Recession Blues & Then Some
Business has taken a steep turn south in recent months for many of my friends around the country, as well as our own firm. Every time I ask, "How's business?" the answer seems to range from not very good to downright awful. I heard a report about one of the biggest single-location PHC service firms in the country starting out a day with 14 service calls on the dispatch board compared to its normal 40-50. Contractors in the HVAC business keep praying for either very hot or very cold weather to boost their fortunes, and neither seems to be coming our way.
The natural reaction is to blame the recession for this situation, but that's only part of the reason. I've lived through several recessions during my business career, and don't recall being hurt nearly as much in the past as now. I made it a point to do some research on this and have come to the conclusion that the downturn has more to do with the emergence of the big home centers and other sources of cut-rate services, such as the "Penny Saver" classifieds, than anything else.
Looking back through my company's records, I found that our peak year in service calls handled was back in 1989. The following year was still pretty good. A recession started late that year and spilled over into 1991, by which time our service calls had declined by about 21 percent from the peak.
Calls continued to decline until 1993, when we got a boost from a showroom business then attached to our service company. Then came another drop lasting through 1996, followed by a slight but steady increase in business, until 2001, when our calls look like they'll drop to about 1996 levels.
Something else is notable about the way our business has evolved. As of 1986, about 44 percent of our business came from existing customers (people who had used our services before), the rest from first-time callers. By 1989, 63 percent of our business came from repeaters and only 37 percent from new callers. That has remained steady over the years, with existing customers staying in the 60 percent to 67 percent range.
To my critics out there who accuse me and other flat-rate firms of "ripping off" people, how do you explain the fact that so many Blau customers keep coming back? Could it possibly be that some people are willing to pay more for better service and better treatment? That some people appreciate the fact we're always available, and trained to treat customers with dignity?
The Home Center Challenge: Our biggest problem, and I think that of most service businesses, has not been hanging on to customers but recruiting new ones. Prior to the mid-1980s, our company faced no home center competition. Then a new Handy Andy store moved into town, followed by a Menards. They undoubtedly took some new business away from us, although we were able to meet their challenge by generating more repeat business.
As for the decline in service calls during the 1990s, I think at least part of the explanation has to do with Home Depot moving into our town. It catered not only to the do-it-yourself market, but started offering installation services. These typically got subcontracted out to a bunch of low-priced you-know-whats, the same type of folks who rely on the Penny Saver ads as a centerpiece of their marketing efforts.
It is simply harder to attract new business than it used to be. Our marketing efforts haven't changed much over the years. We still rely heavily on Yellow Pages, mailings and leave-behinds. Nonetheless, people today have more options. Used to be that if you needed plumbing work done, you turned to the Yellow Pages, or asked a friend to recommend a plumbing contractor. Now they can buy the product and get it installed with a single visit to Home Depot, and the Penny Savers have proliferated as an easy marketplace for price shoppers.
It's not only the flat raters that are hurting, but even some of the higher-priced T&M guys. The message out there today is cheap, cheaper and cheapest. People are willing to risk asphyxiation or explosion by having a furnace or water heater installed by a slug as long as they can save a few hundred bucks.
The New Challenge: What can you do to cope with this ruthlessly competitive marketplace? There is no easy solution. What it means is simply that it has never been more important to learn the skills of running a business and relentlessly employ those skills in your day-to-day operations.
It means crunching those numbers and making sure you get a detailed report of operating revenues and expenses at least once a month. When things get out of balance, you need to act immediately.
It means doing everything possible to keep costs under control to lower overhead and keep the cash flow healthy.
It means if that doesn't completely do the job, raising your prices to a level that assures profitability.
It means training your CSRs, or whoever else answers the phone, to get their conversion rates up into the stratosphere. With fewer calls coming in, it's more important than ever to make sure the people who do call are handled professionally and converted into paying customers. Your people need to be ready with satisfactory answers to the inevitable, "How much do you charge? ¿What will it cost?" and other inquiries from price shoppers.
Most of all, it means hiring and retaining service technicians with highly developed customer satisfaction skills. With fewer calls coming in, with price shopping running rampant, you must look beyond the first sale and strive to keep a customer coming back to you again and again.
This is perhaps the toughest thing to do in today's labor market. Finding someone with the requisite technical skills is hard enough. Getting them to buy into the importance of putting on a happy face and upselling sometimes seems harder than anything else you do in business. But it must be done.
This is a great and noble industry, and it troubles me deeply to see it taken over increasingly by people who don't understand that. Our industry needs people who operate with professionalism and pride in order to make the field attractive to talented young people. We need to demonstrate that the PHC industry is filled with moneymaking opportunities in order to attract folks with keen business minds.
It's not the recession, it's not the weather. The biggest problem we face in business today is ourselves.