Biz Tips

So here we are in another new year. I hope you have your seat belt on, figuratively speaking, because we are in for a wild ride. Maybe 2016 will be similar to other new years, but there is a chance it will be turbulent. Maybe tougher to do business. We have a lot of distractions, starting with the political circus, the roller coaster economy (the stock market is moving faster than a Tesla), and ending with the available labor pool. I found a few lessons about these in my travels.

The labor issue

Janah Morehart has a company in Phoenix called Morehart Air Conditioning and Heating. Her and Josh have been in business for a while and have seen how hard it is to get and keep great employees. A few years ago, she was in an office supply house getting some printing done when she met a young man who provided exceptional customer service. She asked him a few questions and ended up hiring him to come to work in her office on various marketing packages. A year later, he was helping in the field, and then moved into service. This year her distributor rolled out a new high efficiency inverter driven compressor system with all the bells and whistles. This same young tech she hired from the office supply store sold 6 of these systems in the first month of introduction with an average sales price of around $16k. WOW!

So if you ask Janah how to find good employees, her response will be quick. They are all around us. They are at your local Starbucks, Kinko’s, Applebee’s and alike, doing what they have been trained to do and performing it to near perfection. They always provide excellent customer service and you can easily notice them. Janah’s general manager used to run the office for a chiropractor. Janah became highly impressed with her management skills and made an offer to work in HR. So keep your eyes open always in the most unexpected places. Be ready to ask an employee that has outstanding customer skills if they are happy with their current job? Josh Morehart says he can get a new guy productive in 6 months, even coming from another industry. The new rule for finding employees is, hire for attitude, train for skill. Find the one in the crowd who serves others and has a great attitude. They can always be taught your business and trade.

Profit in Maintenance

I am still surprised at how many companies still do not do much with Maintenance Agreements. Grow the customer relationship today; it has value for your company. I mentioned this in another article recently, but it bears repeating. Figure out what you want to accomplish on a maintenance program that offers value to your custoemrs, establish the minutes needed for each task, total up the minutes, add in some travel, a spiff, and there you have your one or two year maintenance agreement. Another option is to set it up to debit the customer’s checking account or credit card monthly, and offer it as a continual maintenance program with no end until they cancel. Pay your technicians a better spiff when they sell a program on a monthly basis, maybe with a set amount per month, that they receive commission on until the customer cancels. And don’t cap it because this can be the glue that holds that employee to you. While in that neighborhood, add in additional services to your maintenance agreement for additional revenue. Include changing smoke detector batteries and other plumbing, HVAC, and electrical services that are easy for your plumbers and technicians to do but hard for the customer to do.

It turns out; this year will probably be tougher than last with more on the consumer’s plate. So we have to get creative on how we get new customers. Team up with a local company who is in homes on a regular basis with pest control, pool maintenance, or alarm services, etc. Get them to include your service with each new customer they add. Maybe you can offer a tune-up, an inspection, or something the customer does not pay for. So it adds value to the pest control company as an example. You end up with a name of a customer who trusts you since you came in with a company they are already doing business with. Now offer them a reduced price maintenance agreement or something to show that they are now within the inner circle like a friends and family that receive special pricing.

Also, I recently sat in on a webinar and saw an info chart that showed direct mail is the second best form of advertising (except in 18-34 year olds) to reach new customers. Direct mail followed up with a phone call, still gets effective results. Yes, calling your customers is the best way to make that phone ring, just pick it up and dial. You already have a relationship; you are not selling land in Puerto Rico but a valuable service they need.

Outside the box revenue generation

I just read an article about an Uber car driver named Gavin Escolar, who made $250,000 + last year. A little above the average for that industry. But he also sells jewelry for both men and women. He has a couple of flyers and catalogues in the back seat pockets of his car which is immaculate. He made about $3000 per month from Uber, and the rest of his income came from custom jewelry he made for many of his customers, customers he has in the car for 10-15 minutes at a time. What a great concept. He has new people coming into his show room each day with an income level perfect for his target market. He says that even going door-to-door would not come close to the response he gets from my passengers. He has great reviews from his passengers with an averaging 4.85 out of 5 on Uber Black, the high end Uber service. Uber is fine with him selling his jewelry in this manner and says they want to improve the local economy and his Uber ratings are at the high end of the scale. But he has not forgotten his roots. He used his money last year to buy 3 new cars and hire 6 drivers. He recruits unemployed Filipino immigrants, his homeland, and gives them a helping hand.

He is a great example of doing something different by creating a niche market. This is the example we need to do today, something different. The old ways will not be as effective this year and beyond to generate additional business revenue and profit.

When the economy and construction is booming, contractors may be able to get away with less-than-perfect management practices and financial controls. However, since the major housing correction about 10 years ago, plumbing contractors and businesses of all sizes have had to adjust and pay more attention to the internal side of their operations, especially key financial factors. However, we all get busy sometimes and need a quick refresher. Here are a few key tips contractors can use to use to review and run your business operations more efficiently and successfully.

Estimate Jobs Accurately

For many projects, contractors must submit bids well in advance of the anticipated start date. However, the actual cost of materials, labor, permits, and other factors can change before the job is completed-and sometimes even before it starts.

Today, accurate estimating is more important than ever. Otherwise, you can underbid on a job and wind up losing money and profit in the end. While everyone today is anxious to win a job, there’s no point in sending out bids so low you can’t make a profit on the work.

Handle change orders quickly

Here’s another area where contractors can get yourselves into trouble unless you estimate your costs accurately and communicate the situation to your customer. Determine the extra costs and get the customer to approve the change order quickly. That’s the best way to be sure you don’t end up eating those costs.

Stay on top of billing and collections

In leaner times like this, customers can start falling behind on their payments. Tracking your account receivables and the incoming cash flow is essential in order to identify collection problems and take corrective action before it’s too late.

In fact, contractors are advised to strive to be ahead in their billing on progress payments – just in case the customer runs into a problem. That means billing a littler more than your incurred costs plus a share of the profit you expect to recognize from the job.

If payments do fall behind, be polite but persistent in your collection activities. Keep the lines of communication open and try to work with your customer to bring in at least a partial payment, if possible. If you call every one – two days with a gentle approach not in anger or force, you might be paid before another vendor who sits back quietly.

Pay your own bills on time

By regularly paying your bills on time, you may be able to negotiate better terms with your vendors or receive advance notice on special sales or inventory closeouts on materials you buy. In fact, if you have been doing this, have you asked your sales or supply contact for a discount or special? Maybe it’s time to leverage your loyalty and partnership.

Review each project’s financial results

Get into the habit of reviewing the actual financial results of every project after completion. Look at the original budget, the impact of any change orders and the actual costs. If the profit on the job was less than expected, try to determine the cause. And if there was a flaw in the estimating or budgeting process, the time to update the figures is before submitting the next bid, not afterward. You don’t always need to add a higher price on your next bid, many times you will find internal processes, using new technology, or using new installation processes or products that vastly reduce your expenses to make a higher profit.

Reduce your risks

Review your insurance policies with your agent on a regular basis and keep your coverage up to date. The number of construction-related lawsuits continues to grow and you need to protect your business. If you hire and subcontractors on projects, be sure to verify that they are bonded and insured to limit your own potential liability. In addition, setting your own safety procedures can vastly reduce your worker’s compensation claims and insurance rate by a substantial amount. This means you can use that extra cash flow as pure profit or allow you to earn more jobs with the ability to submit lower bids with the insurance savings. Having a quality safety policy and procedure in place is vital to your business but very few contractors take advantage of this opportunity.

Think Training

Plan training activities that boost morale while adding to the company’s base of skills. People generally work harder for a business when they feel the company is taking care of them. Keeping your employees up-to-date on installation techniques, new products and skills will give you an advantage over your competitors. Think long term and remember that market conditions are always changing.

Manage your overhead

Take a close look at your financial spreadsheet and analyze those monthly costs. There may be ways to cut your utility bills, reduce monthly bank fees, revamp your business cell phone plan, or your inventory procedures.

Think seriously about reducing any costs you can. Good cost-containment measures can make or break a business in leaner times.

I just finished up a year of traveling for business and have learned several lessons on the road. When I travel by plane, I am TSA Pre-check so I never need to stand in the long line waiting for the x-ray machines. There’s no need to pull my shoes off or take my computer out of the bag. I recently traveled from Phoenix, AZ and when I got to airport I discovered the Pre-Check line was down. In addition, there were about 150 people in line with only three lanes open and a forth is sitting vacant. At the end of this line was a sign that said, “Questions? Tweet TSA, @askTSA.” So I quickly pulled out my phone and sent over a question via twitter that said, “Why do we not have all 4 lines working and why is Pre-Check shut down?”

Before I got through the line I already have an answer from TSA. They came back and said that they try to match the expected load with staff, but missed the fact that the colleges in AZ were out for the holidays that added to the additional traffic. They did say that they were working to get extra help and had a guy walking the line asking people if their flight was leaving in the next 30 min. If so, they would move that person to the front of the line. So they were pro-active in doing what they could to help out.

I went through the line and got my computer out along with my toiletries and proceeded through the scanner. I then put my toiletries back in my bag and walked away without my computer. I realized this tremendous error when my flight landed in Denver and was not feeling good about this turn of events. Once again, I pulled out my phone and tried the TSA twitter account again. This time I tweeted, “Help, left my computer at terminal 2 in Phoenix, what do I do?”

They tweeted back and asked the time I was at the terminal, the date, and which terminal etc. After I replied, they said someone would call me when they located my computer. A lady called the next morning and said she had my computer. I arranged for it to be picked up and everything was all right in the world. I realize the TSA group is not always our favorite friends when we travel but when I needed them most. They were there for me using the latest technology and responding to my needs.

I stayed at a Marriott hotel called the Epicurean, a boutique hotel and gave my rental car to a valet to park. When I went to check out, I gave the attendant my claim check and went back in to settle up my stay at the front desk. The attendant pulled up and parked my car outside and ran out to get another car. When he came back by I asked for my keys but he did not have them. They were in his hand when he locked up my car but left them in another car. So I immediately thought, “My rental car is locked and the keys may be anywhere in the parking lot or possibly on the way to the airport in someone else’s car.” In addition, he cannot remember exactly where he left them. I had a flight home in a couple of hours so I was a little frustrated.

Then enters Genevieve Wojick, the front desk clerk who had helped me check out. She had seen me out front and noticed that I had not left yet and came out to see if everything was OK. She was cool and calm and told me not need to worry, she would handle everything. She said she would arrange for the car to be towed or a second set of keys delivered to get the rental car back. She also would get me a ride to the airport and let the rental car company know what was going on and that the hotel would handle any extra charges and I would not miss my flight home.

As she was calling a cab, the attendant came running back in and said he found my keys! I was so impressed that she had the ability to work past this potentially huge problem and handled it with such a calm manner that provided comfort. She was the “voice of reason” for me during this problem. Marriott does a great job in hiring people to work their hotels and she is a testimony to going the extra mile.

After arriving at the airport, I put my phone down on the scanner to read my boarding pass as I boarded the flight. The United Airlines gate agent said, “Thanks for flying with United Mr. Hinshaw.” I listened in amazement as she called out the people behind me by name as well. That has only happened one time before in my travels and it sure makes an impression.

As I boarded the plane, a tall flight attendant named Sylvia welcomed me aboard. She had a distinctive accent and I asked her where she was from. She responded “Germany.” She saw a young mom coming down the isle with a baby and child seat that was having a hard time. Sylvia said, “Let me help you.” She quickly grabbed the child seat and walked her to her isle. Coming back, she saw an elderly woman about 5 foot tall looking up at the bins wondering how she would get her bag up that high. Sylvia took the bag and hoisted it up for her pleasantly without a problem. That made me feel good about flying United.

So how does this apply to you and your business as a contractor? Do you equip your front line (or actually any employee) to handle a situation when something comes up you didn’t plan on? I am confident that Genevieve’s hotel manager did not have a “what do we do when the keys are lost” drill. I’m quite certain the manager does have a customer service policy that says “Make a decision in the best interest of our customers and we’ll figure it out later!” He assuredly gives them the authority to make things happen, and in my case, it eased my mind completely. What happens when a routine plumbing install doesn’t go as planned? For instance, what happens when someone from your team steps through a ceiling or damages adjacent mechanical equipment? The truly impressive companies today have a system and policy in place to work through those opportunities when they occur, not if they occur. And I said correctly, opportunities not disasters. A real chance to show your customer whether you and your company have honest integrity to take care of them and own your own mistakes. A chance to build complete and total trust if handled respectfully and properly. Good companies actually plan on a problem arising, sort of like a fireman training for a house fire. They train to put out fires with an actual burning building, not just by reading a manual.

What can your team do to make that customer seem special? Make it a goal this year to do more than just what is on the proposal, make the customer feel like you are looking to serve them, not just make a profit. Then your customer will know that you and your company are going to do whatever is necessary to provide the best service and install the best products in their home or building. When you go the extra mile and deliver more than what they expected, most customers become raving life-long fans that tell others about your company. Your customers are your best marketing team if you please them. They tell neighbors, friends, and share it on social media like Facebook.

So sit down with the entire company and ask them how they can make customers feel better by doing business with your company. Don’t have time? You might want to make time because some of your competitors are doing that today. If not, your customer may simply decide to work with your competitor instead in the future. Or you may turn them into life-long partnerships that will make your business grow and keep your customers happy at the same time.

Have you ever had the experience of someone telling you news that just leaves you in a state of shock? Something that makes you wonder, what really matters? Whether it relates to family, life, or even your job or business.

For instance, my wife and I were at dinner a few weeks ago when I received a call. It was from a friend letting me know that a mutual friend of ours had lost their son due to a pulmonary embolism. He was only 30 years old and was simply waiting at their home to have a nice family meal. The mother came into the room and found him on the floor, already passed from this life. We quickly made plans to head south to be with our friends to comfort them in their time of need.

When we arrived, we heard the whole story. Two days earlier their son had called their pastor and asked to have a lunch meeting because he had some questions about life and what happens when we die. Their discussion lasted for a good 90 minutes. Later that week at the eulogy the pastor said he was glad he took the meeting and believed their son got some things straightened out which gave the family some peace, even though he had passed from this life.

At the funeral service at their church, every pew was filled and overflowed. At the reception at their home later on, people had parked 5 blocks away with people lined up outside waiting to get in to share their love for this family. At one point a local restaurant brought over a large amount of food: shrimp, crab, and several desserts. The just left them at the door and said they cared and were thinking of the family.

You may wonder what all of this has to do with you and your livelihood. Perhaps quite a bit more than you know. We all get so busy with our own circumstances but may have no idea what others are going through and how can we show our support and love for someone going through difficulties in their life. This not only relates to friends but to co-workers, employees, boss’s, and customers.

Most of us never forget the people who have comforted us, shared in our sorrows, and encouraged us during difficult times and sometimes, even through tragedy. In most cases, you would esteem this person and care for them as well. Perhaps a boss would have greater respect for that employee, an employee may perform better to honor their manager or boss. Or a customer may become a customer for life and tell everyone they know to use your services and why they should trust you. All because you cared and comforted them during their time of need. We can all testify that we all prefer to by from people we like and people that are like us.

My message is this; be sensitive to your employees, co-workers, and yes, even your customers. We occasionally get a reaction from others that seems over the top. Perhaps an employee will be frustrated, a customer will immediately go off on a rant about how you are taking advantage of them, etc. Realize that it may not even be anything you have done. They may just be feeling the pressure of life and may feel overwhelmed.

So keep your composure and don’t react out of passion, slow down your speech, and discuss the matter. Or calmly clarify your position with compassion if they have misunderstood you. If they have overreacted, in most cases they know and aren’t sure of how to handle their current emotions. Ask them if there is anything they need to share or if they would be willing to allow you to offer any support for them. We do not know what tomorrow brings. If we live like it, we may have a happier boss, hard-working and trusted employees, and even more business with life-long customers who can provide the type of advertising money simply can’t buy.

Warmest Regards,

Jim Hinshaw