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Saturday, 28 February 2009 19:00

INDUSTRY FORECAST :WHAT’S IN STORE FOR 2009?

Written by  services

industry forecast
In the February issue, we included a 2008 industry review. In this issue we continue our discussion with a number of industry experts to gauge their predictions for the year ahead.

Once again, Services magazine thanks the following building service contractors, consultants and suppliers for their insight: Stan Doobin, 2009 BSCAI president and president of Harvard Maintenance of New York City; Jamie Van Vuren, president of Bee Line Service and Supply of Schaumburg, IL; Frank Trevisani, manager of Building Service Contractors for Spartan Chemical Company of Maumee, OH; Tom Morrison, vice president of Marketing for Kaivac, Inc., a manufacturer of cleaning equipment and products based in Hamilton, OH; Barney Gershen of Gershen Consulting, LLC of Bellaire, TX, a consultant to the building service contracting industry; Dick Ollek of Consultants in Cleaning, LLC in Camdenton, MO, a consultant to BSCs; Lance Tullius, a partner with Portland, OR-based Tullius Partners, a firm that offers strategic planning and financial advice to BSCs; Chuck Strobel of Strobel Properties, LLC, a consultant to the industry based in South Mills, NC; and Mike Schaffer, president of Tornado Industries, which has been designing and engineering quality cleaning equipment for more than 75 years.

WHAT WILL 2009 HOLD FOR THE INDUSTRY? WILL THE OBAMA ADMINISTRATION HELP THE INDUSTRY?

 Stan Doobin: 2009 will be worse than 2008. How much so is anyone’s guess. Since our industry does not rely heavily on the government, we will not directly benefit from the handouts from Washington. We will benefit indirectly as some of our clients receive the money they need to stay in business and allows them to continue to employ people or call back laid-off workers. If our clients can start to grow again, the demand for our services will follow.

Jamie Van Vuren: I think 2009 will be much more of the same as 2008. It will take another year or two to break the cycle.

Barney Gershen: Yes, financially, 2009 will be very similar in challenges to 2008. However, some business owners were taken “off guard” in 2008. That will not be an excuse in 2009. Plans for change should be in place by now, but if they are not, the wise owner/CEO will look for guidance to solidify his/her tactical plans for 2009. It is yet to be seen how the Obama administration will affect our industry. It is one of those occasions where “we plan for the worst and hope for the best.” We may see increased taxes and regulations affecting business, but green cleaning will be more valuable.
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Tom Morrison: We are in a post-campaign period now where it’s unclear how the new administration will actually act. However, if the industry can more effectively prove its value in promoting health in an environmentally preferable manner, there is the hope that this administration will be an advocate. Hopefully, it will not make any decisions that will cause the economy to further decline.
Frank Trevisani: I think for those that are prepared, 2009 will be a year of great opportunity. School budgets will be tight, and many places will be cutting back and looking for cost reductions. I think schools, colleges, nursing homes and the private sector will be looking to outsource more, and this is a great opportunity for those service providers that can do cleaning and total facility management. I think it is too soon to tell if the new administration can help this industry, but talk of universal health insurance and living wages will definitely affect the industry.

 Lance Tullius: I’m not sure the Obama administration will help or hurt the industry. I believe that the overall economy will be the greatest determinant of the kind of year we experience in 2009. And because of the very fragile state our economy is in, it will be the greatest priority of the upcoming administration. This will include the administration making great efforts to stop the bleeding and at least generate some sustainability in our economy, which certainly won’t hurt the building contracting industry.

Chuck Strobel: Presidents come and go, and we adjust. The new administration will not bring eternal sunshine, nor will the sky fall. As it has always been, business will adjust to the reality that develops. However, the law of unintended consequences may provide a real golden opportunity. At the top of the union wish list is the proposed card check law that would automatically install unions without a vote. It may well be that employers will accelerate outsourcing of any and all non-core functions to avoid the consequences. This could increase opportunities not only in the standard janitorial, but also in all related services and even in non-related services. Why not propose mail and package delivery for large business? Why not be a service that operates the forklift vehicles? Why not establish your own separate temporary service company?

 Dick Ollek: 2009 will be tough for BSCs that insist on doing business the same way they always have. This economy will require creative ways of going to market so your company stands out. Zig Ziglar said that if you keep doing what you have been doing, you are going to keep getting what you have been getting. Only 2009 will have you getting less if you aren’t more creative in your business practices. At this point I do not see the Obama administration helping our industry because most, if not all, of the jobs he indicates he wants to create are not in our industry but rather in the heavy construction industry. Ask me that question again in six months.

Schaffer: While the industry will certainly continue to face challenges, there are opportunities for aggressive and forward-minded leaders and organizations. More businesses will be looking for what I call “risk transfer” in these uncertain times. That translates into opportunity for aggressively run contractors that are led by individuals who understand that many businesses will be looking to transform their own firms and operations. Contractors that can speak that language and demonstrate that a firm can lower their costs by outsourcing via curtailed investment in staff, equipment, support and human resources functions, can actually grow during periods such as this. In fact, in harsh economic times, outsourcing moves beyond simple cost containment, extending all the way to risk transfer. Indeed, successful contractors must be prepared, from early discussion to selection, to speak to potential clients about the issue of risk transfer and expertise, which helps avoid proposals and conversations revolving solely around cost reduction.

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DO YOU THINK OUR NEW ADMINISTRATION WILL HELP WITH THE IMMIGRATION ISSUE THIS INDUSTRY FACES?


Ollek: I do not, at least in the first year. I think they will be so occupied with other issues like the auto industry, the two wars and creating jobs that this issue will not be uppermost in their minds.

Doobin:
I think the immigration issue is a low priority for the new administration. The government’s top priority is to jumpstart the economy. If the immigration issue was resolved, then there would be more job opportunities for citizens, but many immigrants do jobs that some U.S. citizens prefer not to do—even in a recession.

Trevisani: I think something has to be done and rather quickly. This is a labor-intensive industry and tends to be on the lower end of the wage scale. The price pressure that customers have put on this industry have forced people to look for labor wherever there is an able body and, in some cases, illegals fit that bill. This must be addressed so that a constant flow of labor is available and that everyone is on a level playing field when it comes to pricing this work.

Tullius: I wish I had the answer. This is arguably the greatest and most pressing question faced by the industry. It’s very difficult to speculate what steps the administration may take; it’s really a waitand- see situation.

 Strobel: It is not immigration that is the problem! It is illegal immigration. The next administration may view the underrepresented and poor illegal immigrant as its own natural voting block. Therefore it seems unlikely that anything other then articulate platitudes will be forthcoming.

 Schaffer: Certainly the Obama administration will be facing many challenges, from war in Iraq and Afghanistan, to jobs, the housing crisis, the economy, and increasing tension and conflict in the Middle East. I have been pleased to see them take a centralist approach after they won the election, which I think has been viewed as a pleasant surprise by the business community in general. On immigration, I don’t believe you would find many people who would disagree that the current system is dysfunctional at best. If Obama’s administration continues with a centralist approach, then I hope to see improvements in bringing illegal immigrants out of the shadows, along with efforts to repair and improve the immigration process, all of which should benefit the cleaning industry.

WHAT SOURCES OF OPPORTUNITY EXIST FOR THE INDUSTRY OVER THE NEXT YEAR? WHAT ABOUT THE NEXT THREE YEARS?

Strobel: Opportunity is everywhere! It has always been so and will always be so. The economies change, the laws change, technology changes and administrations change, but each change provides new opportunities.

Gershen: Put yourself in your customers’ shoes over the next three years. They will keep clean and maintained facilities. It is not financially prudent for them to change providers. Listen to the client, work with their allocations regarding budgets, be proactive in offering solutions through re-engineering. Take care of your valued employees and look for talent that is available because of the economy.

Doobin: 2009 is the year of survival. The only major opportunity available is if companies are looking to outsource services that can save them money. Some BSCs may be able to expand their business if they take over additional functions. They can provide additional value to potential clients, but BSCs must make sure that new clients are creditworthy.

Trevisani: This is an exciting time for our industry, and we have a chance to be lifted out of the commodity mentality with our customers and looked at more as pertaining to health and the environment. How we clean and what we use to clean are key factors that have been found to affect our health and the environment. I envision cleaning as an investment and not as a necessary evil based on price. Outsourcing will be a hot topic with all the budget constraints and people will look to outsource cleaning. Cleaning standards, Green Seal and CIMS are all tools that have finally measured what good cleaning and management standards can do to raise this industry to the next level. I think this will continue to grow in the next few years and beyond.

Van Vuren: Yes, more people will begin to understand the importance of green cleaning and demand that their service providers go “green” if they have not already. Day cleaning will also be of interest to many clients and the push for this will make its way in the next three years.

Tullius: In any recessionary period ample opportunities are created for contractors to better their positions and distance themselves from their competition. The first step is to view the market as opportunistic rather than how most view it, which is to take a protective and sheltered approach. How can you make your company more efficient? What investments can you make in these times to sustain higher efficiency than your competitors? Cement yourself as the competitor of choice for the long haul. Show that you can adapt to the times. Beyond organic means, seek out potential external strategies, such as mergers, acquisitions and joint ventures that can further strengthen your position. In Feature times when markets are contracting, consolidation is often a viable and, in some cases, necessary by-product that ends with certain companies vaulting ahead of the competition and creating great separation between themselves and the rest of the pack.

Morrison: I have very strong faith in our industry. As to specific target markets, we will see more opportunities opening up in the educational setting. Large public facilities, such as government offices and healthcare, are a growing market. As for the industry overall, I think we are going to see an even greater push for two things: increased worker productivity and, from our end customers, greater concern for hygienic cleaning or cleaning to protect health, as discussed earlier.

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