I couldn’t help but overhear the two businessmen sitting at the table next to mine as one told the other they were born 20 years too late to be successful in business. I had to turn my smiling face away almost like an adult who had just heard a toddler use a bad word for the first time. I probably should have minded my own business but it’s hard not to watch a train wreck when it is happening before your eyes. These two guys, in less than half an hour, made every excuse to fail and not one argument to succeed.
I personally wasn’t ready to admit the market had changed until recently, when we invoiced out a reseal project and received a goat and two dozen eggs for payment. In a nutshell, our market went from the strongest recorded to the lowest ever, and it had little to do with your trade, skill or reputation. The first appearance of this down market seemed like the end of all business, but I would like to shed a new light on it and see if your business can make an adjustment to power into the next level of business. My goal over the next few paragraphs is to help put your business mind at rest by explaining why the market turned, but more importantly, how to push through to the other side.
The why still angers me because the fall of the home improvement industry, despite what economists say, had little to do with falling home prices or the low dollar. Your phone has slowed because people have become much more selective on spending. The reason for the ease up on spending is the nonstop pummeling about how bad the economy is. I completely believe that this era of 300 channels competing for our attention has created a competition of negativity, with the winner being the program that exaggerates the greatest.
Unless you are willing to go door to door and give each potential customer a hug of reassurance, you must be willing to adapt to weather this craziness. The bottom line in what we do in decorative concrete requires folks to spend and invest in their properties. People don’t buy sunscreen when it’s raining, and your business can do little to change the fact that most folks have gone into lockdown mode. The good news is our society loves to spend — and borrow — money, and will do so as soon as the clouds part.
I have no doubt the decorative concrete industry in and of itself will come through the other side of this market fine. Our industry has a strong and respected foothold in the construction market and this is a good thing. You have many of today’s decorative trailblazers to thank for that, and the list is too long for me to mention. The question is more about you and your business.
Your business will need to constrict according to the availability of work your local area is willing to give up. Most of you have noticed many other contractors slashing prices, leaving you asking how they can stay in business at these prices. My answer is, a drowning man will cling to anything, and some businesses are desperate. There is no need for desperation, and I would recommend passing over most of these projects. If you feel you must compete, maybe to save your client base, than try formatting a letter explaining how you will match dollar for dollar and apples to apples any competitor’s bid. This should give your clients the assurance that you realize the market is competitive but you will not compromise quality. It will also give you opportunity to negotiate the project into your corner.
Your best bet is to put your efforts into projects that aren’t being bid by practically every contractor in your state. I realize the number of these jobs has decreased, but this is your best bet. You will find many competitors dropping off or shifting into different markets, and this will eventually open up more business for you. Many contractors will accept defeat because the monster market we all experienced not long ago created order takers out of most contractors. Many became quite comfortable in answering the phone and assuming the flow would last forever. They were wrong. Stay proactive and keep turning over rocks.
This is the most important part of this article, so please read it carefully. Every person, every piece of equipment you owe money on, must be self-sustaining for you to succeed. It doesn’t matter how long they have worked for you or how much you have paid down on a piece of equipment. If it, or they, are not paying for themselves, than they must be liquidated, and hanging on for the market to change will suck your working capital or line of credit into a catastrophic state. The right time to do this was yesterday, because winter will be here sooner than you can imagine.
Have your bookkeeper run you a line item of every expense that is included in your overhead. I will bet you a shrimp cocktail at the World of Concrete you will see expenses on the list you didn’t know existed. I did. Cut loose everything that is not directly related to profitability. Most contractors do this too late. The level of cuts should be directly related to the level of business that is currently flowing in. My corporation does this MONTHLY. The answer is not to scalp jobs to the point of break-even but to cut expenses to the point of surviving. Many contractors are panicked about their fuel budget and are justified in their concern. Parking a work truck is not a sign of failure. Get creative and let everyone who cashes one of your payroll checks know the urgency of the times. It is in everyone’s best interest for your business to succeed. In all honesty, you may find yourself with just a few good men standing after the dust settles, and this is beyond your control. Don’t beat up on yourself — just do what it takes to keep your business in the blue ink.
I was very hesitant to write this article, because part of me feels like I’m surrendering to the gloom-and-doomers by just putting these words to paper. But the fact is that most folks, builders and developers, are cautious to say the least. My take is that the land of milk and honey, albeit flowing at a trickle right now, is as sweet as it ever was. Let me know how it goes when I see you on the other side.