Last week, Bloomberg Business breathlessly announced “Facebook Plunges Into Home Repair Matchmaking Service!” The reality is a little more nuanced, but is still a huge deal given the 936 million people who use Facebook daily. Facebook has partnered with Pro.com, and users will be able to use Facebook Messenger to find a contractor, get a price, and quickly book the appointment. So while there’s not a “Facebook Home Services” (yet), it’s a powerful partnership.
What the online home services market looks like
The market for home improvement services is estimated at $300 billion a year, and you’d better believe investors and venture capitalists want a piece of the pie. There has been a lot of money thrown at companies like Lawn Guru, Lawn Love, and Plowz and Mowz, companies that provide an app so the customer can tap the screen a few times and their lawn is magically mowed. No contact with a pesky salesperson needed.
There are also platforms like Pro.com, Amazon Home Services, and Porch.com that are looking to cash in on contractors. These sites offer homeowners a wider variety of services to choose from than the lawncare apps. Think this is irrelevant to your company because you do design-build or landscape enhancements? Think again. While Amazon Home Services doesn’t let homeowners buy a complex project with one click, they can get the process started – and they’re a part of the transaction from that point on.
Why Facebook Home Services and their kin should have you worried
The bottom line is that all of these home services companies rely on volume to make their money. How does a large company sell in volume? By driving prices lower. There are two ways these companies do this.
Setting the price to the contractor
Curious to see how these services worked, I went through the application process for one of the mowing apps. When I finally got a call from their rep about the next step, she informed me what they paid their contractors: a flat $15 per hour. If you busted tail and showed initiative, they’d kick you another buck or two.
So these folks want a qualified, insured contractor with all the necessary equipment to work for $15 per hour. Would you? Could you?
Taking their cut off the top
Amazon Home Services is an example of one of these companies that doesn’t want to get in so deep that they’re dictating your price. They just want a little off the top. How much? Here’s how it’s broken down as of today:
- recurring service (ie, mowing): 10%
- custom service (like design-build landscape): 15%
- pre-packaged services: 20% (!)
So how well do you know your numbers? If you give up 15% on a planting job, do you still make money?
What’s worrying about an Amazon Home Services model is that Amazon’s understanding of how to sell more is to squeeze the vendor to drop pricing. I got an email a while back letting me know that if multiple contractors are bidding on a job, Amazon will let you know what the lowest bid was (they’re assuming that’s who won) so you can lower your prices next time and get the job! Dropping your price for a mowing from $30 to $20 could really hurt you. That just means Amazon makes a buck less, and they don’t have your costs. Who really wins by winning a job like that?
How you can win by not playing the game
The best way to set your own pricing and not have to pay an exorbitant finder’s fee is to avoid the online matchmaker app system altogether. They don’t have your best interests at heart, and they’re really not bringing value to you or the client. Here’s what they think of contractors, from the Seattle Times:
“It’s an industry that totally lacks transparency and trust,” said Pro.com CEO Matt Williams. “You have no idea how much it should cost, you have no idea if the guy doing it is going to be safe and trusted. … We make it super simple.”
In other words, “only hire through us or those guys are gonna screw ya.” Does that sound like a business you want to partner with?
The reason why lawn and landscape contractors turn to lead companies and online home services companies is simple: the phone isn’t ringing enough. If you can improve your marketing and your brand’s positioning, here’s what you get:
- better control of the type of leads you get
- more qualified leads (one click ordering = a lot of tire kickers)
- you control the warranty and quality control process
- you keep your money
At Green Pro Marketing, we use our years of experience working in and for the landscape industry to help lawn and landscape entrepreneurs like YOU grow your business. If you’re ready to grow your business the smart way, contact us today.