The First Word: Weathering Economic Woes

The First Word: Weathering Economic Woes

It’s no great secret that the economy today is different than it was at the same time last year. Growth in residential new construction is over for now, at least in many areas of the U.S.As usual, there are tons of numbers out there that back this statement up. For example, the chief economist for the Associated Builder andContractors, Ken Simonson, has been publishing such statistics for nearly a year in his Data Digest newsletter. He reports:
• Overall construction spending skidded 0.8% in January, pulled down mostly by a 1.7% drop in residential new construction
• Sales of new single-family homes have plunged 17%. In the existing home market, sales rose in January by 3%, but were off by 4.3% when compared to such sales last January (2006)
• Construction employment in February tumbled by 62,000, the largest one-month slide since 1991.

Pretty depressing stuff. But not all is doom and gloom. The bright spot is the commercial sector, where new construction seems to be growing at a brisk pace. And the residential service and replacement markets continue to grow.

These numbers and facts become very real as I travel the country, attending trade shows and seminars. I’ve noticed great fluctuations in contractor attendance. Depending on the part of the country (it seems more apparent in the south), if the weather changes unseasonably, attendance drops.

And when I talk to contractors who do attend, they tell me virtually the same thing — the local economy is bad, business is off, and with the unseasonably warm or cold episodes, contractors scramble to get as much business as they can as quickly as they can to make up for previous revenue shortfalls.

The economy, it seems, has driven many contractors back to being dependent on the weather. For those of you who can remember — the days before service agreements were the norm, were days when weather had great impact on profitability, especially in the new construction sectors.

Today, even in the service and renovation/ replacement sectors, weather is becoming too important again. When this happens, price becomes the focal point of the sale. I hear contractors talk about competitors who drop their prices in the belief that that’s how they can get more business quickly. Doesn’t that hurt everyone in the marketplace?

The point is not to panic. Your pricing should remain anchored to the costs of running your business and the profits you need to make. Weather changes arbitrarily, but your prices should not. And training isn’t something that goes out the window when the economy (or weather) burps. Training is how you can overcome obstacles such as the economy and weather.

What should change is how you go to market. What should change is the message you deliver to existing and potential customers. Are you selling boxes, or providing comfort solutions?

As my friend Bill Raymond, of Frank and Lindy Plumbing, Heating, and Air Conditioning, Peekskill, NY says, “You need a clear vision of who you are and where you want your company to be. Keep it fresh and in front of you. Then evaluate your results. If they aren’t what you want, change your system. And that means you must know your cost of doing business, and you must charge enough to make a fair profit.”

If you do this, you certainly can “weather” any storm thrown your way.

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