Growing Your Business

Success Tips for Growing A Sweeper Contracting Business

Uri Ben-Yashar is a Boston area contractor who went into the sweeper contracting business after emigrating from Israel, where he was born, raised, and attained the rank of Captain in the Israeli army. The following is from information contained in his seminar at NPE 2004.

NPE and naPSa were very helpful to me in becoming successful in sweeping, Uri told the audience of about 50 who attended his seminar. I come every year to NPE and always gain information from seminars, as well as from the other attendees. Compared to when I got into the industry, back in 1993, there have been many changes in the sweeping industry. For one, my account tracking shows that the longer I've had a customer, the more they pay. That shows prices have been going down over time.

There have also been other significant changes. For one, customer awareness of our service is now much higher. Now everyone we market to already knows about the business, so I no longer have to explain what we do. Property managers usually know what they want, and are often ready to tell you when to sweep and how much they'll pay.

Government legislation has created changes, too. For example, when I first got into the business, 10 years ago, we were able to dump spring cleanup sand in other places other than regular landfill areas. Now it all has to be dumped in designated landfills. Recently, there have been changes to the immigration laws. These are designed to let more immigrants in to work, which means our labor rate should fall. That should bode well for the future, in that regard.

On the other side of the coin, there are other competitive factors that are pushing things in an opposite direction. Today, instead of so many people starting with sweeping, there are many more branching out from sealcoating, landscaping, etc. This has the effect of bidding price per sweep down. In the last couple years, the phenomenon of national accounts has added a new twist. Because they want discounted pricing, there is a downward market pressure coming from these entities.

They are finding contractors who are willing to perform sweeping services at what many believe is below the point where they can be profitable. However, although such contractors may come and go, I think someone is always going to be there to take the accounts for less money than normal market value. It's something that brings a different level of complexity to our industry.

At the same time, opportunities are developing for profitable expansion through strategic partnering with other types of companies. Increasingly, allied types of companies, for example facilities management firms, are expanding into different geographical areas where end up with differing maintenance and repair responsibilities. Some of these don't want to do the sweeping but have the accounts. I have found an emerging area of growth to be developing partnerships with these.

As someone grows their sweeping company, I recommend deciding just how they'd like to do that. There are two basic directions, which are to diversify into other areas or to continue to grow in the specialized area of sweeping. This is called deciding between horizontal and vertical growth.

Before someone decides to start providing more services, I caution that you need to decide exactly how professional you will be able to provide any of the services you decide to offer. The fact is, you will be judged by your client about the job you do in any area where you provide services, and if you aren't doing a good job it can affect whether or not your current clients keep you for sweeping.

For that matter, serious thought should be given to whether or not you want to grow your business at all. Before developing your growth plan, ask yourself, "Is bigger better?" In most instances, bigger means more money. However, the law of diminishing returns dictates a smaller margin as you grow. When you get above the one or two sweepers stage, it's very important that you grow the business large enough to put in management. Otherwise, you have a large chance of burning out in sweeping because it's so 24/7. On the other hand, if you stay too small it will affect your lifestyle because you will seldom have any time off.

How to tell if you've become a mid-sized business: As you grow, it's important to hand off day-to-day control of the business to managers. At that point your reporting system must be set up well in order for you to keep control. I suggest the following time allocation for the owner or CEO of a medium/large sweeping company.

Business Development 40%

In this role, you should evaluate growth opportunities; analyze your competition; perform marketing analysis and do cost analysis. An example is finding ways to gain cost reductions. In my case, I've learned to bid fuel among 3 bidders every week. As a result of an investigation into getting into the screening of sweepings, we also now save 45% of our previous disposal costs.

Cost analysis is very important, and it must be good enough to make sure you're making money on all of your accounts. If you aren't, prepare yourself well prior to approaching those accounts with the fact – and the facts – about why you need to raise their rates. In my experience, many will accept the increase. Some won't, but that's better than sweeping at a loss.

Another area of investigation that has proven helpful for us is to research our experience with which drivers are best and stay longest with us. We now use that information to decide what type of driver we should be hiring. We do similar analyses on our equipment so we have a good handle on when to buy or sell our capital equipment such as sweepers.

Sales Review 15%

We have weekly meetings with our sales people to review how many proposals have been sent out in the previous week, how many calls have been made to new customers, etc. If you use contact management programs like ACT! or Goldmine it allows you to find out things like how long, on average, it takes from the time you do a cold call to when you start sweeping. Then, you can back out how many calls you have to make, as well as other actions you need to perform, in order to hit your growth targets.

Be sure to concentrate your salespeople to particular geographical locations, chains of stores, competitors' accounts that aren't doing a good job, etc, so you grow in the right directions.

Financial Review 15%

Once I quit signing all my checks I found I was no longer on top of some of my major costs. The result was that I set up some types of reports that allow me to get an ongoing handle on these important cost areas. We now have a cash flow report that allows us to go over an 8-week cash flow forecast on a weekly basis.

Meeting Customers

It's very important that the owner of the business have face-to-face interaction with customers. It's a great way to get information and ideas. One of the things you always need to do is talk with customers to make sure they are happy with your service.

We put on occasional customer appreciation dinners or lunches. You might be surprised to learn that these don't have to be all that expensive. For example, we were able to get the Merrill Lynch representative who does our 401k program to sponsor one of these in return for being allowed to speak to our attendees for 10 minutes.

Whatever you decide on, have speaker(s) who can bring valuable information to your target audience. Another speaker who was well received was an insurance pro versed on the differing strategies available for property management coverage.

Operation Strategy

It is very important to keep an overall eye on where you're going and where you want to be headed.

• Review what you're doing with your director of operations and controller.
• Check your variances between your budgeted costs and actual costs of operations.
• Review your routes to make sure they are being optimized. Software that does this can reduce routes of large companies by as much as 20%.
• Put good preventive maintenance programs into place, including developing a procedure for your mechanics. Ours is to do oil changes and other preventive lubricant changes as much as 50% more often than recommended by manufacturers due to the use in sweeping industry. They have found their equipment lasts longer enough to cover the additional preventive maintenance costs.
• We require that purchases must come through operations manager, which saves lots of money. We also went to a purchase order system, and came up with an inventory amount of all standard items we want to keep on-hand. Many maintenance programs allow for the showing of order points as long as you keep the information entered into the system.

Staff Meetings

Have weekly staff meetings with all of your department heads. Ours last from 1.5 to 3 hours, and we hold them on Thursday afternoons. I get my managers to talk to me by starting with a weekly report, a review of the last week's agenda, and then a review of our action plan. Any action plan should have target dates showing when all planned tasks should be done. If something was supposed to be done by a certain date and wasn't, the manager has to provide that fact prior to the meeting when it should have happened.

Route Scoring

We use an inspection form we've set up as an Excel spreadsheet that has a weighted average. By having the supervisor put a mark of between 1 and 10 on a variety of areas (according to the quality of the job being done by the operators), the computer works out the weighted average score for the operator. We have ours set up so a 7 is what customers will accept; 8 is what we want to achieve.

Then, we have an employee bonus program that is printed bi-monthly. Our bonus scheme means drivers have an opportunity to make up to $1200 extra in bonuses per year.

Strategic Controls

GPS: Everyone who has more than 3 sweepers should have GPS. This enhances control over both employees and performance. The one we use is called Atroad, and was about $500 for each truck installation. Information is sent through a cellular phone line. There are good and bad points to that system. Managers go over each account every morning and make comments. One thing the GPS does is to provide 'proof positive' the driver was on the property.

Here are some other ideas:

Put a retention plan into place: This is used to determine at what frequency you should initiate calls to your customers. We have 3 levels of intensity, with the highest contact level being once per month and lowest once per 6 months.

Have a structured complaint and follow-up system: We call a day, a week and a month after a complaint item has been handled to make sure it is no longer a concern.

Cost Control

If you don't control your costs, you won't have any better control on your level of profitability. Here are some of areas to keep track of:

• All labor costs: drivers, helpers, garage/mechanics, night managers
• Rolling stock: maintenance, suppliers, tires, brooms, registration, leases, fuel
• Disposal costs
• Subcontractors
• Operations personnel: operation managers, garage manager, marketing/sales people, etc.
• Office personnel: controller, office manager, administrative
• Rent/mortgage
• Amortization
• Utilities
• Travel and entertainment
• Office supplies and equipment

Use all of your cost factors to build a solid calculation of your "cost per hour" (CPH), which is the most important figure in the sweeping industry. That's the only way you can develop the price of your sweeping services. Only by using your CPH can you determine such items as:

• which accounts are profitable
• what is your profit margin, on each account and across-the-board
• what you want your profit margin to be
• how to price new contracts
• how low you can go to get a contract and still be profitable.

Keep in mind that CPH is never a permanent number. It's a figure that should be updated with every major change in the business or once per month. That's why it's so important to have the information available in a spreadsheet form. Otherwise it's much more difficult to keep your CPH updated.

In my experience, there are several overall factors that will enable you to grow. First, you must set proper policy and procedures throughout your company. This must include the proper controls to accommodate the size of your company. You must also set up a reporting system that will allow you to track your position at all times, and this must be done in a way that makes it easy enough to do that you will actually do it!

Finally, and perhaps most importantly, you must learn to manage your own time in such a manner as to make it most efficient, relative to the current needs of your business.

Remember: Your goal is to be able to provide excellent service at a pricing level where you can keep your equipment in good repair, purchase new equipment when you need to do so, and pay a wage rate that will attract quality people. That's the only way you will be able to provide services that are above average in your marketplace, which is a key to growth and longevity in the marketplace.

For more information, you may contact Uri via email sent to: uriby@eastcoastmaintenance.com.

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