Making lemonade with lemons.

Many small businesses are watching the news with great trepidation.  Like all of us no one knows what the end of this crisis will be and what affect it will have on us as individuals and business owners.  One thing is clear, this is a basket of lemons.

And the best things to do with lemons?  I say get a bottle of tequila, a salt shaker and some friends – but I understand that mainstream thinking is to make lemonade.

So what is the recipe for the most profitable lemonade?  Services.  Services can grow in a time of crisis.   Let’s look at two examples.

First example would be for an HVAC contractor.  In a strong economy the contractor answers many calls and replaces a ton of hardware.  In a down economy the contractor is making the same amount of calls but not replacing the equipment.  In some calls people are just asking to troubleshoot over the phone and save the service call.  In other calls the contractor is asked to just “mend” the equipment until money is available.    In this situation the contractor has the opportunity to increase their service offerings.  People will be interested in how to save on their heating and cooling bills.  They will be interested in consulting on where they are loosing the efficiencies with their current systems.  In some cases the contractor will only be paid for the service of consulting and running the numbers.  In other cases hardware sales will come along with the consulting fees.  When the customer reviews the expense of keeping old equipment running to the one time hit to replace the equipment and increase efficiencies and lower utility bills.  The long term savings will win out in almost every case.

Now let’s consider the situation of an IT solution provider.  By definition a solution provider is more than a reseller of products.  This business offers a variety of hardware and software solutions that include services such as installation, repair and warranty.  The customer is sure they do not need to upgrade the office printers but when the solution provider offers a review of costs associated with the current office printers to an environment that includes multifunction products and document solutions the final cost savings are equal to the cost of the upgrade in year one and pay for additional upgrades and expansion in year two.  This solution provider, much like the HVAC contractor, is now offering full service solutions.

In many cases successful HVAC contractors and IT solution providers are already practicing these revenue generating services.  In addition to these consulting practices they have changed their advertising and marketing mix to reduce expenses while growing incremental business.  These changes may include leaving traditional media (television, radio, print) and moving to new media (web, viral marketing, networking).  These businesses may also consider hiring more contractors and less full time employees, saving on overhead (benefits, vacation time, sick days).  These are just a few ways many businesses ride the waves of a rough economy safely to shore.

No one knows what the future holds as it relates to our businesses, but one thing you can take to the bank:  the profit on services and solutions exceeds the profits on hardware and software.