By many metrics, our first few years in business have been pretty successful. Just turning a profit for a new business (with low initial capital) is a small victory. However, I make it a point to reflect on past decisions to determine how I can avoid repeating the same mistakes.
As part of our internal meetings, we call this “Lessons Learned.” Our decisions and processes are reviewed whenever process changes are going to happen.
Of course, the challenges of the business are different than they were when it was just me, a customer service representative, and a technician who did everything.
Those initial decisions and their rewards (or consequences) are still fresh in my mind. It is my intent to help new contractors not walk down a similar path.
One of most important relationships you need are ones that I fumbled in the beginning. Which professionals should I hire?
Making the right choices when taking on key resources like a bookkeeper, an accountant, an attorney, a mechanic, or even an experienced tech is vital to business success.
I made the mistake of assuming that if someone called themselves a professional that they could get the job done.
But not all so-called professionals are created equal. Take the time to understand what you need from each professional and seek out the ones that meet your needs and expectations.
You need to follow a very methodical process:
- First, do your due diligence — check out each candidate thoroughly — ask for references and check them out.
- Second, set specific expectations for the level of performance you expect from them (timing, cost, accuracy, etc.). Give them clarity on those expectations from the beginning and make sure that they agree to meet them.
- Finally, hold them accountable for fulfilling their promises – and if they don’t, demand satisfaction and, if necessary, move on, quickly.
If your expectations are not met by these professionals, it can cost you big money. And the worst part is you will have to pay another one to fix what they did wrong.
Marketing & Advertising
For a new business, marketing is a double-edged sword. It’s necessary because you need to generate new customers as soon as possible.
The short story on marketing is to begin by developing a strategy based on having an exact target market and only spend money that speaks directly to them. Don’t go “wide” on your marketing, go “deep.”
- If you don’t have a marketing strategy in place, you’re guaranteed to start very slowly — and a new business that isn’t growing is dying because without good cash flow, overhead costs will put you under.
- If it is done incorrectly or just doesn’t work, it can bleed off cash (or run up debt or credit) with no return.
- If done right, it becomes your best friend. It provides you with ample opportunity to bring in revenue.
Revenue happens to be the most important part of your business; probably why it is at the top of the income statement. If you have revenue, you then need to make sure that you are making a profit.
Pricing for Profit
Make sure you have a pricing system that will allow you to charge enough to make your profit target. Now, this will make you more expensive than the little guys in the market and this will lead to questions from customers about your charges.
So, understand exactly why you must charge this amount, and make sure you can justify it by providing value — the absolute best customer experience — that you can deliver. If you are going to be priced like the big boys, you better deliver equal or better value than them. Make sure your team understands why you charge what you do as well.
Understanding Pricing Based on Demand
Having variable prices is part of any effective business sales strategy. You need to understand that interaction of supply and demand:
- When demand is high: For an HVAC company, the highest demand is in the summer. Your prices should be higher than in the other seasons. Why higher prices? Since demand is high, the supply (your available time to perform the work) will be low. The same is true of every one of your competitors.
- When demand is low: On the flip side, when demand is low and supply is high, HVAC companies have the time and people to do business. Reducing prices and offering discounts typically increases demand and allows you to sell more. Why reduce prices? Your expenses don’t get less — like your workers sitting around the office costing you money) so you need to give on price to get revenue.
To do good work, you need good workers. The best way to acquire the best talent is to create an environment where the best want to work.
I interview technicians from other companies just to see what their company is not doing for them and try to determine how I can do that for them. Sure, it is not always possible but usually their requirements are reasonable.
Ask employees and potential employees what they want out of their job. Don’t assume that is only about making more money. Virtually all good workers will tell you what they really want: opportunities for steady work and income and a reasonable boss.
If you work hard to meet those needs, you will be known as a good employer in the market. The word gets around quickly. Make sure that your commitment to good pay and reasonable work conditions are continuously communicated both internally and externally.
If you do, in time, the word will get out and all roads will eventually lead to your company.
Hopefully, this will make and save you money!
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