After years of working for "The Man," you're finally breaking away to claim your place in the American Dream. Congratulations are in order, so take yourself out for a big celebration as you embark on your challenging journey.
But wait. While you're still in the planning stages and before you pull away from the dock of steady income and paid vacations, you should spend some time thinking about the foundation of your fledgling company. Do you know what you need to know before launching out on your own?
Obviously, you have to know the financial requirements of operating a business. There's no excuse for not knowing what it will take to cover your costs and earn a profit. Plumbing & Mechanical favorite Ellen Rohr offers excellent resources to help you figure out your costs and selling prices. You can even use a free service budget calculator on www.serviceroundtable.com. Knowing your numbers, however, isn't the point of this month's column. Besides, we both know that if you wait until you have enough cash before you launch, it will never happen.
Managing the business is another issue to consider from the outset. Unless you've read Michael Gerber's "The E-Myth Revisited," or for a slightly easier read, "The E-Myth Contractor," then put this magazine down - I mean right now - and read one of these revealing books. If you decide not to read it now, you'll probably read it years later, and when you do, you'll see that you're the "Pie Lady." You need to understand the different hats worn in a business, even if you have to wear all of them at first. But business management isn't what this month's column is about, either.
Knowing your costs is crucial to making a profit. A management process is crucial to growing without going insane. But, more importantly, you need a good answer to a simple question: Why should a customer choose you?
In marketing parlance, this is your USP (Unique Selling Proposition). In nearly every market, there are enough contractors to take care of every PHC chore. If you don't believe me, try this exercise: First, put yourself into a consumer mentality by picking a crisis. You can't flush your toilet. Your air conditioner won't start. Your furnace won't light. None of these crises are life-threatening, but they certainly can't be ignored. Now, just pick up the phone book and start calling contractors to set up an appointment. Assuming you call in the morning, how many contractors will promise same-day service? How many need to put you off until tomorrow? How many ask you to wait a week or two?
If, as a consumer, you would have to wait for several days in order to get service, then congratulations, there may be room for your new business just because you'll answer the phone. You won't have to be so unique. It's more likely that you'll find a handful of eager service contractors who can work you in today or tomorrow. If that's the case, you need to think long and hard about how you're going to find your place under the sun.
Perhaps you're considering a USP based on lower prices. This is the default setting for most of the upstarts I've seen. If you've done your homework, however, you know that being cheaper isn't even possible because you will have competition that charges less than your break-even cost. Besides, where's the ego boost in knowing that people picked you because you're cheap? It's much more gratifying to hear customers say you are "expensive but worth it."
With cheaper service off the table, what else can you offer that would set you apart from the hoards? Believe it or not, even after decades of PM columns touting the virtues of being on time, staying clean and offering a strong guarantee, these are still fair game for differentiation. More and more, another area that offers room for differentiation is technical expertise. There's no end to "unique." Purple trucks, 59-minute service - make that 58-minute service - guarantees the grandkids can cash in on, free dinner with every job, tuxedos as uniforms. You get the point, but there's an important point of differentiation beyond just being different.
Beyond Just Getting The Work DoneYour success may be wrapped up in the way you answer this even bigger question: Why should anyone choose you as an employer? For now, let's forget the fact that our skilled workforce is shrinking as the demand for our service is growing. For now, let's forget about whatever trade you're in. The fact we need to consider is that people make the difference. A hospital is judged by the kindness and empathy of the staff more than by the equipment they have. The person behind the supply house counter can make you glad or mad simply by the way he handles your order, even when the only thing they have in stock is duct-tape. Your success will rise and fall on the quality of the people you can attract and retain.
I believe that if you don't have the leadership skills and vision to attract and retain good people, you should not be cluttering up the phone book with your number. Does this mean I'm against the one- or two-man shops that make up the majority of our contractors? Not really. Though I'm convinced that PHC success is a team effort, I believe our proliferation of small shops simply reflects how we've ignored the people side of our profession.
The average contractor thinks about working in the business. The above-average contractor thinks about working on the business. But few contractors think about propagating their business. When you first decided to launch your business, was it because you had an exciting vision for the future, or was it simply because your only opportunity for advancement was to take the owner's chair and he didn't have anywhere else to go?
Will you plan to build a reputation that can be passed along to people you have trained, or will you simply turn it all over to anyone with a check? Will young apprentices have an opportunity to mature under the guidance of someone who cares about the profession as well as the people in it, or will they be forced to job-hop in order to advance? Will your best plumber or technician have an opportunity to teach, manage or retire when his/her knees can't take it any more, or does he/she have to launch out as competition, like you did, when that time comes?
The bigger your vision, the easier it is to find top-tier people. Big thinkers are attracted to big thinkers. Imagine being the boss of a team of people who are genuinely interested in making the business grow rather than shaking it down. These are the kind of people attracted to someone trying to give them the best rather than trying to get the best of them. Big thinkers bring positive energy rather than negative energy. You would rather spend your energy on progress rather than just staying even, right?
But how can you become a bigger thinker? I'd like to give you a magic formula that will suddenly extend your horizon but I'm not sure there is one. What I do know is that, just as knowing your costs precedes earning a profit, seeing your horizon comes before achieving it. Extend your horizon beyond just making a living. Extend your horizon beyond just fixing stuff. Extend your horizon toward building a business that continues even after you step back. Extend your horizon toward building people's lives rather than just using them to get the work done. The work will get done but the journey will be much more enjoyable.
It's never too late to extend your horizon. Colonel Sanders started Kentucky Fried Chicken with a Social Security check. As you get ready for another new year, I have one other thought about your horizon; the closer you get to it, the newer it becomes. Allow yourself to be a visionary.