After a 10-year economic expansion, the longest in the country’s history, a U.S. economic downturn is inevitable. No one can precisely predict it. No one can prevent it. But just about everyone can prepare for it.
When the next downturn hits, electrical contractors that have developed strong service and maintenance capabilities will fare best of all. Here are five connected strategies that forward-thinking ECs can seize upon today to prepare for the downturn, whenever it may arrive.
1. Start a conversation within your company about preparing for a downturn—Get everyone involved. Include the trusted outsiders who regularly interact with your company, including vendors, accountants, lawyers, bankers, insurance and bonding agents and any others who can contribute a variety of perspectives. Collectively, they can provide invaluable insights and business intelligence focusing on your most cherished markets.
2. Pull out your company’s financial reports, and calculate your sales mix—Take a hard look at the sources of your top-line revenues and your bottom-line profits. Drill down into categories of customers, sizes of contracts, types of work, locations of jobs and other salient factors. Imagine the impact of a downturn, category by category.
Consider how ideas that have sprung from your conversation in the first step match up with the trending you have seen in your financial statements. Start planning your future moves accordingly.
By the way, while your financial statements are handy, add up all your revenues that deservedly fit into the category of service and maintenance. If they don’t represent 40% or more of your total revenues, they should. Plot a course to develop and grow your service and maintenance revenues to attain and exceed that 40% level. For proper balance, a company with $10 million in top-line revenues should be doing at least $4 million in service and maintenance.
3. Consolidate your company’s approach to service and maintenance opportunities—The first two steps were analytical. This third one is action-oriented.
When we say consolidate, we are not suggesting you literally pool your staff and resources into a centralized business unit. Rather, we’re simply promoting the concept that you can create the perception of company-wide uniformity through virtual consolidation of your service and maintenance activities.
Even when a company has a separate department ostensibly dedicated to service and maintenance, there are always pockets within the organization that pursue and perform work activities that clearly fit within the definition of service and maintenance. Promote the appearance of uniform quality of delivery. It will be a big boost to your brand. (Yes, even a middling contracting business has a brand. Everybody does.)
4. Mobilize a “predownturn” mentality throughout your organization—Experience proves construction companies are easier to manage in economic downturns than in runaway fast-growth periods. Everyone becomes more cost-conscious when business begins to slow down.
Pore through your work-in-progress reports with a sharper eye than ever. The right amount of detailed attention to certain jobs that might have been skimmed over in headier times can lead to additional profits. Here could be potential profits that might have otherwise remained unrecognized—even in service and maintenance!
5. Go on the lookout for new sources of revenue, especially from existing customers in service and maintenance—Along with having to defer capital spending, customers will be compelled to economize on their operating budgets. Get creative. Be ready to offer them alternatives to business-as-usual solutions. Remember, our standard definition of service is problem-solving. Without dangerously departing from a good-sense approach to providing service and maintenance, you can help your customers through their own period of suffering.
In an up market or a down market, the fact remains service and maintenance brings more value to the enterprise of an electrical contractor than any other kind of contracting activity. Now, well before we detect dramatic storm clouds rising over the economic horizon, it is time for astute ECs to redouble their commitment to service and maintenance.