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Industry changes: 10 for 10

By:
  • Douglas Freer, CSP
- Posted: August 1, 2015
Ten years ago, my first child was born at the start of Cleveland’s snowiest winter on record, gas prices were flirting with an unthinkable $2 per gallon and the war in Iraq dominated the headlines. Ten years ago I also accepted the opportunity to continue writing for Snow Business magazine as it relaunched with a new publishing partner. Congratulations to the Snow Business staff, and SIMA, for producing the best snow industry trade magazine available. I’m grateful for the opportunity to be a part of the team, and I look forward to the next 10 years. 

Reflecting back on the last 10 years, here are 10 observations and lessons that have impacted me and how we operate our business. 

1. Increased access to training and education
Since SIMA’s inception, it’s only natural that the efforts to expand educational content would have an impact. With the variety and depth of material, including training opportunities, Certified Snow Professional and Advanced Snow Management study materials, and Snow Business magazine - access to information has leveled the playing field.

It used to be that breakthrough-type knowledge or trade secrets resided with a select few contractors who found success after much trial and error. Now, upstart companies gain a faster foothold in the marketplace since they are years ahead of the knowledge curve. The leveling of the education playing field has allowed more entrants into the marketplace, competition has increased, and successful companies must develop better ways to differentiate themselves in the market.   

2. Making the most of your SIMA membership
At my first Symposium (the second Symposium in Pittsburgh), I met some great people and was encouraged to help build the organization by participating on committees and special projects. Ultimately, I came to write for Snow Business. Through the years I have met many people who have helped me grow and improve our business. Without getting involved I would not have had the same meaningful experience. Those who make the commitment and participate to a greater extent will be rewarded in ways that simply can’t happen by paying membership dues alone. 

3. The industry is growing up
In part because of the genesis of SIMA, its growth, and the sharing of information, the industry has become more professional and businesses are better run today. More snow-only contractors exist today than 10 years ago, which demonstrates that snow management is not just an add-on business or afterthought, but a mainstream industry. Beyond the local contractor, there are brokers and regional and national service providers all selling services to the end user. 

4. Price stagnation
Lower or stagnant prices may be caused by any combination of factors. With increased competition, and efficiencies gained from better equipment and available technology, prices have dropped over the last 10 years. While this has helped the end user better understand true costs, many still struggle to understand how much they should pay to receive the services they actually need. Many end users, particularly regional and national buyers, are still trying to figure out how to budget for snow. In some cases budgets have been cut so significantly that they are experiencing service failure because there isn’t enough money left for the contractor to perform the scope of work.

Contractors must find the niche that suits their operational strengths or build new systems to adjust to the changing marketplace. Contractors that choose to treat snow as an add-on service to keep busy in winter are in for a rude awakening. They will find that their cost structure and ability to keep appropriate capacity to meet client expectations will prohibit them from making a suitable or consistent profit given the risk that they accept for entering this industry. 

5. Snow is not a commodity service
Part of the reason for the drop in pricing is the perception that snow services are like any other facility maintenance (FM) service like parking lot sweeping, seal coating, and landscaping, where pricing can be determined by the square foot and many competent vendors can deliver an equivalent service. Technology allows companies to increase their sales reach without necessarily having the capacity to deliver the service, and selling on price rather than recognizing the real challenges that client sites and expectations pose. 

There is no other business like the snow industry. Our capacity is measured in our ability to service all of our clients at or about the same time, within a few hours, regardless of weather conditions. We cannot predict the snow, which makes budgeting difficult. We don’t know if or how much we will profit. What other industry must, on a whim, service all of its clients at the same time? Restaurants have limited seating; the accountant, attorney, and doctor have limited hours in the day; and FM service providers can schedule a construction or maintenance project when they choose to place it on their production schedule. Clients who understand or appreciate the complexities will be less likely to be surprised and or disappointed when reality strikes. 

6. Establish a reputation
When building your reputation, honesty and intentions can best be measured by what you do when no one else is looking. Quick-buck operators will always be around to scalp a few trusting or unsuspecting clients. Their actions make it more challenging for the industry, but it rewards the honest and trustworthy contractors who keep and gain clients based on their reputation. A reputation can’t be purchased. It takes time to build and can be ruined if not managed properly. Check your reputation in the mirror. Ask yourself if people can trust and depend on you. Even in a marketplace with cutthroat pricing, healthy and productive relationships and old-school loyalty are built on mutual trust. 

7. Change the business to meet the market

The market is and will continue to evolve and our businesses must adapt to remain relevant. Doing the same thing because that’s how you’ve always done it might work for a few clients who are just as nostalgic as you - but if you find that your customer base isn’t as deep or broad as you would like, you may need to shift gears. 

For the longest time I resisted providing commercial landscape services, but clients that trusted us and wanted to extend the relationship asked us to service their properties. It forced us to change our operations and client approach, and, as a result, has been beneficial. Rather than continuing to say no because we never provided services for commercial and industrial clients, we chose to say yes and it has allowed us to develop better relationships and extend our business. 

8. Overcoming adversity

Like everyone else, we were affected by the financial crises and resultant loss in sales in 2008-09. In spring 2010 we lost a long-time key employee to health issues. In spring 2011 we had a fire in our building that took months to recover from, and we had uninsured losses. In all of these cases we recovered, and I believe we are stronger today as a result. It’s not how bad the lumps are; it’s how you respond to the adversity.

Our “disasters” forced us to focus on what was most important and stop doing things that weren’t adding value. These experiences helped provide perspective. We will always face challenges, and sometimes day-to-day issues begin to feel monumental. I often recall feeling out of control or helpless as we struggled with cash flow, lack of capacity and issues that came from these experiences. We were able to learn and grow from these experiences, and I believe it’s because we’re optimistic, stubborn, and focused on the priority of getting back to serving our clients to the best of our ability. I’d like to say we are doing a better job today than we were five or 10 years ago, but I know there still is room for improvement. 

9. Shrinking labor market

While I’m not a historian, sociologist, macroeconomist, or politician, I can say with certainty that attracting, hiring and retaining employees is a larger challenge today than it was a decade ago. In the last 10 years the increase in entitlements has resulted in people that we would otherwise hire being more inclined to either drop out of the workforce or find ways to extend generous unemployment benefits into a full-time profession. In other cases, the remaining available and qualified workforce is hesitant to make a change in less certain times and is likely to remain in current positions.

Fighting complacency, a sense of entitlement, and general lack of desire to work has become more commonplace and apparent in our application process. Our largest challenge today and moving forward will be finding and maintaining a qualified, willing and sustainable workforce. We need a younger generation that has mechanical ability and accepts that working in the trades is a viable way to earn a living and build a career. We will continue to hire character and maintain our standards, believing that we will attract people who share similar values. We have to fight the urge to hire anyone just to make roll call. We have been burned by not doing our due diligence in the hiring process - we could have spared ourselves the pain had we been more thorough in our background checks and assessments. The temptation to lower standards in a tight labor market are ever present. I remain optimistic and I certainly appreciate more than ever the people who are willing to do the difficult work that our industry requires. 

10. National service management companies

Ten years ago, national service management companies (NSMs) were forging new inroads into the snow market. Today, they manage and subcontract a vast portfolio of national and regional properties. NSMs offer a compelling value proposition to the property owner, potentially saving their clients money through outsourced and centralized facility management services. 

However, as the NSMs jockey for position to win new work and ensure they have a revenue stream, they often compete on price and forgo client education and the difficult conversation about the true cost of providing their clients’ scope of work. As NSMs compete, prices have dropped precipitously and work is often being reverse engineered by the contractor on the property to meet the actual spend.

NSMs rely on their contractor network, but with prices getting so low that qualified contractors are turning down work, NSMs are often lowering their standards and bringing on any contractor who claims they can do the work. The NSMs are making commitments to clients they aren’t prepared to or aren’t always able to keep because they don’t have the budget to pay for the actual scope of work. National management companies have their value in the marketplace, but until they are willing and able to stand up to their clients and explain the true cost of providing snow service, the client will continue to experience failure when unqualified and underpaid contractors are either not able or unwilling to do the work at the rates they are being paid.
 
Douglas Freer, CSP, owns Blue Moose Snow Co. in Cleveland. Contact him at doug@bluemoosesnow.com.
 
 
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