For many contractors, the COVID Pandemic created many opportunities and homeowners were throwing them deposits just to get their name on the project board. If you answered the telephone, you would get the job.
The lockdowns also caused many homeowners to re-evaluate their houses and properties. They decided to renovate their kitchen, create an oasis in their backyard and increase their property values. It was a perfect storm! However, over the past 6 months I have seen a change in this climate, and it will continue for 2023 and 2024.
We are now seeing that homeowners are spending their disposal income on sporting events, going out to restaurants, travelling overseas, and spending money on other things. They are living life and getting out. They are distracted and not sitting at home. Some are taking longer to commit and others are now getting 3-5 additional quotes.
The housing market prior to March 2020 was steady with a slight increase in home values. When the pandemic hit in March of 2020, there was an immediate drop in the market. From 2020 Q2 and until 2022 Q1, the housing market soared upwards.
Many people took advantage of this by having their home reappraised and took out new lines of credit on these new rates, dipping into their “newfound” line of credit and cash. However, since 2022 Q2, the house market has dropped significantly.
What’s the IMPACT?
No doubt there is unrest and uneasiness in the economy as Canada responds to the last 2 years. History would suggest that some people will benefit from these changes and others will be in worse shape.
Many new contracting companies emerged during COVID and many existing companies had recorded sales years and purchased more equipment and added additional crews.
As we look ahead to 2023 and 2024, will this pent-up demand continue? I don’t believe it will. So, what should we do? Here is what I have done at Gelderman Landscape Services:
1. Sales Training. We have been asking this question ourselves, do we really understand our value proposition? Does our client understand why our pricing may be higher than the competition? Do we really understand our client’s pain and are able to explain in 30 seconds who is a good fit? My recommendation is to invest into Sales Training. If you want a system that will “push” you outside of your comfort zone and gets results…then contact Andrew Wall – https://www.wall.sandler.com/. As contractors, we will need to work smarter and become sales professionals.
2. Customer Experience. Are we “wowing” our customers? During the last 2 years it has been difficult in ensuring each project has gone along smoothly. Yes, we have been burdened with supply chain issues resulting in over promising and under delivering. Sure, many times, we have had no control of when specialty products arrived for installation. Yet, why do we find ourselves not being honest with our clients? Why do we over promise on our schedule?
We have specifically added a CSR (Customer Service Representative) to our Landscape Construction division. This role is designed to assist Sales & Operations and ensure that the client is given the “red carpet care” treatment from the 1st telephone/email inquiry to receiving a gift basket at the end of project. We want our clients to enjoy the experience and leave a 5-star Google Review. How are you enhancing your customer’s journey so that they refer their family and friends?
3. Bench Strength. Now more than ever, we need to develop our team members and get “tight” with our people. We like many of you have struggled to find staff. Recruiting is FULL TIME! And yes, I too hate spending money on Indeed. However, what we have not allowed at Gelderman Landscape Services, is mediocrity. Those that are not aligned with our core values, those that come late, call in sick 1/week or always are negative have no place in our culture. We are hyper focused on creating a high- performance team. We continually invest time and energy into each team member. And we are focused on the long game.
4. CASH is King! With higher inflation and higher interest rates, knowing your numbers is even more critical than in the past. The cost of everything is higher. I have been retooling my budgets and pricing several times during 2022. And yes, I am increasing our prices all the time. With interest rates over 5%, I now need to aim for net profits of 12-15% or higher. When the cost of borrowing was 0%, 10% was good.
When increasing pricing, you may have clients that do not have the appetite or can afford the highest price. Do you have the opportunity to give options i.e. Gold, Silver, Bronze? Giving options allows you to sell “something” to your clients and continue to preserve margins!
Increasing pricing is also important as you need to keep your Balance Sheet healthy for future capital investments. Every business needs to invest in new equipment, technology or human capital each year.
Ensure you are invoicing weekly (or on-time) and watch your Accounts Receivables as your clients may be slipping from 30 to 60 to 90 days.
Knowing whether you are making profit in each of your divisions i.e. Maintenance, Landscaping, Irrigation or Snow is now required. Knowing which revenue stream is making cash or consuming cash will help you decide your future.
If your books or accounting is a mess and you still are managing your business by looking at your bank balance (or struggling to understand what I am writing), then it’s time to have someone else help and give you clarity. Southbrook Accounting Services can help you!
So where do you go from here?
Albert Einstein coined the phrase, “in the midst of every crisis, lies great opportunity.” There is no question that we are in the midst of a crisis. There is an opportunity in every crisis and the deeper the crisis, the better the opportunity can be.
But the big question is “can you see the opportunity and are you taking advantage of it”?
Focus your energy on the things that you can control!
If you want an outside perspective, give Nathan a call.