Whether you’re weathering an economic slowdown, facing the shoulder months, or simply unsure about how to handle your finances, planning for and understanding your financial barriers is one of the most important goals an entrepreneur can achieve.
Finetune Your Financial Literacy
The inability to recognize how to handle your financial responsibilities can be a challenge when a knowledgeable tradesman transitions from doing the work to running the business. But it’s important to learn early how to review financial documents, read profit and loss statements, know what a balance sheet is, or know how to produce a cash flow statement. (Tip: Ruth King’s monthly column is a great place to start.)
So, while you may have years of knowledge repairing HVACR systems or fixing plumbing issues, it’s not enough once you go into business for yourself. If you’ve never handled the financial side of the business, you must learn. Even after you master your finances, there will be new challenges. At every stage of business, there will be external pressures that you should anticipate as an entrepreneur.
The Pitfalls of Apathy
Right now, some residential services are experiencing an economic slowdown. As the country recovers from the pandemic, supply-chain shortages, and lingering inflation, there are still pitfalls business owners should avoid if they want to limit or eliminate financial barriers to success.
One of the biggest dangers a residential business owner faces is apathy. If you’re running the same old sales routine over and over because that’s the way you’ve always done it, you’re going to face failure or have a hard time recovering during economic slowdowns.
Instead of cutting down on your staff, it may be better to invest in hiring an outbound marketer or business development professional. Find someone who will take the time to get to know your current clientele and market to your customers.
Invest in Software
You need to invest in software that allows you to take a deep dive into your customer database and build new sales campaigns to speak to your existing customers. Whether you are surveying your customers after service, asking them what services they want or need, or talking with them about what you could do to improve your business, you need to have regular conversations with your existing customers.
By diving deep into your customer base before going wide and soliciting new business, you’ll create an immediate response that will improve your cash flow. For example, you’d be surprised how many of your current customers aren’t aware of all your company offers. An outbound marketing campaign simply letting them know all of what you offer can net you new jobs during economic slowdowns or even during the shoulder months.
And don’t be shy about contacting your customers. Despite conventional wisdom that your customers don’t want to talk to you, chances are that they will respond. Most people are flattered to be asked their opinion, and they want to know what you can do for them.
Develop Your Avatar Customer
Not only does a deep dive into your customer database net additional repeat business, but it also helps you develop the profile of your avatar customer.
Some of the challenges home service companies see in their conversion rates are usually the result of marketing to the wrong client. Surveys help you determine the types of clients that have used your business in the past, both those who have used it more than once and those who will use it again.
When you have this information, you can run “look-alike” reports to determine the best marketing plan that reaches your existing customer database and a plan that will help you target the right audience when you want to expand.
When you are serving your true avatar customer, your conversion rate increases, your average ticket is higher, and your customer satisfaction feedback improves.
Plan, Plan, and Then Plan Again
Another reason home service business owners fail or suffer financial hardship is that they haven’t planned enough or, in some cases, at all.
One thing a business owner should do is make a 90-day plan that includes all the short-term goals necessary to make your business a success.
The 90-day plan should include:
• Pebbles: Business goals that take about a week to two weeks to complete.
• Rocks: Goals that need a month to a month and a half to finish.
• Boulders: Business plans that may take up to two months to complete; and,
• Mountains: Goals that will take the entire 90 days to achieve.
Successful entrepreneurs know how to go after that low-hanging fruit to accomplish their goals and how to prioritize their objectives so that the larger projects still get done while the smaller ones are checked off. After the 90-day plan, you should also have a three to five-year plan.
The three-to-five-year plan should include:
• Good Employees: Hire good people who share your vision.
• Find Your Customer: Finding your avatar customer base is a very important step in your plan. Once you have it, you can market more effectively.
• Annual Benchmarks: Set annual goals and make sure the company is meeting those goals.
• Vision: Understand the business metrics needed for fulfilling your vision, and,
• Marketing: Develop a comprehensive marketing plan to meet your goals.
Five-to-Ten-year plans are also advantageous because they can be used to develop your vision. Planning further out is really difficult and probably unrealistic because of regulation, and economic and technological changes. But you should set longer-term goals.
A five-to-ten -year plan should answer these questions:
• How many clients do you want? 300, 500, 1,000, or more.
• How many service techs do you want along with the associated support system and fleet?
• What type of revenue do you envision? 5 million, 10,15, or maybe more.
• And, don’t forget profit goals!
These are visionary and necessary but won’t be accomplished without working through your shorter-term plans.
Employees are Your Company Oxygen
You need to hire the right people if you want to be successful. This can be difficult in a market experiencing a labor shortage, as we’re currently seeing. But there are ways to retain the good employees you already have and attract the top talent you’ll need for the future. Employees are a company’s oxygen. One of the best ways to retain good employees – outside of paying well and offering good benefits – is to ensure you stay on the cutting edge of technology. Talented people don’t want to work for a company using antiquated equipment. Nor do they want to work for a company where there are no advancement opportunities.
Let your employees know how they can advance and give them the metrics necessary to keep working up the ladder. Training should also be a part of your company’s DNA. You need to build educational coaching and training into the fabric of your business. And you should lead by example. The most successful entrepreneurs are always learning. Education should be as important a line item in your business plan as new tools and technology. You can’t go from a $10 million company to a $20 million company if you have a $10 million-company mindset.
Learn from like-minded people and those who have accomplished what you’d like to achieve. Staying stagnant in your thinking leads to failure. As you work on eliminating any barriers to success, always keep the big picture in mind. Once you master the steps necessary to achieve that long-term success, even during difficult economic times, you will prosper.
Michael Disney is a co-owner and the chief operations officer for CEO Warrior, where he leads a large and growing company as a trainer and subject matter expert. Early in his career, Disney was an automotive electrical specialist before joining Gold Medal Service in 2013 as a lead generator. Disney accelerated through the company to director of sales and had a key role in the sales successes, including their highest recorded sales month ever at $3.5 Million. He joined CEO Warrior as a master coach in 2015 and became COO in 2019. CEO Warrior is a business consulting, training, and mentoring firm, which provides tested and proven methods to defeat the roadblocks that prevent small to mid-sized businesses from achieving their ultimate success.