You have a Home Improvement Project need. Paint this, Fix that, Repair the what’s-it. You go on line and enter a related search. The first things that come up are several companies that offer to “Find a ‘certified’ service pros near you.” Lets call them “Finder Firms.” You know their names of these Firms. But do you as a homeowner know what you are really signing up for when you use them? Or should you scroll on down to the hardworking local firms and contact them directly? When you agree and submit your project service request to a “Finder Firm”, you as a homeowner should know this: • Your Personal Information is immediately “Sold” to 6-10 Local Firms as “Leads” • These Local Firms will now hound you to the point of distraction via phone, text, and email to submit their bid to you. o Recall, they “Bought” you and they need to recoup their funds • The “Finder Firms” have not “certified” or “guaranteed” these local companies beyond ensuring that their payment for the lead (YOU) cleared. • These locals could even be illegals. All that matters is if their payment cleared to “Buy YOU.” • Competition is great for prices? Not really! We’ll show you why. In the end, you may:  • Be frustrated and annoyed with the number of calls. Be frustrated with having to vet these providers for quality (recall the Finder Firms only takes their money) • End up paying more and/or getting lower quality than if you had gone a different route. • Never get the apples to apples bid comparisons you were hoping for. • May end up researching, calling and hiring a local service provider yourself. Time with the Finder Firm wasted. You may also be interested to learn that in January 2023, the FTC issued an order requiring the largest of these Finder Firms – to pay up to $7.2 million for using a wide range of deceptive and misleading tactics in selling home improvement project leads to service providers. Scary Right! To help explain the points above it really helps to follow the money related to your request for home improvement services. There are thousands of home improvement projects and needs. Painting, Repairs, Installs, Renovations, Etc. Some are small, perhaps install a garbage disposal or paint a small room. Some are large, perhaps build a pool or backyard kitchen paradise. With 38% of US homes built before 1970 , there’s a lot of improvement going around. A typical “renovation” can range from $5,000-15,000. However a typical small repair project ranges from $50-$1000 . For sake of this discussion we will pick a target price of $300 to repair a large drywall hole, or replace the microwave. For the discussion, $300 will be the price you envision paying for the service. You go online, and instead of looking for Local Companies near you that are perhaps farther down the search engine results, you see the nice pretty offer of the Finder Firm that will take all the pain of finding and vetting a high quality reasonably priced provider for you. Here’s what happens after you enter your personal and project information in. 1. The Finder Firm analyses your information and also gauges the value of your project at of near $300. They then attach a price tag of 25-40% of this to a lead fee. They then SELL your information to 5-10 contractors. They immediately collect ~$900 from the 10 contractors. The contractors have no choice in this, it’s part of the fine print “hook.” a. $300*.3*10 = 900 i. If you have a business background you may be wondering how paying 30% for a lead is sustainable… It’s not. b. A few of these contractor will immediately reject the lead as a bad lead – see the law suite reference. c. A few will be too busy, out of town, down sick, unavailable, etc., and will miss the lead. d. The rest will start a race to contact you by whatever means they can. Phone, email, text, even coming to your house. Maybe this isn’t a problem, but expect several calls, texts and emails from each of them trying to win your business and submit a bid. It can be taxing. e. Competition is good right. You filled one form out and now are expecting to get 5 identical competitive bids where the vendors know they are in competition. i. But remember they just paid 30% in sales commission. Typically, businesses survive paying 10% to sales. ii. Typically, a business has about 20-40% operating costs and overhead. And for argument, cost of labor is also 40-50% . And target gross profit should be about 30-40% for a small business. 1. Oh Oh. Do you see the problem? Best case the contractor can make 10% gross profit off this $300. Worse case they lose money. iii. Summary: a 300$ bid on this project will not make them money. They have to raise the price, cut the scope, or cut the quality. 1. To make matters worse the job is not won yet. They know they are competing against others have a 1/5 chance of winning the bid. That just makes their cost of sales go from $30 to $150 (30*5 jobs) 2. The caveat, they and the other contractors are all in the same boat. iv. Their bids are now not exactly alike due to scope and quality tweaks. So you have 5 different bids to vet. 2. Your $300 job just became a $400 job. a. You paid 33.33% more b. You had to deal with may more calls that you thought the service would filter out. c. You have 5 different bids of varying scope and quality that are marginally profitable for the provider. d. On aggregate the contractors a group LOOSE e. The web service made 900$ 3. Your 400$ sustains the 900$ at the cost of the contractors $500. a. Costs GO UP b. Contractor Quality Goes Down c. Economics 101 The Solution So what can the consumer do. Here are some basic points to minimize the impact of using these services on you, your family and your wallet. Plan and Scope your project just a little more. Do your homework. Ask friends for references to contractors Search down the search engine results for individual listings with reviews that you can trust. Do some of your own research. Be prepared to call and manage the bid process with a number of contractors that YOU control, with a clearly written scope. Call Better Call Baldy your Woodlands Texas Handyman today.