Surviving this Economy Step Two: Start Thinking Survival
Posted by Mark on August 31, 2009
Start thinking survival – You have two choices at this point. You can cut operating expenses, overhead and labor costs or you can grow your business.
Let’s talk about your first option, cutting costs (See option two on Step Three). The problem with trying to cut costs is that, believe it or not, it is an extremely difficult thing to accomplish.
Unless you do it in a way that will truly reduce your costs, it does not make any sense to attempt it. For example, laying off a field worker may seem like you’re reducing costs, but the truth is you only reduced payroll for each week and in turn your overhead has increased.
Some may not agree yet, but look at it this way. If you have 10 field workers and each of them work 40 hours a week for 52 weeks a year, that equals 2000 hours of work per field worker.
The total hours are then (A) 20,000 total hours that your workers can produce for your electrical business. Now let’s say your overhead costs (Rent, Utilities, Office employees pay, Owners pay) are (B) $200,000 dollars.
Now your overhead per hour would equal $10.00 dollars per hour for every hour worked by each employee (Overhead per hour = (B) / (A) ). Now if you layoff five field workers, then your overall working hours would equal (A) 10,000 total hours, but your overhead has stayed the same, it is still (B) $200,000 dollars.
Now if you recalculate with the formula, your overhead jumps to $20.00 per hour. That’s $20.00 you will have to apply to each labor hour on every project. Then you have to add the cost of the employees’ pay and add profit to that number. And companies that want to stay competitive or try to turn a profit may have just shot themselves in the foot.
Cutting costs is difficult like I said because it has to be balanced between overhead and labor. Most of the time unless you’re willing to sell almost everything and downsize every aspect of your business, it is too challenging of a task.
Option two, growing your business, will be addressed in Step Three’s blog.
Surviving this Economy Step One: Be Brutally Honest with Yourself
Posted by Mark on August 26, 2009
Be brutally honest with yourself – What we mean is that you, as an electrical contractor, you have to decide whether or not you want to or can stay in business.
It is easy to say yes, but saying yes comes with a price. Most electrical contractors are set in a comfort zone bubble that may seem comfortable where you’re sitting, but in reality it’s an insanity bubble.
Albert Einstein once said “The definition of insanity is doing the same thing over and over again and expecting different results”
If you’re in the “if it’s not broke, don’t fix it” mentality then you’re not in the right mindset to survive the economy crisis we are facing.
Embracing Change to Beat this Economy
Posted by Mark on June 18, 2009
Every electrical business across the country is showing signs of intense economic pressure. You may be experiencing or have heard of companies like yours downsizing, having cash flow concerns, maybe a low bid-win ratio or worst of all, small or no profits.
There’s not enough work, but who wants to work for free? Still you are seeing it every day with bids coming in lower and lower with no answer in sight. If something does not change, where will you be six months from now or maybe a year from now?
Don’t get left behind! For many organizations undergoing change is a hard thing to swallow. Some people rise to the challenge, while others don’t and get left behind. Be Positive! Think about it seriously, you’ve got the power and ability to end up either way. Instead of viewing your particular situation as a problem, see if you can view it as an exciting challenge instead. Remember, change is inevitable, but being stressed by change is not. It all depends on how you look at change and how you choose to respond to it.
Find a solution. Don’t be left behind.
If you’re not ready to dive in, at least get your feet wet and take advantage of some of the no-charge benefits for electrical contractors at iBID Power. Our tools can help keep your electrical business on the road to success.
