Whether specialized or diversified, create and follow your business plan.

On April 23, I put on a seminar in the small town of Green Bay, Wis. Pete Duesterbeck of Mid State Supply was the gracious host, and the attending students were Mid State customers. (I always think it's cool when a supplier commits to the personal development of the folks who spend money with them. Good for you, Mid State!)

The seminar was called “Beyond Flat Rate - a Revolutionary Approach to Pricing.” Are you sick and tired of the flat rate vs. time and material debate? Me, too! We spent the day brainstorming entirely new ways of pricing and presenting plumbing products and services.

We were inspired by Starbucks and Disney and FedEx. These are companies that charge a premium price and then deliver as (or more than) expected. It was helpful to look outside the industry at companies who have positioned themselves so that customers never ask for a breakdown of the invoice.

Just for fun, we patterned our group exercise after Donald Trump's “The Apprentice.” Of course, I played the role of The Donald. We had “George” and “Caroline” helping out. Each group was responsible for interviewing their “customer” and then delivering their recommendations with a beyond-flat-rate presentation.

It was terrific! Lots of great ideas and good group interaction. With George and Caroline's help, we selected (“You're Hired!”) our favorite presenter. Her name: Patrice Sessler. The critical factor? Patrice and her team created a presentation that showed they really listened to their customer.

The customer had indicated that he had a disabled family member. The presentation included all kinds of neat plumbing fixtures that would make life easier: a tub with a door, so that you can drive into it with a wheelchair; handrails on the walls next to the toilet; fully accessible (and very fashionable) sinks and counters.

Also, the total package included a day-to-day update on the remodeling project status, and assurance that Patrice and team would handle everything. Patrice did a terrific job reflecting the needs and wants of her customer, and explaining how painless the remodeling process would be. Nice work, Patrice! The price came to $100,000-plus (remember, it was a game, and I had encouraged folks to think big) and their customer couldn't write the check fast enough. It was a terrific out-of-the-box presentation.

After the program, I had a chance to visit with Patrice and her husband Dewey Sessler. They are high school sweethearts who married and have three kids - all boys. They have lived in Crivitz, Wis., their entire lives and have no plans to move. Patrice described a recent walk through town on a just-warming-up spring day. The birds were chirping, the frogs singing, and a couple of deer glanced up at them as they passed. They love Crivitz. They love the people of Crivitz.

Just a couple of years ago, they considered starting a company to service the plumbing needs of the fine citizens of Crivitz. Dewey studied for and earned his master plumbers license. They prayed about it, asked trusted friends and looked into their hearts. The answer was clear: Go for it! And they did. So far, pretty good. Their customers love them and they have more money coming in than going out.

Patrice and Dewey have an infectious enthusiasm about their business. Part of it is that they feel they are on the right path. Another part of it is that they haven't had the enthusiasm beaten out of them yet. The reality is that most starry-eyed entrepreneurs turn into weary and bleary-eyed contractors after years of struggle and a not-quite-making-it financial position. Patrice and Dewey are young and they don't have to fall into that trap.

However, they will - unless they act now to create a better tomorrow. With conscious decisions, a plan of action and the discipline to implement the plan, they could craft a future and make a fortune.

Patrice and Dewey love small-town life. And they are ambitious, and intend to make a good life for themselves and their family. Now, can they make their dreams come true in a small town? Is there enough there there? That's a question you might ask as you sit on your porch and drink your lemonade, listening to the afternoon sounds of your small town. Let's take a look.

Do The Population Math

Let's use a town of 1,000 people for example. We'll call it Yourville. Yourville certainly qualifies as a small town and the nice round number will make the math easy. Let's suppose your dream is to build a home service plumbing empire in Yourville. Now, let's look at the numbers.

In most industries, a company is considered a major player with 25 percent market share. In a town of 1,000 people, that would be doing 25 percent of the total plumbing work done for those 1,000 people in every year. The beauty of a small town is you probably know just about everyone. Let's assume that you are capable of doing 50 percent of all the work done per year.

Next, let's address how often each person in town would need plumbing service. The “sales cycle” in home service plumbing is estimated at four to six years. That means, on average, a person will go four to six years before he or she needs plumbing service. Let's assume that the average Yourvillian will call a plumber once every four years.

So, each year, one out of four Yourvillians will need plumbing service. That's 250 service calls per year.

Let's assume $500 is the average invoice per service call. (That's reasonable, perhaps generous, based on my real-world experience. It's an average of all types of service calls, from faucet repairs to water heater replacements.)

Therefore, the total plumbing service market in Yourville per year is:

    $500 average invoice x 250 service calls = $125,000 per year.
Should you tackle as much as 50 percent of that work, total sales for your company per year would be $62,500. If your pricing creates 25 percent net profit (much more than the typical 3-5 percent), your net for the year would be $15,525. Will that float your boat?

You can substitute the population of your town and go through the same math. Review your numbers. In any given market, 25 percent market share would make you the dominant player. Be frank with yourself. How many calls are you getting of the total number of service calls ringing in your market? Why aren't more folks calling you, and how can you change that?

This exercise will lead you back to your budget and business plan, and cause you to make adjustments. You do have a budget and business plan, don't you? If not, now is the time to put them together.

Diversify To Thrive

OK. What else can you do? To make a fortune, you must supplement that income. Why not diversify?

How about real estate? If you look at the balance sheet of a millionaire, there is an 80 percent chance that he or she made that million with real estate investments. You can buy under-valued houses that need love, fix them up and sell them. You can get into the rental home or rental apartment business. No doubt about it, if you make a fortune in real estate, you will have earned every penny. Real estate requires the same planning and disciplined execution that you need to apply to your contracting business.

You could start an Internet business. A friend of mine has a neat eBay business, selling scrap material recovered from his day job. The business owner is delighted to have the scrap hauled off the work site. And my friend is netting $300 to $400 per week. Nice!

Do you have something of value to sell? Maybe you can sell a product, an invention or better-built mousetrap. Maybe you can sell information. Do you have a hobby about which you are passionate? You could create an online community, a place for your fellow enthusiasts to meet, share, and buy information. Maybe your site could be like a small town made up of you and your pals. (No one leverages this concept better than my best friend Dan Holohan. Check out www.heatinghelp.com.)

You could be a venture capitalist. How about funding the dream - and written plan - of a would-be mover and shaker in your small town? Picture Suzy. You went to high school with Suzy and you just knew she would be successful at anything she set her mind to. Suzy wants to secure the franchise rights for a Dunkin' Donuts shop in your town. Why not meet with her?

Insist that she bring her business plan and budget. Hey, you are getting better and better at your own business planning. You could even help her put the plan together. Use your expertise to identify good opportunities and right-stuff peopleÉand invest in someone else's dream.

Note: if you live in a bigger town, say 200,000 population or bigger, I would encourage you to specialize, and beware of diversification. I often see business owners add division after division to their contracting companies, going after new ways to serve the same customers.

They end up with a hodge-podge company with an identity crisis. In a not-so-small town, the better plan may be to get focused on what you do exceedingly well, and do that again and again until you hit the 25 percent or better dominant market share position.

Making It Happen

Patrice and Dewey are working on a plan. They know they need to take a candid look at their financials on a daily, weekly and monthly basis. They know they need to get real with a selling price that covers all their expenses and delivers solid bottom-line dollars. They are expanding beyond their local market to neighboring towns to beef up the population numbers. They are concentrating on their most profitable jobs: high-end remodeling projects. They are going to look into real estate investing, too.

Add that to the wonderful way they listen to and serve their customers, and I see a bright future for these small-town entrepreneurs.

Rohr at ISH North America
Ellen Rohr is a scheduled speaker at this year's ISH North America trade show held Oct. 14-16 in Boston. She will present “Beyond Flat Rate - A Revolutionary Approach To Pricing” Friday, Oct. 15 at 9:45 a.m. and repeat the session Saturday, Oct. 16 at 9 a.m. To register for the show, visit www.ish-na.com.