Business downturn due to COVID is real enough -- thanks in great part to our 24/7 national news cycle. While things seem to be turning around, it could still take a year before consumer confidence gets back on track. That’s why it’s so important to have the right resources in place when the turnaround occurs. Here are three areas to focus on:
First, make sure you can differentiate yourself from competitors at a time when worried consumers will tend to just look at first cost, trying to hang onto every dollar they can. You must be able to convince customers your unique solutions will truly make them more comfortable and save them money. You can prove the latter through lower utility costs, and/or reduced cost of ownership. Otherwise, the lowest price will be the main consideration.
With some soul-searching you can find ways to tighten up, making some sacrifices without compromising essential expenditures.
Second, keep your company lean so you can make it through to the other side of this. This requires a close review of spending. Identify costs that are not helping you bring in revenue, and things you do that are keeping operating costs too high.
Start with those expenses you brought on when times were good. Perhaps things that made life a little more comfortable for you and your employees. Are there services you are using that are nice to have but don’t contribute to the bottom line?
What about the products and services you currently offer? Is that new niche service really profitable? For example, maybe you started cleaning ducts or installing insulation, but when you look at true net profits, you might be better off outsourcing these services.
With some soul-searching you can find ways to tighten up, making some sacrifices without compromising essential expenditures.
Don’t Cut Too Close to the Bone
Third, and perhaps most important, be careful not to cut too close to the bone. In down periods, the tendency is to withdraw, reduce personnel, sell off vehicles, slash marketing and training budgets, and try to drop the company down in size so you can be “leaner” to weather the economic storm.
While some cutting may be necessary when trying to conserve cash, all too often we begin cutting the very things that made us successful in the first place. The problem with cutting too close to the bone is it’s hard to grow back the muscle and tissue you’ll need when things turn around.
While some cutting may be necessary when trying to conserve cash, all too often we begin cutting the very things that made us successful in the first place.
If you cut back too much, you may not be able to bounce back and have the resources in place to serve your customers when they need you. You may not have the techs and trucks you’ll need to handle the new business that will become available.
If you slash your marketing budget now, you won’t have it in place to continue the top-of-mind awareness you hopefully have invested in over the past several years. If you cut your training, you may hurt your competitive edge that differentiates your company’s services.
Stay the course, continue to be a leader in your market, and let customers know that you’re standing strong, ready to serve their needs. You’ll send a clear message that you’re the kind of company they want to do business with.
When things settle down, there will be a lot of pent-up demand for your services. There will be many customers who have “deferred” maintenance and replacement, as they too waited for things to turn around. Many of your weaker competitors won’t weather this storm as they will not have enough reserves or are already operating on fumes.
The Answer is Balance
Spend some time evaluating each operating and capital expense to find balance in your decisions. Try putting each decision through three different filters:
Use the first filter to determine if the product or service is doing anything for you right now. Is it profitable? Does it create a lot of goodwill? Does it lead to other profitable services?
With the second filter assess whether an expense will weaken your ability to get what business you can and differentiate your company right now.
The final filter is to determine if a cost is a long-term investment that if cut, will weaken your company and your ability to bounce back when things turn around.
By using these filters you can prioritize each expense and determine which will give you the best short -term and long-term bang for the buck. With a little planning now, you will come out of this better and stronger than you’ve ever been.
Dominick Guarino is CEO of National Comfort Institute (NCI), (www.nationalcomfortinstitute.com), one of the nation’s premier Performance-BasedTM training, certification, and membership organization focused on helping contractors grow and become more profitable. His e-mail is [email protected]. For more info on Performance-Based ContractingTM go to WhyPBC.com or call NCI at 800/633-7058.