Diversify your business
More than 99% of U.S. business are considered small — defined by the U.S. Small Business Administration’s Office of Advocacy as having fewer than 500 employees.
More than 99% of U.S. business are considered small — defined by the U.S. Small Business Administration’s Office of Advocacy as having fewer than 500 employees. Yet only two-thirds of small businesses survive at least two years, 50% survive five years or more and one-third survive 10 years or more, says the U.S. Bureau of Labor Statistics, Business Employment Dynamics.
New company starts are now beginning to outpace failures, which was the opposite during the Great Recession. But keeping the small-business survival rate in mind, it seems logical the firms that do survive are meeting a need for consumers.
That’s where you come in. Plumbing, heating and cooling are all needs consumers have and you can provide repair, maintenance and peace of mind. You’ve established your company with the right employees and the right tools to market it to homeowners and business owners in your community.
The dilemma many of you may have is whether to grow or keep the status quo. For some, growth may mean buying another entity. For others, it could mean a start-up branch in a new territory. And other owners may decide to add new services to the company’s core trade — plumbers going into heating, new construction firms adding a service division, etc.
During the recession, many contractors added new services to help keep the phones ringing, especially the ones focused on new construction. As building starts dried up, they needed new sources of revenue.
There’s that old saying: Don’t put all your eggs in one basket. I remember someone saying it when I opened a 401(k) at my first job, which meant spreading the risk between different types of funds.
Isn’t that a good philosophy to have in your business? Yes, adding a new trade involves training, new tools and equipment, licensing, maybe even different insurance coverages. Look at your community — is there a need not being met by your competitors?
Many times in the pages of this magazine we’ve encouraged plumbing contractors to add services to their companies that make sense, such as water quality/water treatment services (the cover feature of the February 2016 issue). But what about drain cleaning or residential fire sprinklers? They involve water and plumbing, and are natural extensions of a plumbing contracting firm.
In this month’s issue, you’ll read the tale of a Long Island plumber who at first tried to add drain-cleaning services to his company but failed because he couldn’t find the right people with the right training. He finally decided that becoming a franchisee of a new drain-cleaning franchise — Zoom Drain and Sewer — was the way to go. He opened his drain-cleaning firm about a year ago and cross-promotes both companies to his customers. The combination is a success.
Residential fire sprinklers still are a bit controversial in some areas. Many home builders believe adding fire sprinklers to a home will significantly increase the price of it. In reality, the cost of fire sprinklers can be compared to homeowners upgrading to marble countertops. And a few states do mandate fire sprinklers in all new home construction. But what system is best for plumbing contractors to install? On page 26 you’ll read about a California contractor who partnered with a multipurpose fire sprinkler system manufacturer after the state mandated residential fire sprinklers.
Maybe you want to add hydronic heating, HVAC or electrical services to your company? You may need financial help to determine if adding services is viable at this time or some unique marketing ideas to get the new division off to a good start. Or you may be ready to let someone else worry about the myriad administrative duties that come with owning a contracting firm.
And if you read here, you’ll find our annual listing of plumbing, heating and cooling franchises, best-practices groups and associations. Whatever your need is, one or more of these entities can help you. A franchise may be the best way for you to get into a new trade. Or if you have added a trade to your company, say heating or electrical, the best-practices groups can help you with marketing and customer service. Membership in national associations can help you with training your technicians as well as advocating on your behalf with our nation’s legislators.
Whichever group or groups you decide to partner with, make sure you take advantage of the best part of membership — networking. Troubleshooting your business issues with others who had the same problems will give you valuable insight.