Surviving a Slow Economy
April 20, 2009
Do you know your overhead cost from yesterday? Do you know your overhead cost from this morning?
What the heck? Some contractors are trying to figure out how to keep people employed, and somebody is worried about up-to-the-minute financial reports?
Mark Swepston, president of Atlas Butler Heating and Cooling based in Columbus, Ohio, gets reports on net profit on his cell phone and is able to actually manage hourly. But why?
During a recent presentation at the Cleveland Air Conditioning Contractors of America monthly breakfast meeting, Swepston told the rapt audience, “It’s not that difficult, you can do it. You should know these things so you can project the sales you need day-to-day.”
Swepston pointed out that HVAC was one of the few industries he had encountered that contractors actually plan to lose money in certain months of the year. From his standpoint, no one should plan to lose money - ever. Just as a contractor budgets to make a profit at the end of the year, those same business owners could make sales projections for the month, the week, the day, and then manage costs accordingly.
KISSSwepston’s presentation was titled “How to Survive in a Slow Economy.” He has long been recognized as an astute business owner and is often called upon to speak at industry functions. Keeping it simple, Swepston told the group that there are only four things to be concerned with regarding financial management: sales, cost of goods sold, overhead, and profit. He said, “If you are having a tough time in this economy, go back and raise your ticket prices by $10 per hour.”
ON SELLINGWhile discussing sales strategies with the audience, Swepston said, “If you have the right selling attitude in the first place, why can’t you sell in a down economy? Everybody gets sticker shock, even in good economic times.”
Swepston also suggested that one way to increase sales in tough times is to stay focused on a limited market territory that you can easily service. He had noticed that he was driving by business every day on his way to work, and wondered if his company had ever tried to tap into that potential.
“Why would a contractor drive by so much business within just three miles of his office? If you look at the opportunity that exists in a three mile radius of your business, or just on your ride into work every day, you might be surprised at what you discover.”
He also talked about share of market (SOM) management practices. According to Swepston, Lennox Industries had, years before, conducted research, which revealed that the highest contractor brand recognition in the best test city was only 7 percent. He reasoned that a broad approach to marketing in an area such as television advertising in a large metropolitan market would most likely yield a lot of leads from parts of the city that were not as profitable to service. Better to narrow the focus on an area such as an affluent zip code with old systems that could yield better results. Swepston shared with the audience that by going to www.factfinder.census.gov he was able to discover 10,917 houses in an affluent neighborhood that could yield 728 furnace replacements, based on an estimate of a 15-year equipment life.
“Instead of trying to service an entire market, why don’t you get your systems in place to simplify your approach and manage for profit,” said Swepston.
The ACCA crowd left with a clear message - if survival is important in a tough economy, then narrowing one’s focus is more important.
Publication date: 04/20/2009