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Growing Your Business |
Ensuring Satellite Office ProfitabilityIn 1993 Uri Ben-Yashar purchased a Pawtucket, Rhode Island sweeping company that came with two leased Schwarze 347-I sweepers and a route and a half of sweeping accounts. He was working on adding local business for his company until 1996, when a chain store client called. The chain was having problems with the quality being provided by their local sweeping companies. The property manager asked Uri to find a way to bring the same service excellence they had seen in his operation to three of their stores in nearby Connecticut. Uri negotiated a price that would let him break even for putting a sweeper in that locale, and that was the beginning of his first satellite office. Since then, Uri's East Coast Lot and Pavement Maintenance Corporation has expanded into Bayshore, on Long Island, and Nashua, NH. We asked Ben-Yashar to discuss what should be considered prior to developing satellite sweeping offices. WORLD SWEEPER: In your experience what are the big issues, pitfalls and advantages of establishing a satellite office? Ben-Yashar: Expanding into another area should provide a company with economies of scale a minimization of cost since they will essentially be duplicating what they do in their home office. Plus, there are advantages since the current home office may be utilized for all of the 'back office costs' of the new operation. These include accounting, customer support, overall management, major machine repair, etc. That's why, theoretically, a company should be able to minimize costs at its satellite office, when compared to those in the home office. Operations management, sweeping and minor repair functions are the only activities needed in the satellite. These should be duplicated using the methods of the home office. Initially, there will be some cost differential, though, because the initial satellite sweeper operator is also the manager, and a management-caliber person commands a higher wage rate than someone hired to just run a sweeper.
Plus, there are the initial satellite office costs, such as renting a garage when we reach a size to warrant that. I also send my salesman to the remote area. This is an additional cost, as well, for expenses and a hotel room that aren't needed for the home office location. There are a number of ways to minimize these outlays, however, which I will discuss further along in the article. WORLD SWEEPER: In your experience, what is the primary advantage of expansion, and how do you choose where to locate your satellite offices? Ben-Yashar: Most sweeping companies will find that many owners and managers of shopping facilities they currently sweep also have centers elsewhere; nearby, but outside of their current geographical area. If your company is providing an outstanding level of service, your current customers who fit this profile will be open to having you handle sweeping for them in those locations. This is what has determined, for us, where we have gone when we have expanded into a new area. It's critical, in my opinion, to start off in our new location with business already signed up. All of the satellites we have established were based on being able to start with business in that area. My rule of thumb is to have enough customers in an area to be able to break even when we run one sweeper. I will not open a satellite if it means I have to do so at a loss. Since we are able to travel up to an hour from our home office to service accounts, to me the ideal distance for a satellite is about a two-hour drive. That allows your company to service the entire area in between, since both offices can go an hour toward each other to handle clients. That's a good distance to allow frequent supervisory visits, and makes it possible for your home office salesperson to handle the new area, as well. We will consider a satellite as far away as five hours, however that far away isn't optimum.
Undoubtedly, the single most important aspect of adding an office is choosing the manager-to-be, since your liability is considerable. This person must be carefully screened and chosen, since you will be relying on him or her to work remotely, away from your direct supervision. They will be working for you like an owner, and must have good decision-making in unusual, unexpected and difficult situations. Plus, at least to start with, the satellite operations manager must both sweep and handle the needs of the office during the day. Essentially, they need to be prepared to be available for seven days per week until there's enough money available to add an assistant. For us, two full routes allow the manager to become a full-time manager. When we get the third sweeper doing routes in the new area, there's typically money available for an assistant manager. Satellite managers must also be someone who understands basic mechanics, so they can fix the nightly-occurrence type of things that come up. Any large breakdowns are brought back to the home office. WORLD SWEEPER: What do you look for as your initial satellite location? What do you pay, and what are the manager's costs? Ben-Yashar: At first, I help the manager with rent in order to get a place outside the city where we can park the sweeper. Other than that, we help with some moving expenses. At the first location we look for a basement suitable for storing standard wear items. Once we grow to two sweepers, we move the operation to somewhere with a garage so we can have a shop area with a compressor, tire changing air tools, and other basic, heavy-duty tools. I want the manager to do as much general upkeep work as can be realistically handled: oil changes, transmission fluid changes, ongoing preventive maintenance. At the garage location I also want to be able to put in a fuel tank of about 275 gallons that we can get filled once or twice a week. WORLD SWEEPER: Please discuss the communication system you establish between the home office and the satellite. Ben-Yashar: Even when you grow your own business and you're there all the time, as the office grows you get more remote from daily operations. This is magnified with a satellite. You must, therefore, rely on reporting and have good plans and strategies in place. Operations managers all want to have their own way and autonomy, however the only way to ensure success is to look at revenues, percentages, labor rate, numbers of funding the operation, equipment expenses, etc., to make sure the targets are being met. You can't go check on them every day, but you can and must look at all the numbers you can generate. This is something that will vary depending upon the comfort level of the owner. Before you open the office, it's important to determine the level of communication, supervision, reporting, etc., you want to have. How much control and how much freedom? These parameters have much to do with the personality of the owner and the personality of the satellite manager. Here's our system, broken down to a weekly basis: Unless we're still using just one truck, we get the results of the manager's nightly spot checkups daily. On Mondays they communicate with our home office director of operations to transmit payroll information. This includes looking at the previous week's payroll percentages, and any variations the numbers show, i.e., where we want to be and where we are. We constantly work with our managers on ways to reduce costs. For example, when we start using two sweepers we put in an above- ground fuel tank. At some point we also set up a local shop, and an equipment dealer where we arrange to get parts or warranty service. Training methods are constantly improved and employee meetings are conducted on a monthly basis to ensure employee satisfaction. Every other week, as an owner, I visit one of my satellite offices. Since I currently have three satellites, that means I will be at each satellite at least once every six weeks. However, my director of operations stays in much closer contact than I do. My advice is that if you have any suspicions about how your satellite office is being run, don't hesitate to send your home office people to the satellite without notice, etc. Even with your best employees you have to be prepared for the fact that situations change. Something that is very helpful in terms of oversight is that all of the sweepers in our system have GPS. Because the system is Internet-based, we are able to take a look at any route in our system while it is being run. Initially, routes are designed through close cooperation between our home office director of operations and the satellite manager. Then, we monitor the initial routes and constantly refine them to improve time utilization and account for any noise considerations, etc. This is done, in part, through the weekly communications we have with our remote office manager. Our satellite operations manager goes through his location's GPS every day, as well. The main reason for that is to assure the quality and time allotted to each of our customers. By looking at the GPS reports, we can determine whether or not the operator is not only spending the right amount of time at a client's location, but also determine the mix of sweeping, backpack work and so forth that we know is needed for that particular account. Since our GPS is web-based, our home office people can also look at the satellite data at any time. Otherwise we'd require frequent faxing or emailing of the data. Overall, our experience is that expansion into satellite offices has been an excellent way to increase the size and scope of our sweeping business. However, because you have to take the utmost care in making sure there is no reduction in the quality of services you provide, as well as to assure profitability, this process is helped greatly by having correct procedures and safeguards in place. Uri Ben-Yashar is active in naPSa, has been a speaker at National Pavement Exposition, and will be speaking at both the upcoming Las Vegas NPE West, in December, and the national NPE event scheduled for next February in Atlanta. You may reach him via email sent to: uriby@econsite.com. This article is reprinted from American Sweeper magazine, Volume 9 Number 2, 2004. |
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