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Civil / Structural PE
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[This story is a bit long, like most of the things I publish. But it is timely, is based on a real conversation I recently had, and has some interesting marketing advice. TKG]


Changing Horses

“This recession is killing me,” my contractor friend, Hal I. Peno, said over coffee the other day. “If business doesn’t pick up pretty soon, we’re going down.”

Hal is co-owner of a commercial and residential construction company. They’ve been in business 15 years and normally do $2 -$3 million annually.

“Yeah,” I commiserated. “A lot of folks in the building industry already have. And those left are hanging on by a thread.”

“A thread is right. We’ve laid off just about everyone including front office staff. ‘Bare bones’ would be a generous description of what’s left.”

“So what’s your plan?”

“Well, rather than molder here waiting for the phone to ring, I want to be proactive. I was thinking of starting up something a little different. Maybe get into septic systems.”

I mulled on the idea for a minute. The on-site wastewater industry is something I know quite a bit about. Over the years I’ve designed hundreds of systems - commercial, multi-family, and residential. I even installed a few. But there is good reason I don’t mess with them anymore.

“Adding new tools to your belt is a great idea,” I said. “But changing horses, not so much. Septic systems are quite a different animal than buildings. I’d be very careful if I were you.”

“Really? Seems like an easy transition. We already own a couple of backhoes.”

“I don’t agree. Here’s why.

“First, there’s not a lot of money in the septic business. The bar to entry is low, so a lot of people do it. Even though there are now licensing requirements for designers and installers, still the competition is ferocious – particularly in this economy. The dollar volume per job just isn’t that great. A company of your size needs significant cash rolling through. The margin on a septic design and install might only be a thousand dollars. I know that’s better than nothing, but is it enough to actually make a difference? And don’t forget, profit only happens if everything goes per Hoyle. There will be learning curve. You could easily lose money, especially on the first few.

“Second, how will you find work? You’re an unknown in the septic industry. You’re not on anyone’s short list. Advertising costs money and takes time. You can’t expect to hang your shingle tomorrow and get work the next day. It’ll take months, maybe years. Probably worst of all is you don’t have any pertinent experience. The only way you’ll be hired, if someone finds you, is if your bid is rock-bottom-low. I don’t like working for no profit and can’t imagine you do either.

“Third, there’s a lot of risk in the septic business. A successful septic system depends on soils and groundwater – conditions over which you have no control. In 80% of the areas around here, soils are clayey and groundwater is high – both bad juju for drainfields. People hire you to make their systems work, not to tell them their site won’t support a drainfield. So there’s a lot of pressure to embellish bad site conditions. If you can’t make their system work, surely someone else will. This is the main reason I got out of the business.

“And what about startup costs? Who in your company will get licensed? How long will it take? I know you have a backhoe, so that’s a plus. But what about design manuals, software, and specialized tools? Will you create a flyer and mail it out? New business cards? It all adds up.”

“Sheesh!” Hal exclaimed, his sails visibly deflating, “Are you always so pessimistic?”

“Actually, I’m an optimist,” I said. “But I’m also a realist and an entrepreneur who’s tried many things, and read extensively on the topics of business. I wouldn’t want to see you jump into something that may make a bad situation worse.”

“Okay,” he said. “Then here’s the ten-million-dollar question. What the heck should I do?”

“I’ve got a one word answer for your ten-million-dollar question. It’s how several companies I know have weathered the recession, including my own engineering firm. The one word is ‘marketing’.”

“Marketing? You mean running ads in newspapers and trade magazines? We tried that. Didn’t do squat and it cost a ton.”

“That’s not the kind of marketing I’m talking about. There’re much less expensive and more effective methods."

“So you’re saying marketing my existing company is a better strategy than starting up something new?”

“Yes. Why would you want to jump on a new horse in the middle of a raging torrent when your current horse is tried and true? You already know everything there is to know about your horse, but nothing about the other one. Horses can be unpredictable; they buck, they bite, they kick, they can throw you.

“The harsh reality is that if the torrent is powerful enough, no horse will make it across. But I’d rather take my chances on the steed I know, love, and have invested in. Not to mention, your horse already has its own saddle, bridle, and shoes that fit. The cost of staying with your horse is a lot less than switching and outfitting a new one.”

“Okay, sounds reasonable. What kind of marketing do you suggest?”

“You and your partner need to get out and press some flesh – put yourself in front of potential customers or contacts of potential customers. But your message should not be a direct advertisement. You need to find a construction-related topic about which you are an expert and which is in demand. Then you give a free, short presentation on that topic. Are you an expert on septic systems?”

“No.”

“Right. Stay away from them. Pick something different. You guys do a lot of design-build, don’t you.”

“Yes.”

“Well, that could be your topic. It’s gotten a lot of press lately as a viable, cost-effective construction method. Create a Power Point presentation entitled something like, ‘Design-Build Saves Money and Time – And No More Change Orders!’ Don’t make it salesy - teach them what they need to know and at the very end mention that your company is a local leader in design-build construction. You could create that in a day or two I bet.

“Next, put together a simple black and white flyer announcing your free 1-hour seminar. Call realtors, bankers, builder’s associations, economic development associations, port districts, municipalities, Rotary clubs, and anyone else who might be interested. Offer to speak at their upcoming luncheon or dinner meeting.“

Hal had suddenly gone sheet-white. “But I’m not a public speaker,” he wheezed. “ Making presentations skeeves me out.”

“Then you have no business owning a business!” I cried. “If that’s really the case, sell now and go become an employee. Owning a business is HALF marketing, at least. If you don’t do the marketing, you better have a partner who will. Maybe he does the show and you assemble the presentation?”

“Yeah, that would work. He’s a ham, loves the spotlight.”

“And you’re handy with Power Point. Bingo! You could also use mass emails to get the word out. But that has its own set of gotchas. For example, you’d better write well. If you don’t, you’ll come off as amateurish and possibly do more harm than good. Second, obtaining a good email list is not particularly easy. People have been spammed to death and are very protective of their email address."

“Okay, so say we do this. How long ‘till it kicks in – until we start getting results?”

“I can tell you that in my case it was immediate. Some people knew me but had forgotten I did engineering. Others liked what I had to say and referred me to associates. My phone started ringing the next day and I still get calls from those early efforts.”

“All right, you convinced me,” Hal said with a flicker of reserved hope. “We’ll pass on the turds, and get cracking on some marketing. “

“You can’t go wrong there,” I said. “And after we’re out of this financial quagmire, keep right on marketing. Make it a habit and not only will your company grow, when the next downturn hits, you’ll have a tremendous edge.”
 
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When I built my new website a few years back, my webmaster suggested www.paintingexperts.com as my domain name.

I'm glad he did but to be honest 90% of leads I get from my website are just like yellow page leads, price shoppers or people looking for advice.

I do like your idea and depending on the economy in your part of the country it should work.

Sometimes no matter what you do there is just No Work and what work there is everybody and there brother is going after it.

I do agree with the Marketing part of your advice and the expert part as well but I to am a realist and its going to be a tougher next year then it was this year at least for us...
 

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“Okay,” he said. “Then here’s the ten-million-dollar question. What the heck should I do?”

“I’ve got a one word answer for your ten-million-dollar question. It’s how several companies I know have weathered the recession, including my own engineering firm. The one word is ‘marketing’.”


“Marketing? You mean running ads in newspapers and trade magazines? We tried that. Didn’t do squat and it cost a ton.”

“That’s not the kind of marketing I’m talking about. There’re much less expensive and more effective methods."

“So you’re saying marketing my existing company is a better strategy than starting up something new?”
That's the part that stood out to me. I think many business owners struggle with marketing or equate it with advertising. Your illustration of the seminar effectively demonstrates an important difference. Advertising has a major weakness: people instinctively resist advertising and promotional messages. If you can break free from the kind of thinking that has you just promoting for business, there are some incredible opportunities to take advantage of.

Hidden within your illustration is another important principle. You must ask yourself, "What are the barriers to customers buying from you?" If your answer is the economy, dig deeper. You must remove those barriers. You can't change the economy, and you probably don't need to (keep in mind I'm in Michigan, so I'm well experienced in dealing with a sour economy).

If you chart out the buying process, you may very well spot the barriers your customer faces so you can look for ways to remove them. It's often best to work in reverse order. Start with a sold job and chart the steps all the way back to an initial contact who knows nothing about you. As you find obstacles, look for ways to remove them. In the above illustration, information about how to save money and time was presented (in a non-salesy way) so the company could demonstrate how their solution solves the normal problems. Barrier removed.
 
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