Management Talk 4

When the economy slows down, you need to watch that your attitude toward business and your customers doesn’t go south.
Keeping a good attitude assures you will get through this slow down and that the work you do remains profitable. It also assures a better chance of getting the job when others are in a funk and trying to give their work away.
It is difficult to stay positive, but staying focused on the work at hand helps. The work at hand is advertising, selling and running your business like a professional.
If you have seen a marked decline in the number of new leads coming into your business, it is probably due to a poor job of advertising or not advertising at all. You might have been laboring under the delusion you can work by referral. Referrals are good but they should never make up more than 20 to 25 percent of the total volume of work on your books.
When the economy tightens up, you must increase your advertising. During a slowdown, a mistake made by many contractors is cutting back on advertising. “Yep, got to save every penny we can,” they reason.
Trying to save money by stopping advertising is like trying to save time by stopping your watch. Doesn’t work. The only way you are going to get business during these times is to contact more people. That means you must advertise more, not less.

Watch that overhead

Speaking of saving money, you must be very diligent in watching your overhead expenditures during an economic slowdown. By that I mean if you set your overhead budget for the year and find that sales are not up to projections, you must reduce your overhead expenses by at least the same percentage that your sales are down (with the exception of advertising).
If you do not, you are going to spend a higher percent of money on overhead than planned. Failing to adjust overhead when sales are below projections is why so many companies end a year and find they have made little or no profit. It was spent on overhead.
There are several other things you can do that will help. Make sure you don’t cut the markup or gross margin used to calculate the sales price of your work. Your price should be calculated based on the overhead and profit needs of your company and nothing else. Cutting your price is the quickest way to get yourself and your company in financial trouble.
Have you noticed an increased number of people calling, looking for work? Many of them were working for other contractors who made the mistake of “cutting their prices to get the job.” They are now broke and out of business, and their former employees are calling you.
You must also be more selective about the work you do. Many contractors try to be all things to all people. “We can do it” is the battle cry. When the economy tightens up, they will take on any job to “Keep the doors open” or “Keep my guys working.” If that is the reason you are taking a job, then you are in business for the wrong reason. You are in business (or should be) to provide a good service or product to your customers and make a profit doing it.

Play to your strengths
Choose the three things you do best, advertise those specialties and stay focused on them. When you take that approach, you almost guarantee yourself a profit on each job. You can do fewer jobs and make more money.
Finally, renew your pursuit of education. When there is less to do, you have time to polish up your sales skills and refine your business management procedures. We have several books, CD’s and DVD’s to help. The information is at your disposal, it is simply a matter of getting it and using it.
Unfortunately, you can’t hire someone to guard your attitude or improve your education. You have to do it yourself. Those who do these things will survive; those that don’t will simply go away.
Keep your eye on the goal and stay focused. You’ll get through the tough times.

Michael Stone has more than four decades of experience in the building and remodeling industry. He wrote the book “Markup and Profit, A Contractor’s Guide,” published by Craftsman Book Co, and his second book, “Profitable Sales, A Contractor’s Guide,” was published in 2007. He can be reached by e-mail at, by phone at 1-888-944-0044, or on the web at

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