Let’s face it. I could try to put a positive spin on today’s economic crisis in this article, and most of you would roll your eyes. The facts are obvious. Money is harder to borrow. Consumers are not spending their money or moving into new homes. People are reluctant to do anything with the volatility that exists in the stock market. For all of us in the tile industry who were riding the wave of prosperity just a short time ago, we are desperately hanging on to our surfboards today.
So what do we do to stay afloat? One school of thought would be to cut costs in all departments; to reduce inventory and overhead, lay people off, and more. There is merit to this thinking. But before you act rashly, let me share with you what many of our high profit members are doing. It goes beyond cutting costs, and moves towards a complete business analysis.
Consider implementing some of the following points into your business analysis.
Increase your bids at profitable marginsToo often, contractors start chasing jobs when they slow down and cut their prices to get work and keep the guys busy. The net result if they are not careful is that they work hard for no money. They would be better off not showing up for work at all. When times are good, they don’t pay attention to their bid to sales ratio, or to the profit margin percentage on a job. If you continue to implement a strategy of increasing your bids on high profit work, you may be pleasantly surprised. To do this, consider improving your estimating software and job management programs. It hurts to think of investing in tough times in your business, but it may be the best time to evaluate your needs and to take the time to be trained properly and to train your employees to use the system to its maximum potential. All of us are guilty of purchasing technology we know we need and not taking the time to understand its benefits to our business.
Increase your marketing exposure effortsI know this sounds insane, but many of our members and associate partners are increasing their exposure in their markets. A unique opportunity exists to gain market-share and awareness when no one else is doing so. When the market picks back up, you will reap the rewards. Consider inexpensive ways to do this; there are many. Look to forge partnerships with your suppliers and customers. Co-op opportunities may be explored, as other companies are more than likely in the same situation. I know of one instance where several contracting companies partnered together with some of their vendors and embarked on a local promotion strategy to increase traffic in their stores. Explore all opportunities.
Use your industry affiliations to your advantageIf you are not a member of national associations like ours, hopefully you are part of a local group. Now is the time to use your membership to your advantage. Let people know of your commitment to excellence. Ask your association or group to write letters on your behalf or to issue a press release on your involvement. Do anything to differentiate yourself from your competitors. Participate in industry surveys and analysis programs. Get a full understanding of what your affiliations can do to help you promote your business. Consider training initiatives to make you and your employees more efficient and profitable with your time.
Undergo a thorough evaluation of the financial statement with your accountant or key financial personnelIt is amazing how much profit we let slip through our fingers when times are going good. Then, when the market hits a downturn like what we are currently experiencing, we are quickly in the red, bleeding money hand over fist. Sometimes there are glaring expenditures that can be caught in the review process. Cell phone bills, mistakes on invoices from your vendors, overtime, and others are common areas where some real management can improve the bottom line. Examine all expenses. Explore your relationships and pricing with your vendors. Consider partnerships where you can reduce the amount of vendors you do business with to improve your price positioning.
It appears as if the economic business conditions are not going to improve for some time. Don’t wait until your business is in danger of survival. Identify areas where you can improve and act on these now. Don’t be too proud to talk to your peers; if not in your local community, then contact me and I will pair you up with a similar business in a non-competitive area of the country. I can be reached at firstname.lastname@example.org. I would love to hear from you.