As I travel around on tour for InterNACHI, I’m often asked: “Nick, how do I get rich in the inspection business?” In the coming weeks on this message board thread, I’m going to answer the question. Remember, the purpose of being in business, any business, is to make money. If you want to make a good living, don’t go into business. Instead, get a good job. The only reason to be in business, and take on all that entails, is to make a really, really great living.
Let’s start by understanding the miracle of math. I’m not going to use anything more than multiplication in this article (no advanced math), so don’t worry.
The processes that have to occur for your inspection business to convert a consumer into a good-paying customer are many. You have to market your inspection services. You have to get a consumer to come to your website. You have to get your website to cause the consumer to call you. You have to get your phone conversation to cause the consumer to hire you. You have to charge as much as you can for your services. You have to sell additional ancillary inspection services. And finally, you have to get your happy client to refer additional consumers (leads) to you.
There are probably many more steps to this process, but for purposes of example, let’s say there are seven steps. Now let’s rank each step according to how well your inspection company executes them. We’ll use a rank of 0 to 10 with 10 being perfect. So for example, if you convert every consumer who calls you into a paying customer, assign a rank of 10 to that step in the process. If you convert none of them, assign a rank of 0 to that step in the process.
After you rank all seven steps, multiply their ranks to find their product (final result). This final result represents your company’s success (the higher the better). You should perform this exercise regularly to see how your company is doing.
I’ll create a rank for each of the seven steps used by a hypothetical company I’ll call it ABC Inspection Company: 2, 3, 8, 6, 4, 8, and 7. The product of these ranks is 2 x 3 x 8 x 6 x 4 x 8 x 7 = 64,512. This final result, 64,512 represents ABC Inspection Company’s success. It only has meaning relative to the other times the owner of ABC Inspection Company performed and will perform this calculation. It is a number that has a correlation to gross revenue. It’s not a one-to-one relation, but this final result is an indicator that tracks gross revenue. As this final result goes up or down, so does ABC Inspection Company’s revenue.
In the steps, I intentionally left out things that don’t affect gross revenue, but do improve net revenue (bottom line) such as increasing efficiencies, limiting losses, and tax avoidance. We’ll address them later.
Now let’s pretend the owner of ABC Inspection Company decided to try to improve each of the seven steps. Let’s imagine that he was not very successful and only improved each step a little bit. He did some work to improve his website, he found a way to convert more incoming calls into scheduled inspections, he found ways to charge more, etc. Like I said, he didn’t improve each step dramatically, but he did improve them all slightly. Let’s say that he improved each of his steps by only 1 rank. The rank of his steps then go from 2, 3, 8, 6, 4, 8, and 7 to 3, 4, 9, 7, 5, 9, and 8. Not much of an improvement, but a little improvement in each area.
What effect does a small improvement in each step have on the final result? If you think these small improvements had an overall small positive effect on the final result… you’d be very mistaken. Remember, prior to the improvements, his final result was 64,512. So using the slightly improved ranks, let’s do the math:
3 x 4 x 9 x 7 x 5 x 9 x 8 = 272,160. What? 272,160 is more than 4 times greater than 64,512. Making a small improvement to each step of a process can improve the final result dramatically. In this case, it improved it by 321%. That’s miraculous!
This is the secret to getting rich in the inspection business.
Actually it’s a secret that is well known in the e-commerce industry. If you double the number of visits to an e-commerce site, double the number of those visitors who purchase, and double the dollar amount they spend, you don’t just double revenue. You multiply revenue by 8 (2 x 2 x 2). That’s not a gross revenue increase of 8% (which would be whopping). It’s an increase of 700%!!! Small improvements make a big difference.
Now imagine the effect that large improvements would have on your inspection business. I’m going to show you how to make large improvements to your steps, which will dramatically increase your gross revenue.
Home inspections are fun, but now it’s time to get rich. Stay tuned.