Finding ways to differentiate your business

BY RICH SCHMITT
Management specialist

Right now, we should all be pretty focused on right-sizing our companies and serving our customers. We should also be looking for ways to differentiate ourselves in an effort to hold our fair share of the business and, ideally, grab a chunk of someone else's share. One suggestion for an area of focus is service contractors. Most wholesalers have already determined that service contractors are still working because "stuff happens and things break."

Of course, even service contractors are feeling the effects of the down economy but there is work. Over the years we have assumed that between $50,000 and $60,000 worth of parts flows though each service truck. This number may not be correct in the current economy or in your market, but you can probably develop some "rule-of-thumb"numbers for your situation. There are some new construction contractors who are shifting their focus to grab some of the service work since new construction is down. This is causing problems for some of the legitimate service contractors since, while they share many of the same products, the businesses are run much differently.

In this economy most wholesalers are being less selective about their customers. This is certainly understandable.

However, I would recommend that you give priority to the "legitimate"service contractor where possible. By "legitimate,"I mean contractors.who are working to operate professional service businesses. The reason is simple, they tend to be better short-term customers and they tend to have a better survival rate than the moonlighters or guys who will be service contractors until new construction picks up. The simplest way to understand service contractors is to determine how many trucks they are running. This is, of course, not foolproof but it is a quick measure using readily available information.

One- or two-truck service contractors

These guys are always struggling. They are basically a couple techs doing service work. I am not looking down on these guys because all companies start small, but some owners of these companies have already realized their dream and will grow no more. These guys tend to be very high cost to a wholesaler because they depend on the wholesaler for most of their tech support. They never seem to have time for training and often run their business out of their truck with a clipboard and their cell phone. On the flip-side, this size of contractor has its owner in one of the trucks so there is less price negotiation and most are solid honorable people who don't cause many problems and will pay you on-time as agreed. In addition to building a relationship with the owner, it is good to build relationships with each hired-hand tech since they move around or start their own company.

Also they start to bail in their 40s and 50s when their back or knees give out. You can find some of these senior guys wearing orange or blue aprons or maybe working in a supply house. (As an aside, they can be great employees if their people skills are good but if they are arrogant or bitter, their expertise seldom offsets the bad-will that they generate.) I had the occasion to stop at a Big Box recently and was looking for a plumbing part. Since it is almost impossible to find anything, I pressed one of their magic "Page a warm body buttons."A guy about my age came over in a couple of minutes. His apron indicated that he had real plumbing experience. This differentiated him from the others in the department who, as they were stocking the bins, didn't realize that ells come in different sizes. He noted that I was wearing the standard "home-owner-honey-do"uniform (recently washed jeans and tee shirt with paint, grease and grass stains from other "should-have-called-a-professional"projects) and said, "How can I help!"in a less-than-friendly tone of voice. I told him what I was looking for and he said, in the same tone possibly with a hint of ‘that's a stupid request', "Now why would you want that?"

I came to the store for a simple plumbing part and found myself in a plumbing pop-quiz that would have made my heartless high school history teacher proud. Heck, I didn't need to come all the way to his store to have my masculinity challenged. I could get that kind of treatment right at home. I ended up with the part, but this "pro"had taken an opportunity to build lots of goodwill and turned it into an unpleasant encounter.

I only bring this up because that guy could have been working at your supply house and be applying those same "great"people skills to your trade customers. (While I have gone back to that store, many of your trade customers would not tolerate that kind of attitude in your company.)

What they want from their wholesaler:

• Normal credit terms. They are mostly involved in short service jobs and should be paying you promptly.
• Reliable access to the parts they use
• Fair pricing
• A catalog for their trucks
• Tech support as they run into difficult situations
• Some will use their wholesaler's website to order parts early or late in the day.

Five-truck service contractors

At about five trucks it seems that they either get better at running their business or disband and go back to work for someone else. This is where they start to become more viable in the long term. They might have a full-time office person and a part-time bookkeeper. They may have a warehouse or stockroom where they keep common, fast-moving products. They are probably using a computer system for their accounting and billing.

What they want from their wholesaler:

• Credit
• Reliable access to the parts they use
• Fair pricing
• A catalog for their trucks
• Msds documents for their trucks
• Tech support as they run into really difficult situations
• Product training for their techs
• Business training for the owner
• Support for their software (some will need pricing data to load into their computer software to allow quotations)
• Some will use their wholesaler's web site to order parts early or late in the day
• Stockroom and possibly truck replenishment support.

Ten-truck service contractors

At 10 trucks they have enough going that they use robust computer systems, have marketing programs, have some full-time office staff and operate like a real business. Their computer systems will be more sophisticated and include: dispatching, buying, accounting, billing, flat-rate pricing and productivity tracking.

What they want from their wholesaler:

• Credit -- on some big jobs they may need special exceptions but probably don't deserve extended credit on all jobs
• Reliable access to the parts they use
• Preferred pricing
• A catalog for their trucks
• Msds documents for their trucks
• Tech support as they run into really difficult situations.
• Customized product training
• Business training
• Support for their software (some will need pricing data to load into their computer software to allow quotations)
• Some will use their wholesaler's web site to order parts early or late in the day
• Stockroom and possibly truck replenishment support
• Consignment inventory (try to avoid this if you can but some contractors are demanding it)
• Service truck management (replenishment and billing) software support.

Of course the service contractor's profile and needs vary widely, but you can create profiles for your market and your customers to help your team to better understand service contractors. With this understanding, your objective will be to become the primary, and almost exclusive, supplier to the good service contractors in your market.

If your company's strategic focus does not include service contractors, this might not be the proper course for you. As always, any strategic refocusing must be approached carefully and thoughtfully. As I have said before, new markets or types of customers always seem to involve paying your dues.

I think the battle for the service contractor will be won by the wholesalers who can provide those customers with the items on these lists. You earn the right to be the service contractor's primary, almost exclusive, supplier by showing him that:

• You have what he needs now
• You have what he will need as he grows
• You will provide products and services that will help him to grow.

For information about service contractor support tools, e-mail me at rich@go-spi.com.