Economic Outlook '09: Thrive, don't just survive
Tough economic times call for tough, strategic measures.
While this is no time to panic, it is time to reevaluate your business operation.
When the economy is faltering and consumer confidence is low, the money you spend should not decrease, say experts.
The goal should be to not spend less, but instead spend smarter.
Invest in products and services that will save your most precious resources: Time and money.
Decreasing the amount of money you invest will likely decrease the amount of business you ultimately do.
Realigning your resources to where you will see a solid return on investments is the proper strategy.
During a recession, everyone seems to become an economist with their own skewed version of a rescue plan.
The truth is that only you know what is best for your business.
Even though profits may be down at the moment, remember that our industry has been around for quite some time; we will persevere.
Get back to the basics
What your customers are looking for right now is value.
How much value are they getting for the money they are spending?
If customers or owners can receive comparable services from another company or staff at a lower price, that is the rout they will take.
While a job well-done is something to be proud of, many of today’s customers and owners are willing to look past that for the time being and look for affordable services.
Having a company that performs high-quality cleaning is great, but not having to layoff employees is even better.
Price shopping has long been a factor in doing business.
Building owners and business managers are always looking for the best bang for their buck.
Lately, however — especially in facilities where corporate-backed financing is not available — there has been a dramatic increase in the request for quotes.
Going with the absolutely lowest bid will save short-term money, but quality will likely be sacrificed.
"If the economy does go further down the tubes, quality will take a backseat to price," says Ken Galo, owner of L&K Office Cleaning Services. "We are starting to see that trend already in regards to appearance versus budget on items like carpeting."
Scaling back services
Tasks like interim carpet care are add-on services that many do not see value in during an economic downturn.
With limited budgets and low consumer confidence, services that were once performed weekly are now being done on a monthly basis; quarterly services are now semi-annual.
This is alarming because these add-on services are what keep building service contractors (BSCs) in business and food on their employee’s tables.
Now, more than ever, you have to prove that the services you provide benefit the building and its occupants.
There are clients who are willing to spend the money; they simply need to be convinced that the services you provide are worthwhile.
This holds true for both BSCs and in-house custodial staff.
While outsourcing can save facilities considerable amounts of money, it is not always the best idea.
The in-house staff knows the ins and outs of a building — layout, quirks, occupants and special requirements.
They are also familiar with the time it takes to complete various tasks.
Therefore, investing in equipment and adopting new procedures and best practices to maximize the efficiency of current in-house staff could be a better solution than outsourcing.
How larger BSCs cope
For larger contractors, who have been viewed as the recession-proof giants in the past, the story is a little different.
Oftentimes, many larger building service contractors rely on clients purchasing new buildings.
Given the current financing market and credit crunch, very few buildings are being purchased.
"We’re seeing landlords throwing more services into the lease with the tenant — which we have to perform — taking away our ability to sell extra services because the tenant is already getting them from the landlord," says Gary Green, CEO of Alliance Building Services. "This decreases revenue for us because landlords are taking away our ability to make profit."
This burdens business owners and managers by forcing the diversification of their offerings to recoup traditional add-on service profit losses.
Some BSCs are adding value for their customers by offering non-traditional services, such as courier services, security and restoration.
These add-on services, like cleaning, are necessary for many businesses to remain open.
By creating one-stop shopping for the needs of their customers, contractors with business savvy are not feeling the pinch to the same degree as those who refuse to think outside of the janitorial closet.
Manufacturers and the recession
The uncertain future and the tendency to save instead of strategically invest is putting a strain on manufacturers as well.
Rapid and unpredictable price increases are difficult for even relatively stable industries to deal with.
When the price of raw materials increases, the price of finished goods also increases.
These higher costs can only be absorbed by manufacturers for so long before they are forced to pass the buck onto their customers — distributors and end users.
"The rapid rise in commodity prices over the past three years has caused great hardship for the entire supply chain all the way to the janitor using the products," says Mark Unger, president of Unger Enterprises. "Time and energy are taken up coping with and passing along cost increases rather than adding value for our customers. It is hard to predict the future. However, the age old rule of what goes up fast will likely also come down fast is now causing havoc with our economy as we face the downward slope ahead."
Technology to the rescue
"Anybody who is not in the cleaning industry — or close to it — would absolutely make the error in judgment that our industry is recession proof," says Green. "There is definitely elasticity in the demand for our services."
According to the experts, clients are trying to cut back on the amount of money they spend, while BSCs are attempting to add more value to the services they offer.
In order to be competitive, bid numbers must be competitively low.
However, low prices generally come with poor quality.
Finding the perfect synchronization between quality and price becomes difficult, especially in a business constantly flooded with bids and willing employees.
With increasing demands for contractors to further trim their already low estimates, many are left with no option but to restructure the way they do business or face the same fate as many corporations worldwide — only without billion dollar handouts.
As a result, many are looking toward technology for help.
Technology has been known to help automate business processes to save time and ultimately save money.
"Today, technology is so widespread in its usage that people can do more with the time they have," says Mike Jenkins, president of CleanTelligent, a bidding, estimating and tracking software company. "Therefore, the cost of technology compared to the time savings is huge. That is why those companies who are using software and other technology to automate business processes are finding themselves being more competitive and wining more bids."
Will a sour economy affect the green movement?
"There is little controversy when it comes to green cleaning because it is essentially cost neutral," says Stephen Ashkin, president of The Ashkin Group. "In fact, many facilities find they save money by transferring to environmentally preferable products."
Since many green cleaning products are sold in concentrated bulk form, money is saved on shipping costs.
Also, the notion of green is more than environmentally preferable cleaning chemicals — it encompasses every facet of an operation.
According to those interviewed, being green means being efficient.
Not wasting time leads to saving money.
Therefore, being green is cost-effective.
The problem, however, is that the majority of decision makers are weary about investing in green right now.
Keep your head up
The economy’s status will always affect the cleaning industry somehow because of all the different marketplaces it has a presence in.
The way in which you handle a boom or bust is what sets you apart from the competition.
The mop is in your hands — so to speak — and now is the perfect time to realign your business strategy and rid your wasteful, unproductive spending.
Invest in your business, diversify your offerings and increase value in your services.
By doing so you will ensure your operation remains above turbulent waters and your outlook is profitable in 2009.