Home and away: Views on the recession

by Kate Pritchard - Monday, 1st September 2008 -

Take two plumbing entrepreneurs from opposite sides of the globe and ask them about the economic downturn. Will their views match up? We quiz Charlie Mullins (pictured) of London-based Pimlico Plumbers and Belinda Smith of Mullane Maintenance in Oz.

How would you describe the current economic climate in your country?

Mullins: Things are a lot worse than people think. We’ve been through this before and I recognise the signs. I also remember the pain businesses felt and the damage caused by the last recession. From what I can see, this one’s going to be as hard, if not worse, than the recession in the early nineties.

Smith: There is a contrast at the moment between the general economy, which is feeling the effects of a downturn – such as rising interest rates, cost of fuel, housing affordability – and the resources sector, which continues to boom.

This has created a two-paced economy within Australia. Some states, for example Western Australia and Queensland, continue to grow strongly, while more traditional labour-based economies such as New South Wales (where we are based) and South Australia are finding it tougher.

What are the current financial challenges facing your business?

Mullins: Our customers just aren’t spending the money they were 12 months ago. They’re holding back on work and having smaller repairs done. At the same time as our income is being squeezed, the cost of living is rising.

We’re also being hit by the rising price of oil. For us, with a fleet of over 100 vehicles, running costs have gone up massively. Everything that we pay for in business is dearer, from parts and services to the food in the company canteen.

Smith: With the emergence of the two-paced economy, we’re facing wage pressures and team retention challenges due to the inflated wages available in the resource-based employment sectors.

There’s also reduced access to credit facilities and increased cost of finance.

How are you steering your business through this period of instability in the economy?

Mullins: We’ve done a number of things, such as getting rid of any dead wood; reining in unnecessary spend; cutting down on overtime and freezing pay rises; and offering some really good deals to customers.

We’ve also come up with a few more innovative ideas of our own. For example we’ve installed a hi-tech tracking system in all our vehicles, so we always know where the nearest available plumber is when a job comes into our call-centre. We also have a parts courier service so engineers don’t have to leave jobs to get spares, which is proving hugely efficient, especially when we started using a little motorbike to cut through the London traffic.

Smith: Tough economic times just increase the focus on the service we deliver. This actually gives the very best performers an opportunity to stand out from the mediocre.

The downturn can actually be used as a catalyst to improve the business, shed unproductive weight and emerge leaner, stronger and better equipped for the upturn, which will inevitably follow.

Has there been a noticeable difference in the type of jobs being booked by customers?

Mullins: Yes, in the past few months there has been a shift from larger jobs to smaller ones. When perhaps people might have gone for a new heating system a year ago, now they are more likely to opt to have repairs done to their old system.

Smith: There is no doubt that while new home building is subdued, more is being spent on renovations to existing dwellings.

What advice do you have for businesses trading in a tough climate?

Mullins: I’ve been through all this before and there’s no magic formula. Yes, you have to look hard at your costs and cut out waste, but trading in any climate is still about what you have to offer your customers.

Smith: Identify your strengths, concentrate on them very closely, eliminate any wasted or unfocussed activities and absorb the lessons to improve your business. Tough times will eliminate the weakest players, but they also create opportunity for those who do it best.