How much does your business rely on referals?

[azoton]

Been lurking your forum for a bit. Lots of good reading

I've got a question in regard to acquiring jobs. I worked a couple years for a tree service (on the ground and climbing) but it was back about 10 years ago. We were busy non stop year round but they had two people doing dedicated sales but never really paid much attention to sales and management aspects.

My question is aimed at owners/operators: How much of your business is generated by referral versus active sales?

I was talking with a guy a couple weeks ago that operates in my area and he was telling me about 90% of his business is referral based.... at first I thought it ridiculously high but not so sure now... curious about what other's experiences are.

Thanks in advance.

 

[limbwalker54]

I don't formally advertise

98.5%!!! Referrals and word of mouth are pretty much where ALL of my business comes from.

Its not ridiculous. Some of the best built businesses rely solely on referrals.

 

[Groundman One]

50%+ easy.

 

[TDunk]

50%+ easy.

yep

 

[ddhlakebound]

Over 80% referrals, and that's with small ads in the yellow pages and yellow book, and a website.

Positive word of mouth is the BEST advertising you will ever get.

 

[azoton]

Thanks for the replies. Like I said, I thought he was just talking himself up at first but after poking around a bit I'm coming to realize he was not. Those are pretty incredible numbers to say the least!!

Do any of you use active sales at all? how effective do you think that is?

The salesmen for the company I was working for were pretty much cold call specialists.... whatever area we were working they combed the neighborhood looking for potential work on people's property and knocking on doors.

I think one of the reasons they were effective was because they both had worked (prior to me coming on) for a number of years as climbers for this same company and really understood the process and what they were selling.

Thanks again!

 

[pdqdl]

It all depends...

I am in a very competitive market, and I am literally surrounded by top notch companies. I have 3 companies within 1/4 mile of my shop that are run by a Board Cert. Master arborist, and have been operating here for over 20 years. In fact, there are a total of 7 Board Cert. Master arborists in Kansas & Missouri, and I have 4 of them working within 5 miles of my shop. And that doesn't count all the other 5-10 reputable tree services operating within two miles of my shop.

If you are a consumer in my market, it's easy to find a good tree service.

Mostly, our business comes from our repeat customers. New customers are probably about 25% referral, and 75% yellow pages or other marketing efforts. We do a little bit of door knocking when we are in a good neighborhood, too, and that often leads to more work with a few subsequent referrals. It is VERY important to keep your customers after you get them, because this is a very tough market.

 

[Mikecutstrees]

word of mouth.....

most of my business comes from referals. I also have small yellow page ads in two books, and a website. I once did a mailing but out of 300+ postcards I got 4 responses, but those 4 got me many referals. So I'd say 90% word of mouth, 8% phone book and 2% website. The website is a great asset for people to learn more about me and my business though. Word of mouth is best too because you don't have to work so hard to earn peoples trust and the percentage of bids to jobs is much higher compared to phone book shoppers. .....Mike

 

[brisawyer]

98% I am a part timer firefighter full time. I dont advertise just word of mouth. I have all the work I want. Before I get the underbid/hack flame. I am insured and licensed and my prices are comparable to the tree companys here.

 

[Rftreeman]

at this time in my business, I'd say about 75% of mine is referrals and the other 25% from advertising (signs, craigslist & such) this also includes my lawn care jobs so it is not all 100% tree work.

 

[Nailsbeats]

100%, we operate part time as we have full time jobs, but we have work every week and usually a list 10 jobs long.

 

[teamtree]

80% Referrals 20% Advertising

3-6 weeks booked ahead

 

[reachtreeservi]

10 % from past customer referrals
50 % from yellow page ads. (I'm in 4 different books)\
30 % from property manager contacts
10 % from active marketing

 

[Blakesmaster]

I hope you guys are right and things swing this way for me.

I'm spending way too much on adds right now and most of the calls I get from them are price shoppers and I only get maybe 20% to sign on the dotted line. I had no customer base 6 mos ago...and I mean NO customer base and maybe 20% of the work I've done this season has been referrals. Every customer I've had has really liked our work and our price and promised to tell their friends but we haven't seen a lot of work actually materialize from it. Hoping as I do more work for more people from the ads ( newspaper, phone books, and website ) that I'll get more referrals. Only time will tell.

 

[Toddppm]

Interesting but you have to compare apples to apples. You'd need to know how big each company is for one. A 1 crew or 1-2 man company can survive easily on referrals if they do good work. Bump that up to a 2 or 3 + crew company and you're talking a whole different beast. Also depends on what kind of area you are in. I don't know of any big companies around here doing residential work that don't advertise like crazy to feed the machine.

I'm almost in line with pdqdl, we are in a metro market that is very transient, we get very few referrals and when we do, often times we don't even know because the people don't bother to mention they were referred. And Yes we do very good work-most of our work comes from repeat business, if it weren't for this we'd have been out of business already.

When I first started out part time I was working every weekend along with a Ft job. Want to stay super busy? Work weekends when everybody is home , when they hear the chainsaws and chipper they come running for an estimate. I hate working weekends now and we do not do it unless we really have to get some work made up because of weather. I want to have a normal weekend life and think my guys should have 1 too, although I know they work on the side when they can.

Also I am not on the jobs while they're going most of the time so I don't get to talk to people that ask for an estimate right away, I'm sure having to call in turns off alot of people and the impulse buy is gone if I ever get to talk to them.

 

[John Paul Sanborn]

I was talking with a guy a couple weeks ago that operates in my area and he was telling me about 90% of his business is referral based.... at first I thought it ridiculously high but not so sure now... curious about what other's experiences are.

If you've been in the business for over 5 years, you should have around 30% of you gross coming from repeat clientele.

Let me step back up on the soapbpx;

The simple math is if you have a three year rotation of 300 clients averaging $1000 per job, then you should be able to get to $100,000 in half a year. If you can manage these people so that you are taking care of them during the cyclically slow periods, e.g. winter, laborday holiday, hunting season... you can get the bid work done easier.

as for thee budgeted year for a small business, easy mat once again, figure;



365
-521 day a week lost to weather, equipment and employee problems
313
104 weekends are off budget to use for makeup
209
-10 two weeks of vacation
199

so we say 200 budget days a year with a gross of $800/day average $160, 000

It does not sound hard...

 

[simon_basson]

I worked for a tree company for 14 years, until three years ago we had a fall out, and thrown in at the deep end, I decided to start my own company.

All I had was a top handled Efco, a pair of secateurs, and a truck and trailer. I had little money for advertising, so I went for the smallest, "three colour ad'" in the Yellow pages that you can get. I got a few calls, but very little indeed. I tried posting through doors, and out of 2000, I got ONE job! Looking back, I know why I got so few calls from the yellow pages ad', it was due to not only the small size, but also the bad designed (I designed the add my self). ... still no real idea why the posted flyer's didn't work?

The second year more calls came in, (thankfully) and with a larger advert, with full colour, stating my website I started to get a name for my company. On average, I was getting two or three day weeks, not great, but with my wife working in town, we did ok. This year I spent £2400 on my Yellow pages advert, and although it still seems like allot of money to me, I can say it has definitely paid off. The first two years were about 80-85% referrals, this year, with a well designed, larger advert, I'd say i'm getting at least 35% of my calls from Yellow pages.

My website has really helped, I state in the ad' that I have many 'before and after' pictures of my work on there and people LOVE THIS!!! They can get to see what my work is like before I even go and look at the job. There are quite a few tree company's working in my area, some with good websites, but hardly ANY that have a portfolio of their work on-line. I really do believe that I wouldn't't get half the jobs I look at with out it.


Its been a great learning curve trying to get the work, and I am finally at the stage that I can earn a bit of money (though I constantly seem to spend all my spare money on new tools!!!)


Well I think i've wattled on far too much here, but it's been kinda loosely based around Azoton's question of referral stats.


70% referrals.
30% from advertisements.

 

[skyhightree1]

I don't advertise unless you count leaving cards here and there and signs on my trucks... I would say 80% of mine is word of mouth and 15% comes from someone seeing the work I am doing in a neighborhood or wherever I am... 5%from seeing my trucks....

 

[tree MDS]

I'm spending way too much on adds right now and most of the calls I get from them are price shoppers and I only get maybe 20% to sign on the dotted line. I had no customer base 6 mos ago...and I mean NO customer base and maybe 20% of the work I've done this season has been referrals. Every customer I've had has really liked our work and our price and promised to tell their friends but we haven't seen a lot of work actually materialize from it. Hoping as I do more work for more people from the ads ( newspaper, phone books, and website ) that I'll get more referrals. Only time will tell.

Thats it man just keep winning them over one customer at a time- and it still takes forever. This is like year 12 and its finnally coming together somewhat, takes alot of time for sure- but you are making money along the way. Whats nice is when the other guys are dead and you still got calls from refferal coming in and and are out working, thats the payoff. All those underbids you oopsed up on and still stuck to your price and did a good cleanup pay off- eventually. MDS.

 

[GlennG]

100% referrals 0% advertising. My trucks have no sign. Not even a phone #. I have grown to the point that bigger would be less profitable.