Free leads, pay for jobs - Contractor Talk - Professional Construction and Remodeling Forum

MOTB · 07-27-2009, 11:59 AM

Hey everyone,

It seems that a lot of people, including myself believe that contractors should pay service fees for jobs they get, not for leads. One of the top lead generation services has revised their entire business model to provide leads for Free, and charge only for those jobs you get. It is similar in philosophy of eBay where anyone can sell on eBay and the seller is charged a service fee after their item is sold.

Here is what I can see.

This is not a start-up business, it is Contractors.com that has completely changed the older-outdated business models of selling leads. This new service is also associated with Qualified Remodeler, HGTV, Fine Living and some others.

This is not for every contractor since you they limit it to contractors with an established history (requiring 10 customer references and 3 trade references and you must have been in business for the past 5 years) and a few other qualifications.

From a financial perspective, you need to pay for three things:
1) You first buy a territory, which is made up of the zip codes you select. Only 3 contractors per trade, so it is a first-come or exclusive program. The annual fee is $1 per 1,000 households and is non-refundable. Since this fee includes a company listing on all their directories they are affiliates with. I selected 12 zip codes around my area and my total cost was just under $170 for the year.
2) You must also make a refundable deposit of $1,000 against and fees you owe for jobs that you get. You could also lose your deposit if a homeowner wins a lawsuit against you and Contractors.com pays it. (They guarantee the performance of their contractor members, which could be an excellent lead generation strategy, especially when promoted on affiliates such as HGTV)

3) If you win the job, you pay 7.5% of the first $10,000 and 2% on the contract amount above $10,000.

It seems like little risk. If you don't get enough leads in the program, you can quit and your only cost is the territory fee, which considering your getting listed on HGTVPro and Contractors.com could generate leads on its own, and these leads have no reporting or fee associated to them.

I reviewed their video at http://www.contractors.com/freeleads/Video.aspx?pm=QQHQ19 which describes the program well. If you like what you see, you may want to separately check out the Referral Program since I did sign up to see how it works to compare how we work with referrals for my company.

Check it out and offer your opinions,

Brian

J F · 07-27-2009, 12:13 PM

What type of work leads were you purchasing Brian?

MOTB · 07-27-2009, 01:30 PM

Quote:

Originally Posted by J F

What type of work leads were you purchasing Brian?

Me personally .... none. But I do care becuase I run an Internet software company for contractors. We have a vision where contractors could get leads (jobs) directly into their business system, similar to how you can accept a meeting request and have it go into your Outlook scheduling calendar.

I asked a few dozen contractors their opinions and, INSTEAD OF ANSWERING THE QUESTION, they would begin to bombard me with negative feelings about the lead generation business. This negativity is all over this forum so I will not sidetrack. (Sidenote: there are positive comments too, but definetely a lot of negativity)

What I found was that contractors were beginning to ask for ideas to change the way they purchase leads and instead purchase jobs. I think every lead service provider is aware of the changing mindset, and I have been watching very closely to see who would give it the first try.

So I am excited that someone is willing to test the markets differently, and possibly then allow me (and other software companies) a way to connect to the market by making it even easier for contractors to get the leads (jobs) right into their business system.

Other than that, I would need the comments of the community to validate the model as well as the service of this particular company.

Brian

**Ed the Roofer** · 07-27-2009, 02:12 PM

I have my own General Liability Insurance and Performance Bonds when necessary, so why should I and 1,000 or more other contractors front $1,000.00 to a complete Internet stranger for the purpose of guaranteeing my work?

Only 100 contractors gives them $100,000.00 of Seed Money to keep in their account and do with as they want, all the time collecting interest on my funds instead of me.

Then add 7.5% of the sale up to the $10,000.00 break point?

Where do the extra funds come from to pay the Salesman's Commission of around 10% and still leave a viable Net Profit?

I don't think so for me.

Ed

MOTB · 07-27-2009, 02:44 PM

Quote:

Originally Posted by Ed the Roofer

so why should front $1,000.00 to a complete Internet stranger for the purpose of guaranteeing my work?

Hey Ed,

I think a good set of your questions are valid, which I do not know the answer to ... but the one thing that I liked during my own research is that they are affiliated as the job search engine to a lot of big players so it is not a completd strange.

Also, I do not think the 1K is for the pupose of guaranteeing the work. I think it is to open your account for the first jobs you get, and if the customer was screwed, that it would defray the cost. I think the question should be, after the 1K is depleted to open the account, do we just go into normal billing procedures after our reliability has been proven.
Brian

RidgeWalker · 07-27-2009, 02:50 PM

3) If you win the job, you pay 7.5% of the first $10,000 and 2% on the contract amount above $10,000.

THAT IS FREGG'N INSANE! 7.5% up to 10K? And you still have to do all the things a salesrep would do to get paid that much?

And what about a company that has salesmen who need to get paid a commission? This model does not work, it is greed plain and simple and designed to keep contractors from learning how to do it themselves.

Lead companies for contractors know a very important FACT. Most have no clue how to untilize the internet to get qualified leads.

They provide the service, but it really not a service. It is a way to keep us from learning how to do it ourselves.
These people need a REALITY check!!!! I could take those percentages and put it into local marketing online and dominate Google and get all the leads instead.

**Ed the Roofer** · 07-27-2009, 03:00 PM

I read somewhere on their website that the $1,000.00 is in the event that any judgment or arbitration award goes against you, it is there to satisfy the order.

Also, the argument could be made from their perspective that you could potentially reduce your marketing/advertising costs, but that is not a given that their site will generate enough leads to eliminate most contractors other sources of advertising.

Ed

chris n · 07-28-2009, 06:20 AM

Quote:

Originally Posted by Ed the Roofer

I read somewhere on their website that the $1,000.00 is in the event that any judgment or arbitration award goes against you, it is there to satisfy the order.

Ed

That is why we pay $$ for a contractors license here in MD and I am sure other states as well

bwalley · 07-28-2009, 07:20 AM

Quote:

Originally Posted by MOTB

Hey everyone,

It seems that a lot of people, including myself believe that contractors should pay service fees for jobs they get, not for leads. One of the top lead generation services has revised their entire business model to provide leads for Free, and charge only for those jobs you get. It is similar in philosophy of eBay where anyone can sell on eBay and the seller is charged a service fee after their item is sold.

Here is what I can see.

This is not a start-up business, it is Contractors.com that has completely changed the older-outdated business models of selling leads. This new service is also associated with Qualified Remodeler, HGTV, Fine Living and some others.

This is not for every contractor since you they limit it to contractors with an established history (requiring 10 customer references and 3 trade references and you must have been in business for the past 5 years) and a few other qualifications.

From a financial perspective, you need to pay for three things:
1) You first buy a territory, which is made up of the zip codes you select. Only 3 contractors per trade, so it is a first-come or exclusive program. The annual fee is $1 per 1,000 households and is non-refundable. Since this fee includes a company listing on all their directories they are affiliates with. I selected 12 zip codes around my area and my total cost was just under $170 for the year.
2) You must also make a refundable deposit of $1,000 against and fees you owe for jobs that you get. You could also lose your deposit if a homeowner wins a lawsuit against you and Contractors.com pays it. (They guarantee the performance of their contractor members, which could be an excellent lead generation strategy, especially when promoted on affiliates such as HGTV)

3) If you win the job, you pay 7.5% of the first $10,000 and 2% on the contract amount above $10,000.

It seems like little risk. If you don't get enough leads in the program, you can quit and your only cost is the territory fee, which considering your getting listed on HGTVPro and Contractors.com could generate leads on its own, and these leads have no reporting or fee associated to them.

I reviewed their video at http://www.contractors.com/freeleads/Video.aspx?pm=QQHQ19 which describes the program well. If you like what you see, you may want to separately check out the Referral Program since I did sign up to see how it works to compare how we work with referrals for my company.

Check it out and offer your opinions,

Brian

7.5% on $10,000 is quite a bit of the profit, to be able to pay for the leads you will have to add 10% to the job just to cover the lead fee, and that could cause you to lose the job.

Mike Finley · 07-28-2009, 08:16 AM

It looks to me like the shell game has done nothing but mix around the shells again. $750 job aquistion costs is what they want?

As I've said a million times the costs of these lead services to aquire their leads is too high, that model is broken and this fee demonstrates with an inside look at how much they have needed to make as a gross when selling a lead. Absolutely insane. This indicates to me that on average they are reselling leads enough times to hit this figure in the more typical model.

Just yesterday we had so naive guy on here who was talking about selling leads on his new site for $1-$5 each and the discussion moved to how would he make money.

This is just more evidence of how badly these lead companies have killed this niche by competing against each other and driving up their lead aquisition costs to this level and just keep expecting contractors to keep paying through the nose for their expenses.

7.5% of gross sale, that's equal to somewhere around 20-30% of net profit per job or more!

J F · 07-28-2009, 09:06 AM

Quote:

Originally Posted by Mike Finley

It looks to me like the shell game has done nothing but mix around the shells again. $750 job aquistion costs is what they want?

As I've said a million times the costs of these lead services to aquire their leads is too high, that model is broken and this fee demonstrates with an inside look at how much they have needed to make as a gross when selling a lead. Absolutely insane. This indicates to me that on average they are reselling leads enough times to hit this figure in the more typical model.

Just yesterday we had so naive guy on here who was talking about selling leads on his new site for $1-$5 each and the discussion moved to how would he make money.

This is just more evidence of how badly these lead companies have killed this niche by competing against each other and driving up their lead aquisition costs to this level and just keep expecting contractors to keep paying through the nose for their expenses.

7.5% of gross sale, that's equal to somewhere around 20-30% of net profit per job or more!

Any idea what happened to that thread or why it was deleted? I can't find it.

DavidC · 07-28-2009, 10:44 AM

I just read the thread and haven't been to the site, so just playing devil's advocate.

If it takes an average of 3 sits to make a sale and an average of 3 leads to get a sit, how much do you have invested in leads per sale? Is there a net savings by processing "free" leads until you make the sale?

(I'm just thinking out loud so don't go picking on my goat)

Good Luck
Dave

**Ed the Roofer** · 07-28-2009, 11:59 AM

Quote:

Originally Posted by J F

Any idea what happened to that thread or why it was deleted? I can't find it.

He wasn't a contractor or affiliated with contractors in any way and just wanted to Poll the contractors for how to make a business model to make himself some money.

It's called Data Mining in the T.O.S. and is not allowed.

He didn't have any useful content to add, so Ta-Ta.

Plus, at $1.00 to $5.00 per lead, the business would not last, as Mike pointed out.

Ed

**Ed the Roofer** · 07-28-2009, 12:01 PM

Quote:

Originally Posted by Ed the Roofer

Also, the argument could be made from their perspective that you could potentially reduce your marketing/advertising costs, but that is not a given that their site will generate enough leads to eliminate most contractors other sources of advertising.

Ed

Quote:

Originally Posted by DavidC

I just read the thread and haven't been to the site, so just playing devil's advocate.

If it takes an average of 3 sits to make a sale and an average of 3 leads to get a sit, how much do you have invested in leads per sale? Is there a net savings by processing "free" leads until you make the sale?

(I'm just thinking out loud so don't go picking on my goat)

Good Luck
Dave

Thats the counter-point that I was trying to make also.

Ed

MOTB · 07-28-2009, 12:19 PM

Quote:

Originally Posted by Ed the Roofer

He just wanted to Poll the contractors for how to make a business model to make himself some money. It's called Data Mining andd is not allowed.

Hi Ed,

I spoke to him to ensure it wasn't a set-up to me since the timing of his question was so close to my learning of this new service. In any case, he was sincere in learning about how to make a business model and some money. I think everyone may have woken him up as to how hard it may be. The one thing I verbally emphasized is that he can still decide to give it a try, but at least he sees clearer about the upward battles he will face. But least he forget, there is still a few hundred million in sales going on in that industry so, regardless what we all say, perhaps someone can build a better mouse trap and change the model.

The one thing that I think should be considered is to not prohibit Data Mining since it is happening anyway on other forums (i.e. LinkedIn). Personally I would enjoy seeing more business strategies being put on the table with growing traffic to ContractorTalk. It is easy to throw conversations all over the place, accumulate a few hundred opinions, yet much harder to execute if someone truly is going to give it a try.

In my previous business, I and all my competitors, would ask a question to see what the market wanted, and then we would execute different ways to address the needs .... and then the market decided who had the best answer. In my opinion it would be nice it happen more frequently here since it will eventually better the market, but I do understand the fine line the topic draws when it comes to running a forum like this.

Brian

PS. I would think the current lead generation threads would have accumulated enough negative data mining that soon the whole category should just be prohibited.

That is why I offered the topic once I saw a new potential.

**Ed the Roofer** · 07-28-2009, 12:52 PM

It is a fine line.....

But, what always happens, is some/many posters start to jump in and kick the chit out of a non-contractor or associate and the thread just becomes a bunch of beatching and moaning, and Reported Posts to the Moderators about why Little Jimmy isn't playing nice with their topic.

Then they want action taken immediately against those tyrants who have contributed on this forum for years, who they personally condemn for ruining THEIR Topic Thread. Yet, they are here only for that one singular purpose, to define and enrich their own company aspirations with little else to share.

Often times, I would like to give them a bit more rope, but their intent is as clear as day, so it really becomes a non-decision for the fairness to the rest of the forum so one or a couple of threads don't change and disrupt the camaraderie and brethren kinship devoted to sharing and helping our brother contractors.

Even if there were an exclusive separate sub-forum for that type of posting on here, the Blood-Bath would still be ongoing.

Ed

SelfContract · 07-28-2009, 01:03 PM

To avoid similar problems like this, I honestly suggest Nathan (Admin) design/create another forum dedicated solely for Lead Business, Lead Software Forum, etc, or anything concerning business leads in general.

And everytime, a lead-related thread come into the Contracor forum like this, every moderator can always take it out like they do it for our DIY forum. (because "leads" issues are not "construction" issues at all??)

RidgeWalker · 07-28-2009, 02:28 PM

If you have participated on this forum long enough you'll have all the data you want to mine. = )

gtp1003 · 11-03-2009, 04:49 PM

First off you have no need for a marketing company to bering into the mix. for a buck 1.32 a home you get all the support and leads if your in the correct location and canvassing is not a prt of the idea.

DarrenB · 11-03-2009, 05:51 PM

Care to explain yourself GTP?