SAN DIEGO - The stock markets are falling. Companies are announcing waves of layoffs. Consumer confidence is waning. Obviously, 2001 isn’t off to a great start.
| More Tips From Hunter Industries' VP Jeff Carowitz |
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For additional information on successful irrigation contracting in 2001, click the following link for an article that covers how contractors should spend more time planning and strategizing if they want to succeed in the face of this year’s uncertainty: For more information about Hunter Industries click here: |
While no one is necessarily sure what the coming year will bring in terms of the economy, Jeff Carowitz, vice president of San Marcos, Calif.-based Hunter Industries warned that one trend that has a significant impact on contractors’ businesses is what he called “the profit squeeze.”
“The profit squeeze is when two factors come together that make it more difficult to earn a profit,” Carowitz explained. In the irrigation industry, two such factors that could occur this year would include less demand for irrigation work and an increase in material costs.
“The increase in prices for fuel, pipe and labor started last year, and there’s no reason to believe it will go away in 2001,” he related. The big question is then what the market will do this year.
Short of finding a crystal ball that shows you the path to take, being prepared for the unknown is a challenge. Carowitz encouraged companies to engage in a practice that he called “scenario planning” in an attempt to be better prepared for whatever market conditions lie ahead.
“Scenario planning allows you to model the upside and downside of different situations that could influence your business,” he explained, adding that Hunter Industries goes through this exercise as part of its strategic planning.
The steps to scenario planning are simple enough. “Develop good and bad scenarios that you could face this year,” Carowitz suggested. “Then get with your team of managers and discuss these scenarios. Ask them, ‘How would we respond if …,’ and ‘What would you say if …’
“Think about how the key criteria of your business - your employees, your customers, your cash - will be influenced under these various situations,” Carowitz continued. “From there, record all of these thoughts and look for constants or various action items to implement.”
Carowitz then engaged his audience of nearly 50 irrigation contractors in a simple version of scenario planning, and they came up with the following strategies for dealing with a good year and a bad year:
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- Focus on maintaining quality and customer contact. “Both of these areas often suffer during rapid growth,” Carowitz added.
- Be more selective about taking on new work, with a focus on referrals. Consider developing a list of questions to screen customer phone calls that come into the office to minimize time wasted with undesirable customers.
- Raise your prices. “Put the law of supply and demand to work for you,” Carowitz recommended.
- Focus on managing your inventory. “This is a good idea in good and bad times,” he noted.
IN A BAD YEAR …
- Raise your level of service.
- Expand your geographic area of work.
- Focus on upselling current customers.
- Evaluate the profitability of your current customers. “And don’t be afraid to get rid of customers if you’re not making much money from them,” Carowitz said.
- Focus on getting your managers to be better managers.
The author is Editor of Lawn & Landscape magazine.
