This week on the podcast, Rob, Stephen, and Wade are talking about referrals. They share a proven process you can use to actually get clients and vendors excited about referring you to other businesses or consumers. Learn how it works and what questions to ask on this week’s show.
Topics we cover in this episode include:
- Why contractors should focus on getting referrals
- Make sure you’re one of the best at what you do before seeking referrals
- Examples of the vendor well process in action
- Who you can use this process with to get referrals
- How to start building relationships in your vendor well, including the exact questions to ask
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[00:00:00] Rob Williams: Welcome to the Contractor Success Forum. Today we are discussing how to grow B2B, business to business, contractor sales, using referral in what we call the vendor well. So today we’re gonna discover what in the world is the vendor well.
And here it is on the Contractor Success Forum. We discuss how to run a more profitable, successful, construction business. And who is here to all help us share how to make a construction business successful? It’s Wade Carpenter Carpenter and Company, CPAs. And we have in the other corner, Stephen Brown with McDaniel-Whitley Bonding and Insurance Agency. And me Rob Williams, author of The Pumpkin Plan for Contractors in the works. And IronGate Entrepreneurial Support Systems.
So today, guys, we’re talking about getting referrals in the construction business and B2B. Man, that’s a tough thing to do, isn’t it?
[00:01:03] Stephen Brown: It is. You’re only as good as your referrals, right?
[00:01:07] Rob Williams: Yeah, it could be. Yeah. And, you get this steady business. One of the things is people don’t like to give referrals, especially if you’re working for somebody. I mean, when I was a contractor, I was not going to refer my subs cause I didn’t want them to go somewhere else. I was too busy trying to get them to show up to my jobs already.
[00:01:25] Wade Carpenter: I think that’s a valid point. And too many contractors are out there just completely going by the bid process. And sometimes you are at the mercy of, you know, low bidder and all that stuff, but when you can get in with that right owner or whoever you’re working with, you can usually make a lot more money and they know your work and that would give you steady work.
And so I think this is a great topic.
Why contractors should focus on getting referrals
[00:01:48] Rob Williams: Yeah. I tell you, staying on that subject, Wade, why would somebody wanna go from referrals? I have one situation I had recently with a contractor. We were looking at his expenses. And God, he had a lot of overhead and stuff, and he had a lot of people in there, and I was like, what’s going on with this?
He said, yeah, we’re bidding all these jobs. And I said, how? What’s your closing rate? Oh, he said, man, sometimes we’re up to 5%. Somewhere at times we’re 2% of our jobs that we get. I was like, oh my God. Most of his overhead was bidding jobs over and over. He’s in those plan rooms and stuff. Bidding, and all his profit was going to the bids. He was very marginally profitable.
[00:02:31] Stephen Brown: So what did you tell him to do?
[00:02:33] Rob Williams: Well, we talked about The Vendor Well. But we actually talked about defining his niche and getting good. He was actually really good at some things, but they bid everything. And this could be a little bit off the subject, so we won’t go there long, but if you stay in your niche where you’re really good, then you’re gonna get more of the right jobs. But you’re also gonna win a larger percent of them.
One of the situations, he had really good carpenters. He had really expensive carpenters. And the average jobs, he wasn’t winning, you know, so he hadn’t figured out which jobs to bid and which ones to not. They were bidding everything and he was not cost competitive at everything.
Make sure you’re one of the best at what you do before seeking referrals
[00:03:15] Rob Williams: Which is the other thing, talking about getting a referral. Are you guys going to refer somebody that’s not gonna make you look good? Are you gonna tell one of your clients to go use somebody if he’s not good or if you’re not sure that he’s gonna do a great job? Wade in accounting, I tell you what, if I don’t know somebody’s an excellent CPA, Wade clearly stands out in accounting because he’s established his niche with contractors and he can really do an excellent job as a construction accountant. He doesn’t go after everything. So people are excited. If I see somebody, I’m gonna want to tell Wade about it because I know my client’s gonna be better off. He’s gonna be able to pay me more often, and it’s gonna make me look good for referring him to Wade. I think that’s the key.
And I did wanna start with that because if you don’t have that down, don’t waste your time going down the referral road in the business. If you don’t have people that think you’re the best, go work on that for a while. Don’t go here yet.
[00:04:21] Wade Carpenter: Right. Well thank you for that shameless plug there, Rob. But anyway.
[00:04:26] Rob Williams: Hey. Hey, you were a good example.
[00:04:28] Wade Carpenter: In construction I have seen contractors, and especially the trades like electrical or plumbing or some of the other trades, where they could go bid everything under the sun and they’re doing different things and they never really get good at that.
But then I’ve seen other contractors that they get in with a particular retail shop or some chain and they learn their system and they do good work for them. And they will have them keep coming back time after time. And the contractor, maybe they can do it a little cheaper or whatever, but they get good and they know exactly what they’ve got to do to get the job done because they’re, can become the cookie cutter type thing.
So I think this is a great subject.
[00:05:13] Rob Williams: That’s a great example. And that’s great. I wanted to start with a couple of stories too, because I think we’ve been having some feedback, we want more stories. So the stories in there for me, it was similar to that, but it doesn’t even have to be sticking with that one vendor, that one owner or whatever, maybe it’s a contractor. You can work together with people.
An example of the vendor well in action
[00:05:34] Rob Williams: In my example was when we were building wall panels and trusses. If the slab was messed up, our product wouldn’t work. So we were definitely looking for people that would pour the slab correctly. People didn’t know they weren’t pouring the slab correctly.
So we started working with those guys. We got with the end contractor, said let’s meet with your slab guys. So we got with them. We found out why the slabs were not being poured right. And it was basically, well, first they didn’t know they weren’t pouring them right. Nobody was telling them. So that was the thing.
But then they didn’t have the tools they needed to do it. So we got with them, we met with them, we drew the blueprints for them. We would draw the slab plans and the layouts and give them those dimensions that they needed. And we’d even give them the diagonal so they’d know it was square.
And we got with the plumbers too. So it was the plumbers, the slab guys, and us. And we figured out who it was, but some of the guys did not want to listen and do that. They just wanted the old way. They just don’t want change. So when we got that, do you think we referred those slab guys and do you think we referred those framers?
We made sure those guys were on every job in this area and we didn’t wanna sell a job unless we had one of those framers or one of those subs. So we were actually the vendor well there. And, but I think they actually referred us some. I think we as the supplier referred them all the time. And now you may know what the vendor well is.
Anybody can be in your vendor well
[00:07:07] Stephen Brown: Well, I mean, all right. My take is the vendor well are, if you’re a general contractor, if you sub out work as a subcontractor, your subcontractors, and then your folks who provide you equipment, material, supplies. Is that right?
[00:07:24] Rob Williams: Yeah, it can be anybody. You ask some questions at the end of this, hang on. And at the end of this, we’re gonna give y’all some of the questions at the end, of how you do this and how you go and ask your contractor or your owner if you’re the GC. It might be owners or it might be, you know, I don’t know who the person above you is, but we’ll talk about that because you need to find out from them who their key people are that they depend on, and that we can relate to, that we might be working together in some way.
You don’t have to be working together, like the other second story I had was a friend on the West coast that got with the suppliers that he’s dealing with. So he started talking to– well, he asked his guy, they were more of the manufacturing side of it, who was giving him his materials. So he got with the people that were supplying the materials and they said, oh, you know what? We’ve really noticed on the last two years, this guy’s buying all kinds of stuff and he’s paying his bills, he’s doing this stuff, so something’s going great about his business.
So they got together and then they worked everything out exactly how you could do it. It wasn’t as much about systems like the slab thing was, but it was just about a common relationship. Those suppliers said, hey, do you think you have time to work with this? So immediately he got full for a year, and then he got to the point he had three or four years worth of stuff, referrals. He didn’t have to go out and sell anything. He was completely booked up.
And that’s the way your business should run, is you should not do every sale you could do. You should do as many sales as you can and you should be able to sell more. But in using this vendor well, like he did, you can really lower that cost of your sale.
Your profitability goes up too because what we talked about earlier, you don’t have to waste as much time bidding or those kind of things. So you’re gonna get those jobs. You’re gonna have a waiting list. But he is good. He’s the best at what he does in his niche, so.
[00:09:21] Stephen Brown: Sure. I’ve got a HVAC Contractor that is really good at what they do and the material suppliers that spec out this HVAC requirements to the AE firms love them because they know it’s gonna be installed right. He has that reputation. And also he pays promptly. I think that’s important.
[00:09:42] Wade Carpenter: Well, I think about this too, I guess from the standpoint of, Mike Michalowicz talks about this concept too, where, how he grew his business. And essentially it was basically a desk manufacturer for these stock traders. He was in the IT business.
And I think the vendor came to the conclusion that, hey, these people are doing it right. They’re causing less problems. And Mike, in his IT business, he was having less issues because they were making sure that these computer systems got installed in these desks right.
[00:10:16] Rob Williams: Yeah. Because there were two holes in there. There are two channels to put there. And Mike was yanking the electrical cables out of the one tube and putting his stuff in, or his people were, and they were doing the same thing and they didn’t know that one was designed for electrical and one was designed for computer cables.
And once they figured that out, he was the only one that knew that. And so he got referred to all the other top Wall Street traders and stuff.
[00:10:40] Wade Carpenter: I just think about that from, you know, I have known some trades that know how to install certain specialized products for electrical, plumbing, some of those things and I’ve seen that happen too. And they do actually get some referrals to sub out jobs that they get a call from the vendor because of that, because they know how to do it.
Does the vendor well work for Business to Consumer businesses?
[00:11:01] Rob Williams: Oh yeah. Yeah. That’s great. It’s, the other thing that we’re talking about, we’re talking about business to business here. What if you are not business to business? Because I know we have a lot of listeners here that are not because they, they call us. So they might have, they might call on residential.
Does it work there too? Well, it does. And your referrals, you might–
[00:11:20] Stephen Brown: Explain what we mean by business to business.
[00:11:23] Rob Williams: Oh, okay. If you’re a contractor, it doesn’t necessarily mean residential versus commercial, but a lot of the contractors out here either work for other contractors as a subcontractor, or they work for businesses that are not homeowners. And this business might have regular repeat business. So I guess business to business doesn’t have to be repeat, but that’s what we’re thinking about in this example.
But there are also people that are business to consumer, B2C. So business to consumer would be when you’re going to somebody’s house to pour concrete. So that’s a shout out to my friend yesterday, my meeting. And so he pours flatwork for people, but he’s mainly not working for other contractors. He’s more business to consumer because he is pouring for a homeowner that needs that. But the problem is you only get one pour, and then you gotta go find another. There’s not repeat business.
And maybe you get some referrals off of that, and that might be a good business model. But if you could find out somebody that is in common with all those homeowners, maybe it’s a landscape company. That was one thing we were talking about.
That may be your vendor well, the landscape company may be able to refer you to a whole lot of homeowners. So you’d really wanna spend your time with say, that landscaper. Or maybe it’s in somebody that sells something into the home or a realtor or just something like that. So you have to be creative with where that would come.
So the vendor well can work for residential also.
[00:12:55] Stephen Brown: Okay. So you gotta target who the best vendors are that can send business your way. And then you gotta create a well of them?
[00:13:06] Rob Williams: Yeah. Yeah. What we’ve actually seen is you only need a couple of them to fill you up sometimes. That first example we were giving about Mark, that friend of ours, he has three and he can’t, there’s one that gives him more than business than he can do. But you probably don’t want all your eggs in one basket, but yeah.
[00:13:22] Wade Carpenter: Well, two comments on that. Number one, exactly what you said. One or two people. When I first went out on my own, before I knew Stephen, I had one bond agent here in Atlanta that sent me clients that’s like, if you wanna bond, you go see Wade. And that was my vendor well.
But to your point about the B2C stuff, the consumer, I would think the residential side is even geared towards doing this type of referrals. I’ve got one in particular that a contractor that installs high-end appliances for various manufacturers here in Georgia and South Carolina.
And they just line them up. They sell the product, and they line up the installation and they don’t have to do anything.
[00:14:06] Stephen Brown: Yeah, I just got a guy that did some roofing on my house from Thumbtack, who turned out to be fantastic. Gave him a great review. And Thumbtack charges him $35 a lead for people that come looking for someone to do that type of work. And he had a bunch of great reviews and it was an easy platform for doing business. But he’ll get a lot more business in and around Memphis from me and other insurance agents.
[00:14:36] Rob Williams: Yeah. You know where I used to find my framers when I was looking for framers was the nail supplier. Every framer in town would go in that nail gun in the, in the nail supplier gun. And I needed it. I wasn’t asking other people because I learned after, it took me 20 years to figure this out, that the other builders are only gonna send me their worst framers if I asked them. So.
[00:15:00] Stephen Brown: Yeah.
Hey, that’s smart. So just hanging out in the nail department going–
[00:15:04] Rob Williams: I did, All Fast. Oh yeah. I mean they, they had really cool little gadgets too. I’d buy these laser levels over there just to play with, and but they had all that. So I’d go down to this All Fast nail supplier and you, if you just stand there for 10 minutes, you get them.
But you’d still don’t know who the good ones are. You want the owners and stuff to tell you which ones, because those are the ones that are paying their bills. And so that would probably be a good one. So this is, a reverse vendor well, but it would be good for the framers to network with the nail supplier.
[00:15:33] Stephen Brown: Well, the nail supplier would go with the framer who uses the most nails, and that might be a crappy nailer. Maybe he’s just missing everything,
[00:15:41] Rob Williams: I’ll pick–
[00:15:42] Stephen Brown: No, I, no, I got your point. I think that’s great. You gotta use your imagination and be smart about how to build your vendor well.
Pay your vendors promptly
[00:15:50] Stephen Brown: I mentioned earlier about paying your vendors outrageously fast. If you got a great vendor that’s supplying you great leads, what do you think about that Wade?
[00:16:00] Wade Carpenter: Oh, I see it all the time. The general contractors, they love their subs because the subs are what makes them. And so they do make sure they get paid promptly.
[00:16:10] Stephen Brown: Yeah, I had one situation where a general contractor was having problem on a job, and he had a paid as paid provision in his contract with the subs. But the owner was incredibly lousy and he wasn’t getting paid remotely on time. So, he just eased off paying those key subs that he had been grooming, and it was amazing how fast they turned on him just for doing that, and how ungrateful they were. But nevertheless, that’s a sad story.
This is a great story about building up your vendors that are loyal and that refer business and help make you money, right?
[00:16:48] Rob Williams: Yep. There you go. So, so let’s go. People, they’ve hung out with us for this long. So here let’s tell them how do you do this? Get a little bit more specific.
[00:16:57] Stephen Brown: All right.
[00:16:57] Rob Williams: We’ll talk that as the people or maybe they fast forward as they didn’t have to hear us talking and everything.
[00:17:02] Stephen Brown: Well, I wouldn’t blame him. Well, yeah. Okay.
How to start your vendor well
[00:17:05] Rob Williams: Alright, so first you gotta get figure out, you asked a minute ago who to deal with. How do you do this? Will you go to your client? Let’s just say the example here is that you’re working for a contractor, because that’s probably the, most of the people are subs. But if you’re the GC, it could be that you go to the owner or the architecture, something like that.
But you asked, and they say, who are the vendors/suppliers– you don’t use vendors. We should rename the vendor well for contractors, because we don’t use the word vendor usually. So who are your subcontractors? Who are your suppliers and who are your services? It may be an architect or something that you depend on most? And they’ll, they’re probably gonna ask you, well, why do you want to know that? They usually don’t wanna share it.
And you say, well, we found that we can do a lot better job for you as our client, if we work with the other people that are doing a good job for you. Because we cannot do it alone. If you’ve got somebody that’s in lean manufacturing, if you hear that they’re gonna want you to do that, they’re already gonna be familiar because they would always get on us. We are only as good as our subs. And in lean manufacturing, you’ve got to figure out how to get everybody to work together, all the way down to the suppliers.
So if you initiate that and let them know that you are going, don’t tell them you’re going out for referrals. Tell them that you’re going to the other key guys to do the best job that you can. We can only do a certain level of work by ourselves. Our job as a contractor is to work with the other contractors.
Questions to ask to build your vendor well
[00:18:41] Rob Williams: So they should give you a list of those and they may even want you to meet in there. And then when you get with these contractors, don’t ask for the referral yet. Don’t go in there and ask, this is not a networking meeting. This is a do a better job for your contractor. So it may not be real fast, it may take months to do this, and you establish that relationship and usually you don’t even have to ask for the referral. They will ask you, if you are doing a great job of being the best, if you have time to work for one of their other contractors in a bad situation. That’s the best way to do it.
That is how to do it. So ask them who are their key suppliers, subcontractors, services that they depend on most, and then you go do a good job with those guys. Say, what is it that this supplier could do better for you? Or what can I do better if I am working in the same thing like the slab guy and the framer, or plumbers and heat and air guys, they’re always on each other. And electricians. If I could ever get those guys to agree that would be huge.
So you ask them some of the questions I had. What would make your job easier? This is now you asking other subcontractor. What would make your job easier? What do you wish, we’ll say it’s Bob the builder. What you wish Bob better understood about the work you do for him.
Then, when would you like me to give you updates on what I’m doing with Bob the Builder? So we, in other words, when do we get back together? And it might be when on the job sites. That’s a huge thing. One of the best relationships is getting one sub to talk to the other, to let them know, yeah, we really did top this out. It’s ready for you. I don’t know how many superintendents are listening to this, but they . They’ll say it’s ready and they’ll schedule you and it’s not ready.
So if you can contact back– and sometimes they forget to call you and then you don’t show up. And who gets in trouble? Not the superintendent. You get in trouble for not showing up and maybe they didn’t even call you. Then what frustrates you about companies like mine? Blank companies like mine, let’s say electricians like my company. So those are the questions that you can ask.
Also another one after time we’ve got, I would love to build on our working relationship with other clients. This is kind of proof for you, word it how you want to, but just like we did on our first jobs, please let me know if you have any other contractors or owners who may benefit from our work. I wouldn’t use those words exactly, but that’s–
[00:21:10] Stephen Brown: No, definitely not like that. No.
[00:21:13] Rob Williams: But just ask them those things. And remember the benefit to other contractors, we will make them look good. That’s the big thing. When you’re asking for other jobs or you’re working with them, think about how you’re gonna make the other contractor look good because they used you, and then you’re gonna get more of them. If those people thank the other contractor for referring you, they’re going to give you more.
[00:21:37] Stephen Brown: Don’t forget to thank them.
[00:21:38] Rob Williams: Yep. And then, again, how do we make your life in business better and easier for you because we’re on those jobs. So there are your tools. So, hopefully this is good. Hopefully you stayed to the end to get those valuable tools and nuggets. So, do you think that would work for you guys and your clients, Stephen and Wade?
[00:21:58] Wade Carpenter: Absolutely.
[00:21:59] Stephen Brown: No, everything we were talking about made me think about my clients.
[00:22:04] Rob Williams: Yeah.
[00:22:05] Stephen Brown: And the different ones that were best at this or that. All of them are really good at something,
[00:22:11] Rob Williams: So vendor well, that’s in the Pumpkin Plan. If you’re reading the regular Pumpkin Plan is the last chapter because, don’t work on this until you’ve worked on everything else first. This is the golden nugget at the end of the rainbow here, but.
[00:22:27] Stephen Brown: Whoa.
[00:22:28] Rob Williams: Ohh.
[00:22:29] Stephen Brown: So if you listen to the end, you really get the top secret, okay.
[00:22:32] Rob Williams: Yeah. It’s really, don’t go there if you’re not good yet. If they’re not gonna be good because you’re not gonna get them if you don’t make them look good. If you’re not really good and perceived as being good. Not just good in your own eyes. It’s out there. So, make sure you work on that part first. That you have something where you’re excellent because you’re not gonna get referrals because 98% of the time we hear that referrals don’t work. And that is why. Because you are not making that person look good when they give you a referral, it’s not for you. It’s because they think they’re gonna look good in the eyes of their clients and they’re gonna be helping their client, not you. You know, so make them look good and you’ll get referrals. Don’t make them look good, you will be like 98% of the people that don’t get referrals.
[00:23:24] Stephen Brown: Huge point. Great gold nugget, Rob.
[00:23:28] Rob Williams: Alright, golden nugget. Well, there we go. From the Contractor Success Forum. Thank you for listening and give us some feedback. Hit us on YouTube if you’re not on YouTube and what do you call it? Follow us. Subscribe, that’s the right word.
So, and or get on the podcast and follow that. What? I don’t know what you call that. Subscribe. I don’t know what you do. Yes, stalk us! Stalk us. Podcast. All right, thanks.
We are Wade Carpenter, Carpenter and Company, CPAs. Contact him if you need any help. Stephen Brown McDaniel Bonding and Insurance Agency for the best bonds and program in the world. And Rob Williams authoring the Pumpkin Plan for contractors. Coming to a bookstore near you in a while when I finish it. IronGate Entrepreneurial Support Systems. We are running our pilot programs. We can help you with this now.
But that is us. Thank you for listening to the Contractor Success Forum. Have a good day.