing on a new offering that you can’t truly deliver is destructive to your brand, and not a value-add to the customer. Make sure you have the team/talent to execute on a new offering that is additive to your overall value before you start trying to add customers to this service. 

Where could you expand your geographic footprint with your existing offerings?

Many home-services businesses are extremely geographic centric - even geographically constrained by the cost and time it takes to travel to and from the job site. This creates a natural constraint on how much business you can capture from a single distribution point. Another constraint is the number of available clients within the geographic region you're targeting.

One very straightforward way to expand your business is to expand your footprint. The most obvious way to do this might be to open an office in a new city, but you can also create a ‘distributed’ workforce where office work isn’t a requirement of the job. This approach can free you up to hire from a larger candidate pool while also allowing you to put your service techs closer to customers you might not be able to physically support today. 

Is there an underserved market in your area that you can start servicing? 

Instead of adding an additional product line to your existing brand/company, you can stand up a new business with a unique brand. This is going to be more common when the new offering is very far afield from your current product/services. An example would be that you currently have a plumbing business, and you are thinking about standing up a lawn care or turf company. While these businesses both work with homeowners, they operate in unique ways. The translatable skills you might be bringing to the table are your knowledge about how to build a company, create a brand, and hire a team.

It's important to note that your existing plumbing brand probably isn’t of much value in the lawn care market. You actually see this play out in the franchise world of home services, where some groups will hold onto multiple brands that they franchise out and support, but each company appears to be independent of the others. This strategy is effective if you can identify an underserved business line that is not related to your current offering and also where you have the ability to hire talent that can bring a technical/domain expertise that you may lack in the new area. 

Are you built to service residential or commercial customers or both?

One of the biggest types of service specialization is whether your focus is residential or commercial. If you’re going for both, it's important to understand how your teams are built to service each side of the market.

  • Acquiring homeowners will come at a much lower cost.

    Homeowners turn over their properties and change vendors at a higher rate than commercial businesses. For this reason, you can find new ones at a higher rate. There are also many more homes than there are businesses looking for building services.

  • Businesses can provide much larger bills, but also concentrate your A/R.

    Grabbing a big commercial contract may sound great, but it can result in having a large portion of your revenue tied up in a single (or a very few) account(s). This can create risk for your business in the event that the customer leaves. While homeowners may represent a lower individual value, by spreading your revenue over hundreds or thousands of customers, you end up with no single buyer being able to massively impact your bottom line. 

  • How you service these two customer groups is very different.

    The types of services you provide to each group is going to vary. Homeowners don’t mind when you come by during the day to service their home - in fact, they often prefer that for some job types. But businesses may require you to perform services during off-business hours, overnight, or very early in the morning. In commercial, you’ll also be working with business managers more often vs. the primary owner of the property. That means you are working through another company's policies and procedures. 

  • Competition will vary in each area.

    If you run a home-centric business, you may find that there is more competition, which means price undercutting could be a challenge in maintaining your price points. However, in the commercial space, there are often larger providers you'll have to compete with that can potentially offer service levels you might struggle to match. 

How do you identify your best customer targets and find more of them?

Do you know what your best customers look like? Can you quantify your customer value, or is it more of something you look at intuitively? Consider looking at customers in a couple data-driven ways when deciding how to grow your business. By focusing on customers with higher long-term value, lower cost of sale or cost of maintenance, and with better route density, you can drive profits up significantly. Here are several items to consider.

  • Customer churn and stickiness

    Do you measure customer churn and/or repeat business? Some services aren't suited to a repeatable or subscription business, but do your customers at least call you back when they have other needs and at what rate? Measure this to understand where repeat revenue vs. one-time revenue comes from. You can also layer this over a geographic map and by product/service type to see if there are any trends. Do specific services result in lower stickiness? How about specific geographies? What you’re looking for here is to determine commonalities between repeat vs. one-time customers.

  • Long-term value
    This information should be in your CRM, but it might be hard to find or report on. You can look at tools like PowerBI or a customer intel tool like GlassHouse to visualize this information quickly and easily. The value of this metric is to understand what the expected long-term value of a repeat customer will be. When you understand how much a customer will pay you (on average) in the first year, 3 years, 5 years, you can start to measure the amount of time/money you can reasonably spend to acquire those customers. This metric is a combination of both churn and customer annual spends. 

  • Cost to acquire

    How much do you spend to gain a new customer? You can look at this as the ‘average cost’ by looking at your total acquisition spend and dividing that amount by your number of added customers. But you can also go deeper and start looking at what it costs to gain customers from specific areas or for specific services. If you break this down by where the customers come from (inbound marketing leads, purchased leads, door knocking, outbound mailers, etc.) then you can also see which channels cost more or less than the average. You may find that you have channels with very high costs and you’d be better off investing that money on a better performing channel. Remember, you do not have to use every acquisition channel if some of them are not working well for your business. 

  • Cost of service

    What is the cost to deliver your services? This is related to your ‘gross margin,’ and it tells you if you are charging enough for your services and also running efficient delivery. If you have to go back on-site multiple times to fix/finish jobs, you’re going to drive up your costs. Drive time and costs to meet with customers multiple times will also influence this metric. We recommend reviewing which techs are getting and giving strong client reviews to understand where training opportunities are to improve service quality and reduce additional visits on the same jobs. 

  • Geographic location/density

    Where are your customers located? This is important when considering route density or drive time from job to job (which is non-profit generating time). Look at where you’ve drawn the boundaries of your service areas and consider the density of current and potential customers within that area. For example, if you are working in a very rural area, you might end up with a larger area to capture enough potential buyers to make your business model work. If you are in an urban area, those boundaries may be much smaller, but you may find that there are areas of town that are more interested in your services. This requires really breaking down the value of various parts of a market.