AUSTIN, TEXAS — The crowd cheered when economist Brian Beaulieu told Nexstar Network members that there would be no double dip recession. Beaulieu, CEO of the Institute for Trend Research, had told Nexstar’s plumbing, HVAC and electrical contractors in prior years to hang onto cash and batten down the hatches.
“My concern now is that you’re not ready for how busy you will get,” Beaulieu told the contractors.
The economy will grow slowly in 2011, get much better in 2012 and continue to grow at least through the first half of 2013, he said. Beaulieu spoke at the 30th Nexstar Super Meeting here in late September.
Long range, the economist predicted, a person in his or her mid-40s or older will never have to suffer a recession this bad again. Also on the good news side, the National Association of Manufacturers reported that 21% of global manufacturing takes place in the United States, Beaulieu noted. Combined with Canadian manufacturing, the U.S. and Canada have two times as much manufacturing as China.
Challenges for the future, however, include long-term high unemployment and unsustainable deficits. The deficit means that inflation and interest rates will be up and programs will have to be cut to pay the interest on the national debt, probably military spending.
Beaulieu detailed a number of trends that bode well for the next 18 months. Delinquency rates have peaked on commercial/industrial/institutional loans, which means lending will resume soon. Corporate profits are up. Non-defense capital goods orders (without aircraft) are up.
The three big trends for the future are demographics, inflation and higher taxes, he said, like 5%-6% inflation in 2013. Interest rates will never be lower than they are now and he urged the contractors to go out and borrow as much money as they can to buy wealth-creating assets such as businesses and real estate. Buy real estate on mountains, on the water and in urban areas, he urged. Add sales staff, build inventory and increase prices, he said. Buy equities, not bonds, including American Depositary Receipts for stocks of foreign firms. He recommended stocks in the medical field, especially eye care and bladder care, noting that people who can’t see or can’t stop urinating will spare no expense to fix their problem.
During the breakout sessions, business coach Jim Hamilton told the contractors to manage labor as a percent of sales, ideally at 20% of sales or less. If revenue and labor costs are at the right ratio, then that means your compensation matches up properly with your selling prices, Hamilton said. High labor costs could be a symptom of not enough calls, discounting, bad flat rates, bad execution in the field, scheduling problems or unforeseen bad weather, among other reasons.
If sales are up and labor costs are down, the reasons could be that you’ve exceeded your sales goals, billable hour efficiency is up, the task times in your flat rate book are too high, you’ve experienced increased add-on sales, your jobs have included big ticket equipment, or you have a high number of subcontract sales.
Hamilton showed the contractors why subcontract costs need to be accounted for as a direct cost to arrive at net sales. Labor costs and ratios have to be calculated against net sales, not total sales, he explained.
Hamilton told the contractors to manage their service techs for 40% efficiency — 16 billable hours per week. When billable hours begin to sink below 16 hours per week, labor costs begin creeping up.
Also during the breakout sessions, contractor Dan Friesen taught social networking to overflow crowds that sometimes didn’t know a status update from a Tweet.
“Social networking is an online cocktail party,” Friesen, owner of My Service Co., Alberta, Canada, told the contractors.
It’s the anti-marketing of marketing. Just as a person who gives you a sales pitch at a cocktail party is annoying, companies that try to sell with social networking get blocked or unfriended.
Friesen explained the big four of social networking, Facebook, Twitter, LinkedIn and YouTube.
Social networking is all about relationship building and there are no shortcuts. If you’re social and nurture relationships, it will turn into marketing. Friesen related how he follows his hometown’s (Lethbridge, Alberta) Humane Society on social networking. That led to the Society asking him to donate to its fundraising auction, which Friesen did at nominal cost. Now he has the business of all of the members of the Humane Society.
There are no shortcuts — it takes effort, Friesen told the Nexstar members. It also cannot be delegated to an underling.
“Delegating your social media efforts is about as effective as delegating your marriage,” he said.
Social networking has to be done by the owner, personally, because people don’t become friends with corporations. They do, however, do business with people they like.
Social networking is also unlike conventional marketing because it doesn’t take money. A small contractor can connect with dozens or hundreds of potential customers for no money in a short amount of time by being open, honest and willing to share its expertise.
Friesen said he spends about an hour a day on Facebook, Twitter, and other sites, and 45 minutes of that is spent reacting to and commenting on other people’s posts.
“You can’t participate too much,” he said.
Nexstar Super Meeting breaks business barriers