We have often cited barbers as unique examples of businesses that benefit from earning recurring revenues—almost automatically—every day. We were wrong about that, which is an important mistake to learn from.
In virtually any field, an organization’s ability to develop a steady stream of recurring revenues is a primary factor in guaranteeing their mere existence, let alone success.
Capturing recurring revenues
The part that we missed in our oft-mentioned observation about barbers was that their recurring revenue is not necessarily automatic. We soon appreciated our mistake when we visited a barber for an interview for this month’s column. We came away with a new appreciation for the barber’s everyday business experience. Better yet, we got an insight into how any organization—including electrical service and maintenance contractors—can improve their chances at capturing recurring revenues time after time.
Anthony Mankoski operates a one-man barber shop in an elite private club that has been a center-city gathering place for hundreds of business executives for nearly a century and a half.
We expected the sheer number of club members would have immediately assured him of plenty of business and kept him fully occupied when he took over the barber shop a few months ago. But it seemed as though everybody already had a barber.
It took quite a while for Mankoski to ramp up his business. And to continue the growth, he applied a principle that service-oriented contractors and many others can borrow to promote their own line of work and build an ever-growing customer base—prescheduling. Before customers leave the barbershop, they are gently pressed to schedule their next haircut.
“A good haircut should last about four weeks,” Mankoski said, “but without prescheduling, customers may not return exactly that often. Without prescheduling, customers may miss two or three haircuts a year. And that adds up to some significant money.”
The lesson here for any aspiring service contractor is straightforward: at the completion of a service call, try to set a date to come back. There’s always more to do. In this column, we often extol the virtue of continuing to build a service and maintenance customer base. The larger that customer base grows each year, we have said, the better it is for any contractor’s business.
Build that business
Mankoski has a different take on things. “As a barber, you’re better off if you have regular customers, even if fewer in number, but all of whom come in more frequently,” he said.
By contrast, we believe that electrical service and maintenance contractors should never stop building their customer base. With that belief, we have three things in mind.
First, it is only natural that every year a small percentage of customers—for legitimate reasons—simply depart, even when they are completely happy with the quality of service. Natural attrition—and hair loss—is a fact of life.
Second, the growth of your customer base will lead to growth in the numbers of your service electricians. A reasonable amount of revenue growth enables a company to continually refresh itself by acquiring new and talented individuals.
Finally, it is impossible to successfully scale up an organization and maintain an expanding customer base without software designed for service-related business. Contractors objecting to the monthly cost of field-service software should note they are probably spending more each month parking their trucks.
A single-chair barbershop has a theoretical maximum number of customers. A successful electrical service and maintenance business can—and should—continue to grow at a deliberate pace.
Reimagine, reinvent and renovate—the theme of this month’s issue—is an apt reminder that over the lifetime of most buildings, four or more times as much money will go toward the ongoing needs of the electrical system than the cost of its original construction. Long term, nothing compares to the service and maintenance business in terms of increasing the value of an electrical contracting company.
We enjoyed meeting Mankoski, especially when he shared his anecdotes about cutting his own hair in high school, firmly convincing himself then and there that after graduation he wanted to become a barber.
We asked if his school-age son shares a similar interest in barbering, and he said, “No, he’s firmly convinced that he wants to become an electrician!”
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About The Author
MCCOY is Beliveau professor in the Dept. of Building Construction, associate director of the Myers-Lawson School of Construction and director of the Virginia Center for Housing Research at Virginia Tech. Contact him at [email protected].