EDITOR’s NOTE: These two articles are reprinted here from The Serviceroundtables’ Comanche Marketing Newsletter.


Are we really heading for a recession? The media seems to think so, but that’s not new. The media has accurately predicted twelve of the last two recessions.

It’s natural. The news media seems overfilled with pessimists. After all, who would feel compelled to buy a newspaper blaring the headline…

“All Well With World”

Or, how about…

“Things Better Than Expected”

So the media reports about doom, gloom, dark clouds, and misery. News reporters and anchors seem to relish bad times with the same zeal a Dallas weatherman uses to report the potential of snow.

Phooey.

It’s possible to find bad news anywhere if you look at things the right (or wrong) way. Just ask an economist. After all, there’s a reason economics is known as the “dismal science.”

Yet, somewhere between optimism and pessimism lies realism. Realistically, the economy does appear to be entering a bumpy stretch and it’s not just because the pain is showing on the east and west coast media markets. People in fly-over country are starting to act a little nervous too (fly-over country is the part of the country where most of us live, but that the important media, political, and Hollywood types “fly over”).

Personally, I’m not sure I buy the bad news. But, let’s assume the broad economy slows. The first thing to remember is that economic slowdowns are often uneven. Some areas do well while others suffer. Ditto for industries. In short, any recession might miss you altogether!

But, let’s say it doesn’t. What can you do? Try the following (I’m going to start broad and get more specific):


1. Don’t panic

Recessions are generally temporary self-corrections of the market. As long as the government doesn’t try to interfere too much, recessions don’t last. In the last 25 years we’ve only experienced two recessions and each lasted eight months.


2. Refuse to participate

It may sound trite, but you can simply refuse to participate in a recession. Remember, in any economy some companies grow and some companies shrink.

Can you grow in a recession? Yes! Except for isolated situations like the boomtowns of the California Gold Rush, there’s never a time when ALL companies grow. There’s also never a time when ALL companies shrink.

When more companies are growing than shrinking, we call it an expansion. When more are shrinking than growing for two quarters in a row, it’s a recession.

The difference between an expanding and declining economy is slight. An overall growth rate of 3% is considered robust. A contraction of 2% is felt to be a deep recession. That’s not a big difference.

Here’s the point. Economic expansion or contraction, SOME companies are ALWAYS growing. Why shouldn’t your company be one of them?

Your mindset is important. Lots of empirical research studies show that people with a positive outlook outperform people who see the glass as half empty. Positive live longer lives, are healthier, earn more money, and have fewer problems in general.

If you run around focused on woe, then woe you shall have. If, on the other hand, you focus on growth and refuse to accept less, you will grow.


3. Put forth an extra 5%

If most contractions are limited to a couple of percentage points, what happens when you put forth more than a couple of percentage points of extra effort? What happens if you put in more effort to meet people who might become or refer customers? What happens if you put forth more effort to stay in touch with your customers? What happens if you increase your marketing to new customers? What happens if you get up a little earlier and leave the shop a little later?

Can pure brute force effort overcome a declining economy? Yes! And the effort doesn’t have to be monumental. Increase prospecting by 5%. Write 5% more letters. Meet 5% more people. Work 5% longer hours. Cumulatively, this will have a dramatic effect on your performance. If you can get everyone in your company to perform similarly, your challenge will soon become finding people to increase your headcount.


4. Be a rainmaker, first

Imagine sitting in a boat on a lake. The lake water is sales. Beneath the water are the jagged rocks of overhead. You can try to avoid the rocks, and thus, avoid sinking. You can hold your breath, dive into the water, and chisel away at the biggest rocks before they sink you. Or, you can try to make rain so that lake water rises and you can sail comfortably above the rocks.

Inefficiency and excessive overhead is never good. However, if you generate sufficient sales, you buy time to attack the problems at your convenience. It’s easier to raise sales than cut fixed overhead. And, no one ever saved their way to prosperity.

Now is the time to step up your marketing. Now is the time to make rain for your company.


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, 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).

You can find a couple of other ideas here…

www.serviceroundtable.com/info/surviving.htm table width="75%" border="0" cellspacing="2" cellpadding="2">

Matt Michel is president of the Service Roundtable (www.ServiceRoundtable.com), an organization dedicated to helping contractors prosper. Matt is also the publisher of Comanche Marketing, a free marketing e-zine. Subscriptions are available at www.ComancheMarketing.com. You can contact him directly at matt.michel@serviceroundtable.com. Or send your comments to Contracting Business at letters@contractingbusiness.com.