The Secrets to Surviving a Downturn, Part 2

January 19, 2009

By: Matt Michel

5. Get involved in your community
I belong to a local service club and often visit other area clubs.  Each club seems to be overrun with bankers, financial advisors, insurance agents, realtors, developers, and small business owners of all stripes.  Well, most stripes.  There are no plumbers, electricians, carpet cleaners, or pool contractors in any of the three clubs I visit.  There’s one mechanical contractor and one general contractor.

The people in service, civic, and leads clubs are centers of influence in a community.  They are the people others call when they need a good plumber, air conditioning contractor, electrician, etc.  Who do you think gets recommended?

You.  Well, you get recommended IF you’re in the club.

6. Focus on service
Pure service companies may find slowdowns pick things up.  When the economy slows and people feel threatened, they put off big ticket purchases.  They will choose to repair rather than replace.  Gear your company and marketing accordingly.

7. Check your pricing
Service transactions are smaller than big ticket transactions, but are more profitable.  Your margins for service should be higher because your labor component is higher.  If you haven’t checked your pricing lately, now is the time.

If your pricing is too low (and for a majority of service companies, it’s too low), it’s natural to wonder if a recession is the right time to raise prices.  That’s like asking if it’s better to subsidize your customers when cash is tight than when your bank account is flush. 

If you’re losing money due to low pricing, you won’t make it up with volume in good times, let alone a bad economy.

8. Restructure your pricing
Consider playing with your response charge (i.e., a diagnostic charge, trip charge, whatever you call it).  You might lower it to give yourself a lower number to quote to homeowners (i.e., when homeowners ask about pricing, quote the response charge). 

If you charge time and materials, you might raise it to offset your hourly rate (i.e., make your hourly rate appear lower). 

You might waive the response charge if the homeowner agrees to proceed with the repair (i.e., use it to capture calls).

Remember, if you reduce your response charge, you’re taking money out of your pocket and lowering your effective hourly rate.  You must offset the reduction in your hourly rate, no matter whether you are a flat rate or time and materials contractor.

9. Make smart investments
One of the benefits of an economic slowdown is you naturally look for fat and cut it.  It positions your company for greater profitability six to nine months down the line when things turn.

While you want to watch expenses and might delay major purchases yourself, you shouldn’t avoid investing in your company.  For example, it might cost you a couple of thousand dollars to reprint your flat rate books, yet the new books raise your average service ticket by $10 to $25, it will only take a few weeks to stimulate a return.  This is a smart investment.

As a rule, you want to give greater weight to investments that will help drive sales.  Buy new furniture later.  Invest in a direct marketing campaign now.

10. Get the no-brainers done
Every company has a list of “round-to-its” that haven’t been done.  When the phone’s seemingly ringing of its own accord, it’s easy to let things slip.  In a tight economy, you don’t have that luxury.

Here are a few of the no-brainers…

  • Magnets – make your magnet more than the standard truck magnet to earn refrigerator real estate and keep customers away from the yellow pages
  • Referral cards – give all employees cards to hand to your customers to give to prospects, offering a discount for the customer’s friend and something for the customer
  • Door hangers – Make sure you’ve got door hangers to cloverleaf around service calls (ask how many door hangers the technician hung after every service call, prior to dispatching to the next call)
  • Leave aheads – Leave ahead brochures are given to homeowners at the start of a service call to inform customers about products and services you offer – they open the door for add-on sales after the initial work is complete
  • Fax cover page – Dump the Microsoft fax cover template and turn your fax cover page into a marketing piece
  • Stickers – Your stickers are another way to keep your name front and center with your customers and keep them out of the yellow pages
  • Consumer newsletter – A basic tool for communicating with existing customers, staying top-of-mind, and subtly driving sales
  • Yard signs – You should place yard signs out for every installation, remodel, or multi-day job.  But don’t simply put up the yard sign.  Add a brochure box and place the yard sign near the sidewalk so that curious neighbors can learn more about your company (psst… offer a discount if they call while you’re still working in the neighborhood).


Source: Comanche Marketing. Reprinted by permission.
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Copyright © 2008 Matt Michel

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