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I apologize for the not so subtle reference to the famous Buggles hit song/video “Video Killed the Radio Star”. It was the very first video played on the seminal music video channel MTV and an omen signaling a monumental shift in how we listen to music. When I look at the hydronic/piping/plumbing service industry introspectively I cannot listen to the original song and not get an eerie sense of foreboding with regards to our industry.
Unemployed Skilled Tradesmen a Historic Threat
Quit being so dramatic right? I have spent the last 17 years being the eternal optimist but the state of our industry is dire. The historic level of unemployed skilled tradesmen threatens our industry like never before. Everyone knows (I’ll do my best not to over generalize but in this case I refuse to cater to the few who say “we’re busy” I don’t know what anyone is talking about”) an out of work plumber, pipe fitter, etc. let’s just call them “piping tradesmen” and there has never been a bigger influx of unemployed pipe tradesmen attempting to hang their shingle calling themselves contractors.
On one hand you may say “well that’s the American Dream at its finest” but all it’s really doing is allowing consumers to get their plumbing/air conditioning etc. below the real cost of doing business and exposing home owners to possible issues with unlicensed and uninsured service providers.
Do we even need to talk about how every water proofing, concrete contractor, window contractor, carpet layer and basement remodeling contractor can suddenly replace sump pumps, install battery back-up systems and water heaters?
Don’t Lower Your Pricing to Meet Demand?
That brings us to another delusion, some of our so called experts are having. They have all become extremely good at telling people to “differentiate yourself from the competition”, good and responsible contractors won’t get caught up in lowering their prices to compete with the “newly” minted contractors. While there are a few ways to differentiate yourself from others in this historic downturn most have a very high barrier to entry. Are you going to buy new snazzy trucks? You need cash. Are you going to send all your service people to learn the latest in Green Plumbing or high efficiency heating and cooling? You’ve got to pay them to go and in most cases pay the company that is doing the training. Let’s buy space age, I mean cutting edge diagnostic tools (I just wanted to write space age) you’ll spend a pretty penny. By the way I use the word “contractor” loosely in the description above.
I’ve read that ignorance, self esteem and fear are the reasons for contractors failing by the bushel basket. I agree wholeheartedly with the concept of service contractors keeping their pricing and service high so they can continue to train employees, keep service quality high and actually make a profit. However it is completely irresponsible to broad brush the current depression and work situation and attribute it to ignorance, self esteem and fear.
Survival Will Have Two Faces
Most plumbing contractors that survive this (and it will go on for at least two years) will have two common traits #1 Have enough money saved to lower their pricing enough to compete in a market that can only afford white box service and hopefully staunch the blood flow long enough to return to profitability before the money runs out or #2 Do whatever it takes to lower their labor costs to continue to make a profit during these white van times. Read into “do whatever it takes” however you want, make it as nefarious and suggestive as you feel necessary.
Flat Rate Pricing is Dying
I will fight the flat rate philosophy all day long on this, in good times there are enough people to go around. You don’t like my pricing, move on to the next. This concept has no answers for times like this, at least not in our market and there are only a few markets throughout the country that are holding their own. Skilled labor is approaching 70% percent unemployment in municipalities around the US. Some of the best flat rate pricing contractors in our area are dying and it’s not because they provide bad service, their pricing is off the charts.
Here is a passage from Gary Vaynerchuk’s book “Crush It” that relates to many businesses and certainly translates well to the plumbing business “……these new models demean the training and insight and education it takes to be a great journalist (plumber, HVAC tech, electrician, etc.), and perhaps that’s true, but crying about how things should be instead of embracing how things are doesn’t do anyone any good. The changes affecting the news business (insert plumbing, HVAC, whatever) are permanent. Fundamental supply and demand is shifting.” Here is the knockout punch, “Quantity is up, price is down, which means the cost structure has to shrink dramatically. And like it or not, many people’s respect for quality reporting (insert plumbing, HVAC, whatever) has eroded. This upsets me as much as the next guy, but the fact is that it’s the trend that is having a huge impact on business and needs to be noticed and accepted.” I couldn’t verbalize this concept any better and it’s scary but real. Another huge concern of mine is when work does start turn how long will it take for the consumer or commercial building owner to be willing to pay what it actually costs to do the work at a reasonable profit?
You can’t blame the contractor’s stupidity, self esteem and fear for the service industry’s woes. There are some really fine service businesses that refuse to lower their prices and continue to provide a high level of service that will go out of business because they don’t have enough people willing to pay for their services. No one wants to address this issue it’s like a dirty secret. I’m going to give you an example and this is one of 50 I’ve had in the last two months, we have a residential customer that we have served for two years or so. He called on a Saturday and needed a new water heater. He said he’d wait till Monday. I gave him a price of $1,150.00 for a 50-gallon heater. He said “I’ll see you on Monday”, Monday rolls around and he calls me up and asks me if “that’s the best I can do?” I was a little taken aback because he’s never haggled with me in the past and quite frankly we’re pretty competitive. I told him I could drop it by 50.00 to which he replied “that’s all huh?” He went on to tell me that a friend of a friend was an out of work plumber and would do it for 200.00 plus the cost of the heater. I tell you this story because it’s happening everyday of the week.
Pricing so Low Consumers Have to Try it
The consumers don’t care about the service, the numbers are so low that it overrides their desire for excellent service. They are willing to take a chance on having a non licensed, non insured service person do the work. Are there no customers willing to pay for great service? Of course not, but there are not enough of them to sustain our industry as it has been sustained in the past. Please see above regarding having enough money to ride it out.
I know, I shouldn’t have given my former customer a price on the phone. I should have built urgency and value, gotten into his house on Saturday, made him tell me no 7 times and sold him a tankless water heater for 5K. Batten down the hatches because our industry will never be the same, never look the same, never feel the same.