By Phil Harwood, CSP
Managing a snow business is a serious challenge, even in good economic times. Not knowing when we will work, how much we'll work, or what conditions will exist when we work make the snow business a challenging way to earn a living. At the same time, these unknowns have always existed, and many have learned to manage these aspects of the business and make a good living playing in the snow.But things are different now. The industry is facing a brutal economy, skyrocketing commodity prices, tight credit markets and more competition. It's ugly out there. But while the talking heads argue about whether our economy is facing an actual recession, business owners are focused on survival. Failure is not an option. We have too much invested to quit or to put our heads in the sand and simply hope for the best. We must find a way to ride out the storm no matter what it takes. We will survive—and hopefully prosper—if we play the right cards.
The secrets of survival are, in fact, not secrets at all. They are proven business practices that are profoundly relevant during an economic slowdown. When the economy is booming, it seems everyone makes money. But when the economy slows, things get more challenging and only the most dedicated, disciplined and driven businesses survive and prosper.
The goal, of course, is for the business to be a source of reliable profits, not just something to keep us busy until spring comes around. As a good friend of mine says, "We don't need the practice." This statement is very true. After all, if we aren't making a reasonable return on our investment, why are we leaving our families in the middle of the night to go out into a snowstorm?
Narrow your focus
Profitability is important, and there are only two ways to increase profitability: increase revenues or reduce expenses. At any given revenue level, a $1 cut in expenses equals a $1 increase in profits, while a $1 increase in revenue equals less than a $1 increase in profits. If our profit margin is 30%, a $1 increase in revenue equals a $0.30 increase in profits. Because of this, there is always a tendency to cut expenses to the bone during tough times. I disagree with this approach. While I'm all for eliminating waste and inefficiency, by focusing only on cost-savings initiatives, customer satisfaction is often ignored. Once this happens, the game's over.
We need to be very careful about what we focus on during a slow economy. The goal of any business is not to make money. It is to find customers and keep them. If the only concern is short-term profit, the game is lost. But if we think about locating, acquiring, servicing and satisfying customers, we just may hit a home run.
Shake it up
The starting point is to realize that we cannot follow the ways of the past, that we must change our business models in order to survive and prosper. The things that got us where we are today will not take us into the future. We have to be open to new ideas and to change.
Resistance to change is universally common. We try to protect what we have or what has made us successful. The irony is that the more successful we are, the more we try to protect what has worked in the past. Learning new things requires effort. We like things to be comfortable and easy. After all, we've earned it, right?
It has never been more important to analyze your business model and operating practices from top to bottom and to be prepared to make changes. Now is the time for leaders to step up, increase productivity and efficiency, get the right people on the team, implement lean management principles, develop superb marketing plans, create great strategies for the future, execute flawlessly in service delivery, and satisfy customers beyond their wildest dreams.
With this in mind, focus on three major areas to help businesses prosper in this slow economic period: growing revenues, managing expenses and reducing risk.
Growing revenues
Strategies that promote customer satisfaction and retention and increase sales to existing customers are more critical than those that focus on new customers. A small increase in customer retention delivers a disproportionate impact in profitability. Focus on existing customers first.
Get to the core. Focus on the core businesses. Now is not the time to be distracted by multiple businesses, divisions and hobbies. Be the best at one thing. What is it? Divest yourselves of distractions, roll up your sleeves, and focus on being the absolute best in this profession.
Customers first. Put yourself in your customers' shoes. What matters most to them? If you don't know, find out. Typically, customers' primary concerns have to do with their service providers being prepared, proactive and committed to their properties. They fear being put last on the list. They fear we'll sub out the job to some goofball who won't show up during "the big one."
Also high on customers' lists of concerns is their service provider's ability to accurately invoice them and responsiveness to issues that arise. Unfortunately, the snow business has a reputation of being less than professional when it comes to these areas.
With this understanding, ask: What are you doing to become the best in these areas? If these areas—or whatever areas you determine are most important to your customers—represent their "pain," what are you doing to alleviate it and demonstrate that you are the right company for them?
Don't skimp on marketing. Your marketing efforts need to make crystal clear who you are, what you do specifically, and what makes you unique. Why should someone buy from you when there are 15 companies lined up waiting to pounce? What's your differentiator? If you can't articulate this difference in a meaningful way, your only point of differentiation will be your price—and that's a trap you don't want to fall into.
Many companies cut back on marketing during slow economic times because they see marketing as an expense, not an investment. They are more concerned with making money in the short-term than with finding and keeping customers. This is not the time to cut back. In fact, since everyone else is cutting back, there's less "noise" and more of an opportunity to increase marketing returns. Now is the best time to be marketing—when everyone else isn't.
Diversify. Decide which market segments to target. In the snow business, it's great to have diversity. In addition to not placing all of your eggs in one basket, having a diverse customer base increases your capacity to provide service. This increase in capacity means you're able to generate more revenue without increasing fixed costs, which means more profit. For example, office buildings need to be open at 6 a.m. or 7 a.m. during the week, but often have less critical needs on the weekend. Retail properties often open later and require more attention on the weekends. Other properties may not require immediate service at all.
Lock them in. Strive to get the best customers locked into multi-year contracts. There is a real and significant cost of renewing contracts—both for you and for your customers. If you are the strategic partner that you should be with your customers—and not simply another vendor—then they will be more willing to discuss a long-term contract. Take the initiative and make it happen.
Expand your network. Do more with less and increase revenue by using subcontractors. By using subs you create a "virtual organization" that can ramp up quickly and shrink down equally as fast. Adding overhead—hiring more people, buying more trucks and renting another yard—to increase capacity can backfire if you lose a large contract. A virtual organization is less risky but must be effectively managed to be successful.
Managing expenses
As you seek to increase revenue, look at tightening your belts, as long as customers are not negatively impacted. At every step, ask: How is this adding value to our customers? Anything that isn't adding value doesn't deserve to be funded.
Look large. Start by looking at the largest expense items, which will yield the biggest opportunities to make changes. Labor costs, for example, represent a huge opportunity. What can you do to reduce labor costs—especially unbillable costs? Tighten routes, use more technology, eliminate outlying properties, hire more part-timers to eliminate overtime, and create incentives for quality, productivity and efficiency. Look at every aspect of the operations for savings. Do you need to pay every employee an extra two hours to wash his truck, refuel and restock it? Or can you pay a yard guy $8 an hour to service the entire fleet while everyone else is home sleeping?
Play it tight. During tight periods restrict spending, delay purchases when possible and conserve cash. Meet with your banker to talk about credit lines and the need for cash before a crisis ensues. Invoice quickly and accurately, and be diligent about collections. Cash has always been king. In today's economy, cash is both king and queen. If managing cash flow is not your strength, partner with a financial expert because if you run out of cash, you're done.
Reducing risk
This has always been an important aspect to the snow business, but it is even more so today. One of the most important ways to reduce risk is to have a strong financial modeling system in place. Again, if this is not your strong suit, find someone to help.
Evaluate contracts. Review contracts now—your contract, your customers' contracts and your subcontracts—to identify areas for improvement. The negotiation of contract language is part of doing business, but it requires expertise and guts. Don't assume that contracts—even existing ones—can't be renegotiated. They can. It happens every day.
Estimating and sales. Have a great estimating and sales process. Measure your properties—do not allow subs to do it—and use a proven system for developing estimates and pricing work.
In the snow business, as in many other businesses, there is a tendency to pay little attention to selling skills and the sales process. Often, companies rush into every sales opportunity, ask few questions, bid on everything in sight, and hope for the best. In today's economy, this approach will not promote survival or prosperity.
Final thoughts
Managing a snow business can be a very rewarding experience or it can be a nightmare, depending on the choices made. Those who are successful in growing revenues, managing expenses and reducing risk will be able to weather the storm and come out of it stronger and better prepared for what lies ahead.
Phil Harwood, CSP, is the founder of Pro-Motion Consulting, which helps create healthy, profitable and sustainable businesses. To subscribe to his free newsletter, visit philharwood.wordpress.com or e-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
