Life Without Commercial?

Life Without Commercial?

Things are changing fast in the national economic landscape, and with each passing day we deal with COVID-19, it becomes clearer the trades won’t be resetting to “normal” after all this is over. I want to get your wheels turning on a very real and very concerning possibility. What if this new, post-pandemic marketplace costs you a good portion of your commercial contracts… for good? Do you have an actionable plan to supplement that revenue loss with new residential business? Or is downsizing in your future?

The Business Sector is shrinking — will you shrink with it?

I’ve been watching a pretty wild business story unfold over the last few years. LifeWay Christian Resources is based out of Nashville, TN, and long story short, Lifeway has had the corner on the church supply and Christian gift market. And it’s been very lucrative up until recently.

In 2017, they upgraded locations, sold their headquarters for around 125 million dollars and moved across town into a new, state of the art facility. In 2019, they shocked the world by closing their 170 brick and mortar retail stores and shifting all of their sales online. This turned out to be a good move for them, as they reported a nearly 20% increase in sales after the transition was complete. Then… COVID-19.

The bulk of Lifeway’s revenue was church supply curriculum, so with most of the churches in the country closed or at least running limited services, they’ve taken a beating so far this year. They proposed a plan to cut 25 - 30 million dollars in spending moving forward, with a hiring freeze and all workers not in shipping and receiving working from home.

Why am I telling you this? Because there’s a trend happening here I think our industry needs to be aware of. The latest twist was a statement a few weeks ago by LifeWay’s CEO, where he announced the necessity of working from home revealed they can operate just as well with much lower overhead keeping staff remote permanently. They do not plan to bring their whole staff back into their building even after the pandemic is over and are now looking to put their THREE-YEAR-OLD, 277,000-square-foot facility on the market for sale. A place where eight months ago 1,100 employees clocked in every day now sits vacant. So, if you’re keeping track, that’s 170 retail stores that were closed to shift to an online focus BEFORE the pandemic, and now a huge facility sitting vacant in metro Nashville. You can almost hear several contracting companies around the Southern states crying. Some big-time maintenance contracts evaporated with those decisions, some that were probably thought to be iron-clad.

During a conversation I was having this week with David Radziej, CAE IOM for Metro PHCC, he told me he’d heard a similar tale where a 27-story building in downtown St. Paul, MN, currently houses only three employees: the CEO, janitor and security guard. Ninety percent of the 60,000 employees of Morgan Stanley Bank have been working from home since March, and projections are that less than half will ever return to regular in-office hours. Some restaurants won’t be opening their dining rooms again at all and are shifting to a curbside and delivery only model. Walmart, Publix, Kroger and other major supermarket chains are pushing delivery or curbside pick-up options hard, and I read an article this week saying this might be the end of in-person grocery shopping as we know it altogether. Could Walmart skip having to pay a heap of stockers, heat and cool 180,000 square-foot facilities to operate online and bring it to your door? It’s trending that way. While most retailers struggled, Amazon was up almost 15 billion dollars in the first quarter of 2020… The writing is on the wall. Many companies are trimming staff or are making accommodations to work from home, and all businesses are looking for ways to do more with less. That means consolidation and elimination, and it may not be temporary.

This is not meant to scare you, but PLEASE don’t let it catch you off guard either. Look around at how businesses are adapting to the changing climate and consider how it will FORCE changes on your own business. I speak with far too many contractors whose businesses hinge on a few large commercial contracts, and they dance on the razor’s edge.

Commercial work can be great because you can pick up a good amount of work quickly, keep service scheduled without having to constantly push, and get into a more predictable routine. It’s also a lot easier to make ONE sales pitch to a company owner where a “yes” gets you work at 16 locations than it is to convince 16 homeowners to let you inside their homes. But losing 16 households doesn’t normally rely on one person’s decision either. The margins in commercial work are typically much lower, and the risk is much higher vs. the residential side.

Comfortable or not, now is the time to invest in your residential work. More people are at home during longer periods of the day than have been in the last 20 years, and that puts more stress on all of the household systems. Some are forced to be at home and they’re just looking for projects to improve their home’s value and efficiency. You’re the one for that job, but these sales don’t come simply through networking golf games and lowest bids. These leads, maintenance agreements, higher margin, and more loyal customers come through good marketing strategy.

Sure, there are many, many businesses that can’t fully streamline, and going online or working from home is not an option. But as this NPR article states very clearly, "Going into an economic downturn, those CEOs are laying awake at night thinking of all those buildings that they're heating and productivity is continuing without being at the office. They’re saying, 'Wow, I think we could use a change here.’”

Again, my intention is not to try and get anyone to hit the panic button just yet, but as you see other business owners making tough decisions to shift their model in a smart, sustainable direction, make sure your livelihood isn’t hinging on the decisions of just a handful of CEOs or government officials.

If you’d like some guidance in growing your residential client base, that’s what Hudson,Ink has been helping contractors do for close to 20 years. We have content, strategy and even software to fully automate the process for you. Give me a call at (800) 489-9099 or email me at [email protected] to set some things in motion.

justin jacobs
Justin Jacobs
Marketing Coach
Hudson,Ink

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