By Bridget McCrea
A look at where your electrical contractor customers are now, versus 12 months ago, and what new struggles they’re working to overcome
With the national economy continuing on the path to recovery, and with more new and retrofit construction projects coming off the planning table into reality, the business environment as a whole feels a lot healthier than it was just 12 months ago. But that doesn’t mean there aren’t still challenges to contend with. Electrical contractors, for example, are grappling with a new set of issues as the available labor pool shrinks, project owners strive to cut costs, and new competitors come out of the woodwork.
Consolidation and Poaching…Ouch!
In Houston, Joe Martin says one of his biggest challenges right now is trying to figure out which electrical distributors will best serve his company’s needs. A long-time HD Supply customer, KenMor Electric was impacted by Anixter’s 2015 acquisition of HD Supply’s power solutions division. “HD Supply was one of our main distributors; Anixter has set up rules that apparently upset some of the commercial reps working there,” Martin says. Now, other companies are “jumping in” and trying to take over any business that might shake out as a result of the acquisition. “Consolidated Electrical Supply (CED) and Mayer Electric Supply had been trying to get our business anyway,” says Martin. “Now they’re just getting a bigger chunk of it.”
As it figures out the new electrical distribution dynamic in its area, KenMor Electric is also dealing with a regional labor pool that’s getting smaller and smaller by the day. “It’s getting pretty cutthroat around here,” says Martin. “I’m not sure if it’s because Houston is a particularly busy place, but some of our competitors have come into town and tried to steal our employees by offering really high labor rates.”
According to Martin, no positions are safe from this recruiting tactic, which targets everyone from the electrician to the project manager. “They basically go after everybody and anybody,” Martin explains. To offset this challenge, he says KenMor Electric is sacrificing some of its bottom line to retain its top talent. “If someone who is being recruited is one of our key, critical employees, then we’ll pay more to keep him,” he notes. “Unfortunately, the amount of money we make on our jobs doesn’t go up, so that increase comes right off our bottom line.”
Even with its distribution network in flux and its employees in danger of being poached by other contractors, Martin says business was good overall through the third quarter of 2015. “There seems to be plenty of opportunities out there right now,” says Martin, “although the competition for those projects is pretty stiff and that’s been pushing margins down a bit this year.”
Who’s Doing Work on the Side?
Unlike basic construction, electrical contracting isn’t exactly the kind of work you can “dabble” in. But that hasn’t stopped people in Maglio Electric, LLC’s region from doing “projects on the side” and taking on work that should be reserved for licensed, capable contractors that understand the ins and outs of electrical installations and repairs. “We’re seeing a lot more people doing work on the side,” says Justine Maglio-Wardell, office manager for the family-owned contracting firm in Hampton, N.J. “This environment is making the bid process a lot more competitive.”
Focused on tightening their budgets, project owners typically go with the lowest-cost option, not understanding that they might be sacrificing quality, workmanship, and timelines in the process. “We’re getting a lot more people calling for estimates on everything,” says Maglio-Wardell. “We belong to a few industry groups and everyone is pretty much saying the same thing about how competitive the environment is right now.”
In certain cases, the fact that some of the “low bidders” are fly-by-night/side operations has worked in Maglio Electric’s favor. By the time the homeowner or project owner finally makes the decision to award the job, for example, the low bidder may be long gone. “When homeowners can’t get in touch with those operations, they call us,” says Maglio-Wardell. “There have been a few cases where we’ve picked up where the ‘company that doesn’t return phone calls’ has left off.”
Asked whether her firm’s electrical distributors are stepping up to help Maglio Electric compete more effectively in the cutthroat pricing environment, Maglio-Wardell says she’s working more closely than ever with a number of preferred supply houses in the area. Particularly when mid-sized retrofits and new construction projects are on the table, she says distributors are asking questions like, “How can we help you land this job?” and “Do we need to revisit the numbers?”
“At this point, our distributors are reaching out and trying to provide us with the best numbers that they can come up with,” says Maglio-Wardell, who adds that distributor response time (i.e., via phone, email, etc.) has been better than ever in recent months. “They really seem to be trying to get back to us in a timely fashion, so as not to hold us up from being able to get bids and estimates to our own customers. They’ve also been good about doing their due diligence and providing solid customer service. We really appreciate all of that.”
Scaling Up to Meet Demand
As the overall national economy continued shifting into full-blown recovery mode in 2015, Dave Gilson saw business pick up significantly. “As the economy got better, companies finally started spending money,” says Gilson, owner of Terabyte Technologies, Inc., in Aloha, Ore., where a surplus of available land is currently undergoing rezoning (to residential) by the local government. Once that process is complete, he expects business volume to increase exponentially.
“Residential construction is booming here, but it’s limited by the way the land is currently zoned,” says Gilson, whose key challenges in 2015 included the need to scale up to meet the new demand and also to stay on top of new technology trends.
“We work in low-voltage, so our technology is always changing,” says Gilson. “Just when you think they’ve come up with everything that they possibly could have, a manufacturer introduces a newer, better option. Keeping up is a never-ending challenge.”
Gilson says his electrical distributors are helping to streamline the purchase by creating online buying portals that his field employees use to generate orders (and then email those orders to Gilson for confirmation/approval). “From my perspective,” he says, “distributors are really trying to accommodate the needs of the businesses that they work with and are getting much better at interacting with us online.”
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McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.
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