Construction may be where the glamour is in our business, but if you’re looking for higher revenues, fewer headaches, and a smoother running company, it’s time to start constructing a successful residential business. Why?
With new construction, you are commonly left waiting to collect money for work you’ve already performed. Because you’re at the mercy of general contractors, you’ll have a hard time staying afloat if they go under. Plus, you’re stuck in the world of the low-bid mentality.
With residential service, you give up the pride of saying, “I wired that building,” but you gain many other benefits. In short, you’ll have a much stronger company, and you’ll reap the following rewards of a residential service focus.
Benefit #1 — Paid on time
This is probably the most important benefit I can think of. When you go to a customer’s home and perform the work, you’ll leave with the money for that job. You won’t have to wait for months until a contractor cuts you a check. That’s the glory of residential service. No billing, no hassles — just cash flow.
Benefit #2 — No receivables
Customers don’t have a problem paying for services when they are rendered. Imagine walking out of a department store without paying for the goods before you left. It doesn’t work that way. Your services should be the same way, and with residential service they can be. You’ll have instant cash flow without waiting for receivables to come through — not to mention you won’t have to make calls for collections.
Benefit #3 — Retail vs. wholesale
In the residential world, you’ll be able to charge what your experience and expertise are actually worth. That means you’ll experience the benefit of retail prices rather than the wholesale prices you most likely end up charging in the construction world. When you focus on residential service, you’ll receive what you’re actually worth.
Benefit #4 — The flow of cash
One of the toughest problems of working in new construction is getting the cash flow together to pay your employees, suppliers, and bills. Without a steady stream of cash, it can get tough at times to keep things clicking, but when you are collecting your fees on every call, your cash flow will be continuous. You won’t lose sleep over meeting your payroll and paying bills on time.
Benefit #5 — No more low bid
Another issue that holds contractors back in the new construction world is the low bid mentality that overrides everything else. It’s next to impossible for a contractor to get the type of revenue that allows him to pay his employees high wages with good benefits, run marketing that increases business, and afford top quality tools and trucks. With residential service, you can escape that mentality. You’ll be paid according to the level of service you provide.
Benefit #6 — Wide open spaces
The exciting thing right now is that the residential market is mostly wide open. Chances are, in your area there is no predominant leader — and that could be a huge opportunity for you. If you can move your focus to the residential market with marketing that grabs consumers, you’ll be in a prime position to thrive.
Benefit #7 — You can survive if they leave
In the new construction world, your company can be wiped out if just one employee leaves you. If they leave and take your big account with them, you could be in trouble. However, in the residential world, if an employee leaves, you’ll still be strong because there are thousands of homeowners out there. Even if that employee takes away a little of your business, you can replace it.
Benefit #8 — Pay the best and attract the best
With the cash flow that you’ll gain in the residential market, you can afford to pay the best wages in your market. This helps attract the best employees to your business. When you do that, your service level will rise, and customers will start talking more about you. Then you’ll bring in even more revenue and more calls. It’s a cycle that leads straight to success.
Benefit #9 — You’re more valuable here
When you can build a business based on serving homeowners — and you’re able to lock them into your business — you’ll create a business that is simply more valuable. With a dedicated list of clients, you’ll be more attractive in the future if you ever want to sell your business. If you haven’t thought of an exit plan, there is no time like the present to decide how and when you’d like to leave your business.
Kennedy started Mister Sparky in 1996 in Atlanta. That location is now one of the largest and most successful residential electrical service companies in the Direct Energy Services portfolio, based on sales volume. Kennedy currently owns and operates the Mister Sparky franchise serving the greater Sarasota, Fla., area. He can be reached at [email protected].
