Anyone buying these businesses should recognize it as a grind and not easy money. A blue sea strategy for differentiation should be the order of the day and not just an option. Avoid the sharks!!!!
Working around the trades, I see a big struggle in just trying to find good help since we had a whole generation discouraged from learning those skills. It makes the key person bus issue even bigger.
Apprenticeship and direct learning was a big model for learning skills. The college mode of learning in a lecture hall works for some very specialized skills, but not so well with others. Apprenticeship is still the dominant way of learning in many areas, like the trades and real estate, where I learned from mentors. With college becoming so much more expensive and low ROI, I'm wondering if more people won't turn to this model soon.
The real concern is that social media is making the next generation believe that you shouldn't have to work hard. You should be a digital nomad. That you can just dance around and go viral and making gobs of money. Who is going to do my plumbing when my 75 year old business owner who came out over Thanksgiving to fix my shower just can't anymore? Pretty soon I fear you won't be able to find someone no matter how much you're willing to pay.
Right. When I sold my dot-com era company to Private Equity a few years ago they were just starting to get into the rollups of "ordinary" businesses - gardeners, plumbers, HVAC, etc. These small mom-and-pop businesses are notoriously poorly run - it takes someone who knows the trade very well *and* can also manage employee, AR, the P&L, and the balance sheet. I would bet that 95% of most owners don't even know what a balance sheet is - I didn't know myself for the first seven years.
It's almost like Private Equity has had a magic crystal ball on this move, as the unforeseen benefits of AI seem to be (at least temporarily) wiping out white collar jobs. Knowing and running a "trade" business right now certainly seems to be the right place to be - for the moment. The pendulum will inevitably swing back in the other direction as competition mounts from white-collar grads who may have a difficult time getting that intro programming job. What a difference a few years have made - I remember the WSJ article from a year or two ago stating that we were short 500,000 programmers in this country.
These "trades" businesses are not often discussed in "normal" channels like the mainstream media. They are also not "sexy" or cool to run - you don't often hear people bragging about running an HVAC business while attending "the opera".
I have quite a few tenants in these trades, and I also coach a few of them through Vistage. Aside from the usual BS of trying to run a business in California, I think the biggest problem these guys have is in quoting jobs to the customer. They are either too expensive or too cheap (to earn enough profit), and they don't get a lot of visibility on what their competitors are doing. Business is down, and they're not sure why? I ask them and they just shrug.
I have one tenant who is an HVAC installer, and I had him quote me some work - he was more than 2X more expensive than the other guy. I told him that, and he had no idea. He said he has very little visibility into what his competitors are charging for quotes, and has to just guess a lot of the time. This is just an example of one of the problems with running one of these service businesses...
Woah, thanks for reading and for the detailed reply. The visibility problem is very interesting – maybe because a lot of clients are from repeat business and due to the nature of the business being localized, maybe price discovery isn't as efficient. Wonder if there's scope for innovation and transparency in this area.
Anyone buying these businesses should recognize it as a grind and not easy money. A blue sea strategy for differentiation should be the order of the day and not just an option. Avoid the sharks!!!!
I'm currently building my business plan and invesntment long term plan. im a electrician and self employed contractor working with earned income and good investments. to buy more assets
Anyone buying these businesses should recognize it as a grind and not easy money. A blue sea strategy for differentiation should be the order of the day and not just an option. Avoid the sharks!!!!
for those that are willing to work, the promise of America is still there
Working around the trades, I see a big struggle in just trying to find good help since we had a whole generation discouraged from learning those skills. It makes the key person bus issue even bigger.
Apprenticeship and direct learning was a big model for learning skills. The college mode of learning in a lecture hall works for some very specialized skills, but not so well with others. Apprenticeship is still the dominant way of learning in many areas, like the trades and real estate, where I learned from mentors. With college becoming so much more expensive and low ROI, I'm wondering if more people won't turn to this model soon.
The real concern is that social media is making the next generation believe that you shouldn't have to work hard. You should be a digital nomad. That you can just dance around and go viral and making gobs of money. Who is going to do my plumbing when my 75 year old business owner who came out over Thanksgiving to fix my shower just can't anymore? Pretty soon I fear you won't be able to find someone no matter how much you're willing to pay.
Right. When I sold my dot-com era company to Private Equity a few years ago they were just starting to get into the rollups of "ordinary" businesses - gardeners, plumbers, HVAC, etc. These small mom-and-pop businesses are notoriously poorly run - it takes someone who knows the trade very well *and* can also manage employee, AR, the P&L, and the balance sheet. I would bet that 95% of most owners don't even know what a balance sheet is - I didn't know myself for the first seven years.
It's almost like Private Equity has had a magic crystal ball on this move, as the unforeseen benefits of AI seem to be (at least temporarily) wiping out white collar jobs. Knowing and running a "trade" business right now certainly seems to be the right place to be - for the moment. The pendulum will inevitably swing back in the other direction as competition mounts from white-collar grads who may have a difficult time getting that intro programming job. What a difference a few years have made - I remember the WSJ article from a year or two ago stating that we were short 500,000 programmers in this country.
These "trades" businesses are not often discussed in "normal" channels like the mainstream media. They are also not "sexy" or cool to run - you don't often hear people bragging about running an HVAC business while attending "the opera".
I have quite a few tenants in these trades, and I also coach a few of them through Vistage. Aside from the usual BS of trying to run a business in California, I think the biggest problem these guys have is in quoting jobs to the customer. They are either too expensive or too cheap (to earn enough profit), and they don't get a lot of visibility on what their competitors are doing. Business is down, and they're not sure why? I ask them and they just shrug.
I have one tenant who is an HVAC installer, and I had him quote me some work - he was more than 2X more expensive than the other guy. I told him that, and he had no idea. He said he has very little visibility into what his competitors are charging for quotes, and has to just guess a lot of the time. This is just an example of one of the problems with running one of these service businesses...
-Wayne
Woah, thanks for reading and for the detailed reply. The visibility problem is very interesting – maybe because a lot of clients are from repeat business and due to the nature of the business being localized, maybe price discovery isn't as efficient. Wonder if there's scope for innovation and transparency in this area.
Anyone buying these businesses should recognize it as a grind and not easy money. A blue sea strategy for differentiation should be the order of the day and not just an option. Avoid the sharks!!!!
I'm currently building my business plan and invesntment long term plan. im a electrician and self employed contractor working with earned income and good investments. to buy more assets
You're using air duct cleaning as your example here? That's a SCAM business!