How do I survive the down economy?
FSB’s experts weigh in to help a remodeling firm whose sales have plunged during the economic downturn.
Eric Tolley, Oak Park, Ill.
I have been in the remodeling business for eight years and have built a lot of brand equity in my company – but our sales have dropped 70% in the last two years. I know I don’t have the energy to start over. How do I survive until the economy turns around?
By Elise Reinemann, Fortune Small Business contributor
Dear Eric: Brand equity can sometimes be a liability during tough economic times, assuming that you charge a premium for your branded services.
Today’s hard-pressed consumers may be more willing to sacrifice an unquantifiable measure of quality for an easily calculated price savings, says John Pearce, a professor of management at Villanova University.
But don’t give up! Some customers may decide that they don’t need to pay extra for top-quality service, but others may simply be waiting to remodel until they have the money to pay for it. In the latter case, your business should improve along with the general economy.
To survive until the economy turns around, Pearce recommends offering your customers a broader range of product/service/price combinations.
Here’s one idea, courtesy of Matt Draus, president of Descon Construction in Oak Park, Ill. Draus has been in the remodeling and construction business since 2000 and takes in between $1 million and $1.5 million in revenue a year.
He suggests selling maintenance services to your current client base. Last year, Descon purchased a small maintenance company with one full time technician who does service calls to fix leaky faucets and other minor problems.
If you already have an employee who is well-rounded and can do a little bit of everything, try sending out a flier to existing clients stating that you now offer maintenance services. You’ll be able to get business from your current client base, and also add new clients who may hire you later on for remodeling jobs.
Good luck!
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DiggExperts are predicting the economic contraction to continue through 2009, so your question is vital to many business owners. Without knowing too much about your business, the advice offered is somewhat general. These tips can help many businesses to make it through more challenging times.
Borrow smartly/Renegotiate your loan terms
Bankers are often willing to stretch out or balloon principal payments, if the business has a solid plan to increase their revenues. Banks sometimes will renegotiate loan terms for good customers. Starting a line of credit with a second lender can give you more options, negotiating power and an alternative in case your bank begins to view your company as a risk.
Renegotiate deals
Renegotiating deals with your current suppliers can offer numerous benefits. You can extend your payment terms and thereby avoid borrowing money to pay your suppliers, or you can negotiate a lower cost of goods and increase your profit margins.
Boost your advertising
Companies can take business from weak competitors and position themselves for future growth by advertising more when competitors start advertising less. Companies that don’t cut advertising reap disproportionate rewards once the hard times are over. This approach works best when the competition has cut its ad expenditures significantly (between 40 to 60 percent).
Upgrade your personnel
Take stock of your staff with an eye to increase both your available cash and your profitability. It might be time to think about which of the weaker performers can be replaced by high performers. Don’t get rid of your good employees, as you will lose the money you put into their training.
Expand internationally
Any company with the potential for an international sales presence should look into establishing one. While the dollar is weak, American goods and services are highly affordable abroad. Foreign sales and exports are a sort of insurance policy for many companies.
Don’t lower prices, add value
Lowering your prices tends to hurt your brand and makes it difficult to raise prices later. Instead, create some new value proposition that makes your prices appear lower.
Make use of your peers
Talk to or meet with other business owners in your industry. Get together and use each other like an advisory board to find solutions to your issues. CEO membership organizations such as Vistage exist for this very purpose. Vistage offers a free booklet “Managing in an Uncertain Economy” at Vistage.com/economy.
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IM WANTING START UP A LITTLE CONCRETE BUSINESS, ALTHOUGH I DONT HAVE ANY KIND OF CREDIT LINE BUILT UP. IS THERE SOME KIND OF PROGRAM THAT I CAN APPLY TO RECEIVE A LOAN?? ALSO MY BUSINESS WOULD CONSIST OF ALL PHASES OF CONCRETE WORK, CONCRETE & ROCK WALL DESIGNS. FOOTINGS-FOUNDATIONS. PLEASE LET ME KNOW.
THANK YOU..