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Sunday, January 27, 2008

Heading west (and south)

Construction has boomed on Canada's west coast, with the impending Winter Olympics. Should you move -- or expand -- your business to a thriving market when your current market is in decline?

In a couple of hours, I'll be on my way to Vancouver, B.C. for a two day visit with my mother and siblings. It's the first visit 'home' in more than a year, and the first in several years without Eric and Vivian.

When I get there, after a family dinner and visit with relatives, I'll wake up tomorrow to write a story about North Carolina's construction economy. What I'm hearing in North Carolina echos to some extent what we're seeing in Canada -- there are signs of a less-than-perfect economic environment, but at least in the non-residential sector, things are going well. (There is a housing slump in North Carolina, but this paradoxically is helping the rental market -- people want to move there, where there are jobs, but they can't sell their homes in other U.S. communities.)

This raises interesting and important questions about the construction economy, marketing, and local conditions. Our industry is acutely affected by macro-economics; the current economic crisis touches close to home and one of the first signs of economic downturn in the larger economy occurred when truck makers suddenly found that small truck sales were sharply declining -- reflecting the deterioration in the residential construction market after the sub-prime mortgage crisis.

But conditions are not necessarily the same in Detroit compared to Charlotte; in Washington, D.C. (or Washington state) compared to Chicago, or for that matter, in Naples compared to Jacksonville, Florida. While many industries including publishing are now relatively globalized, construction is still very much a localized thing -- you can't move the real estate and the buildings -- so local conditions dictate opportunities and challenges.

Of course, while you can't move your market, you can move to -- or from -- markets. In the local environment in North Carolina, for example, many residential contractors are shifting to commercial work. And you can move to a market where there are opportunities -- lots of out-of-state contractors are setting up shop in North Carolina now, trying to capitalize on the opportunities there.

Are these moves wise, market-wise (and how should you best handle the marketing if a move is in the cards?)

My perceptions here are shaped by the direction my business took about eight years ago, when we first branched out beyond our Ottawa home base. Initially we set up shop in Toronto, then in (at that time a daring move), I went 'international' with a launch in Washington, D.C. Further ill-planned expansion took my business to Baltimore, Atlanta, Maine, and North Carolina. We now have a viable business in North Carolina -- the other branches have closed, at least for now.

I discovered in expanding beyond my home base:
  • Not all markets are the same; what works in one place doesn't work in another. Local culture is really important. Baltimore and Washington are a short drive from each other -- but what works in Washington doesn't work in Baltimore -- if anything the local people resent Washington-style behavior perhaps out of civic pride.

  • First impressions aren't always valid. You can scout a market, even test the water, and receive seemingly positive indicators; but you aren't getting deep enough to know the real culture and interests of the people. Markets, like individuals, can be superficially friendly but really nasty underneath the surface. Or they can seem 'aloof' until you known them better, and then they warm up to you and become your friends.

  • You may not need the trappings, but you need to be present. When I first expanded outside of home base, I thought we needed offices and admin staff -- a physical address -- in each market. Then I cut back -- too far. You don't need high overhead arrangements; your local (sales) employee can work from the home, but you need someone in the area, who is connected to and relates to the local culture and values; and you need to be able to listen to the person. Yes, you can do some things remotely -- as I will tomorrow, crafting the relevant North Carolina lead story from Canada's west coast -- but I couldn't do this without the help and guidance of Bob Kruhm in Durham, NC.
The grass isn't always greener away from home; are you running away from a problem, or running to an opportunity (or both). Consider your own values and goals in expanding. I've always been a "geographical" person; that is, someone really interested in transcending my home base; I like the idea of overseeing a multi-city and multi-national business and enjoy flying (first class, where it is possible and cheap). But there are costs: Both the direct travel expenses, the distractions, and of course risks to your family with stress and distance.

Consider the strengths and advantages local people have in their own markets, especially where relationships and connections matter. These advantages are offset of course if you have really specialized expertise and can make an effective contribution.

This leads to my final observation -- can you network through your industry groups and ties, and then form local alliances/partnerships with people who know their space; relationships founded on trust and non-competition? How do you find these relationships? Business experience helps, and participating/supporting and working with industry associations on a state, national or international level certainly will bring you closer to these alliances. This is one reason why I advocate membership in the Society for Marketing Professional Services (SMPS) for non-residential contractors (along with your relevant trade speciality organization) and for residential builders, your local home builders' association, affiliated with the National Association of Home Builders or the Canadian Home Builders' Association.

So, if it is in your heart to expand geographically, go ahead. Just remember, you need to proceed with caution and prudence, and you'll probably make some false steps and mistakes, as I did in my initial foray beyond my home base.

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