SBM #55 – Are You Ready?

Are You Ready?

 

 

 

 

 

 

 

 

 

The economy is humming along and your sales are doing just fine. As a matter of fact, things are actually pretty good. That’s why this is exactly the time you should heed that famous Boy Scout motto to “Always be Prepared”. Great advice, but be prepared for what?

Every seven years

On average, there is an economic downturn of some sorts every seven years. Sometimes a little longer, sometimes a little sooner, but seven years on average. Yet when they do happen, most owners seem to get caught totally off guard.

A slowdown, a recession, a depression, each one a little more serious than the other and each one can hurt your business. The trick to minimizing it’s impact, is to do a quick walkaround of your business. Much like every pilot does before takeoff. Why? Because when business is reasonably good, we tend to get a little too comfortable and take our eye off the some of the details.

We stop paying attention to the regular everyday expenses like the wireless phone bills, the internet or the various insurances policies. Or maybe we’ve let our receivables stretch out a little longer than we used to. What about overtime? Is anybody paying attention to it? Is it justified?

What would you cut?

What would happen if your revenue dropped by 20% -30% tomorrow? What expenses would you need to cut? How quickly could you do so? Most individuals can’t answer these questions because they just don’t know.

Making time now to review all your expenses is time well spent. It allows to rationally think things through, instead of being in crisis mode. Doing so now gives you time to explore all the alternatives available to you. For instance, can you use the postal service instead or a courier service? Does that package really need to get there the next day? Can you email invoices instead of mailing them?

If you have delivery or company vehicles, are you getting discounts on fuel by using a corporate fuel card? These cards give you a discount on every litre or gallon of fuel purchased. Over the course of the year this can really add up. If you haven’t been using them, now is the time to get them. Just remember, it’s easier to get credit when things are good?

No one noticed

One of the things I did when I first started out and continued with each startup, was to avoid lunch meetings. By scheduling client meetings before or after lunch, I avoided having to buy a prospective client lunch that I could ill afford. Later on, I would enforce this practice with my staff every time the economy took a downturn. It was easy to do and no one ever noticed. When things got better, we would selectively reinstate lunches.

Are you ready?

Using this kind of benchmark helps you focus on those extraneous expenses that have quietly crept into your business over the past few years. When, not if, a downturn comes, the last thing you want to be doing is trying to generate new business and cut expenses at the same. Doing it now, let’s you answer the question of – Are You Ready?, with a resounding yes!

Copyright © Greg Weatherdon 2017

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Creating conditions that will grow your HVAC company

Originally Published In Snips Magazine October 2017

First Aid

A common theme with HVAC sales professionals is their profitability or, more precisely,
the lack thereof.

It’s not that they’re sitting around. Most have a steady workflow, but profits are elusive. In those cases, the first place to look is their pricing model. Commonly, many don’t have a formal model or template, yet have managed to stay somewhat competitive in a highly competitive environment.

So assuming their pricing is reasonable and expenses are in line, what could be the problem?  Digging into the operational side of the organization often uncovers what can be called “profit killers.” When you consider how competitive the HVAC business can be, minimizing waste — whether in manpower, materials or service region — is tantamount to increasing profitability.

What is meant by critical mass? Critical mass, in this context, is nothing more than concentrating your service area in a tight geographic zone. Why? When you consider the operating costs of your service vehicles can range between 75 cents and $1 a mile, it doesn’t take long to appreciate the potential savings. These rates exclude labor, so every mile driven can get very expensive when you add everything up.

What’s the problem?

The genesis of the problem usually harkens back to the start of the business. When a business first opens, owners take every piece of business they can and try to generate revenue. The attitude is that every order is a good order. Owners have bills to pay, and they don’t have the luxury of being too selective.

However, as the business matures and stabilizes, too many don’t change their thinking and continue to take every piece of business that comes their way — no matter where it is. Why mess with what works, right? Unfortunately, maintaining this attitude can become quite expensive when left unchecked.

Another catalyst that compounds the problem is that countless owners often get convinced by a marketing company that for just a few dollars more they can blanket a whole city or region with their promotional message instead of focusing on a tighter geographic area. It’s a good pitch. Who wouldn’t want more exposure? But it comes at a cost.

Consider that you probably pay your technicians for seven to eight hours of work per day. How many of those hours are actually billable to customers? Probably closer to five and many times less. A disproportionate amount of the difference is lost to travel time between calls, but it doesn’t have to always be this way. What if you could increase your billable hours by just one more hour a day? This could generate upwards of $20,000 in additional revenue per technician (200 days times $100 per hour). This is where the concept of critical mass comes in.

How and why

So how do you apply the idea of creating critical mass? Start by identifying where most of your business is coming from. A simple exercise of mapping out the postal codes of your customers will show where your customers are concentrated. You’ll most likely see clusters of customers in specific areas — a critical mass. The opportunity is to further enhance your presence in these key areas. If you are spending money on promotions, now is the time to target these key areas with increased frequency. This targeted approach can result in a much higher awareness than a citywide initiative.

Here’s another simple example of how creating critical mass can help your business development. Many HVAC companies use lawn signs to advertise during installs or upgrades. Having multiple signs throughout a neighborhood creates a powerful awareness for your company. Prospective customers regularly seeing your service vehicles on their streets also sends the message that you must be good because everyone uses them. Lastly, generating critical mass in specific areas helps word-of-mouth. (For more information on word-of-mouth, check out “8 statistics you should know about word-of-mouth,” July 2016 Snips).

To be sure, every city and every business is different. Rural-based operators have different challenges than those in large metropolitan areas. However, driving long distances between calls or sitting in traffic still costs you money.

Where focusing on only one area is not feasible, an alternative way to create critical mass is to consider limiting your service to certain areas on specific days of the week. For example, service the northern suburbs Mondays, the western communities Tuesdays and so on. Of course, this excludes emergency calls.

In such a competitive environment, you need every advantage you can get. Tightening up your service area and creating critical mass will go a long way to increasing your efficiency and putting more money in your pocket at the end of the day.

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SBM #54 – Are you a Hunter or Gatherer?

Are you a Hunter or Gatherer?

I like to define entrepreneurs into one of two categories, they are either a hunter or gatherer.

A hunter is someone who’s business requires them to go out every day and find new customers. Whereas a gatherer is much like a farmer who continuously harvests business from an established base of existing customers. The best businesses do both.

Of course, all entrepreneurs start out as hunters. They must, because they don’t have an existing customer base from which to harvest. Survival in the early days requires hunting every day, otherwise they won’t be in business very long.

Neglected Opportunities

Unfortunately, far too many entrepreneurs neglect the opportunities that exist to become a gatherer. They are so accustomed to the thrill of getting a new customer, they completely miss out on or don’t realize the potential that exist from generating incremental business from their previous customer base.

Long vs Short Purchase Cycles

To be fair, some businesses have incredibly long customer purchase cycles. An example of this is roofing sales as most people only replace their roofs every 15-20 years. Another example is new car sales, whereby people are keeping their vehicles an average of 7+ years. So, trying sell these people any sooner is very difficult.

In these situations, there still exists the opportunity to harvest from these relationships through referrals to friends and families. Easy to do, but seldom tried and wastes all the goodwill generated. Even hunter type businesses can become gatherers, if they stay in business long enough.

Many other businesses with shorter purchase cycles, think months not years, still don’t try to increase the purchase frequency. They are in such a habit of hunting that they overlook or fail to identify the many opportunities to promote complimentary or supplementary purchases. They just wait and hope that the customers return or calls them.

Look for Opportunities

Entrepreneurs that act as gatherers look for opportunities to be constantly in front of their customers, reminding them of the products and services they have to offer. With the all tools available today, such as, social media or email, staying visible is far easier than ever before.

Hunting everyday is far more difficult than gathering. Finding a balance between hunting and gathering can reduce the pressure to find a new customer every single day. Understanding whether you’re a hunter or gatherer business allows you to design the most effective strategy that will allow you to maximize your potential from all the goodwill you’ve already generated.

I’m Greg Weatherdon and this has been your Small Business Minute.

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Copyright © Greg Weatherdon 2017

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