- Features | April 7, 2016
Becoming an Expert in Multiple Markets
So you’ve cut your teeth and made a name for yourself by carving out your own special niche in your local market. You’re now known as the go-to contractor for your specialty and it’s taken years for you to achieve that stature. You’ve watched the market fall and weathered the storm. Now you’ve been paying attention to the market around you, and while it’s coming back, you have a feeling the market is shifting and not coming back in areas that have been strongholds for you in the past. You’re suspicious that other markets are taking off, but you’re not sure they are worth pursuing. You would like to expand into other markets, but that means expanding outside of your niche market and venturing into uncharted waters. All the while still feeling a little jaded from your last experience, which ended up costing you six figures off your bottom line, and you’re still not sure what went wrong.
MEASURE THE WORK AVAILABLE
You remember reading newsletters and published articles a few months back talking about the construction market and how there is a direct correlation between the value of Construction Put In Place (CPIP) and Electricity End Use (EEU). The relationship between EEU and Gross Domestic Product (GDP), as lead indicators, and CPIP is well documented. EEU is closely related to GDP, and its usage relates directly to the production of goods and services. This relationship can be used to accurately determine the size of the construction market within any segment. The relationship between these three factors, construction market cycles, and other key market indicators can be used to accurately identify the market size across various areas of construction.
In 2005, MCA Inc. was commissioned by the ELECTRI Council to develop a methodology to determine the size of specific markets in select areas, based on the following criteria:
- Remain neutral and unbiased as well as applicable nationally, yet be extendable to the local level.
- The data sources must be impartial, consistently reported, reliable, and accurately measured.
- The method must be easy to understand and use.
- Allow for the segregation of work, recognizing both existing and emerging markets.
MCA Inc. met these criteria by developing a method to measure the construction market size in 30 separate trades down to the county level. The methodology begins with using CPIP as the basis for the construction market size. EEU is then used to scale the market by its segments: industrial, commercial, and residential.
FIND MARKET OPPORTUNITIES
You begin by finding out your overall construction market and the size of the industrial, commercial, and residential segments in your geographic area for the past 5 years. Next, you focus on the overall size of the industrial, commercial, and residential segments of your specific trade within your geographic area. Looking at the results, you see that your market is predominately commercial and residential, with not as much industrial work as you had previously thought. You’ve had a feeling that the commercial market had shifted to be the predominant segment in recent years, and these results have confirmed your suspicions. Comparing your sales over the past five years to the overall market and within each market segment will provide you with the trend of what your market is doing and whether you are growing with it or not. Let’s say that the trend in the commercial segment shows that you haven’t been growing your sales with the market. The million dollar question you’re asking yourself now is, “What market do I go after next?”
You look at a list of the