If your business is one of the lucky survivors of the “Great Recession,” you should take advantage of this enviable position to make a number of moves. Just as the housing market has “reset” the value of homes, many of the expenses of your business have gone through this same process.
If, however, you have been a loyal customer to your suppliers and sub-contractors, it’s up to you to make the first move to re-negotiate those costs with them. You should not expect them to come to you with new, lower prices.
Let’s take a look at a few areas of cost and see what you might expect.
In most areas of the country, real estate prices have dropped dramatically. If you do not already own your place of business, this may be the best time to look around at what is available to either purchase or lease.
Rental rates for retail space are down by as much as 50% in many areas and down substantially in almost all areas. If you have an existing lease, talk to your landlord about a reduced rate. You will likely have to offer to extend the term of the lease to entice the landlord to agree to a reduced rate, but if he can assure that you will be staying and he does not have to try to carry an empty space in the current market conditions, this may prove to be a pretty attractive option for him.
If you do wind up relocating, you should be able to negotiate a favorable package of leasehold improvements from a new landlord in exchange for a five-to-seven-year lease. If you do purchase a new building, you will likely save enough to make those leasehold improvements. You will also have put yourself in a position to build some long-term equity by making this move at the low point in the real estate cycle.
The other element of this package is the area of displays. Your business being one of the survivors puts you in a position of favor with suppliers who are anxious to get their products into the showrooms of those dealers and remodelers who have weathered the storm. Talk to all of your suppliers to see what assistance they are willing to give you in updating your showroom.
These suppliers know that the retail public is not going to be excited by outdated, stale product displays. It’s likely that many of these suppliers will be willing to provide product at no, or very little, cost to help you freshen up your showroom. By the same token, it is likely that your sub-contractors will be willing to participate in your showroom update on a very favorable basis.
Our customers want to do business with dealers and remodelers who are succeeding and whose businesses look like it. Upgrading your facilities will have a significant impact on the attitude of your staff as well.
Unless you’re in a unique marketplace, you have probably experienced a good deal of price pressure as you attempt to land remodeling projects. Just as the real estate market has reset, so have the costs associated with many elements of the projects that your firm performs.
Sit down with each of your suppliers and subs. Have frank discussions of the current realities in the marketplace and see if they are willing to work back through their cost structures to see if they can do better with the bids and prices that they are quoting to you on your projects. Many of us have adopted a pretty rigid, fixed approach as to how we price work, and this is true of our suppliers and subs.
This is also a good time to step back and look at how we approach our projects. Is in-house labor the way to go, or should some of the work be sub-contracted out? Are there substitute products available that perform as well as or better than what we have always used? Go through every step of the process you use to execute projects and ask yourself: Why do we do it that way? If the best answer you have is that “we have always done it that way,” then it’s time to see if there is a better way.
The whole area of marketing is really in turmoil right now. The traditional methods have been seriously impacted by the many forms of social networking, Internet media and the proliferation of cable television outlets. Look at how you’re spending your marketing dollars. Just as you need to re-examine how you perform your projects, you should put each dollar that you spend on marketing to the “why are we doing that?” test.
Most of us have only marginal knowledge of how many of these new marketing methods and concepts can be deployed, so it’s imperative that you get knowledgeable advice from someone who does understand how to approach this area. Hint: Don’t get this advice from someone who is trying to sell you their marketing scheme.
Wages and Salaries
Finally, we come to one of the most difficult and sensitive areas of our overall costs. When it comes to wages and salaries, you will need to balance the need to be competitive in the labor market with the need to be competitive in landing business from your potential customers.
If you’ve been in business a long time, you probably have employees whose wages have risen over the years. You are going to be facing competitors who are just entering the business and have hired employees who may have taken a job similar to the one they previously had and are now willing to work for a much lower wage.
If your business has been around for a long time, you should be able to sell some price differential to your customers. If you find that your wage structure is significantly out of line with that of your competitors, you may not be able to avoid addressing this disparity. The best way to do this is to be open with your employees and solicit their input as to how to address the issue. Look for ways to meet this challenge without having to cut wages, perhaps by everyone looking for ways to increase productivity. Try to find ways to avoid trading a cost disadvantage for a morale disadvantage.
Take this time and opportunity to reset the basics of your business; you may never have a better chance.