It’s an age-old question we, as contractors, face when deciding whether to stay specialized on the trade(s) we currently do or if it makes sense to add another trade to the existing mix.
Coming from a family business that originally only did heating, I can tell you the pros and the cons for us. The pro, we worked like crazy during the busy season and then could enjoy our time off in the slow season. The con is we opened ourselves up to other contractors who would lock us out of our customers’ basement because they could serve the customer as a one-stop shopping experience.
We didn’t like that at all. Plus, if you experience a dreadfully mild winter, as we did this year, there’s no second bite of the apple to give you a chance to make it up such as being in the cooling trade and having a hot summer to boost sales.
One trade was a high-wire act.
That’s why we branched out and went into the plumbing and cooling business. These days we also are doing electrical work.
It’s so much easier to sell additional services to a happy existing customer than to constantly find new customers who don’t know you and then convince them to use you. Plus, the more cross-training you do, the more the average tickets rise. You can make legitimate suggestions to help your customers achieve safety and comfort.
For example: While on a heating call, you see the water main has old gate valves. If you make the right recommendation (to upgrade to full-port ball valves) you don’t need to move the truck, sales increase and you’ve helped your customer because that main water shutoff could be all that’s stopping him from an emergency flooding when something breaks.
The problem is you can’t tiptoe into another trade. You need to be committed to making it what you do. I tell clients: “If one person at your company can do it, it’s a hobby. When all of you can do it, it’s an integral trade your company does.”
I teach contractors how to add another trade all the time. Here are seven tips on what we do when we add another trade:
We customize one or more of my trade manuals such as plumbing, heating, cooling and electrical to fit their service area and the type of work they want to do.
We build a training center module that simulates real-world service and install work so the techs can master it in a safe environment.
We tweak the customer service rep and dispatcher manuals to reflect the addition of the new trade.
We dedicate weekly and big-block training time to get our existing techs up to speed on the new trade so they’re fully cross-trained.
Once this is all done, we add brochures that feature happy customer testimonials and pictures, and add it to the Tech Packs so they can make sure the customer knows all of what we now do.
We add it to all the marketing the company does — starting with the website and on-hold messages.
We make sure the parts for the new trade are on the trucks and in the warehouse so the techs feel confident they have what they need when they’ll need it to serve the customer the way they should be served.
How do you know?
Now if all this seems like too much to do, I’d say you can wait but you may risk being locked out of your customers’ basements too.
First things first: Pay attention to changing market conditions and monitoring how well your own company is functioning.
There is always a balancing act. Sometimes, a good sub can be a good answer to staying focused and specialized, if you feel another trade will pull you off task.
However, you do risk giving away dollars and control to someone else. If the other company messes up, it’s bound to damage your own business and reputation so choose your subs and trade alliances well.
Be aware taking on a new trade (with new products and services) can make a lot of sense but it can be challenging, especially if you’re eliminating subs and now doing the work yourself.
No one answer fits all but here is some good advice that I share with my own clients who have decided to continue to use subs appropriately and to enter new trades successfully. It’s all based on my own company’s approach.
As a matter of fact, one of my clients is currently debating the value of whether to add weatherization products and services to the work it already does. It’s in this enviable situation because the company now does a great job of selling and doing home energy audits and weatherization work is a natural result of its energy audits.
Currently, the company uses well-trained subs (the customer delegated how to do the work to its standards) who do this work at very competitive pricing. But, we naturally debate the worth of potentially making more money and taking more control of the outcome.
What I recommended to this client when faced with a great question like this is to bring it up in his Daily Business Meditation first. The Daily Business Meditation is where you ask yourself the following set of questions and spend time thinking about it:
What business am I really in?
What business should I be exiting?
What business should I be going into?
In this scenario as to whether to bring on a new trade with a new set of products and services, you must ask yourself the next set of questions. Answer them as honestly as you can by first removing your ego from the equation:
Will we make more money for less grief by continuing to sub the work out?
Does subbing the work out keep us from being distracted from what we should be focusing on?
Would we make more money and still be competitive in pricing as well as do a better job if we did the work ourselves?
The other bigger questions to ask are:
Are you already on top of how to deliver on sales and work done in the trades your company does today?
Are you the company people think about when they want top-notch work in the trade(s) your company does?
Note: If you said yes to these two questions, it’s time to think about expanding into another sector or growing your service area. If not, it’s time to stay focused and make this a reality first and then reexamine how this next piece you want to add would fit in a profitable model.
Our company also knew what trades we didn’t want to do. And one trade we never wanted to do was home security. That’s why we found a really good home security company that we could be allies with and we worked out a Stand-Still Agreement that benefited us both. In Stand-Still Agreements both parties agree not to enter each other’s business or take one another’s clients. Know that this type of agreement can vary.
One last thing: Once you are philosophically onboard about adding this next piece to your company, you must do a financial projection and remember if it doesn’t make sense on paper — don’t pursue it.
This article was originally titled “Need to add another trade?” in the September 2016 print edition of Plumbing & Mechanical.