Expansion Challenges

By William Atkinson | Oct 15, 2012




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Classic Electric & Consulting, Oceano, Calif., devotes about 20 to 30 percent of its time and resources to low-voltage work. The company has an office manager and three full-time electricians, including owner Toby Mitchell.

“We first got involved in low-voltage because it seemed there was so much more demand for it, especially with customers’ increasing use of computers,” Mitchell said. “We used to use medium-voltage—120 volts—to control most things for customers. However, it seems that, these days, everything is going toward computers—0–10 volts. Computers are interfacing with equipment that they never interfaced with before. As a result, we wanted to be ahead of the game instead of being behind and trying to catch up.”

On the low-voltage side, Classic Electric focuses on datacom work rather than fiber optics.

“There hasn’t been a big enough call for it yet to make it worth investing the time and expense in the training and tools that would be required for us to do that work,” he said.

Since Classic Electric is a service-based company, it doesn’t bid a lot of work.

“Most of the work that we do bid is design/build,” he said. “As a result, we run the low-voltage side of our business the same as we run the medium-voltage side.”

Mitchell hasn’t found a need to advertise or market his low-voltage services. Virtually all of his low-voltage work has come about as a result of word-of-mouth.

“When we do medium-voltage work for someone, they find out that we can also do low-voltage work,” he said. “Once they realize this, they tell us about a low-voltage project they have and then have us do that also.”

While Mitchell doesn’t advertise or do marketing, he admitted that he sometimes finds it challenging to get low-voltage work because of the number of competitors interested in doing the same kind of work. Classic Electric positions itself as a high-end service provider in an environment that has a lot of low-end competitors and a customer base that, for the most part, doesn’t understand the short- and long-term values of high-end service.

As a result, Mitchell is challenged to grow the low-voltage side of the business while maintaining his profit margins.

“As demand increases, there are more and more people coming into the low-voltage business,” he said. “There aren’t a lot of required codes and standards, so pretty much anyone can do the work. Customers figure that, as long as their computers are working, that’s all they care about. They aren’t worried about whether things could be more efficient.”

To deal with this mindset, Mitchell has to communicate a lot with customers and prospects.

“We are more expensive than a lot of competitors, so we need to explain to people why they should work with us,” he said.

He said his well-trained electricians are an advantage, and as a result of their training, they will do a better job and will be able to do it faster than a competitor.

“The other guy may charge less per hour, but he is probably going to charge for more hours than we would,” he said.

Education is extremely important to Mitchell, so he requires at least 40 additional hours of training per year.

“If someone is not willing to continue their training, they don’t have a home here with us,” Mitchell said.

Another selling point that Mitchell finds effective is that, starting this past year, Classic Electric began offering full warranties on everything.

“We offer 10- or 20-year warranties,” he said. “If a customer’s system breaks, we will fix it. They don’t need to call the manufacturer or deal with manufacturer warranties.”

He has found that, when customers and prospects understand this, it helps get business.

“They like that kind of security and convenience,” he said.

Even if Mitchell loses to a lower priced competitor at first, he still often eventually ends up with the business.

“Many customers that we lose initially due to price end up coming back to us when they experience problems,” he said. “They never come right out and admit, ‘We went with someone else who was cheaper, we had problems and you were right.’”

And, of course, Mitchell doesn’t expect them to admit that out loud. He just comes in and solves the customers’ problems.

“When we come in, we often find improper installations, and we have to clean them up,” he said. “In some cases, we find ‘tangled messes,’ with stuff wrapped around high-voltage lines.”

After completing this kind of work, Mitchell also usually finds that it is an ideal time to discuss maintenance contracts with the customers. That is, they are more likely to agree to such contracts then because they have just experienced a problem, as a result of a competitor’s faulty work, and are still raw from the inconveniences that they have been through.

Since Classic Electric is a service-based company, it focuses a lot of attention on trying to get maintenance contracts from all of its customers.

“One of the best ways to maintain steady work is to go after maintenance contracts,” Mitchell said. “Most customers don’t even think about this, so we explain it to them when we are doing work for them.”

Mitchell said that, when a customer signs up for a maintenance contract, he and his team can catch potential problems before they become major problems that can lead to serious downtime.

On average, Mitchell is able to get about 30 percent of his customers to sign up for maintenance contracts initially. After the first year, though, maybe only 10 percent to 15 percent of them renew.

“One reason many of them don’t renew is that they haven’t had any problems the first year,” he said. “Also, since money is tight in general these days, they figure that they will save the money associated with a maintenance contract and only spend it if a problem does occur later.”

In the future, with so much of the medium-voltage business becoming computer-controlled, Mitchell expects to expand this side of his business. He will do so carefully and gradually, though, because it can be expensive.

“I wish we had the finances to purchase all of the certification testers, for example,” he said. “However, the volume just isn’t there for us yet. As our business increases, though, we may invest more in the equipment.”

ATKINSON has been a full-time business magazine writer since 1976. Contact him at [email protected].

About The Author

ATKINSON has been a full-time business magazine writer since 1976. Contact him at [email protected]





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