Blog

1) Customer Mentions a Lawyer or Lawsuit

2) Customer Breaches the Contract

3) Customer Raises Their Voice

4) Customer Bypasses Chain of Command

5) Customer Alludes To Not Paying or Paying Less

How to Fire Your Client

Contractor customer retention is a big topic among professionals. The more clients you can keep, the more your residual revenue increases. Furthermore, new competitors emerge every year, stiffening the competition for existing and prospective customers.

In pretty much every region of the United States, the contractor market is congested. Competition is fierce as over 700,000 active contractors in the construction field alone! And it seems that new contracting companies are emerging every day.

One tactic that young companies employ (mainly because they have to) is discounted services. They often outbid more established companies to make a name for themselves and build up a client base. 

Contractors Society of America provides some advice and tips to increase your contractor customer retention rates in the following post. Then, you won’t have to worry about any upstarts trying to horn in on your client base.

Invest in CRM Software

CRM stands for Customer Relationship Management. CRM software is self-explanatory: software designed to help you keep track of your customers and improve relations and customer service. 

A big part of contractor customer retention is improving customer satisfaction, streamlining your services, and anticipating your customers’ needs. CRM software can be a tremendous help in all of those departments. You might also consider some of the best construction project management tools.

A customer profile is one of the best tools a good CRM software suite will have. It will automate gathering data and information on any customer you do business with into one digital space. So how would such a tool help? Let’s take a look:

Improving Customer Satisfaction

No one likes to have to explain themselves repeatedly to different sales reps. Having a consolidated customer profile with information gathered from different agents negates the need to ask redundant questions. In addition, it gets your customers the help they need faster.

Streamline Services

Many CRM software suites can automate customer calls, customer outreach, and even marketing emails so you can spend your time on more important matters. 

Anticipate Customer Needs

A CRM software suite will record all the services a customer needs. With this information, you can better predict what type of services they will need or want next and reach out to them about it before they have to ask. 

Manage Online Reputation

Your company’s online reputation has mostly to do with what people are saying about it online. However, it also will play a big part in your customer retention rate. Review sites are one of the largest forums that people use to sound off about companies they’ve hired. 

Sites like Yelp, Google Business Profile, Angi, and Houzz are frequently visited by customers looking to evaluate their current or future contractors. Unfortunately, a bad experience may prompt clients to confirm their suspicions about your service by looking for similar complaints.

However, being present on these sites isn’t enough if you want to increase your customer retention rates. Consider the following statistic: 52% of consumers expect companies to reply to their online reviews. 

So, as much as possible, make sure you are responding to the reviews your company gets across all platforms. Responses show that you care about the customer’s experience, and it builds trust and brand loyalty. 

General Review Platforms

Platforms like Google Business Profile and Yelp are essential for all business types. While contractors benefit just as much as any other industry from favorable Google reviews, the platform also influences lawyers, doctors, and any other business you can consider.

Niche Review Platforms

Platforms like Angi, Houzz, and HomeAdvisor are specific to the contractor industry. Therefore, feedback on these websites/apps is critical for contractor businesses. These sites are not more important than Google and Yelp, but they are vital to your reputation.

Social Media

The same goes for social media. If someone takes the time to retweet you, tag you, or comment on your posts, be sure to shoot back with a response. Acknowledgment drives engagement, and people are more likely to hire a company that shows activity online.

Utilize Email Marketing

We know email marketing can seem a bit spammy at times. Still, the fact is that it is very effective for customer retention. Keeping in touch with existing and past clients can be a great way to remind them of your service – especially if they had a good experience with you. 

For the most part, people won’t want to take the time to research and communicate with a new contracting company. Instead, nine times out of 10, they will go back to one they have a relationship with, assuming that the first project went well. 

Email marketing messages are a great way to remind your customers of your service and their relationship with your company. The numbers don’t lie, either. According to a survey, 37% of respondents reported that email marketing messages were effective for customer retention. 

There are some things to keep in mind if you want to launch a successful email marketing campaign, though:

Email Frequency

You never want to inundate your customers’ inboxes with marketing messages. Most contracting companies don’t need to send multiple emails a week. Try sending out a message every month instead. 

Personalized Messages

Having the recipient’s name in the subject line, referring to a service they hired you for, or reminding them of maintenance will help increase open rates. People’s email inboxes are filled with spam, so you have to give them a reason not to skip over your message.

Special Deals

Tell your email list about any special deals on services you offer. You might also run seasonal promotions for holidays, summer, winter, etc. The key is sparking engagement from your email list. Monitor your metrics to see which promotions your customers respond to most favorably.

10X Customer Retention With These Methods

So how can any contractor compete with lower prices? Instead of finding new customers who are willing to pay more for experienced contractors, work on retaining your existing customers. Increasing retention is generally more cost-effective than having to churn and burn.

Contractor customer retention may be your best chance to stay competitive in your market, even with newer companies offering their services at lower rates than yours. 

Contractor customer retention is one of those concepts that are easier talked about than executed. However, it is far from impossible, and it will be much cheaper for you than to go out and try to rustle up new leads and customers. 

The strategies mentioned above, including CRM investment, reputation management, and email marketing, contribute to a higher retention rate. Retaining customers reduces stress on your budget and allows you to maintain a more sustainable business model in 2023.

Builders’ risk insurance is essential for large-scale projects. As a contractor, you may have wondered about builders’ risk insurance. But, on the other hand, maybe you have gone to jobs without it because you are already covered by contractor insurance. 

However, it’s critical to understand all the aspects of this kind of specialized insurance, as going without it could do irreparable harm to your company and your reputation. 

Of course, every contractor who has considered this type of coverage has wondered, who pays for builder’s risk insurance? The answer to that question can vary on the project, however. 

To help you understand more about builders’ risk insurance, what it covers, and who will pay for it, the Contractors Society of America presents the following post.

What is Builders Risk Insurance?

Builder’s risk insurance covers everything that your contractor insurance does not. Generally speaking, contractor insurance protects you, the contractor, and your company from claims made by customers. 

For example, if property damage occurs during the project, contractor’s insurance will cover the cost of the damage and protect your company from claims made by the property owner. 

On the other hand, builder’s risk insurance goes a step further and protects all parties involved in the project. Say, for example, that a bank is funding your project, and you need to hire subcontractors to complete it; builder’s risk insurance will cover any losses suffered by yourself and these other parties involved. 

Builder’s risk insurance will also cover the actual property owner if property damage is incurred during building. It even covers smaller items like your tools and equipment. 

In short, builder’s risk insurance is a catch-all policy that includes all entities that have a stake in the project. With such a broad span of coverage, the question then becomes, who pays for the insurance?

Determining Who Pays for Builder’s Risk Insurance

There is no universal answer to the question: who pays for builder’s risk insurance? However, what is certain is that even though the policy can cover many different parties, the cost is not split. In other words, one entity will pay for the policy even if it covers 5 or 6 other entities. 

That’s mainly because a single policy will cover a multitude of entities. However, traditionally, the policy is paid for by either the general contractor or the land developer/owner of the property. 

The onus of paying for the builder’s risk insurance policy usually falls on one of these two parties because they tend to have the most stake in these kinds of projects. 

Who pays for the insurance is usually decided when the details of the project are being worked out by the general contractor and the property owner. That’s why the answer to the question, ‘who pays for builders’ risk insurance?’ is so subjective. 

It can depend on the project’s scope, the negotiations between owner and contractor, the relationship between the owner and contractor, the length of the contractor, and the number of parties to be involved. 

What Does a Builders Risk Insurance Policy Cover?

While a builder’s risk insurance policy covers a multitude of parties and situations, it doesn’t cover everything. It usually comes down to whether or not a party will take a financial loss if an accident or setback occurs. 

For example, an equipment supplier who has already paid for their goods should not be covered in a builder’s risk insurance policy even though they are technically involved in the project. 

Architects are another example of a party that should not be included in a builder’s risk insurance policy. Even though an architect is involved in the design of the building, they will not take a financial hit if an accident or setback occurs during construction. However, here are some of the essential things that builder’s risk insurance policy does cover:

• Inclement Weather: Inclement weather, such as rain, hail, snow, and high winds, can cause damage to a building in progress and can delay construction. Builder’s risk insurance policy will cover any weather damage or additional costs incurred due to project delays. 
• Tools: If your devices are damaged or stolen while building, a builder’s risk insurance policy will cover the costs to replace the tools. 
• Banks: If a bank is funding the project and something goes wrong, this policy will make sure the banks are covered financially. 

Being a general contractor is appealing to many different types of people. People who like to work with their hands, people who have a skill for task delegation, and people who garner satisfaction from seeing a job through to the very end all flock to the trades, and many of them eventually become general contractors. 

It’s also easy to imagine that many general contractors get into the business because of job security. In addition to making an above-average income, general contractors’ job growth projection through 2026 is 11%. 

And if you are one of the people who want to be among Texas’ fine general contractors, you probably have some questions about the process. Luckily, obtaining a general contractor license in Texas isn’t as hard as it is in other states. But the process is still riddled with red tape and bureaucracy.

In the following post, Contractors’ Society of America will be helping all the hopeful general contractors out there by answering some of the questions associated with how to get a general contractor license in Texas. 

Can I Use my Contractor License in Another State?

While some states have contractor license reciprocity agreements (meaning that you can obtain a contractor’s license in a state other than the one you became licensed in without taking another test), some do not. At the time of this writing, Texas has no such reciprocity agreements with other states. 

Furthermore, “state jumping” is not allowed. State jumping refers to when you get a reciprocal license in one state and then go to another state and obtain a license there and the merits of the reciprocal license you got in the previous state.   

Do I need a General Contractor License in Texas?

The short answer is no. Texas does not require any testing or specific licensing if you want to operate as a general contractor. But there’s always a short answer and a long answer. The long answer is that while Texas doesn’t require anything to operate as a general contractor, some cities within the state might. 

Of course, it gets complicated for many general contractors. The city you are working in may have its licensing requirements. But to get your general contractor business set up in Texas, there aren’t any specific licensing requirements. 

Contractors that need a License in Texas

Chances are if you are a general contractor, you probably offer other services that do require state licensing. For example, if you plan on providing plumbing, HVAC, or electrical services in-house, you will need to obtain a license for those services. Of course, if you plan on subcontracting all of those services out, you won’t have to worry about getting those licenses yourself. You must be sure that any subcontractor you are working with is fully licensed and insured.

Do I need General Contractor Insurance in Texas?

Again, the short answer is yes. If you are working for public clients, the state requires that you have workers’ compensation insurance. Workman’s comp protects your clients and your employees should they get hurt on the job. The workers’ compensation insurance will foot the bill for any medical costs. 

And yet again, there is a longer answer. You may also need a builder’s risk insurance and put up a surety bond to work with some clients or in certain cities in Texas. The surety bond protects the client if they fall short of building codes or a project is left incomplete. The builder’s insurance protects against any damages that may occur during any given project. 

Some cities may require you to have all of the insurance types mentioned above to get your work permit. The best way to find out which Texas cities you will need a license and insurance in is by visiting the Texas Municipal League’s website and clicking on the specific city. That link takes you to a city-specific website that lists general contractor licensing and insurance requirements.

Get your Career Started

If you are ready to start your journey as a general contractor, why not become a member of Contractors’ Society of America? We provide you with the valuable resources you will need throughout your career. Plus, we offer unique networking opportunities for contractors of all kinds so you can find quality subcontractors or pick the brains of industry leaders. 

Should contractors be bonded and insured? Well, only if you want to win the most customers possible. Savvy homeowners will know the difference between liability insurance and a bond. And if a contractor isn’t bonded, they may very well stay away from them. 

So the short answer to these questions is yes. All contractors, whether you fit pipes, install electrical boxes, hang drywall, or shingle roofs, should be bonded and insured. But for those of you with inquiring minds, Contractors’ Society of America will be explaining why you should be licensed and bonded as a contractor. But let’s start with the basics.

What is the Difference Between Being Insured and Bonded?

There is a common misconception that insurance and bonds are essentially the same things. That isn’t the case. In straightforward terms, a surety bond protects contractors’ customers, while liability insurance protects the contractor. 

A surety bond is a certain amount of money that a contracting company puts up to a surety bond company. If the contractor fails to follow local building codes and regulations, leaves a job incomplete, or detriments the property, the consumer can go after the company’s surety bond. 

The bond protects the customer from an ill-intentioned company and keeps contractors honest. On the other hand, insurance means that you won’t be on the hook if a contractor is injured while working on your property. 

There are different insurance types that a contractor should carry, like liability and worker’s comp. Still, these policies are more to protect the contractor and his/her company than the customer. 

On the consumer end of things, there is one significant difference between insurance and bonding. As erstwhile mentioned, a bond will protect the customer if the contractor fails to follow building codes. Adhering to regulations is very important.

Say, for example, you hire an electrician to wire a room you recently added to your house. The project goes off without a hitch; you pay the contractor and say goodbye. But a few months later, your new addition doesn’t pass inspection because of faulty wiring. 

In this case, the electrician’s insurance can’t help the consumer at all. But the bond can. The customer could file a claim against the company and go after their bond money to help cover the cost of rewiring. 

Do you Need to be Bonded?

The tricky thing about bonding is that some states require it to get your contractor’s license, while others are laxer on the rule. Here is a full list of which states require a bond, but it’s best to contact your local licensee board for specific regulations. 

That’s because some states require a bond for some trades but not others. The county you are operating in may be a determining factor as well. For instance, if you are a contractor in Montana, you may be required to be bonded in one county but not the neighboring one. 

Do you Need to be Insured?

Again, the short answer is; absolutely. Different states have different license laws. Some require insurance for you even to get your contractor’s license. But in general, you will need at least some basic insurance to obtain your contractor’s license. 

But apart from the requirements, not having a full complement of insurance as a contractor can cost you customers and income. That’s because some home owner’s insurance policies require that the homeowner works only with insured, licensed contractors. 

So, for example, a homeowner could have their insurance voided if they knowingly work with a contractor who is not insured. For this reason, many savvy property owners will stay away from contractors who don’t carry a full complement of insurance policies. 

Final Thoughts From CSOA

In the end, the bonding and licensing process benefits both contractors and their customers. It may seem like a hassle for a contractor to pay into a surety bond every year, but it keeps your work honest, which in the end, is suitable for your business. 

On the flip side, it can be a chore for the consumer to obtain multiple estimates from different contractors (as is the smart practice) and to make sure they are all fully licensed and bonded, but in the end, it’s worth the effort. 

But whether you are a consumer or contractor, we can make the process more comfortable with the wealth of resources we offer here at Contractors Society of America. Reach out to us today.