Contractor’s Corner: Now’s the time to conserve cash and expand your horizons - May 2020
By Dave Stafford
What a rough time it has been since COVID-19 wafted in earlier this year, causing the financial markets to crater. While the federal government has assured us that all will be better in the near future, a large number of businesses across the country were forced to close or operate at a marginal pace. Many of us have been working from home and going stir-crazy. Amid all the uncertainty, here are some thoughts to help contactors navigate the current time and plan for the future.
CONSERVE YOUR CASH
You’ll never see a more forgiving environment than now for delaying payment to suppliers, and while they may not like it, they’re doing it, too. Some industry leaders have already announced credit line modifications and extended payment terms. It is especially important for you to embrace the “float philosophy” by using cash flow wisely. One highly regarded company, an auto supplies retailer, apparently turns its inventory in under 14 days while paying its suppliers in an average of 200-plus days! Float is one reason Berkshire-Hathaway has been so successful and has invested heavily in insurance companies like Geico.
Yes, you do have the obligation to pay your bills, and you should do so; however, delaying payment is cheaper than paying interest on a bank loan or line of credit. What’s even better, there is no application and waiting period. To protect your credit reputation, it is always best to have the conversation with your suppliers. They may even have some other suggestions or an inventory that they’ll sell at discounted prices and better terms. There is a demand issue now, not one of supply. Use that to your advantage.
Even the highly publicized government stimulus checks and loans come with fine print, the worst of which is that so many people are applying, and some banks have already laid off the people who would normally be processing those requests for government-backed loans. When pushed, the regional Small Business Administration official at an online town hall admitted that “not all banks have been approved yet, and there are still some ‘glitches’ in our pipeline. I recommend you contact more than one bank.” That’s not good news for someone who has relied on a single bank for financial help. Talk with the bank that’s been pursuing you for your business; a quick phone call will tell you whether there is fertile ground for a great new financial connection.
With that backdrop, and because we have no idea how soon any degree of normalcy will resume, hold on to what you have in hand. Review any pending purchases that may be delayed until later in the year; even though you may get good terms, you are still using up valuable credit. Having said that, you may have a particularly good opportunity, while many are looking for work, to do that buildout or remodel at an exceptional price.
WORK WITH YOUR EMPLOYEES AND SUBS
Although you have probably been doing it already, be creative in working with your employees and subcontractors. Have a one-on-one conversation about what you can do together to get through this crisis. This is especially important if you are running into cash flow issues and may have to trim salaries, commission rates or bonuses. Keep the message simple and clear.
Some companies have laid people off, given no choice because of an abrupt lack of sales and cash flow. Others are operating with minimal staff and limited hours. One company did a series of permanent terminations but paid a three-week severance. Others have either reduced hours or rates of pay to avoid outright layoffs. If possible, many allow employees to work from home with no reduction in pay.
With state and municipal mandates in place, lockdowns on nonessential businesses have been particularly devastating, albeit necessary to enforce social distancing. Rules vary, but should a flooring contractor happen to be Class A and be engaged in a related construction business, they will likely be considered “essential” and continue operations. One company has limited personal contact with ongoing jobs, aside from necessary installation personnel, to daily virtual “walk-throughs” that can be streamed to supervisors and other managers. Some have adopted guidelines to keep personnel from potential virus exposure by limiting their work site involvement. Some retail dealers, if open, are operating under shortened hours and have limited the number of customers allowed in at one time.
RAMP UP YOUR ONLINE PRESENCE
Now would be the time to upgrade software and equipment and hire consultants to help enhance your online identity.
Go back and mine your client lists and do an email contact blast. Take a hard look at inactive clients: “We notice you’ve not shopped with us in a while, and we’d like to make it worth your while to visit us online or give us a call about your flooring project.” Feature a virtual “inspection visit” to evaluate a flooring issue. We had one client who was convinced he was going to have to replace entire corridors of glued-down broadloom carpet; he had no budget for it and was apoplectic. Upon brief inspection, though, it was a matter of too little adhesive and overly vigorous wet cleaning. Carpet replacement was not needed, just regluing and re-seaming.
Offer to drop off some of the latest commercial flooring samples. Get a conversation started about upcoming projects, those that are funded, unfunded or in the planning stage. In some cases, department heads and supervisors will welcome a phone call because they have fewer distractions and more time on their hands right now. They might appreciate some estimates to help their budget efforts. Be prepared with a list of points to discuss if or when you do have a conversation; yes, it’s about business, but it’s also about you caring enough to follow up and see how he’s doing and what you can do to make his day better. Some talking points may include:
• “Here’s what we can do online to help with samples and budget…”
• We’re your partner for a better flooring solution because …
• Here’s one way to save on your next flooring purchase …
Share online reviews from satisfied clients on projects you’ve completed. Be sure to include those featuring repairs and maintenance since that may be your way into a new client relationship. More than ever, people are shopping online, checking products and reviews before going into any physical location to select a product. When possible, adjust your website to share concise case studies that give details of what you were able to accomplish for that satisfied customer. Show award-winning product pictures or any installation in progress.
Have you posted videos on YouTube that feature your installation prowess or problem-solving? If so, include it with your email to clients and provide a link on your website. Not all videos have to be for DIY clients. Other ideas include showing a step-by-step video diary of an old floor removal, repairs, floor prep and installation of the new floor. Make sure your video title grabs attention and is descriptive, e.g. Tips for Success on Your Next Flooring Project or A Flooring Transformation from Ugly to Beautiful in 24 Hours. Keep the videos short-one to three minutes-and make sure the focus and sound quality are acceptable.
Should you have an interior designer on staff or an outgoing project manager, offer a FaceTime/Instagram/Zoom chat for design or project questions. That connection may generate a new design project or a request for bid from you down the road. Or use a freelance onscreen personality to appear with your employee in a video with a scripted question-and-answer session. Many performers are doing live streaming, but they are professionals. You should edit your video prior to broadcast, keep it shorter, offer a transcript feature and a rebroadcast from your website.
EXPAND YOUR BUSINESS STRATEGY
Look for a brighter horizon and better days ahead. With many experienced people being furloughed or terminated, you may never have a better time to upgrade personnel and fill those positions that are necessary for future growth. Now, I know this may seem odd to some, but if you are struggling with sales and profits, perhaps you need better personnel. When times are good and money is rolling in, sometimes we overlook marginal performers. When you are making the tough decisions to lay people off, where do you start? First in/first out, or do you base it on performance? You should be looking at potential. Now is the perfect time to do it.
Is there a business segment that you’ve previously considered but rejected that should now be re-evaluated? What about a company you’ve noticed with a striking online persona that would be a possible fit with your overall business goals? It might be worth a conversation about starting a joint business. Perhaps you’ve not pursued certain commercial business areas where you have existing contacts: property management, institutional or even healthcare. Just because schools are closed to students or nursing homes and hospitals are not allowing visitors does not means they have no maintenance requirements. Your personnel may be needed to perform repairs or expert installation.
Budgets and existing allocated funds are there for many clients, and they still need to get the work done. Make ten phone contacts among those client prospects, and I’ll bet you find several that are interested. If they’re not, why not? Who are they currently using? And don’t forget to ask the important question: is there any way we can help?
UPDATE YOUR CUSTOMER SERVICE
Find ways to improve customer interaction. Although not possible for all flooring, some stores have integrated online ordering and curbside pickup. In a personal case, we had seen a specific home decor product we wanted and ordered it online. Within ten minutes, we received a text confirming the order, and it was ready for curbside pickup in 30 minutes. There were no glitches, and we got outstanding results. How can you adapt at least a segment of your business for online sales? Perhaps you can add an online inventory of commercial remnants, overstock LVT, area rugs and mats.
With your employees working from home, set up an online strategy session. What should we be doing to drive business our way today? What is one idea for helping out our client? How might we offer some version of curbside service or pickup options?
Times are tough and may be even more challenging in the short term. Plan for the brighter days ahead and look for opportunities to make creative changes in operations, personnel and service to your client base. Be patient and positive, and if there was ever a time to go the extra mile with everyone, this is it.
Copyright 2020 Floor Focus
Related Topics:Lumber Liquidators