No field service business is immune from an economic downturn, which is why it’s vital to take advantage of the best expert strategies to build recession-proof service businesses.
Using the top proven strategies for field services, you can establish recession-proof service businesses and:
- Protect profits
- Optimize spending
- Mitigate financial risks
- Maintain healthy cash flow
- Prepare for a possible slow economic wave
- Streamline daily tasks and maximize resources with the #1 field service software
What Happens During a Recession
A recession happens when the Gross Domestic Product (GDP) declines for two or more consecutive quarters. Even though a recession is a natural aspect of a free market economy, there are some precautions you can take to minimize the financial pain.
When a recession is a real possibility, how does it play out with your field service business? First, customers may pull back from ordering new equipment or services. There is usually a decline in demand. Also, customers may be less willing to sign long-term contracts, such as service agreements.
Conversely, it will be easier to restock much needed parts and equipment because your suppliers are also facing uncertainty. In addition, your employees will be less likely to leave since new opportunities will be harder to find.
Here’s what you can do to establish recession-proof service businesses:
1. Secure Potentially Lucrative Capital
Cash reserves and financing options are critical to have BEFORE a recession hits. It may be the deciding factor on maintaining efficient operations. Reach out to your bank and keep a close watch on your credit in case you need to take out a small business loan.
2. Establish a Cash Flow Plan
Since field service businesses need cash to maintain operations, it’s crucial to stay current on cash balances and sources of income. Among failed small and medium-sized businesses, 60% cited cash flow as a reason.
In turn, it’s important to create a cash flow forecast for each quarter to guide business decisions and identify when there may be shortcomings. A cash flow forecast involves estimating future sales and expenses. This will help identify when more cash is going out than coming in.
3. Keep an Eye On Key Performance Indicators
Key Performance Indicators (KPIs) measure performance over time for a specific objective. In the field service industry, you may measure the time to schedule technicians, or the travel time from the shop to job sites. Alternatively, you may track marketing KPIs to see if a campaign is a good or bad use of your investment.
These metrics can guide your decisions. For instance, with the travel metric, you may decide to invest in field service software that leverages GPS to optimize route density to map the best route.
When budgets get tight, you will be able to look at KPIs and decide how to better maximize spending.
4. Delay Unnecessary Purchases
Delaying routine purchases, like computer upgrades and office furniture, can result in substantial savings. For larger purchases, now is probably not the time to buy that third work vehicle or upgrade facilities. During an economic downturn, it’s best to play it on the conservative side until the market turns around.
5. Meet With Partners and Suppliers
Having an open dialogue with your partners and suppliers can put you ahead of the game if a recession rears its head. You can come up with a plan to protect your business. Being flexible when negotiating terms with your partners and suppliers can increase your chances at success during slow times.
6. Create a Business Emergency Fund
Similar to a personal emergency fund, it’s highly recommended to establish an emergency fund that covers six months of business costs. This can give you peace of mind knowing that you could weather a storm. One way to get started on this is to be aggressive with your receivables, contacting those that owe you and trying to get paid faster.
7. Reduce Overhead Expenses
In order to build recession-proof service businesses, it’s important to reduce overhead costs that are not directly related to the goods and services you provide. Examples are rent, legal fees, and advertising. These expenses can become problematic during an economic downturn.
As a field service business, you will need to decide what you can cut to optimize spending. Here is a list of various overhead costs—ranging from easy cuts to drastic measures:
- Renegotiating contracts with suppliers
- Changing vendors for services
- Eliminating travel and entertainment
- Outsourcing some work functions
- Employee layoffs
- Real estate consolidation
- Moving to a remote workforce
8. Downsize Your Inventory
Most field service businesses carry inventory to stock their trucks and service client needs on a daily basis. This is another popular way to cut costs by keeping inventory at a lower level or just purchasing new parts and equipment on an as-needed basis. This differs from field service businesses, such as HVAC technicians and electricians, but it is still a viable option.
9. Create Multiple Streams of Revenue
Sometimes, a field service business needs to think outside the box in times of financial turmoil. How can your business diversify your revenue streams? Maybe you are an HVAC business looking to learn how to install the latest and greatest smart thermostats? Or maybe you’re in the plumbing field but could also implement another field service business into your current expertise.
More revenue streams equal increased cash flow—exactly what you need when the market goes south and you need to establish recession-proof service businesses!
10. Invest in Technology
Investing in new technology can improve efficiency and reduce costs. For example, is your field service business using the best software to optimize efficiency? With software like FieldEdge, you will save time and money. Here are some of the next-level features:
- Performance Dashboards: Shows a snapshot of your business, including sales, service agreements and profitability.
- Customer Management: Review all completed jobs and confirm what equipment your crew used. Also, use images to show homeowners what problems exist.
- QuickBooks Integration: Every transaction flows into QuickBooks—completely eliminating double data entry.
- Service Agreements: A complete picture of when service agreements are due for renewal, billing and scheduling. Send reminders and invoices automatically.
- Price Presentation: Price books help techs sell additional equipment and services.
- Quotes & Invoices: Reduce unpaid invoices, get paid faster and identify your top performers.
- Mobile CRM: Run your business from anywhere, create work orders on-the-go and dispatch techs from your mobile device.
See how FieldEdge can streamline all your processes, saving you time and money. Book your FREE personalized demo today!
Build Recession-Proof Service Businesses Today
Using these top 10 proven expert strategies, you are well on your way to building recession-proof service businesses.
Remember, getting prepared prior to an economic downturn will save you from scrambling at the last moment to make ends meet.
With these pro strategies for building recession-proof service businesses, you can establish a strong business with long-term success and profitability!