Rising Costs!

Property managers, mall owners, department store managers, and municipalities are trying to find ways to cut costs. Services such as parking lot sweeping are often viewed as an unnecessary expense. The primary reason for this mindset is a lack of knowledge and education on the part of the customer. Contractors need to remind their customers that using the services of a quality sweeping contractor will:

• Enhance their property value
• Increase the life of their property
• Reduce additional maintenance expenditures
• Help manage storm water systems
• Reduce airborne particles
• Help control animal and rodent populations.
• Reduce insurance liability and risk
• Provide appeal to a property
• Increase the market value of the property

If the customer understands the value of sweeping, can they really justify cutting it?

According to a recent survey, over the last three years, the majority of sweeping contractors faced a loss in sales. It doesn’t seem that anyone’s crystal ball can really predict where the economy will go from here.

So, how can businesses develop a plan of action when you have no idea what’s going to happen next? What strategy will work in the current economy and what will need to be done if it gets worse? And, is it just the economy, or is it other aspects of the business environment today that continue to be hurdles that owners have to navigate to be successful?

Challenges faced by contractors are the results of their customers cutting costs. Volatility is intensified when competitors don’t play fair, prices in the industry are driven down by national service providers (NSP) and companies who are taking shortcuts in safety and quality as well as questionable hiring practices. Further, increasing fuel prices, government regulation, and increased employee insurance costs add to the everyday costs for sweeper contractors and to the costs of their equipment. There is no room in pricing to recover these costs of doing business. The pressure on the sweeper contractor’s customer to cut costs is leading to the acceptance of a lower quality product or requiring the quality company to do the same or more work with less time for less money.

Many contractors believe that NSPs are the largest threat to the sweeping industry. Many NSPs come into an area and “lowball” bid everything because they are working on national contracts. In this economy the low price is becoming more and more attractive and the importance of quality is being minimized. How to compete with these companies is a major question, but many companies are finding that if they diversify or increase the services they offer, they are better able to contend with these very price focused organizations.

Within the industry there are different measures being taken to battle rising fuel costs. Companies like Chamberlain Sweeping in Cincinnati have “woven pull behinds into our routing.” According to Christy Schmidt, this allows Chamberlain to reduce the every night use of their larger trucks. Michael Wagoner of Cantel Sweeping in Gresham, OR “has streamlined scheduling and passed on some costs where (he) can.”

Government regulations that are cracking down on fuel emissions are also driving the costs higher. Contractors are being forced to retrofit their current equipment or purchase new. The equipment manufacturers are doing their best to produce more fuel efficient and alternate fuel equipment. “Equipment costs today are almost double what they were during our last acquisition cycle,” says Ron Lichtenstein of Algonquin Sweeping and Striping Co. in Walpole, MA.

Additionally, some companies are finding that this is a good time to sell older equipment to those who are investing, and work to pay off debt before investing themselves.

As a contractor struggles to keep his employees working, new insurance regulations and added costs make the price of keeping an employee even higher. Many are being forced to lay off their workers. Others are restructuring their health insurance offerings and this then trickles down to their employees being required to pay higher deductibles and employee contributions.

So you may be asking yourself, is the outlook all bad? The answer is of course not. Around 20 percent of sweeping companies are actually growing their sales in this tough economy. The strong and those who find creative ways to survive will still be standing at the end of this crisis. What can be done to give a guy (or gal) a chance to be in that 20 percent?

One thing that may actually benefit the industry is that contractors are being forced to understand and reevaluate their costs. Windell Brent of Commercial Property Maintenance in Albuquerque, NM is creating a “We’re in this Together” environment with his customers. “We try to develop a sense of working together for survival,” said Brent. Brent has had to revisit his pricing structure to show his part of the cooperative effort. “We had to become more efficient and cut our overhead to compete at lower bidding levels. We can only do this if we know our costs and at what levels we can still make a profit.”

Companies like Griffin Parking Maintenance in Tampa, FL are focusing on buying more fuel efficient trucks and maintaining them better. “We are training all employees on how to be more efficient in working their sites,” says Carl Gardner, Griffin Parking Maintenance. Maintaining these efforts will likely pay off if and when the economy recovers and the industry stabilizes.

Advertising and more focused marketing is another strategy being used. “Algonquin increased direct mailings to coincide with specific opportunities such as spring clean-ups or winter retail bidding season,” says Lichtenstein. “We pushed only our website and our 15 years in business. It seems to have helped us meet our growth targets and add new business.” Algonquin Sweeping also mailed to specific target groups such as landscapers and local colleges and universities.

Although what will be faced in the future isn’t necessarily clear, this is not a time to sit idle and wait for clarity. Now is the perfect time for internal as well as external evaluation. Now is the time for creativity, for branching out by trying new things and strengthening networks because when the dust clears, those who did something will be the ones who swept it up!

About the author: Gregg Blair, Product Line Manager, Engineered Components, is with Superior Tire and Rubber Corp. gblair@superiortire.com. Gregg is also a valued member of the North American Power Sweeping Association (NAPSA).

NAPSA is a nonprofit association made up of 300+ contract sweepers, service providers and sweeping equipment dealers, manufacturers and suppliers. NAPSA is dedicated to providing beneficial support to the membership and enhancing services to the sweeping industry.

NAPSA is committed to promoting and educating the power sweeping community while enhancing the environment. For more information on NAPSA membership, please visit www.powersweeping.org or call (888) 757-0130.

Story by Gregg Blair, Superior Tire & Rubber Corp., Warren, Pennsylvania

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