Buying, Selling, Advertising Key Markets
April 19, 2010
ORLANDO - In light of the drastic economic readjustments triggered by recessionary conditions, business owners are finding they are faced with two choices: get smarter about business or get out of business altogether.
The economy, though a prime culprit in the business stresses faced by much of the United States, is not the only reason that business as usual is not bringing owners the success it once did.
“It’s not just the economy, there has been a paradigm shift in the market,” explained Jim Abrams, president of Retail Services and CEO of Clockwork Home Services Inc., as he kicked off the inaugural Focus on Your Future (FOYF) event held by Clockwork Home Services in Orlando, Fla. Hundreds of contractors attended, some looking for a magic bullet to pull their businesses up by the bootstraps in today’s tough economic climate.
Abrams startled the audience as he compared business practices and competition from just a few years ago to how things really operate today.
“In 1995, there were few utilities, no consolidators, few franchisees, no big box stores, minimal insurance, no lead referrals, no competing manufacturers, no Yellow Pages® encroachment, no super regionals, little sophistication, and two proprietary trade groups. Now in 2010, utilities, big box retailers, franchises, proprietary trade groups, and super regionals account for approximately a $16.5 billion piece of the market pie.”
He went on to compare the 1995 Indianapolis home service market to the 2010 Indianapolis home service market. According to Abrams, in 1995, 85 percent of the market consisted of mom and pop shops with the average shop bringing in close to $200,000 annually. Fifteen years later, in 2010, that same market yields only 30 percent as mom and pop shops with the average shop only bringing in close to $100,000.
Abrams and his colleagues spent the rest of the day unfolding a strategic business plan for the independent contractor attendees looking to level the playing field and become smarter competitors by buying right, selling right, and advertising right.
BUYING RIGHTOne of the quickest ways to make more money is to reduce costs, according to Rebecca Cassel, president of the Client Services Group, a division of Clockwork Home Services. In her report to the attendees, Cassel showed that, for most companies, it is easier to increase profits by decreasing costs than by increasing sales. She emphasized that buying as a group in cooperatives such as BuyMax Alliance, can not only save contractors money, but that it would allow them to compete more effectively with the big box retailers.
“The top five things you need to understand in order to buy right are pricing, terms, supply chain management, private-label products, and co-op advertising,” said Cassel. “In buying right, volume counts, and banding together to buy puts your business in the place to buy like a billion dollar company.”
Buying right is more than just purchasing products at better prices. Lon Cassel, vice president of Consumer Products, a division of Clockwork Home Services, discussed the value of acquiring local competitors to increase current customer lists and profit levels.
“You can buy more customers in one day than you can attract with advertising in a year,” he pointed out. “In today’s direct marketing world, it would take approximately 400,000 letters to reach the audience necessary to get 1,000 more service calls. If you calculate the cost at $0.50 an envelope, those 1,000 new customers cost you $200,000.”
Lon Cassel went on to suggest that acquiring a one- or two-truck shop could be more beneficial and cost effective. He warned that bringing former owners into the fold once the acquisition is complete could be a two-edged sword. “These one-truck owners can actually make great, productive employees because they understand how tough it is to make a buck,” he said.
SELLING RIGHTBuying right and making smart acquisitions can provide contractors with increased opportunity, but having the right mix of employees to properly run a business is important as well.
In his session, “Selling Right,” Terry Barrett, general manager of AirNow in Millbrook, Ala., stressed that proper selling begins with the individual. “Your company’s success will be determined by each team member’s individual performance,” he said. “Your people are either your competitive advantage, or your company’s weakness.”
Barrett went on to discuss four practices to help ensure that a contractor’s team gains and maintains a competitive selling advantage - recruit the right people, train the people, provide tools for success, and manage the people.
In order to recruit the right people for selling, as well as other positions, he suggested implementing behavioral profiling in a company’s hiring process. This step can help determine who the right people for a contractor’s company may or may not be.
Having hired the right people, Barrett encouraged attendees to train their new hires for their new positions as company representatives. This training goes beyond technical and selling skills, he said. It teaches the new employee the proper way to engage a customer at every aspect of the process, from selling to installing to servicing. Barrett suggested that good, comprehensive staff training should focus on technical skills, communication and selling skills, ethics, and attitude.
“Without the right tools, even the right people with the right training will have a hard time generating top results,” he continued. “By giving your team tools tailored for success, they’ll become superstars.”
Some tools for high-performance selling include good leads, price guides, presentation books, and proper financing.
With the other three selling practices in place, managing people is the final key element for selling success, according to Barrett. Setting attainable goals and measuring each individual and corporate success allows management to effectively steer employees in the proper direction while minimizing the personal aspects of constructive criticism.
“What gets measured gets achieved, and if you want to achieve the plan you’ve set out for your company, you need to hold your team accountable,” said Barrett. “That’s a manager’s responsibility and it’s crucial to your success.”
“Often contractors tell me they can’t afford to train,” said Barrett. “I have just one question for them, ‘Can you afford not to train?’ When your team knows exactly what to do on every call and in every situation, they’ll generate more revenue naturally on every call by providing top-notch service.”
ADVERTISING RIGHTGood business practices and an appropriately trained and managed staff won’t do a contractor much good if the general public doesn’t know the company exists. “The number one reason that contractors fail is lack of advertising,” said Keresa Richardson, president of Benjamin Franklin Plumbing. “You have to get the message out there. A good advertising campaign is seen by everyone, everyday.”
Just as the competitive market has changed, so has the advertising market. Direct mail, Yellow Pages®, and the radio were once prime targets for the majority of a company’s advertising dollars. Today, however, contractors are required to navigate these old sources with new perspective as they work to conquer television, cable, and online advertising.
Richardson emphasized that contractors must profile and know their customers as well as evaluate and track all the marketing they employ.
Adam Armbruster, senior partner with ESA & Co., a retail and television broadcasting consulting company headquartered in Red Bank, N.J., offered some marketing and advertising advice during his session “Thriving Against the Giants.”
“Advertising is about 10 percent of your gross, and more has changed in the last five years than in the last 50 years,” he said. “Intrusive marketing is important. You have to go out and get your customer instead of waiting for your customer to come to you.”
Armbruster encouraged contractors that it wasn’t necessary to increase their ad budget, but that it was essential that they market smarter by going to where the customer is spending their time.
“If your customers are online, why are you spending your ad budget in the Yellow Pages?”
MORE TO COMEThese topics and more were covered in depth during the FOYF event in Orlando and Las Vegas in March and April. Throughout the day, breakfast, snacks, and a box lunch was provided for attendees. Beyond the presentation notebook printed for attendee convenience, after each session ended an outline takeaway was supplied for further review and analysis.
A question and answer period was also provided. Each session speaker sat at the front of the room to answer questions about their presentation and allow attendees time to explore the concepts that were presented. The day’s presentations spent so much time educating the contractor about running his business better, however, that most of the questions asked during this session were about the different success group and franchise opportunities available. One contractor mentioned that he spent the entire day “waiting for the sales pitch boot to drop,” but it never really did. The sponsors of the event ensured that the day was all about attendee value.
Prizes were awarded throughout the day, including power tools, $1,000 to one attendee’s supply house of choice, and a $10,000 software package.
More FOYF events are scheduled for Dallas on May 7 and Baltimore for June 9.
For more information, visit http://change.hvacwin.com or call 800-742-9755.
Publication date: 04/19/2010