How to Prepare for the Next Downturn

July 2, 2018
The greatest opportunities for you and your business will come during a recession.

Sooner or later (hopefully, much, much later), the economy will nose down. It may seem counter intuitive, but the greatest opportunities for you and your business will come during a recession. Downturns are horrible for contractors caught off guard, especially if they panic. However, the opportunities are amazing for contractors who have prepared and act decisively.

Build Your Cash Reserves
Whoever said cash was cold and hard was wrong. It’s warm and soft. If you have enough of it, you can cuddle it. Cash makes you safe. It makes you secure. Squirrel away a little cash every month and put it in a separate, conservative, interest bearing account. Build a cash reserve account into your overhead if necessary. More than anything else, cash offers peace of mind that you can weather an economic storm, which reduces the odds you will make emotionally charged, panicky decisions.

Be Ready to Step on the Gas
If the economy shrinks 3%, that’s considered a deep recession. Can you overcome a 3% downturn? Of course. It’s like running into a headwind. It may be harder, but with a little more effort you can run just as fast. Moreover, your competitors will likely be slowing down, giving you an opportunity to push ahead.
In a recession, consumers become nervous. They put off expenditures if they can. Thus, it becomes harder to find replacement customers. When it gets harder to find a customer, you should not reduce your efforts. In fact, you should increase them. This means stepping on the gas.

The contractors in the Service Roundtable who increased marketing and advertising during the last recession, did not just stay even. They grew by an average of 25% to 30%! By increasing their brand presence while the competition pulled back, they stood out from a field that appeared less crowded.

Turn Off the News
Listening to the news is a recipe for depression and paralysis. Do not do it! Instead, watch comedies or listen to business podcasts. An excellent podcast is, which is free. Each episode features a top contractor or business coach talking about what it takes to be successful the plumbing and HVAC industries.

Be Positive at the Office
You may avoid the news, but people in your company will watch it and get infected. This makes it doubly important for you to be positive and upbeat. Your team will feed off your attitude. If you appear unfazed, they will be unfazed. This doesn’t mean ignoring reality. Acknowledge it, but address how you will take advantage of it.

Shift Your Offering
Remember, consumers will be frightened and try to avoid spending money. Yet, they must have HVAC. This means they will likely slip into a repair, don’t replace mindset. Be prepared for it.

Present options to rebuild old units, while noting that this will only delay the inevitable.
You should already be selling on payments instead of total price. If not, get the financing vehicle in place to present every replacement or rebuild based on payments. This is how people want to buy major equipment.

If you have not added a connected home offering, start now so that it will be in place and give you products that people want as well as their recurring monthly revenue streams. This is the biggest opportunity for HVAC contractors since high efficiency.

Keep an Eye Out for Acquisitions
Any downturn will inevitably drive some contractors from the market. If you have cash reserves, this is the time to go shopping. Buy market share by buying struggling competitors. If nothing else, buy their lists.

This is also a time to recruit. Excellent technicians working at good companies will see their hours cut. While happy under other circumstances, they might be willing to make a jump. Good technicians are your primary constraint against future growth. Go get them!

If you do not own your shop, real estate can typically be purchased at a discount during a downturn. This is the time to buy a lot, keep an eye on foreclosures, and engage in other real estate-related intelligence.

When Will the Economy Turn?
Pay attention to the yield curve, or the difference between long and short-term bond rates. It is dangerously close to an inversion. Since 1955, nine out of 10 times the yield curve inverted, a recession followed within two years.

Matt Michell is CEO of Service Nation Inc., which operates the Service Roundtable, Retail Contractor Coalition, Service Nation Alliance, and Roundtable Rewards buying group. To learn how you can offer a recession resistant connected home offering, attend the Connected Home Contractor Summit September 27-28 in Minneapolis. Learn more at

About the Author

Matt Michel | Chief Executive Officer

Matt Michel was a co-founder and CEO of the Service Roundtable ( The Service Roundtable is an organization founded to help contractors improve their sales, marketing, operations, and profitability. The Service Nation Alliance is a part of this overall organization. Matt was inducted into the Contracting Business HVAC Hall of Fame in 2015. He is now an author and rancher.