Repeat Business: Why Not All Customers Are Equal

Ever found yourself busy with work, but your business’ bottom line stays the same year on year?

Provided that your schedule is full, your business is probably running into one of two fundamental issues. The first of which is connected to pricing – you might not be charging enough. Countless heating & plumbing businesses fall into this trap, and it makes it extremely difficult to make enough money without working overtime.

But if your prices are fair and reasonable (both for you and your customers), there could be a deeper issue at play – one connected to the type of customers you work for and which we’ll cover in this article.

The two types of customers 

Customers can be kind, irritating, troublesome, rude, friendly – but every customer will fall into one of two categories:

New or Existing. 

New customers are always important – especially for younger trades businesses which are new to the game. But not everyone stops to consider how costly they can be.

Finding them is difficult enough, but advertising your services, taking their details, and the risk of having to chase up payments all mean hours of unpaid work. With all this on their plates, many business owners don’t have enough time to examine their accounts to understand the true value of their existing customers.

You’ve probably thought about how you can boost profits and take home more money – all without work hours continuing to eat into your evenings and weekends. One of the most impactful ways of doing this is to look inward at your customer base, asking yourself this question: 

“How many of my jobs are done for existing and new customers?”

Industry averages

For a clearer picture, we decided to look at all the jobs invoiced through our software throughout a 6 month period. On average, from the over 5,000 heating and plumbing companies using our software:

• 75% of jobs are billed to existing customers
• 25% are for new customers.

Granted, jobs for new customers are typically bigger. But looking at the total revenue reveals that, even still, much more money flows through existing customers. From the same companies and time period:

• £69.6 million came from existing customers
• £47.2 million from new customers

What does this mean?

This data shows us that the average heating and plumbing businesses works more for existing customers than new ones. 

In other words, there is simply more work out there for existing customers. If your business completes a higher ratio of jobs for new customers, you could benefit from looking into refocusing your efforts. This could help you save time and make even more money.

Repeat business: 5 reasons why existing customers are so important

The delicate balance between new and existing customers will vary from business to business. There are pros and cons to each side, and factors such as location, business goals, and more will influence the perfect ratio.

New customers will always be important for a few reasons:

• If you want to scale up your business fast, you’ll need lots new customers – just not at the expense of existing customers.
• Every business loses customers, even if its no fault of your own. New customers will top up the tank.

But existing customers provide a while suite of extra benefits including:

#1 – Referrals

Established trades businesses will get new customers through referrals and recommendations from their existing customers. This is a free and effective source of work.

#2 – Efficiency

Completing jobs for existing customers is much more efficient. You already have a record of their information and access to previous job records, meaning you don’t have to work out what another engineer has done.

#3 – Reliability

If you’ve worked for them before, you know that they are a reliable customer who will pay on time and respect you.

#4 – Cost effectiveness

Businesses that only care about new customers can easily find themselves in a vicious cycle of spending too much time finding new customers → leaving not enough to do top-tier work → meaning fewer customers return → and more time spent finding new ones.

Existing customers are much cheaper to book jobs for since they require little to no time and money invested into marketing. Either they’ll contact you, or a simple service reminder can do the trick.

This will help you impress and keep even more of your customers and generate a much more positive cycle of repeat business like we talk about in our guide to creating a self-sustaining business.

#5 – Increased lifetime value

Focusing on your existing customers means working to increase the percentage of your customers to come back for more work (known as your retention rate). With a higher average retention rate, each new customer will be worth far more in the long-run.

What do the most successful heating & plumbing businesses do?

To answer this question, we took a look at two large businesses using our software that have a far higher-than-average profit per employee. 

For example, one of our biggest and most successful heating companies completes a staggering 95% of its jobs for existing customers.

This suggests that many heating and plumbing companies are not prioritising their existing customers enough. We would even go as far as to say that you should strive to book at least 90% of your jobs for returning customers before focusing on finding new ones (excluding, of course, very young businesses who do not yet have a built-up customer base).

It’s important to emphasise this approach doesn’t always work for everyone, however, and you should always do what you think is best for your business.

In another example, one company completed very close to the average rate of 75% for existing customers, but has recently been on a new customer drive and is spending up to £5,000 p/m on advertising.

This company has clearly decided it needs to find more customers to expand its business. The investment is a risk, but since many of its customers do come back for new jobs, it’s a justifiable decision that will most likely pay off in the future.

Closing thoughts

In short, focusing on your existing customers is hugely beneficial – not just for the short-term profits, but the long-term success it sets up.

Companies that feel the need to constantly search for new customers might need to simply make some small changes to their workflow to encourage customers to come back for annual servicing, gas safety checks, and bigger jobs. One of the best ways to do this is through all-in-one job management platform like Gas Engineer Software.

At the end of the day, a company that mainly books one-off jobs gets far less out of a new customer than one that encourages repeat business year after year.