Cleaning & Restoration Association News

Oh, To Do It All Over Again - Part I

August 10, 2005
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Woulda, coulda, shoulda...


"Oh to be twenty again but with the wisdom of fifty."
-Anonymous

Milestones happen. The days drag/ drift/ fly/ rush by and then you get smacked with another "place in time" - a date that forces you to stop, appreciate on what you have accomplished and reflect on what you would do different if you could do it all over again.

As I write this, yesterday was my 30th wedding anniversary. And no, don't worry, I'm not even remotely qualified to give anyone marital advice. (Even though after 30 years of dealing with me Sioux certainly could!) However, milestones such as this make me reflect on the years where I made so many, many mistakes in business and yet I still achieved success. Avoid these three business boo-boo's from my "Top Ten List" of blunders I made and you will cut years off your success curve.

1. Not buying the very best equipment. I am embarrassed to tell you how many years I wasted scraping along with marginal machines and tools (Including the ill-fated "making our own truckmount" venture that started out with my partner's innocent but ominous question, "How hard can it be?" Trust me, we found out.).

Simply put, equipment prices are so low in comparison to the potential profit margins in this industry it is absurd not to buy the very best stuff. This is especially true when you remember that labor will always be your greatest expense (the most expensive labor out there is your own, because you are so necessary in other areas of your business.). So if you or your employees can work faster/ better/ more efficiently by spending a little more on quality equipment, do it. The increased investment will be paid back many times over the years ahead. And speaking of years we come to Business Blunder No. 2 ...

2. Not replacing equipment often enough. Listen carefully here. The Second Law of Thermodynamics states that "everything in the universe is in a perpetual state of decay." What does this mean to a carpet cleaner? Truckmounts wear out. So does everything else in your company (including you, but look for this point next month). Far too often I limped along with worn-out machines and marginal equipment that could not maintain the pace and broke down, which led to ticked-off customers and demoralized employees. (not to mention adding an enormous amount of stress to my life!).

Once I got smart, I started replacing my vehicles, truckmounts and other key pieces of equipment on a regular schedule. For example, we found that once our truckmounts hit 5,000 hours, it was time to replace them. Sure, I know a lot of fussy owner-operators can nurse 10,000 hours or more out of a machine, but why bother? Especially if you are working with employees, the inevitable breakdowns and "hassle factor" found during those second 5,000 hours absolutely won't be worth it. Still not sure? Let's do some math:

A common target gross in this business is $100 per machine running hour. Remember, this is the actual time your machine is turned on and cleaning carpets. Very likely your numbers may be, and probably should be, higher. But even if we use the low $100 per running hour average, this long-suffering $20,000 machine has generated a half million dollars in volume when it hits the 5,000 hour mark. Isn't it time to give it a vacation by selling it off to someone else?

Thanks to both e-Bay and dedicated Internet sites, you'll find it easy to sell your used cleaning equipment. Add up the money you make from the sale along with today's low interest rates, plus the tax breaks and the increased reliability/ efficiency of new equipment, and how can you not justify the investment? Bonus point: Both you and your employees will appreciate the morale boost that new equipment brings to the company.

3. Running with no reserves. It happened to me far too often. I would construct "the perfect week," with each truck booked solid and each employee working to maximum capacity (and sometimes beyond). Then, inevitably, the phone would ring with a call from one of my best adjusters with a 3,000-square-foot water loss. So I'm standing there with my pants down, without any "reserves" to throw into the battle. My choices are both few and painful:

  • Antagonize my current or next client by postponing or canceling their job.
  • Lose a huge water loss worth thousands, and possibly lose future referrals from my adjuster that could be worth millions!
  • Burn out my employees by asking them to work stressful overtime.

    None of these options work. Any general that would throw all of his troops into battle without maintaining a reserve deserves to be court-martialed. And yet this sad, scrambling-by-the-seat-of-our-pants scenario is repeated thousands of times every day in our industry. Fight back by maintaining a reserve in three areas: equipment, people and finances. Let's talk about each one:

  • Equipment. Sure, all equipment needs to generate enough profit to justify its purchase price and carrying costs, plus contribute something to the general overhead of the company. But think about this. Even if your extra "reserve" truckmount sits parked 28 days per month (unlikely), in just two days of running it will more than pay its keep. Not to mention the positive "Moment of Truth" you create with an insurance adjuster by immediately responding to his call. You also will enjoy the peace of mind from having a back-up machine ready to go in the event of a breakdown. Few things are more stressful than desperately trouble-shooting a balky truckmount with the housewife watching and with three more houses backed up waiting! Been there, done that.
  • People. This one is tougher, as you can't just park your people like truckmounts. However, over the years we did develop some ways to maintain an employee reserve while at the same time keeping a lean company. For example, we generally ran two people on a crew. If needed, one person could be split off to run that all-important back-up truck kept on stand-by. I also tried to book the day a bit light, leaving an hour or two for the inevitable last-minute spotting call or an emergency water damage. What happened if there weren't any urgent calls? No problem: this just gave our people a bit more time to up-sell their current customers and make more money with our generous commission structure.
  • Money. This is a feast-or-famine business. You, however, have obligations year round, especially if you have employees. So establish an emergency fund for your company that will let you continue operating for three months even if your business volume drops 20 percent (if you don't know how much this fund should be then you're not tracking your numbers carefully enough). An easy way to fund this reserve is sweep 5 percent of every business deposit into a separate interest-bearing account. Once you have met this reserve amount, just keep on sweeping that money in and use the excess funds for equipment purchases or replacement (see Business Blunder No. 2). And last but not least, it is just prudent to establish a business line of credit, even if you don't think that you will need it.

    Wow. I'm out of space. But remember to steer clear of these three "business sins" and you will jump start your success! I'll confess more foolish moves from my Top Ten Business Blunders list next month. Hopefully you won't repeat my dumb decisions!

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