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Mining

Similarities exist between certain contractors and Gold Rush miners.

Last summer I was privileged to enjoy 12 days in the Cimarron Mountains of New Mexico with my 16-year-old son and a group of city- slicker Boy Scouts. We trekked more than 65 miles across the Philmont Scout Ranch, toting all our necessities on our backs. I count the fact that I didn't have to be airlifted out as a personal achievement, but the crown of our particular trek was to climb Mount Baldy, all 12,441 ft. of it.

After a leg-withering half-day climb, we achieved the summit where we were greeted by a 70 plus-year-old geologist/historian who, during the summer season, makes that same hike daily. As we recuperated from the climb, our historian shared some mountain lore and, wouldn't you know it, almost immediately I saw parallels between Mount Baldy's story and the plumbing/heating/cooling industries. (If you think that's a stretch, visit my Web site for my “Wilderness Plumbing Report.”)

Back in the 1800s, gold was discovered on the mountain and, before long, the area was teeming with miners in search of their fortunes. The miners, and the settlements that sprang up to support them, were so numerous that at one time there was even a public school on the mountain. To the casual observer, there's not much left but a Scout trading post and a few artifacts.

Upon closer inspection, you begin to see that the mountain is pocked with abandoned mines, marked by piles of rubble at their entrances. More notable is the forest of poplars. At first we thought nothing of it, but this is one place where you literally cannot see the forest for the trees. We learned that, as the miners excavated in search of those elusive veins, they needed timber for shoring and fuel. In a sense, the forest became more valuable than the gold.

As a result, the mountain was practically denuded of old-growth forests. Since then the poplars, fast-growing softwood, have filled in. They will eventually be replaced with the sturdier oaks and cedars and maybe, in another century or two, the forest will be back to “normal.” But the mountain will never be the same as it was before the Gold Rush.

So, what does all this sentimental tree-hugger talk have to do with the PHC industry? For starters, it's high time for contractors to step back and look at our own mining practices. Mining, you see, is the practice of harvesting a naturally occurring resource, with no intention or ability to replenish the source. It should be noted that I'm not implying that mining is immoral but simply pointing out that the practice has its consequences.

Mining Our Talent Pool

With occasional and refreshing exceptions, our industry tends to use up our talent without a good plan for replenishing the pipeline. For example, it's not uncommon to see a qualified plumber flit from shop to shop, looking for a better environment, a little better pay or some other perk. At first, this appears to be the free market at work - everyone has a right to a better job, right? But the contractor, with his mining helmet pulled over his eyes, fails to see the long-term necessity of cultivating his or her own professionals.

Without a consistent recruiting and training program, contractors are constantly looking for “timber” to shore up their mines and they commonly reach for the nearest “tree” that has a pulse and can turn a wrench. A mediocre technician becomes valuable, not because of performance but because the near-sighted contractor is suddenly in a jam and needs a warm body that can placate a few customers.

Then there's the contractor with a top-tier tech on his or her payroll. To keep this tech on board, the contractor may offer an excellent wage package but since there's not much in the way of back-up, this sturdy oak will soon be overworked and overstressed. What good is a great paycheck if you're too tired to spend it?

To replenish and rejuvenate our workforce, we need to budget for training and recruiting. Wages and perks must improve. We can take some of the load off our aging workforce by providing apprentices for every experienced professional on staff. This is particularly important for the “one-man band” that will one day like to hand the pick and shovel over to someone with more energy.

Large company or small, run the numbers and figure out what it will cost to add an apprentice for every seasoned professional (even if that means you'll be hiring your first employee). Add that number to your overhead and adjust your selling price accordingly. For the next six months or so, bank those extra funds while you search for just the right person. This way, you can bring him or her on board and cover a few months' wages until the apprentice learns enough to start carrying his or her own weight.

Market Miners

A few contractors have figured out how to make the phone ring, but rather than build relationships with their clientele, they simply mine them for all they can get on one trip. Market miners can easily be the most expensive in town, yet their profit picture may not be any better than the customer-oriented shop which lives for repeat and referral business. Please note: I certainly have no problem with a businessperson charging as much as they wish for his or her services. I do, however, have issues with contractors who leave a spoil pile of customers and employees who are wary and distrustful of our profession.

If you and/or your employees talk only of how much money you can extract from a customer, you may be developing a mining mentality. Some customers are certainly more fun to serve than others, but keep in mind that we're in the service business and our sales come from service. Celebrate big-ticket jobs for the amount of service you delivered, rather than the gross dollars generated. You may find that a service focus results in better sales with the added bonus of a long-term relationship with your customer.

Set a company goal of earning a referral from every customer. It's difficult to ask for a referral after shaking down a client, but if you've truly served your customer then you've earned the right to ask. If sales take a nosedive because earning referrals is being emphasized, then it's highly likely that your company was mining the market. But if sales climb and referrals start rolling in, you have just learned the difference between mining and cultivating.

From a profit standpoint, let's look at some simple math. Let's say a company has an average invoice of $500 for service work with a taxable profit of 15 percent ($75). For a mining company, it's not unreasonable to find the advertising budget devouring 25 percent or more of sales. At 25 percent, it's already obvious that advertising takes a bigger bite of the pie than do the profits.

What if our example company decides to focus more on service; earning referrals instead of burning through customers? All else being equal, if one customer in four comes as a referral, the marketing bite drops from $125 per customer to less than $95 per customer. The math gets more complicated if we try to figure the “half life” of a referral customer who also refers a customer, but the point is this: If better service yields more customers, then why burn through them? Don't be a market miner.

Here's the punch line about the gold on Mount Baldy. According to the historian on the mountain, it's estimated that there's about $10 million worth of gold still in the mountain and it would cost about $10 million to extract it. To top it off, back in the 1800s when the mining was going full-throttle, the miners were doing well if they actually broke even. Most never did.

If you find that after all your sweat and toil you're doing good to break even, then maybe it's time to stop mining and start cultivating. It's still hard work, but at least you can get ahead and leave something behind besides a pile of rubble.