Surviving the slowdown
May 1, 2008
Brett Lascko considers himself fortunate. As the owner of Lascko Plumbing and Mechanical in Muskegon, Mich., business is not good, he said, but could be far worse, especially in a state that has had one of the highest home foreclosure rates in the country.
The state is also losing jobs: In a recent report, the U.S. Labor Department said that Michigan, along with California and Indiana, leads the nation in job losses.
Lascko said that automotive industry-centered Michigan has lost thousands of manufacturing occupations, leaving large pools of people without jobs.
There has been a “mass exodus of people from our state,” he said.
But with all of the state’s bad news, Lascko is confident that his company will survive, thanks to its diversity.
Residential constructionLascko Plumbing and Mechanical’s work is 60 percent new construction and 40 percent residential service. When the company started, it was a residential new-construction company with some commercial plumbing and light-commercial HVAC work.
The company slowly moved into the residential service market. Lascko said it has been a saving grace for companies like his.
“Residential construction has just gone away,” he said.
Yet for reasons he can’t figure out, the commercial market in his area has picked up and the company has had one of its best years, despite the economy.
“Residential and commercial never seem to be up at the same time,” Lascko added.
For many contractors who have only been involved in the residential new-construction market, the past few months have been devastating. That is why some of these contractors, in an effort to stay profitable, are now entering residential service.
Jim Hamilton, a business coach with Nexstar, a business-improvement association for independent contractors, has seen this scenario before.
“The new-construction market has gone down the tubes,” said Hamilton.
Many of these contractors are instead trying their hands at residential service, but they run into problems with setting prices.
“The service business is a different animal,” said Hamilton.
He explained that contractors getting into the service side sometimes price jobs in the same way they would for new construction. That leads many contractors to not charge enough for their services.
The drop in housing work is not just having an impact on new-construction contractors. Hamilton said it is affecting everyone from real-estate agents to bankers and even HVAC service companies.
“Contractors are being squeezed because customers are not willing to pay,” he said. “We have to be proactive.”
ProactiveHamilton said the first thing contractors need to do is get out of any negative mindset.
“If you are a worrier, it will kill your business,” he said. “I refuse to participate in this slow economy.”
For some service contractors, the phones are not ringing at their business. This is something that Hamilton said he hears a lot.
“If the customer isn’t calling you, call them,” he said. “Tell them it’s time to check their system.”
When calls are not coming in, Hamilton believes it is time to take control of the call center.
“Who better to call then customers who have spent money with (you),” he said.
MarketingYou can’t just call your old customers. You still need to keep finding new ones. And one of the best ways, according to Hamilton, is some crafty marketing.
He recommends getting involved in the community. One way is to find charity auctions that are happening in your community. Hamilton said you could donate a $20 gift certificate or a free clean-and-check service to the auction for people to bid on. He said this puts your name in front of customers who might need your service. It also gets contractors in touch with customers who may have money to spend.
“The money goes to charity and it lets you into the community,” said Hamilton. “The auction is a slam dunk. Community involvement is where it’s at.”
Another example is something Hamilton did when he owned his own service business. His company, based in Kansas City, Mo., was called Bone Sudden Services. He provided T-shirts for art school students to wear when they were working on projects. The shirts had the company name and logo on them. Hamilton said the shirts cost him about 75 cents a piece.
“And who will most likely wash that shirt?” asked Hamilton. It will probably be the mother, who is also the one who typically makes service calls, he said.
Lawrence Snow, a business coach with the Quality Service Contractors, also has some marketing strategies.
“We have to be creative in how we make our money,” he said.
One way to do this is to see what other industries are doing. For example, Snow asked how many times you go into a person’s home and see magnets on the refrigerator from pizza delivery companies. He said similar promotional items would be a good move for HVAC contractors.
“If it’s successful for them, it must be working,” he said.
But traditional marketing must be done, and it has to be done well. Snow said this means having great designs on service vehicles and a well-managed Web site.
When it comes to the Internet, Snow said that little over half of contractors in the industry are still not on it. He said this a major disadvantage because many people are turning to the Web to find contractors. It’s not enough just to be listed in the phone book. While Snow says contractors should not abandon phone book listings, they will miss many customers by not having a presence on the Web.
TrainingNot only should contractors keep marketing, but they should continue to train their technicians.
Roger Fouche of Schaal Heating & Cooling in Des Moines, Iowa, said training is very important, especially now while the economy is starting to stumble.
“The market is not the greatest,” he said, although Fouche added that he believes Iowa has a more stable economy than the rest of the country.
He said the number of customers attempting to finance repairs and installations have gone up. However, more people are being turned down for credit.
“When people don’t get financing, they put off repairs” or purchase inexpensive, middle-of-the-line products, Fouche said.
Fortunately for Fouche, Schaal Heating & Cooling has had a good year, thanks to a “very hot summer and a cold winter.”
But he said that the company has taken the time to teach technicians about customer service.
“People have high expectations,” said Fouche. “They want to be catered to and they want people in their house that are professional.”
The company has covered this base by getting many of its technicians certified through the North American Technician Excellence program.
Schaal conducts weekly training where they tell the technicians how to educate homeowners on heating and cooling options. One way is to make homeowners aware of how a higher-efficiency product will save them money in the long run. They need to know that the utility companies provide rebates to customers who upgrade to energy efficient heating and cooling equipment, Fouche said.
Fouche said that his technicians are also taught to be courteous and treat customers well. He said the goal of the company is about “getting out and making friends with the consumer.”
PreparationLike Fouche, Phil Gorjanc has focused a great deal on training his technicians about customer service. He said great customer service keeps customers on board even when the economy is falling off the tracks.
Gorjanc is the co-owner of Gorjanc Comfort Services in Cleveland. Gorjanc said that Cleveland is in “a kind of transition.” The city use to have a lot of steelmaking, but is now gearing its work force more toward hospital work, service work and wireless technologies. But this transition is still in the early stages, Gorjanc said.
Where other cities have found new markets to tap into, Cleveland is “kind of lagging behind,” he said.
“When the economy is doing well, everyone is doing well,” Gorjanc said. But it is when the economy starts slowing down that “well-run companies separate themselves.”
Gorjanc said he has been focusing on protecting current customers. That means continually focusing on customer service.
He has also been looking at ways to improve processes such as dispatching, minimizing drive times and keeping a close eye on overhead expenses.
Gorjanc and his company are members of Nexstar, and he said that the organization kept contractors up to date on where the market was heading. Gorjanc said that because of Nexstar, his company knew a change in the economy was on the way a few years ago.
“The downturn didn’t surprise us,” he said. “So we were putting our ducks in a row.”
For other companies, it may have taken them by surprise, especially if they have not been closely monitoring their financial statements, Gorjanc said.
Gorjanc Comfort Services’ owners look at their financial statements at least once a month, if not once a week. For contractors that wait until the end of the year to review their statements, Gorjanc said “they are running their business through the rearview mirror.”
Gorjanc’s company has been in business for more than 45 years and has seen all kinds of economic ups and downs. Gorjanc expects the current economic situation will last for another 12 to 18 months.
“That’s why we’re hunkered down for the long haul,” he said.
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