by Ranger Kidwell-Ross and Gale Holsman
This article was written, and the podcast recorded, at the end of 2016. This information was developed for a contractor who, for the sake of providing privacy to her and her company, we’re going to call “Jill.” The company is located in the Southeast portion of the United States. As a member of the World Sweeping Association, Jill wanted some advice about how she should look at her company and some of the things that are currently happening with it.
Sitting in with us on the call is Gale Holsman, someone well qualified to be a “resident expert” on the topic of being successful in the sweeping contracting business. Gale is President of American Sweeping, Inc., located in Kansas City, as well as a member of the Advisory Board of the World Sweeping Association. Gale has bought and sold a number of sweeping companies, as well as other related types of businesses. American Sweeping is a very substantial sweeping organization in the Kansas City marketplace, and Gale also owns a number of other businesses. Gale has also provided sweeping contractor consulting via his firm, Sweep America Systems, and has been a top-rated speaker at the National Pavement Exposition and elsewhere.
Ranger Kidwell-Ross: Thank you for being willing to provide your expertise on this topic, Gale.
Gale Holsman: Thanks, Ranger! I’m looking forward to it.
Ranger Kidwell-Ross: The contractor whose questions we’ll be addressing we’re going to call “Jill” (and the reason we’re doing that — not identifying the contractor— is that we very likely will be talking about some financial information and we didn’t want to identify the company.) Welcome, Jill.
Jill: Thank you, Ranger.
Ranger Kidwell-Ross: To get started, Jill, could you give an overview of why you contacted our office in the first place, what your situation is? I know that you have just completed your 20th year in the business of sweeping, which is a significant amount of time. You have related that, in the past, your company was more successful than it is today as you have grown your business. That is a problem that a surprising number of business owners have confided to me about over the years. Please provide us with an overview, if you would; a snapshot of the past. Then, we’ll move on from there and try to come up with some ideas for you.
Jill: OK, sure! What led me to call is that 2016 is the first year that we’ve achieved $500,000 in sales. However, we are not realizing a profit. We’ve had some expense situations happen because we have two older sweepers that we’ve had to sink a lot of money in. We’ve also picked up several new routes and are not really sure if they’re cost-effective or not; we are having to go a long distance to service them. As an outcome of this podcast, I’m hoping to get ideas about what we can do to start turning a profit, instead of juggling bills each month.
Ranger Kidwell-Ross: That certainly sounds like a reasonable goal to me! How many sweepers do you have? Talk about that, if you would, the number of routes, how many sweepers you operate, and a little more background.
Jill: We operate two routes a night, with the exception of one night. We had 3 sweepers, we had two Schwarze 347-Lite machines and we have a Schwarze Gale Force, which is equivalent to the older 348 designation. However, because of a recent mechanical breakdown on one and a driver getting in a wreck and making another of our 347-Lites not driveable right now, we’re just down to one sweeper. So we’re having to service a few of our jobs by hand, so that we can make the one sweeping route that we’re dong right now manageable. Although we don’t really feel that’s fair to the customer, at the moment we’re just trying to get by until we can do something about a second sweeper.
Ranger Kidwell-Ross: So in that scenario, cash flow really can be critical, because if you don’t have cash flow, you can’t take advantage of fast payment discounts and multiple purchase discounts. But you also can’t afford to go out and fix a sweeper right away when it gets damaged. If I understand what has occurred, now you’re left not only without a backup sweeper, but without one of your front-line sweepers temporarily.
Jill: Right! I think what also hurt us is that we did not have the cash reserves and the money we have borrowed has not been through banks, because our credit is not that great. Due to that, we had to go through other alternative means with high interest rates. On the upside, these have been short-term loans; however, in the meantime we are having to pay them back a few thousand dollars a month.
Ranger Kidwell-Ross: OK, Gale, do you want to ask some questions and see where that takes us?
Gale Holsman: OK, so Jill, let me ask you how many employees you have on your payroll?
Jill: We average 10 employees.
Gale Holsman: OK, and out of the 10 employees can you describe how many drivers and how your management is set up, so we kind-of understand how you’re spending your wages?
Jill: I have an office assistant and then I have a supervisor who goes out to look at the jobs as well as performs some routine maintenance on the sweepers. [In addition to sweeping] we also have other areas that we do, like striping, pressure-washing, stuff like that. The supervisor also does a little bit of that when he is not busy with the sweeping side of it. We also have 3 to 4 drivers a week, they all average 40 hours, but sometimes they’re getting overtime. We’re trying to look at ways to keep that overtime down, but that’s kind-of where we’re at, right now.
Gale Holsman: OK, and you have yourself as well, right?
Jill: Yes, myself as well.
Gale Holsman: So, let me review: You have an office person, a supervisor, the kind that also runs the striping, the power-washing, and keeps the maintenance on the trucks, and you have 3 drivers, sometimes 4, at the 40-hour rate, some overtime? Is that correct?
Jill: That is correct.
Gale Holsman: OK. Now, when we talk about your supervisor, are we paying him salary, or are we paying him hourly?
Jill: Hourly, and he makes $15/hr.
Gale Holsman: OK, but he doesn’t run a route?
Jill: He does not run a route. We do some sweeping during the day, just a few side jobs during the day, and he’ll do that, but he doesn’t run an actual nighttime route.
Gale Holsman: OK, now, is this supervisor we’re talking about your son?
Jill: Yes, it is.
Gale Holsman: I thought so. Now, your three drivers, do we have them on some kind of an hourly wage, or salary, or commission, or how are you doing that?
Jill: Paying them by the hour. We start our drivers out at $10/hr., and I think the highest paid driver right now is at about $11/hr. They have topped out before at $13.00, even $13.75, if they’ve been here for any length of time.
Gale Holsman: Do you offer benefits for anybody?
Jill: No, not currently. We’d like to, but the only benefit we offer right now is paid vacation after being here a year.
Gale Holsman: So, a week’s vacation after being there one year. Do you keep track of your books on QuickBooks? Is that the system you’re using?
Jill: Yes, we do use QuickBooks. That’s the primary system we use. I also have a spreadsheet that I keep track of some stuff on, too.
Gale Holsman: OK, good deal. And do you have a CPA that helps you do your year-end? Or, do you kind of turn everything over to him, and he puts everything in properly and gets you all handled, as far as the government, taxes, etc.?
Jill: Yes, we have a payroll service that we use for our payroll and we also have a CPA that helps us with our year-end.
Gale Holsman: Good deal. So, the payroll company does your weekly payroll?
Jill: That’s right, yes.
Gale Holsman: OK, good deal. That’s smart. Glad to hear that, because a lot of people get in trouble in that area and to have a service is well worth the money, in my opinion. So, how do you handle your receivables? If a customer gets at, say, 30 days, what do you do about collecting your money?
Jill: Normally, payments are made via check, although some do electronic deposit or credit card. We have one customer that we do things besides sweeping for. They’ll pay us early at a 3% discount, at 97% of the invoice, but everybody else just usually pays us by check or electronic deposit.
Gale Holsman: OK, and if you take your total receivables, what percentage is over 30 days right now? Do you know that number?
Jill: I do have some that are over 30 days, let me see here.
Ranger Kidwell-Ross: So, while she is looking, what would you like to say about that?
Gale Holsman: My interest is in knowing that she is looking at that, and that she is looking at receivables on a frequent enough basis that every month or every week she is taking time contacting these people. I assume you send invoices every month, right, Jill?
Jill: We do. We send invoices every month, and you’re right, usually the bigger jobs, I’m very aware if they are late, and so I want to be calling them. However, we have some other customers that maybe their invoice is $100 a month. Those are the ones that usually will fly by for 3 or 4 months, and then I’m like, oh, wait, they owe me $500 or $600!
Gale Holsman: Absolutely! And those are the ones that you need to tickle. So you need to make sure that you’re getting to those folks quickly, so they know they can’t just forget about you because they will! And it adds up quick, doesn’t it?
Jill: It really does.
Gale Holsman: For most business owners, receivables are the hard part. It’s amazing how I have to teach and re-teach my people: Until it hits the bank account, payment is just a dream. It doesn’t mean anything until the cash is in the bank. That’s very important. OK, so your payables and receivables, we talked about that a little bit. Let’s talk about the structure of a company now. When you go out to do a job, and you’re going to do a Walmart, let’s say, ’cause everybody is pretty familiar with a Walmart. Most Walmarts today go most every day, and they need to be done daily. It doesn’t behoove you to do a Walmart three times a week, it will put you too far behind [and you’ll end up picking up the same amount of material for a much smaller revenue]. So, if you’re sweeping a Walmart every day, how do you go about pricing that job? I’d be interested to see how much money you think your truck is worth.
Jill: Well, honestly, there are a couple of Walmarts, one in particular that I know we’re probably taking a loss on…
Gale Holsman: Why would you do that?
Jill: We’ve been doing them for several years now, and they won’t go up in price. So I think we really need to look at just letting them know, “Hey, we’re dropping you!” We’ve kept doing them at the older rate because we’re in the area. That said, we are there for an hour and 15 minutes, and they’re paying us $50 a sweep.
Gale Holsman: You probably have two employees on the sweeper, too, if I was to bet…
Jill: That’s right.
Gale Holsman: So, if you’re paying a guy $11/hr. to drive the sweeper, and $8/hr. for a backpack operator employee, which is minimum wage, you could figure 70% of the job is taken up just in the wages, much less the fuel and everything else. You’re right, you need to do something about that account. This is what happens when you keep an account at under market value just because you’re already sweeping in the area. If you’ve got a job that you’re doing for $50, like what you’re talking about, you’ve got to do three more jobs to make up for that one because of the revenue loss. So now all four have become substandard jobs. You know what I’m saying? You may have a good job, but if you get one or two Walmarts, it takes the whole night now [to not break even, let alone make the profit you need]. Do you do audits every night?
Jill: I haven’t. It’s not something that we’ve been doing until probably the past few weeks.
Gale Holsman: If you go to your QuickBooks — and I’ll be glad to set you up with my controller if you can’t figure out how to do this — they have a system where you can set up a spreadsheet to handle your route audits. You can designate a “Route 1,” and you know what your gross is, because if you sweep someone for $100 a month, you divide the $100 by 4.33, and the time of week that you do it, there’s your daily sweeping revenue.
Gale Holsman: It is vitally important that you develop your cost accounting for each day’s route. Let’s say you have a route that’s making $475/day. Figure out the hours it takes to run that route, 6 hours or 8 hours, whatever the case may be. To get to the entire cost of operation you then add in all of your fixed and variable costs: your wages, fuel, insurance, daily prorated office expense, cost of owning the sweeper per day and anything else that should be included. Once you add in all your expenses it will allow you to take a snapshot such that you’ll know exactly if that sweeper on that route is sustaining the income standards you’re expecting. Once you find that it doesn’t, then you must consider your options. Can you condense the route; can you add to it; do you have to get the time per account down; are you paying too much to the drivers; are the current sweepers too expensive to operate?
It works the other way, too. If you’re making a whole lot of money perhaps it’s time to afford a new sweeper. That’s when it’s time to call Schwarze or one of the other companies in the business and say, “Hey, I’m ready for a new truck, if I can afford it!” To get there, though, often calls for more supervision, more this, more that… That’s how I’ve always done it because cash flow is king, as you know. Does that make sense?
Jill: Yes, it does.
Gale Holsman: So if you’ve gotten into a habit, you see, it’s just like putting your seat belt on in your car. Once you do it enough, if you don’t put your seat belt on you feel weird. Once you get used to seeing your numbers, it’s amazing. Now, I have another form I’m going to share with you.
This is another thing you could set up with your bank. Go to your bank and have them set up and show you exactly what your deposits are every day. You can get this on your online accounting every day. What it does is show you your cash flow throughout the month, as an owner. If you get this every day, you know the health of your month. Then, if you’re not seeing the dollars that you’re expecting for that time of the month, you need to march into your office and talk to whoever handles receiveables — or maybe even talk to yourself if you are the receivables clerk — and say: “There’s something wrong here, so let’s figure out what it is. You may have a big account that you see hasn’t come through. If you watch the cash flow through your company, it really helps you understand what your deposits are daily, which will be a line item. You’ll know what checks you have out, which is another line item, and it will show you your payables. All your payables should go on this report. Everybody you owe should go on this report. Then your receivables, everybody that owes you, should be on this report every day. At the end of the day, you’re at your bottom line. If you quit today, paid everybody off, brought all your money in, take the money you’ve already got in the bank, that would be where you’re at today. Now you say to yourself: “Is that a positive or a negative?” If it is a positive, is it the positive I’m looking for, in December of 2016? If it’s not, well, you can say to yourself: “There’s something off. My payables are too high, or I’m not getting my money in, or I’m spending too much money. It might even be, my house mortgage may be a little bigger that what I can afford.”
You’ll be amazed, the people I’ve met over the last 35 years doing this, and an analysis confirms they are not charging enough, they’re spending too much, and/or they’re living beyond their means.
Gale Holsman: That is where you are currently is there is more outflow than money coming in. In business, that’s THE big problem so, therefore, you’ve got to get that in line. To get it in line, you have to have systems. Systems are what make you successful. No matter which systems you set up, the items I discussed above are the things you need to be looking at on a daily basis, so you can control your destiny. Otherwise, at the end of the month, you’ll find yourself saying “Well, I’ve got six dollars more than I started with, so I must be making money.” You’ll have no clue how you got there, but you’ll think you’re making money.
It’s almost like going to the gym. I mean, if you start getting a little pudgy, you think you yourself, “I’ll start eating salad.” Well, salad’s good, but if you’re not also walking it doesn’t work. So you really need to walk off even salad. In this case we’re talking about a regimen you set up for yourself to keep your business goals in mind in order to be able to achieve them. Makes sense, right
Ranger Kidwell-Ross: Let me break in to say that, by putting together a system like what Gale’s talking about where you get a report back every day, you need to streamline the process to where you can EASILY grab that report every day. Otherwise it’s at the bottom of your list when the phone rings or the inevitable things come up that you hadn’t planned on for that day. And we haven’t talked about what might be called ‘long-term measuring. A next step to me is how does today’s information compare to what you did this time last year? You will generally have ebbs and flows in your business; about the same time of year you will usually have about the same situations, about the same challenges or plusses. You want a system such that you will be able to compare this month on a year-on-year basis, as well as how you are doing this particular month. You might be doing poorly compared to last month, but when you look back a year on the same month you could be doing better than you were back then.
Gale Holsman: That’s a great point, Ranger. You’re exactly right because, again, that gives you a snapshot for where you were at the same time in 2015, versus where you are in 2016. When you sit down with your supervisor and your people, then you can actually set goals for these guys and offer some monetary rewards to them. Of course, if you’re not making money, then it’s a whole different conversation. However, having a system like this will allow you to know what’s going on in your business and will make you money. Knowing how you stand can also be used by you to build enthusiasm inside your ranks. Because, let’s face it, Jill — and you should write this down — “The herd only runs as fast as the lead horse.” And guess who your lead horse is?..
Gale Holsman: That’s right, you! So, therefore, you have total control to set the momentum in your company. And know this: When you’re driving home tonight and you’re thinking about this conversation you and I and Ranger had today, you have to do a self-check. You have to decide: “Am I still excited about running this business or am I done? Can I get this company to go where I want it to go and, if so, what do I need to do in order to get this done? How can I surround myself with a team that will do the things that we want to do?”
What Ranger is talking about is taking and setting your P&L side-by-side with the one from the same time last year. I actually do it in print, so when my bank asks me for a year-to-date on my company, not only do I give them a year-to-date for 2016 but I can give them 2015 as well, because I want to show them that I’m excelling. When I need to borrow more money to buy more sweepers or other equipment I have to show the momentum that my company’s got, that I can pay the money back to them. And guess where they’re getting the momentum from?
Jill: From you.
Gale Holsman: That’s exactly right! Ranger and I have worked together with sweeping contractors for many years. One of the things we’ve learned is that, really, the owners are the ones that need to be talked to. I’m not saying that’s you, but I listen to your story and I think you need “pump me up,” you know what I’m saying
Jill: I do, yes.
Gale Holsman: Fortunately, that ain’t all bad, because whether it’s NAPSA or Ranger’s World Sweeping Association, that’s what we’re looking for, as contractors. We want somebody to pump us up! You go to the national conventions, like the National Pavement Expo and I see Ranger, and I see the other big players in the sweeping business, and that gets me excited. I come home and I’m ready to go, Go GO! But that’s in February, so then March comes and June comes, and August comes, and September comes… and I’m no longer pumped up.
You know as well as I do that you’re only as good as the company you keep, and you’ve got to keep good company! You were smart enough to call Ranger and say, “I think this is what I need, I need some help and I’m excited about talking to somebody to give me ideas that pump me up, that get me re-excited about the business!” If you are excited, then you’ll do what needs to be done to make your business a success. Then, the employees will follow, the dollars will follow, the systems will follow, and before you know it, life is a beautiful thing! That’s a fact, and it’s what you need to get done in your company right now.
Ranger Kidwell-Ross: Jill, one of the things that I’m concerned about is hearing you say you have Walmart that you’re spending up to an hour-and-a-half on for $50 even when you know that’s not making you money. You remind me of when I counseled a contractor in the Midwest and he said, “They really want me to sweep this Walmart, so much so that they’ll pay me $125a sweep, which is a lot more than what I’m getting here, locally!” We started talking about the details, which included that he had to run 45 minutes to get there and then come home again. Hopefully, he could get some more accounts in that town in the long-term but he had no assurance of doing so. The $125 was so much more than he had ever charged locally that he had no belief that he could ask them for even more money. Once we figured all the costs involved, I think we ended up at $225 or $250 or something like that a sweep if it was going to be profitable for him. So, he screwed up his courage and asked for what he needed and they said yes.
What I’m trying to get across to you is that you can’t afford not to ask for the money you need to be profitable, because you can’t afford to work for free, just to break even. Believe me when I say that all the clients you have where you’re not charging enough are saying the same thing: “As long as we can keep this contractor going for 50 bucks, let’s do it!” Now, they might go find somebody else that will do it for 50 bucks, but then that will be the contractor that’s losing money instead of you. Personally, I’d rather go to bed earlier than pay somebody to have me get up and go to their place and work for them for free.
Gale Holsman: Good point, Ranger.
Ranger Kidwell-Ross: A concern I have is that you have at least a couple accounts where you know you’re not making any money but you haven’t called them and said, “I’ve learned my costs exceed my income on your account so we need to make changes.” There’s a business anecdote that says you need to fire the bottom 10% of your customers every year, because they are the ones that aren’t making you money. Additionally, tthey’re usually the ones that are the cause of 90% of your complaints.
Gale Holsman: I think what you need to do too, Jill, is follow up on what Ranger’s saying. I know this is a lot of information we want to get to you quick. Something I remind myself about continually is that everything is time. There are only 8 hours in a day of business work. I’m happy to do one stop for 8 hours, if it does what I want it to do. The key is, what is it that each and every one of my customers needs to provide for my business? That’s where your route audits are going to come in really handy. When you do route audits you will know exactly, per minute, what you need on that sweeper truck; once you get everything in line, only then will you be able to see what it costs you to be in business. Right now, I’m at an average of $1.25 to $1.80 a minute, depending on the travel time. So that’s what I want, need and expect to get from my sweeper. If the Walmart or whoever else doesn’t want to pay that, like Ranger said, it’s tough to say “no,” but sometimes you’ve got to lose the battle to win the war!
Jill: Right! I agree, and I wouldn’t have a problem saying “no” to that Walmart; honestly, that’s probably the worst one we do. But what about a situation where you’re working for a third-party service provider and some of the lots you do for them are profitable, but some aren’t?
Gale Holsman: That’s a tough deal. Two things are going to happen here. Number one is, you really need to have a good relationship with the provider that you’re talking about, i.e., the guy or the female that you’re working with. They have to understand what your situation is. I’m very straightforward and I tell them, “You want to pay no money, you get nothing!” I mean, it’s that simple. I don’t have problems saying that. I mean, that’s just where we’re at. Now, I know what you are saying as far as third party dealings. Ranger and I have had a lot of conversations over the years about the third-party vendor situation. He’s more well versed on it, because he deals with them a lot better than I do; I have very little patience for them. Regardless of who you are considering doing work for, you still have to hold your own. You’ve still got to build revenue and to do that you have to sell the value of your service. And to sell service, you have to have nice trucks, you’ve got to have uniformed people, you’ve got to be the real deal. You’ve got to go to Chamber meetings, you’ve got to be known, you’ve got to get into different publications around town, so people know who you are. Perception’s 90 percent of the real!” It turns out that people will pay for perception. People naturally think that if you’re a leader in your industry then they will do business with you. It’s important that you do that because, if you do, you’re going to be able to get the dollars you’re asking for. Now, that brings another question, Jill: Who’s doing your selling for you? I mean, who’s going to handle talking to that Walmart?
Jill: Well, that will probably be me.
Gale Holsman: OK, let’s just role-play for a second. I’m the Walmart manager, Jill. What are you going to say to me about getting that $50 to $125, like Ranger just said? What would you do? How would you go about doing that?
Jill: Well, I would say something along the lines of: “We’ve been sweeping your lot for several years, and we are looking at our numbers again, and in today’s economy $50 an hour is just not profitable. We’re actually losing money, so we’re going to have to go up on your per-sweep rate.” — That’s what I would say.
Gale Holsman: How much are you going to raise it, and are you talking to me in person or are you going to call me?
Jill: I’m going to talk to you in person. You think it’s better to talk in person?
Gale Holsman: In this particular case, absolutely! People do business with people and people like to see the heart behind the bill. Always remember that! If you send me an e-mail, a letter or anything else, it’s easy for me to ignore you. But if I get to know Jill, to like Jill, and I think that her story makes sense, and if I’ve been with you that long, I might say, “Look, you know what, $125 is not even that high. What do you say to $150?” I mean, I’ve seen that before. I’ve had that happen to me, believe it or not.
Gale Holsman: Yeah, “wow”! But if you don’t go see them, guess what happens… Nothing…
Jill: I think my problem is that I’m scared to ask.
Gale Holsman: I don’t blame you, I hear you loud and clear! I think you’re looking at that check every month.
Gale Holsman: However, it’s extremely important that you keep a line of communication open with your main accounts. Now, let me give you another little system that you can work, one that will help. I heard you say earlier: “You know, if it’s a $100 account, I don’t really pay a lot of attention to them, but if it’s a $1000 a month account, then I would call them if they got behind.” And that’s normal. That’s as normal as putting gas in a car because most people are like that. They’re going to take care of the big and not worry about the little. But you’ll find that maybe your little accounts are actually making you more money than your big ones.
Jill: True, true!…
Gale Holsman: So what you do is, then again, this is where I come back and preach, and preach, and preach — your route audit is so important! Your route audit is as important as your daily financial snapshot. You must have these things so you know who’s making you money and who’s not. That’s the only way that when Ranger calls in a few weeks to see how it’s going you can say “Thursday night I’m killing it, but Friday’s a little weak. So, guess what: I put a circle around the geographical area they’re working in on Fridays and I’m making contacts designed to take that route from $300 a night to $650 a night. I’m going to target that night to make sure it becomes profitable work, as I want to stay in that $1.40 a minute area on Friday night’s route. I’m doing what it takes to make money!” Doesn’t that get you excited?
Jill: It does, it really does.
Gale Holsman: Absolutely! ‘Cause that’s what you need to do. You need to do that each and every day. Why? — “The herd runs as fast as the lead horse.” It’s very important that you always keep that in mind. When you lay down, the whole herd’s going to lay down with you because that’s how that works. Isn’t that right, Ranger?
Ranger Kidwell-Ross: You bet that’s right! Now, let’s talk about how you might be able to make that happen. Do your employees all have business cards?
Jill: We do have just generic business cards and some of them do pass some out.
Ranger Kidwell-Ross: And what do they get if they come up with a new customer for you? Have you got something lined up for that?
Jill: Well, sometimes, for example, if it’s a striping job, we’ll give them maybe like a small percentage of what we cleared, or we’ll tell them that we’ll give them like a $25 gift card to a restaurant, or something like that.
Ranger Kidwell-Ross: I encourage you to make a way to really incentivize them to be interested in helping build the business. For example, when you’re having your safety meetings which, of course, you have right along, are you able to say, “Hey, guys, we really need to beef up this route on this side, over-here. Do you have ideas what we can do in that regard?” You have to decide whether you’d feel comfortable with them talking to a company next door or something like that. You well might not want to do that, unless they are uniformed and you have hand-outs, and so forth, that you can give them. At the same time, you do want to make sure that you jog their memory about whom they might know. “Who do you know that’s in business? Who do you know that owns business property? Any of your relatives?” — and so forth.
It’s kind-of like Amway, you know, where you set up a down-line chain. If they know there’s something in it for them, then they are going to be much more likely to be out there selling for you, and they’ll remember that card that’s in their pocket. By the way, I always recommend that those generic cards have an email something like info@ or sales@ your company domain. Always use your domain name on that card, don’t ever have a “gmail” address or anything like that. Instruct them to write their name on the back of their cards so when somebody calls and you say, “How did you hear about us?” — they say, “Well, I got this card someplace.” — you can ask “Is there a name on the back of it?” And, when you find out where the lead came from you’ll provide some sort of compensation. If you always find out where your leads come from and provide a reward then you’ll have a feeling within your company that you’re really trying to follow through and pay them for whatever they do, too. That’s important because it keeps employees interested in the process of building the company.
Jill: That’s a good point, thank you!
Gale Holsman: That’s good stuff, Ranger!
Ranger Kidwell-Ross: What kind of other information might we provide in this conversation? Are there things that we should still cover?
Jill: The main thing that I’m looking at, or wondering, is that I need to go into some of my sweeping accounts, because the profit is generated from that. Out of $500,000, it’s a little bit over $360,000 year-to-date sweeping, and my payroll for sweeping is $150,000. That just seems a little high to me.
Gale Holsman: On my sweeping situation, I try to stay in that 40% range for employee costs. If you’re looking for my recommendation for a guideline, it’s 40%. Some people think thats high, but I tell you, when you’re sweeping, there are two main items out there that you’re paying for, the sweeper and your people. If you hire better people, you can sell them. That’s what makes it work.
You know, it’s kind-of like the UPS guys. When you meet the UPS guys they’re all well dressed, well groomed, you could tell they’ve all been to college and they could make pretty good money. But they’re drive this truck many hours a day. The reason they do what they do is they’re being paid well and believe that it pays off for them.
The most important way to know what’s happening in your business is to continually look at your numbers. Make sure, when you’re looking at your numbers, that you put percentages next to the dollar value of the numbers. As an owner, you can get a snapshot quicker with percentages.
Jill: Well, I think that’s the main thing that will really help me the most [from this conversation] is to start doing the daily route audits and have the spreadsheet. I think I’ve been too generic in my record keeping. I do track fuel, and I break down to this is for the sweeper, this is for building.
Gale Holsman: How do you buy fuel? Do you put it all on charge card?
Jill: That’s what we’ve been doing. But we recently got a fleet card, and so we’re hoping that that will help us to be able to keep better track of things.
Ranger Kidwell-Ross: Where did you get your fleet card, through the World Sweeping Association or elsewhere?
Gale Holsman: I think it was elsewhere. I got something in the mail.
Ranger Kidwell-Ross: OK, and do you remember the name of the type of company fueling stations that you can go to?
Jill: It lists several. We have a lot of Chevrons in our area, so we use those a lot. I think also you can use them at Texaco, you know, your mainline gas stations.
Ranger Kidwell-Ross: Well, I’ll put a plug-in here for World Sweeping Association, because one of the things that people do, just like they do with the Chamber of Commerce or the Lions Club, or whatever, is to join because it sounds like a good idea, but then they don’t really keep track of what their benefits are. For example, I don’t know for sure that the different fueling organizations that you need, where you are located in the Southeast are the ones that are in the World Sweeping Association fleet management system. But I know that recently we put out a notice in our twice-monthly World Sweeping Association Update that our fleet folks made an offer that they’d give their new WSA signups a $100 fuel credit. Whenever you’re in the market for those kinds of things, you don’t want to leave $100 bills on the table.
Baldwin Filters gives WSA Members over 50% off their standard retail pricing. Knowing that, why wouldn’t everybody choose to use Baldwin Filters? You have an opportunity to buy a name brand filter with a one in in a million failure rate at a savings of over 50%. When you buy anything for your business, make sure to take advantage of discounts through all possible vendors. For example, as a WSA Member you are eligible for a 15% discount from Schwarze on your sweeper parts, 20% from Elgin Sweepers and Victory Sweepers. Be sure to take advantage of any kinds of discounts. It’s sort of like clipping coupons for your business. Really, make sure that if there’s anything out there that you can do to lower your costs, that you do it.
Make sure that you’re rebating your fuel that your sweeper uses, for example, if you have a twin-engine sweeper. As a WSA Member, you know how to get your $.28/gallon excise tax rebate for the fuel your sweeper uses. In addition to making sure you’re getting that discount you also need to check into your local state situation to see what you can save on the state level. For example, here in Washington State where I’m located, you have to sign up for your off-road rebate for your sweeper engine before you can apply. However, once you have the certificate, which is free, you can rebate all of excise tax on the fuel you use on a state level, as well. That program varies from state-to-state. Don’t leave those nickels lying on the ground, because like those small accounts that we’ve been talking about, over the course of time those discounts really add up.
Jill: That’s a good point, thank you!
Ranger Kidwell-Ross: Now, is there anything else we should be discussing, Gale?
Gale Holsman: I think the highlight of the conversation is: “Make sure you charge enough for your work.” I mean, that’s the theme. Make sure you get enough money for your work. And if you’re not, you’ll know it, because you won’t have any money at the end of the month.
Ranger Kidwell-Ross: That’s one of the things that are happening here — let’s go back to the beginning: You were profitable when you were smaller, now you’re larger and you’re not profitable.
Gale Holsman: So something happened there, along the way, that you took your eye off the important part of having to make a profit. I know from experience, in helping other contractors that your customers will respond positively to the idea that they want you to be profitable. There’s no other way you can keep your equipment in good shape, you can hire employees that are well trained and safe, ones who will keep their eye out on the client’s property, and so forth. Your customers want that. They don’t want you to have to go out of business, because then they have to go out and find somebody else. So it’s in their best interest to keep you profitable as well, not just in your best interest. That’s something to remember that might help you when you’re out there saying something to an underpaying Walmart, or to whomever.
I have a tough time working with anyone that doesn’t want to pay what I need. Remember, with third party vendors and Walmart there are other reporting costs, as well as typically lower pay, excuses not to pay accounts fully, etc. So I’ve made a point that if I do work for a third party or a Walmart I charge the shoot out of them. But this is the deal, guys: You’ve got to have a constant flow of excitement going out your front door to bring accounts in the door. So therefore, what I’d say is, I’ve always made more money on the little guys and accounts nobody really wants; I get the sweeps like the banks and the strip centers. You will also have better success working directly with property managers where you’ll understand each other. Property managers know what they want and I make sure they understand how my company operates and that he’s going to get what I tell him he’ll get. I’m thorough with him; I make sure that I understand everything that he’s asking for, and he learns that when he chooses us he won’t have to worry about his tenants being upset because his center doesn’t look like it’s supposed to. That’s what the goal is. Don’t you want to give them centers that look like what they expect? If so, you have to charge for that and people will pay for that, if they truly believe you will be able to provide them with the thorough, trouble-free service they want. How do you achieve that; you able to monitor with GPS. Now, Jill, there’s a good question: Do you run GPS’s in your trucks?
Jill: We have GPS on our tablets, we have a route scheduling software and it’s got GPS capability on it. What I’ve been finding here recently is that they’ve been turning off the GPS. They’ve been turning off the GPS tracking on the tablets.
Gale Holsman: Are you talking about your drivers?
Jill: Yeah, my drivers.
Ranger Kidwell-Ross: Not your “former drivers,” but your “drivers”?
Jill: I think it was a very recently hired driver that just recently turned off the GPS… so we’re going to be looking at that real closely.
Ranger Kidwell-Ross: Well, when I was a kid, they had a show called “Judge Roy Bean,” and he had certain crimes he called “hanging crimes.” I think employees who turn off the GPS might fall into Judge Bean’s category.
Gale Holsman: You know, Ranger brought up something earlier, Jill — he mentioned safety meetings. Do you have safety meetings?
Jill: We have them about once a month.
Gale Holsman: Once a month’s generally pretty common. Do you have guest speakers come?
Jill: We have at times, but it’s been a while.
Gale Holsman: Well, I think the safety meeting can be used very productively for other issues, as well. When you conduct your safety meetings it is an opportunity for you to talk to your workers. More importantly, they get to talk to you. You must have a climate at your meetings that encourages your workers be able to approach you. They need be able to tell you whatever’s on their mind, like, “My truck’s a piece of junk and here’s why,” or, “This stop sucks for these reasons,” or “I’m going into a dangerous part of town that we need to talk about.” There are items that you need to be communicating with your workers on a back and forth basis, and turning off the GPS would be one of those items.
I use the Verizon model, and it’s a box that I put under the dash, and they can’t turn it off. So that’s something you may consider, and it’s real-time, which is great I could be sitting in your office or in Ranger’s office up in Washington, and I can show every one of our trucks and where it’s sitting, or how fast it is moving down a highway. That’s the kind of information that is vital to know about your rolling stock and you will also gain needed information about your employees. It’s a good baby-sitter as well as can provide vital information to customers when they want and need it. Plus, my dispatcher receives a page on her phone if an operator goes 7 miles per hour over the speed limit. In this day and age you need to have GPS.
Ranger Kidwell-Ross: I want to go back to approaching one of your customers who isn’t paying enough for your services. One of the absolute hallmarks in sales is that the people who really need the money will telegraph that fact and, so, have a much more difficult time making the sale. You are currently in a situation where you really need that additional money and a key is to have the courage of your convictions developed on your part well before you talk to any of them about an increase. You need to convince yourself first before you go into any of the situations where you’re wanting a raise: You’re losing money on those accounts and that cannot continue. Actually, whatever happens is a win/win for you. You’ll either get the account to be profitable or you’ll quit losing money on it. Either way, you win, but either they’re going to say “yes” and you’ll start making money or they’ll say “no” and you’ll quit losing money. That’s not bad, either. What you can’t do is stay in the status quo.
Have your ‘ducks in a row’ before you go in. It doesn’t hurt to be able to reference that “insurance has gone up by this amount over this amount of time, our sweeper truck costs have risen from here to here over the last 5 years, fuel has increased, etc.”
Expanding on the topic of fuel and rising costs: When fuel prices increased did you take a fuel surcharge? That’s a way to help offset the fact you have a low basic contract amount where there’s no room to move the contract price itself. I am aware of several contractors who, faced with losses on accounts, started adding in an ‘environmental fee’ for disposal; some paid the new fee and some did not. HOwever, they saw it as a creative way to make a marginal account profitable.
There can be a real problem with accounts you’ve had at the same rate for 3, 4, 5 years without a price increase because the costs of so much have risen. You’ll find that even when a client agrees to start paying more that you’ll actually be ending up at the same profit margin as where you started them but at a different dollar amount. Your clients will relate to the argument that prices have gone up because they’ve gone up for them, too. With that argument they’ll be much more likely to just figure that another contractor will tell them the same thing and that they won’t sweep them for $50, or whatever, anymore either.
These clients may have been discussing at their meetings that their sweeping contractor is the only one that hasn’t raised prices and are chortling about that fact. They may have expected a price increase from you long ago.
Gale Holsman: Jill, do you like talking to your customers?
Jill: I like talking to some of them, the ones I have a good rapport with. Others, though… Once I get into the mode of doing that then I’m fine with it, but I’m mostly an introvert so have to work myself into calling customers. Some I talk with all the time but others I never hear from unless I reach out to them.
Gale Holsman: The fact is that most of the time the last thing they want to think about is having their parking lot cleaned. I have found it helpful to start out that way with some of them. I say “I know the last thing you probably want to think about is cleaning your parking lot, but that’s my job and I want to continue to do business with you so I’m calling to say I need about 13 minutes of your time; I’m not a professional visitor so I won’t be wasting your time.” Then, once you’re sitting down with them tell them what needs to be said quickly, efficiently and professionally and get out the door again. Keep in mind that there’s just one reason you’re there and that’s to cure your customer’s problems.
Ranger Kidwell-Ross: Also make sure you’re prepared. Everyone should have a good ‘elevator speech,’ so you can succinctly talk about what you do. In my opinion, these days that should include the fact that your business is the first line of defense for water quality, removing pollutants before they can run off the parking lot and pollute our drinking and recreational water supply. Your great job also ensures visitors will come back and provide your client and/or their tenants with repeat business.
Also think about any kinds of ‘guerilla marketing’ you can do. One area I’ve counseled contractors to pursue is sweeping for churches. Offering to sweep a church parking lot once a month for a weekly note in their church bulletin about your donation can be a good way to gain a positive reputation among business owner parishioners. Also join organizations where you’ll be around other business owners, whether that’s Kiwanis or Lions Club or the local Chamber of Commerce, my personal preference if you’re going to just be doing one of those. Get involved and visible in what you do. A lot of times club members can send out information to the member mailing lists about what they do as a business.
Gale Holsman: I join the Chamber with each and every business I have. It’s the best for getting you into the network of other business owners, gets you a schedule of all the events they have you can attend. You need to become known to the other business owners in the area. [My sweeping company is known as a place where any customer problem can be solved] so I’ve even had calls from people who want us to come get a snake out of their basement. They don’t know who to call but we have the reputation of handling problems successfully and that’s what you want to cultivate.
Ranger Kidwell-Ross: Make sure your customers know about all the services you provide. At the same time, think about other services you can provide to your same customers, which is typically a way to make more money than going out to add new customers for your core service of sweeping. At the same time, you want to get sweeping contracts with the businesses located next to or nearby to your current clients. Look at your windshield time between stops and figure out how you can reduce it.
At the same time, think about what else you can do: Can you show empty storefronts for your remote clients? Can you do the cleanup of spaces when tenants change over? Remove anything that was left behind and ‘vanilla out’ the space. Sometimes you can make a profit center out of getting rid of leftover office equipment.
If a stop sign gets knocked over, who better than you to replace it? All that’s needed are a couple bags of redi-mix, a new post, a posthole digger and a level and the job gets done. If you’re open to projects, tell your customers to call you whenever they have a need and you’ll either self-perform it or find someone to handle it for them, at which time you can gain a percentage of the work billed for. Find ways to become indispensable to your customers. Then, when ABC Sweeping comes in the door with an offer to sweep for less, their first thought is not money saved but that they’ll lose Jill, who always handles whatever needs to be done for them in addition to doing a great job on the parking lot. When that happens it’s much less likely they’ll make a move for a few dollars.
Is there anything else we should cover for you today, Jill?
Jill: No, this has been great!
Gale Holsman: Now what you have to do is go out and get ‘er done! Jill, I also want to remind you that every day is an excuse to have fun.
You may reach Gale Holsman, who offers contractor consulting via prior arrangement, by calling 816-966-1161. Gale has also provided information helpful to sweeping contractors in other articles located on the WSA website. These are linked below. Note that these articles, as well as over 200 others on the WSA site, are password-protected and available only to current Members of the World Sweeping Association: