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Eat or Be Eaten

November 7, 2008
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I love nature shows, especially those that demonstrate ferocity in the animal kingdom. Last night I caught a segment where an imposing monitor lizard went looking for lunch in a badger’s den, only to end up becoming lunch for the badger.

In business, I subscribe to the theory that you provide the best products and services and let the market dictate who wins or loses. But it’s also wise to know your competition in order to articulate your advantages to the market.

Sometimes it even makes sense to buy, merge with or sell to a competitor. Perhaps it’s now time for your company to consider one of these options.

To gain insight into this topic, Clear Seas Research* surveyed hundreds of participants in our Building Materials Panel. The panel, comprised of subscribers to BNP Media’s construction-themed magazines, provided intriguing insight into the competitive mindset of contractors, wholesalers, designers and engineers during this challenging period.

When panel members were asked if any of their competitors had gone out of business in 2008, 40% said no. The other 60% indicated a mean average of three competitors had bit the dust. That’s a lot of roadkill.

Looking into 2009, only 27% of respondents believe that none of their competitors will fold. Conversely, 73% said they expect a mean average of four competitors to go out of business next year. If accurate, there’s even more carnage facing the construction trades.

When respondents listed reasons why they felt their competitors failed this year or will fail in 2009, five words were repeated frequently:

  • Bad (bidding, branding, debt, clients, installations, reputation, service)
  • Lack of (advertising, business skills, capital, cash flow, customer base)
  • Low (demand, prices, sales, margins)
  • No (work, credit, management training, new construction market)
  • Poor (economy, marketing, planning, workmanship)
 
Some respondents were blunt about their dead competitors:

Did not do customer follow up.
Didn’t brand themselves well.
Exorbitant spending when things were good.
Pricing too low, not sustainable.
Unable to collect from accounts.
Owed the bank too much money.


What, if anything, should your company do in response to these market conditions?

When asked how likely it is that their company would consider selling to or merging with another company, only 3% of respondents said it was “likely” their company would pursue these options. Both survival and expansion were cited by respondents as reasons for selling/merging:

Keep my employees and myself employed.
Merge skills and assets to survive economic crises.
Open up new geographic areas of business.
To consolidate resources.
Opportunity for owner to cash out.

However, when asked how likely it is that their company would consider buying a competitor in 2009, 12% of respondent said it was “likely/very likely” they would do so. Here are a few reasons respondents gave for buying a competitor:

Gain customers at fire-sale prices.
Obtain equipment and real estate at a decent price.
Increase market share.
Better regional representation.
Diversify.


Only an owner (or, in some cases, the owner’s bank!) can determine if now is a good time to sell, merge or buy a competitor. It’s a simple but daunting question. Is it time to eat, or be eaten?

*Clear Seas Research provides custom research, reports, and analysis for the construction field. For more information, contact Kelly Clinton at clintonk@clearseasresearch .
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advice

Tieger Plumbing
December 12, 2008
I did the exact opposite of the inept advice given by PM so called business experts as most have no clue to run a business of their own . With that said I did what Hellton etc said not to do and I found I am on the average am making $1,200 -$2,000 per man per 6 SIX hour day (just for labor) Material mark up is gravy Without paying fees for a flat rape book or pricing program and as work seems to be slower for others I just increased my prices and picked up new accounts. This economy is a gold mine for contractors not afraid to change $225 PER HR PER MAN and my prices are going higher as the market drops even more. Any legitimate Master plumber who does not make $4,000 -$6,000 a week working alone should rethink of their career. The morons who belong to a franchise are the losers in life as they have a need to kick money back to be called a "team player" SCREW the team I am here to feed my family and make money as I am having fun doing what I love to do. Sylvan Tieger,LMP

Limiting your income

Donn Peacock
February 18, 2009
I think $4,000 to $6,000 a week is limiting your income. The team player is the one that can really expand their income by leveraging themselves into 60 employees not just themselves. You need to look long term and figure out what you are going to do when you are not able to climb under houses or turn the wrench. I agree the economy has many positive things happening. We are busy and looking up daily.

How we "Spread the wealth"

Tiegerplumbing
July 11, 2009
With the new "Spread the wealth" policy I guess I was proven right as many big remployers are now sinking faster then a lead balloon. Sure it looks great for the ego to say I have 300 employees BUT it is the actual net that counts and much less exposure to liability plus the quality is much better as no one cares more about a business then the actual owners

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