Joseph owns a residential landscape company doing new installations for homeowners. He mainly works on referrals from custom home-builders, architects, and past customers. Sometimes his company is busy and other times he waits for the phone to ring. By chance he was asked to do some hauling for one of his contractor customers. In the past he didn’t pursue this type of business because is was a nuisance and disrupted his operations. But this got him thinking about how he could expand his revenue sources.
Joseph decided to set up a new division that focuses on service work. He moved his chief estimator into the role of division manager to build the customer base, added a service manager, and put a bookkeeper in charge of managing the accounts. He started by asking his customers what other type of services they needed on an ongoing basis. His homeowner customers trusted his company, liked their work, and actually wanted his company to provide more ongoing maintenance for them as well. They asked for weekly lawn and garden service, annual weed removal, yearly tree-trimming, winterization service, and annual irrigation repairs. Some of his customers owned pools and also wanted his company to do their pool service, maintenance, and repairs. Some customers had young children and wanted swing sets and playground equipment installed. Some wanted new barbeques installed, fencing added, stables for their horses built, cages for their pets, and patio covers added. Some customers asked him if he installed annual holiday lights as well. Some customers even wanted his company to offer debris and junk removal and hauling. WOW! All that business and Joseph hadn’t even thought about providing it for his customers.
Start slow and build steady!
As you contemplate the future of your company, what are your choices? Would you rather own a fast and furious company 100 percent dependent on acquiring new contracts, one at a time, if and when your customers decide to build something, and when you are the low bidder? Or would you like your company to have a slow and steady division with an ongoing revenue stream, and regular service customers to help you weather the ups and down of the new construction business?
When you have a slow and steady company you also have an asset you can sell. Service companies with annual contracts are more valuable than construction companies. The average construction company sells for 3 to 5 times net earnings before interest and taxes (EBIT). The average service company sells for double that amount.
Start a service division now. Determine your goals and implementation plan. Hire a manager to run the division for you. Setup your office to succeed with a dedicated service manager, accounting manager, and sales person responsible for the success of the division. Your job is to provide direction, vision, and hold your managers accountable for achieving the results you want.
So, what ever happened to the donut shop mentioned earlier? Last week I drove by and they were closed. The owner never understood what business he was in, what it took to keep the doors open, and how to add more recurring customers by doing more than the competition. What about you? What are you waiting for? Go make it happen! Slow and steady beats fast and furious every time!