Game Plan For Growth
For building service contractors everywhere, this recession is testing the mettle of their business plans, financial decision-making and ultimately, the foundation upon which their companies are built. Faced with economic challenge or crisis, many businesses are just aiming to keep their doors open and stay out of the red.
Industry leaders, however, won’t settle just for that basic level of survival; they are scrambling to offset financial losses with new ventures and have their sites set on growth. With perseverance, vision and an opportunistic work ethic, that proactive ethos is making a difference in their organizations.
As addressed in last month’s cover story, many BSCs say “business as usual” is changing due to the recession, with certain services losing priority among customers and with frequencies being reduced.
It’s difficult, in an unprecedented era of customer cutbacks and in anticipation of a still-uncertain economic rebound, to know what the future holds.
But some BSCs believe that the business climate is volatile enough that they are changing their game plans to become more creative and aggressive in obtaining new business. After all, when customers are cutting frequencies from daily to three times a week or less, and doing without add-on services, what else is a contractor to do?
“You don’t want to stop growing; that’s not healthy,” says Terri Gogetap, president of FBG Service Corp. in Omaha, Neb.
BSCs have to look beyond their comfort zones and think outside the box to continue to grow during a recession. But growth is possible, many say, for those who are proactive about delivering what customers want.
“Just being flexible, being open, looking for innovative ways you can bring value to your customers, is more important than ever now,” Gogetap says. “Just because you’ve had a long relationship and have been serving a customer for 10 years, that doesn’t cut it anymore. You can’t rely on your past relationships. You’ve got to work to make them stronger. But also always work to bring more value because what you did yesterday doesn’t count.”
Many BSCs are taking advantage of the double-edged sword that is market instability, working hard to secure new bids that are out there because customers are shopping around for a better price.
“What’s benefited us is a lot more bidding opportunities, especially in what we call legacy-type accounts — accounts where they haven’t changed in years and years or who have in-house staff that they have personnel on there for years and years with high wages and high benefit packages,” says Don Zerivitz, president of Pro Clean Building Maintenance in Altamonte Springs, Fla.
For BSCs of all sizes that reach into several different markets, the recession has forced a change of focus.
The suffering financial, real estate, retail, industrial and manufacturing sectors represent areas in which contractors are willing to maintain accounts, but have stopped chasing. They’d rather invest in stable markets such as government, education and health care.
At FBG, the focus that has been on manufacturing — one of the four segments the company concentrates on, along with commercial, education and health care — has been minimized to make way for a focus on education.
“We’ve placed more emphasis on education because we see that we can bring tremendous value to schools that are in-house and we’ve had a lot of success there so that’s very positive,” Gogetap says.
Marsden Holding LLC in St. Paul, Minn., has also expanded market territory, seeking areas outside of traditional regions and moving further out from city centers to outlying markets. Because the company’s footprint has grown regionally and nationally with acquisitions and aggressive sales, local shrinkage has been offset for Marsden.
“Our belief is that in a recession, and in a tough economy, while you have a lot of business at risk, there’s also a lot of opportunity,” says Guy Mingo, Marsden Holding’s president. “And if you’re aggressive and cover your territory properly, better than average, the hope is that you will emerge bigger and stronger than you were going in. The trick is, obviously, getting more business than you lose.”
Opportunity amidst cutbacks
Customers across the board are not only cutting back on daily and regular cleaning services, but they’re also de-prioritizing periodic and add-on services such as carpet cleaning, leaving a big financial void to be filled.
“Our special services have just been taken apart because people aren’t doing any of the add-on work, or, they are doing some, but compared to what it was, it’s pretty limited,” Zerivitz says.
However, even with the reduction of basic cleaning duties such as vacuuming and dusting, many predict that demand for periodic services will pick back up as soon as customer cash flow gets better.
In fact, when cleaning schedules and frequencies are reduced, specialty services become more important.
Marsden has used the recession, and the dynamic of a lot of accounts potentially changing hands, as a time to increase sales activity and expand market territory. Mingo sees opportunity in the fact that daily services are being cut — despite specialty services also being cut by many customers.
“We’ve really tried to increase sales in the specialty services area, to try to work with our clients who are maybe buying three-day-a-week services, to build a stronger periodic service program,” Mingo says. “If you’re not going to be vacuuming every day, create a carpet cleaning program for them so you can get that dirt out of the carpet where you’re not vacuuming five days a week anymore.”
Baltimore-based My Cleaning Service is focusing on selling specialty services to current customers to make up for work lost in it’s niche market, the construction industry. With a little diligence and hard work, the company is finding plenty of business, says President Lisa Bands.
“We’ve been doing a lot of cold calling, just calling everyone, saying, ‘Is there anything you need done?’ So we’re finding places that are right under our noses but we hadn’t bothered to look or ask,” Bands says.
Marsden is trying a bundled service approach, offering security and HVAC services. Diversification can help BSCs retain an edge over competition, depending on the customer.
“If you buy multiple services from us, we’ll give you a discount. We’ll also give you one point of contact, one invoice, for those clients having an interest in that. There’s a lot of interest and excitement around that,” Mingo says.
The economic downturn is hatching new business ideas as well. For Topeka, Kan.-based L&J Building Maintenance, the recession paved the way to an experiment with residential cleaning, says President Lonnie Williams.
“We just started that recently and ended up getting two new customers right away. I’m not real sure how that’s going to work yet — it’s something that’s totally different,” Williams says. “I was just curious and I just went out there to see how it works because the market is changing.”
The bright side
Zerivitz says he has nothing to complain about, even with customer cutbacks, because he’s managed to grow at a time when that can be very difficult to do.
“It’s a lot more work and a lot less fun than it was. But I know a lot of people doing a lot more work and having a lot less fun and they’re getting killed,” Zerivitz says.
Growth, in turn, makes great new things possible for BSCs, rewarding the additional investment of time and money and resources. Contractors are not only thinking innovatively, selling aggressively, diversifying services and branching into new territories — they’re also taking advantage of the weak labor market, hanging on to valuable employees and choosing from a better pool of job applicants.
Marsden has invested heavily in its sales staff, in the hopes that being aggressive in that area will help offset the losses in other areas.
The company has increased its sales force by 20 percent. The business is still out there, Mingo says, but it’s harder to find.
“You have to be more aggressive in going after it. What might have been your normal standard in the past is not your normal standard anymore,” he says. “People are afraid of that because we’re adding costs at a time that our customers are cutting back but we don’t see a choice.”
Some BSCs are already seeing customers bounce back from a reduced services schedule, but others have yet to see that change. In fact, some worry that it won’t change, that customers will be satisfied with three-day-a-week cleaning vs. five-day-a-week.
But business in other industries is so bad that contractors in the cleaning industry are lucky to have work at all during a recession, says Bands.
“We have such a fortunate industry because people are always going to need our services,” Bands says. “So if you don’t clean one thing, you clean something else. It makes our industry better than a lot of industries.”
BSCs have no choice but to challenge the way they used to approach contract cleaning, Mingo says. The good news is, most smart businessmen and women in the industry are willing to do whatever they have to do to come out on top, he says.
“You kind of keep your head down and hit it hard, that’s what you have to do. I think the thing about this industry, and the entrepreneurs, the people that are in this business, is that we are used to working hard, we’re used to grinding it out, and business doesn’t come easy, never has,” Mingo says. “There’s a lot of perseverance.”