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State of the Service Economy Virtual Roundtable: 10 Takeaways

By January 2, 2024January 5th, 2024No Comments

My company provides technology and financial services to more than 600 small and mid-sized businesses across the country and 2023 was a strong year. Turns out that was no different than what was experienced by many other service firms.  The Institute for Supply Management – who publishes a widely watched indicator of business conditions – said their service index has been in the expansion territory for the past 10 months.

EverCommerce – a technology provider that helps their more than 685,000 service-based businesses streamline their operations, and increase their retention and their engagement with their customers – recently published their State of The Service Economy report which showed similar results: that 69 percent of North American service-based small businesses reported moderate to healthy recoveries from Covid.

Here are 10 takeaways about the service economy from a conversation with EverCommerce’s President Matt Feierstein and two other business owners in the services industry.

1 – The service economy is resilient.

Matt Feierstein: We’re not still fully out of it. But the resiliency that the service-based industry has shown through is fantastic. Customer service is incredibly important for SMB in this industry. That’s at the heart of everything they do. We’re not talking about large businesses that may be more generically focused. We are talking about vertically tailored small businesses that know their end markets, know the needs of their customers.

2 – The pandemic created opportunities for those that paid attention.

Shon Gregersen (Owner and COO of AIMVO Pest Control, a 200-person family owned business which operates in six states):  Before Covid you’d knock on a hundred doors and you’d have 30 people home. Now 90 people are home. Our per rep close ratio went up considerably once people weren’t afraid to talk. Our salespeople probably talked to double the amount of people every day!

Jim Griffin (President and COO, of Direct Orthopedic Care, a full-service orthopedic practice with locations in Dallas, Austin, Oklahoma City and ten other locations): We exist in the market to try to get folks to avoid the emergency room and to be able to seek out orthopedic care where it can be taken care of. People did not want to go to the ER due to so many people having Covid. People chose alternate settings such as ours. So that helped quite a bit.

3 – Strategies to combat rising costs included increasing volume and increasing prices.

Jim Griffin: Overall, I would say that 2022-23 with the rise of inflation and interest rates has posed a challenge. We’re about 85 percent insurance based and the insurance policies are based on contracts which do not change and they’re usually multi-year. What we’ve tried to do is just continue the momentum of volume in our clinics. We’re largely a fixed cost scenario. Once we meet our costs, anything additional really flows to the bottom line.

 Shon Gregersen: In 2020, we were going into probably $35-36 bucks a month for a pest control contract. Now, because of rising material and labor costs, we’re at $50 bucks a month. Our customer see value in the services we provide as we’re on track for a record year. We’ll end the year with 10,000 new homes we’ll service this year.

4 – As overhead costs increased, some businesses turned to technology to cut overhead.

Jim Griffin: The back office is where the most opportunities are to provide those automations.  One of the things that gave us an interesting lens was choosing our software vendor which provided a very good API (application programming interface). It provided a platform to help us automate pieces of our business.

Matt Feierstein: We help service based SMBs drive automation through better use of technology and we have APIs available for folks who want to do more than our applications can do. This way our customers can use developers to better automate their businesses.

5 – Other service companies leaned on online marketing to increase sales.

Shon Gregersen: In 2020 we started an online marketing program. I brought in my own guy who, he didn’t go to school for marketing, but he had the right brain to figure it out. He helped us to start our online marketing using Google and Facebook ads. When we brought him on, we were doing like 300 in-house accounts a year. This year we’re on track to do 2,500 by the end of the year. That’s where 25 percent of our sales this year will come from.

6 – Services businesses became more adept at accepting payments and collecting receivables.

 Matt Feierstein: We know that service businesses want a greater level of payment integration within their business management software. Fifty percent have some level of integration, only 25 percent have full integrated payments. That’s a huge opportunity in the future for operational efficiency.

Jim Griffin: The vast majority of our payments are credit cards. When someone comes in, we use technology to analyze their card, we classify everything correctly and collect up front. Statements are needed but I think paper statements could go the way of the dodo bird. We do our best to provide a statement that makes sense with text and email delivery options, both for convenience and ease of payment.

Shon Gregersen: When a new customer signs up, they give the sales rep a card right there. We have a collections department. We give customers up to 90 days. They’ll get a ton of phone calls and that’s where the automation comes in. The software is setup we know when an account is past due. Customers are automatically getting calls, emails, and texts notifications.

7 – The next big technology thing for service companies will be artificial intelligence.

Matt Feierstein: We’re doing work with a variety of our solutions around AI already. For example, our customer engagement solutions allow SMBs to use tools to survey customers after they’ve received service. They may receive thousands of surveys a month where they’re getting valuable operational data. How did that service go? What could they learn from it? We’re providing tools to collect the data, but AI provides us the capability to give them an analysis of that data. We believe AI can make their utilization of that business management software even more efficient. As we move forward, our customers will see that AI needs to be embedded in the tools that they’re working with.

8 – Service businesses still face financing challenges, but it’s not impeding.

Shon Gregersen: For us, we all agreed we weren’t going to get to the point that we had to use bank money. We grow until we’re out of our internal reserves and then we hit the brakes. This last year, with how expensive everything has gotten, we had to be careful about that. We don’t want to have massive bank loans. We’re internally funded and there’s some interest there from company to company.

 9 – For services companies, customer loyalty is critical.

Jim Griffin: We have a hospitality mindset within healthcare, which is missing in a lot of areas. Communication and transparency are important.

Gene Marks: Our policy, particularly when it comes to billing, whenever anybody quibbles, they win. I just don’t haggle over a few bucks here or there. For me, to keep customer loyalty means that I’m on their side and I won’t be happy or accept payment from anybody unless they’re satisfied with the service that we provide. That’s what I would expect as somebody I’m working with.

Shon Gregersen: On the collection side, I’m a hundred percent with you. What are your chances of getting somebody to sign up who you’ve sent to collections? Not happening. We write it off, and call them back, six to twelve months later and pretend like it never happened. Start fresh.

10 – The future for services businesses looks good.

Matt Feierstein: Another trend we found in the report was despite the challenging economic conditions, the service industry is healthy and growing. That warms our hearts and we’re excited about the small role that EverCommerce can play in supporting, simplifying, and empowering these service-based small businesses that provide important services to us every day as consumers. We’ve enjoyed the opportunity to provide service to customers like Shon and Jim.

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