Pricing Strategies & Coupons

August 28, 2005

Bob Kille Acuspect Home InspectionI just love the coupons that my competitors put out that have a limited time offer or some other incentive for a customer to act now. Many startup home inspection firms offer their customers special discounts if they’ll give them a try or place an order before the end of the month or year-end or whatever. An example of a call to action in the coupon might look something like:

I can only offer you this discount if you buy before March 30th. After that, it’s back to full price!

But the truth is, if the customer calls on May 5th with a nice, big easy home inspection order and wants the discounted price, nine out of ten companies will give it to them. What you don’t realize is that, by going back on your word regarding the time limit, your also training your customers/realtors to expect that your always going to sell at the lower price, and that those “limited time offers” are available any time they ask.

Oh, and what happens when you don’t give it to them? That’s right, you said the magic referral reversing charm, the charm that won’t let you pass go, the word without equal, NO.

Here’s the danger, discounting your price with gimmicks in relation to other home inspectors fee’s will put you into the perceived category of a low rate home inspector and when you finally figure out that you can’t make the home inspection business profitable at these prices, it may be to late to push the price.

Unlike the larger franchise firms that have a coupon marketing system with a huge budget to combat the perceived value to product pricing, and the budget to bleed money for an extended period of time your in a no win situation using the coupon strategy.

So if your determined to use the coupon strategy to build your business, “Mean what you say, and say what you mean”.

You just might make it.

Copyright © 2005 by Bob Kille. To read other home inspection related articles or to view home inspection software and book publications by Mr. Kille, click on this link. www.inspectorsuccess.com

Hallmark “When You Care Enough”

August 8, 2005

Bob Kille Acuspect Home InspectionI was reading an article about Joyce Hall, the founder of Hallmark greeting cards and thought I’d share his personal motto and how it fits into a business model. His motto is very similar to one I had adopted somewhere in my first year of business.

In his memoirs, “When You Care Enough.” Hall explains how he adapted a sign posted by one of his college professors, “Time is Money – save time” into a motto for himself: “Time is everything – save time”

In my business model I also hold a similar belief/motto, “Save Time – Create Relationships” This has proven itself, dare I say, time and time again.

Somewhere in your business model you have to address the issue of repeat business, how you’re going to get it. In every business there are only thee ways to grow a business; increase the number of customers, increase the average transaction value, and increase the frequency of repurchase.

For most of us, I’m referring to the home inspection businesses under five years, generating repeat referrals from your realtor contacts ( inspections ) may very well be a function of respecting their time. In my area, yours may be different; an average inspection time is about two hours. After that magic number expires the realtor starts to get annoyed and doesn’t really care how good you are anymore, they’ve got places to go and your holding them up. This especially applies to the high producer types.

My business model takes into consideration how long an inspection takes, where can I reasonably save time while still staying within the standards of practice and completing a competent home inspection on site. The business decision of doing the most comprehensive and all-inclusive inspection versus an on site inspection that is competent and referral generating is one worth considering.

For example, I don’t include photos in my residential reports as it takes an extra ten to fifteen minutes. This ten minutes would more times than not put me over the two hour self imposed limit. Remember, I’m doing the report on site, printed and handed over with an explination of the summary items. That’s a whole lota stuff to get in in less than two hours.

I did some homegrown research on the whole business of photo inclusion in the reports and here is what I found out. I asked fifty realtors if they would rather leave ten to fifteen minutes earlier or have photo’s included in the report; here’s what happened. A total of four out of fifty realtors stayed the extra ten to fifteen minutes. All four of them had out of town buyers who weren’t present at the inspection.

Before I get slammed, by all you inspectors who include photo’s in your reports, I will admit that using photo’s is one of the factors involved with getting higher referral rates from past home buyers. At this point in my business I get 70% of my business from realtor referrals. As the years go by, and my prices have increased, so have my past customer referrals. It may be time to start looking at a limited number of photo’s in my report and putting a little more effort into past customer marketing to increase the number of non-realtor referrals.

The “Time Is Everything – Save Time” motto seemed to work out ok for Mr. Hall and my own interpretation of the saying “Time Is Money” hasn’t hurt me any either.

Copyright © 2005 by Bob Kille. To read other home inspection related articles or to view home inspection software and book publications by Mr. Kille, click on this link. www.inspectorsuccess.com

Home Inspection & Profit

August 6, 2005

Bob Kille Acuspect Home InspectionI was speaking with a fellow inspector who wanted to purchase the 3D software and home inspection data libraries when the subject of pricing a home inspection came up.

Most inspectors, in order to figure out there pricing, start calling around and asking other inspectors prices on a fictional home. They do this until they’re satisfied that they know what to charge for the common shapes and sizes. This is a very dangerous strategy for pricing your services and should be avoided at all costs.

The first thing you need to figure out is can you “afford” to be a home inspector in your area. You have to do the math. Take the number of anticipated inspections per year; multiply by the average inspection fee of your competitors for gross income. Next, add up all your fixed costs and subtract it from the calculated gross. Leave 10% for business profit. Can you live on what’s left? Don’t forget any of the fixed costs. There are at least 20 fixed costs associated with the home inspection business. If you can’t think of twenty, your going to need help to calculate your total fixed costs. It’s crucial to have an accurate number here.

To figure out your total fixed costs and projected profits along with your average hourly rate, go to: www.inspectorsuccess.com and download the “PROFIT CALCULATOR”.

If your just starting out you should figure on about 100 – 150 inspections your first year. More if you’re an exceptional marketer. Your next year should produce 200 – 250 home inspections. The average home inspector inspects approximately 250 – 350 homes a year. Can you hang on long enough to get to the numbers that generate a profit after all expenses? Do you have a reserve fund that you can draw down on? At “their” average prices are you creating any equity/savings?

There are number of items that influence the prices in your particular area especially if the market is small. In particular, the one I ran up against was a local firm that did a volume business with three inspectors and kept the prices low enough to discourage others from entering the field. It worked.

I spent about 6 months trying to get into that market place with very limited success. My prices were $50 – $75.00 higher than his because my fixed costs were higher and volume was lower. To compete with him at his pricing I would have been out of business somewhere in my second year.

Out of business, without any equity to show for all the time, trouble, and expense invested in the process. Not to mention that had I stayed employed with someone else, my bank account would never have taken the $20,000 hit to get the business started. So many inspectors out there are just hanging on because they did they’re pricing based on someone elses fixed costs. Its little wonder only one out of five new inspectors make it past year five.

Without the proper pricing structure for “your” business the work will be frenzied, inadequate, underpaid, and, as a result, unfullfilling. It’s quite possible that owning your own independently operated home inspection company is not what it was cracked up to be. In short, to start your own business without the prospect of creating equity is not a good idea. Find your true fixed costs, add them to what you need to create EQUITY in the business after your second year estimated numbers. Try it, you’ll like it.

Copyright © 2005 by Bob Kille. To read other home inspection related articles or to view home inspection software and book publications by Mr. Kille, click on this link. www.inspectorsuccess.com

Permit? We don’t need no stink’n permits!

August 4, 2005

Bob Kille Acuspect Home Inspection A fellow home inspector gave me a call late last night with a bit of information about one of my past inspections. Apparently, he was hired to inspect his old residence and to his amazement the house had been added to by about 2000 square feet. The owner of the house was, or claimed to be a builder.

The house was a real looker except for a weird floor plan off the master bedroom and my inspection revealed a number of common and not so common problems like inadequate combustion air supply.

On to the point, during the home inspection I had asked the owner if he had gotten permits for the additions and he said yes, they would be available to the new buyer (not to me). Of course this deal fell apart and now comes our next inspector, the x owner, who asks the same thing and gets the same response. However, having been the previous owner and curious to boot at the dramatic changes, he’s looking at how the additions were done in a more structural way.

One of the things that he noticed that I didn’t was that the owner had erected an adobe block parapet wall at the rear of the building to give it some character. To support the load a huge wooden beam was used. Here’s the kicker and what I failed to notice, you can’t support a masonry wall with wood.

Back to the permits, come to find out that the owner only had a permit to add a small room addition off the garage. We never know when a permit has been issued or not and we really shouldn’t care except to note that our customer should receive and review all permits issued for construction. Our job as home inspectors is not plan review but documentation of what we see and to that end we should be putting the onus of any permit or review back into the realm of buyer due diligence.

I do this with a simple comment in my home inspection report when I suspect an addition.

Consult Seller: The building has had one or more additions or modifications for which a permit may have been issued. Municipal building permit research is highly recommended if permits are not provided for review.

Would this comment protect me? What do you say if anything? Feel free to comment on this entry.

Copyright © 2005 by Bob Kille. To read other home inspection related articles or to view home inspection software and book publications by Mr. Kille, click on this link. www.inspectorsuccess.com