Where would you cut costs? Or NOT cut cost? Why?

[Beth n Rod 1,279]

If you had to look for ways to save money, what costs would you cut FIRST and why? What costs would you absolutely NOT cut? Why? Please explain int he thread... :groovy3:

Beth :)

[Celeste 341]

We would absolutely NOT sacrifice anything that would compromise our quality, so I guess cutting corners on products is out.

Lots of little "cuts" could make a difference so maybe re-evaluating phone plans, being more careful how to route jobs & estimates, making sure that whatever we have printed this year will be something we can use in a different arena next year, slightly smaller ads if we choose yellow pages.

I guess none of those are as much cuts as just better money management.

Well - I did ditch the lawn guy - we'll be cutting our own grass this year :)

[Mike W 14]

We would absolutely NOT sacrifice anything that would compromise our quality, so I guess cutting corners on products is out.

I have to agree that quality should remain a top priority. I have been taking the impala instead of the truck to do most estimates. There is a huge difference in gas mileage. Inventory levels are also kept to a minimum. This way money is not tied up in excess chemicals and spare parts. I have also changed my advertising to more effective focused groups. I am not saying I cut back on advertising, just making it more effective.

Many little cuts and streamlining procedures are in place to make this a good year. Deciding not to purchas a new computer and other office equipment is another huge cost saved. I want them, but I don't need them.

[Beth n Rod 1,279]

Keep 'em coming guys and gals!

Beth :sunshine:

[PressurePros 249]

• Purchase used vehicles outright.

• Don't buy more equipment than you need.

• Refine your advertising to what works. Do this by tracking results. Don't fall for every form of advertisment that comes down the pike.

• What Celeste mentioned about routing

• Pay one crew leader well, his/her helper substantially less.

• Buy in bulk

• Systemize your operational techniques to be as efficient as is possible.

[Beth n Rod 1,279]

Great points Ken! :)

Beth

[Tegrey 121]

Ken said,

• Purchase used vehicles outright.

• Don't buy more equipment than you need.

• Refine your advertising to what works. Do this by tracking results. Don't fall for every form of advertisment that comes down the pike.

• What Celeste mentioned about routing

• Pay one crew leader well, his/her helper substantially less.

• Buy in bulk

• Systemize your operational techniques to be as efficient as is possible.

I say Ditto! LOL

1. We do purchase new vehicles, to eliminate maintainance, Plus we get GM Discount.

2. We purchased one new car,for estimating, 30-35gpm, One large sprayer for three buildings we will do soon, they paid for it.

3. Cut our advertising by 2/3 this year. Added a web site.

4. Always buy in bulk if possible.

5. Learn what your competition does. They will save you money.

Thank You.

[Beth n Rod 1,279]

Any others?

Beth

[FCPWLLC 233]

A different spin.... I have simply been raising my prices. Increased Revenue has essentially LOWERED expenses as percentage.

Just something to think about.

I have friends that fret over money much differently than I do. They are spending time and energy trying to figure out how to cut expenses or to save more. I tell them that the same time and energy used could be used to figure out how to Make more money versus how to spend less.

[MMI Enterprises 289]

Cut recreation for sake of wearing more DIY hats, route consolidation and leaving trailer behind when possable.

No chem, supply, or tool cuts..they are what makes for increased production. Nothing wrong with increasing research and shopping though to obtain equivelent stuff at cheaper cost...

[Scott Stone 604]

• Purchase used vehicles outright.

• Don't buy more equipment than you need.

• Refine your advertising to what works. Do this by tracking results. Don't fall for every form of advertisment that comes down the pike.

• What Celeste mentioned about routing

• Pay one crew leader well, his/her helper substantially less.

• Buy in bulk

• Systemize your operational techniques to be as efficient as is possible.

1. I disagree, FOR AN ESTABLISHED CONTRACTOR, I buy new vehicles. We put an average of 3000 to 4000 miles a month on a vehicle. One day or night down because of a breakdown is far too expensive fo rme to justify the risk of a used vehicle. Just one night every three months would more than pay for a truck payment, if you have to have a truck payment. Additionally, there are tax credits that lower the effective price of buying a new truck, if you are wise with you purchase. Imagine an effective price of $14k for a new 3/4 ton pickup with a full warranty. Well worth it to me.

2. I agree wholeheartedly with this. There is nothing worse than equipment that is sitting. I also have stopped buying used equipment. Every time I do, it ends up costing far more than the money that I saved.

3. Down economic times are not the time to cut back advertising. You want to make the investment and advertise more. You will notice that when major stores are getting ready and or have filed bankruptcy, their advertising is at least sustained, if not ramped up a little bit. Cutting back on ads is a VERY false economy.

4. Agreed, Routing is important. Most of my jobs for my crews is arrive and set up one time, and it will take all day. That is the way I like it, and it really improves efficiency, but it is not possible for everyone. The one or two nights a week where there is a series of stops, I do them. It is worth it to me, because these are easier accounts, and it shows my guys that I am doing the same type of work they are, and it does create loyalty. Additionally, I also take the crazy yucky jobs, instead of sticking them with them.

5. I pay all my people well. Just the way I roll. It actually works outt o a percentage of the job, because that is how I figure the job. They are paid hourly, though. So, to make it clear, I Figure out how long the job will take in manhours, multiply my manhour rate by a set number, arrive at the price. I want all my people to be able to buy a house.

6. Buy in bulk, as long as you are going to be able to use the bulk in a reasonable amount of time. I do not like storing stuff for months, or years. The only exception is parts, mainly because I can get them for a quarter of the cost that I can buy them locally.

7. Absolutely, develop a routine and be absolutely a jerk that it be followed to your specifications. It reduces errors, injurys and problems. I also make it imperative that I receive a text message or phone call that tells me each day what was accomplished, equipment problems and the hours worked. Even with a time clock and defined task, I get the text with all this information.

But then, I roll different than a lot of people.

[PressurePros 249]

Scott, I only run 4 crews and will probably be lucky to break $400,000 this year in gross sales. If that number hits a million+, I will probably still buy used vehicles and I'll tell you why. Its not about being established, its about down time here in the northeast. In Arizona and in commercial work, you guys work year round. I shut down operations from mid November until the second week of April. If I had four new trucks I would be making payments on them for 5 months when they sat and earned nothing. That would be approx $8,000 out of pocket for vehicles doing nothing. If I were to buy them outright that would tax my company cash flow even worse. Again five months of down time paying vehicle loans would be equivalent to buying a ton of inventory and sitting on it. I can use that money to advertise and create 20 times the revenue I would be paying in interest payments on a loan. I prefer the mid route and purchase outright something that has already had majority depreciation. Yes there are tax benefits in terms of new vehicle depreciation, but they aren't nearly as much as the actual real world $$ depreciation on a vehicle when viewed as an asset on your P&L.

I think many get hung up on he word "used". Not talking about some Sandford and Son P.O.S. that you have to roll down a hill and drop the clutch to get running. I'm talking a four year old vehicle that has 45K miles on it. I use vehicles even older than that. They look great and they are maintained. I have zero down time other than oil changes and inspections. I do understand that statistically I have a greater chance of one of my vehicles breaking down but those stats do not translate into a small business like mine. Now if I ran 30 trucks that all needed constant duty, I may be playing against the odds.

Another factor for me is that my trucks all travel within a 15 mile radius. The vehicles are not taxed with excessive miles. Add in that we use massive amounts of sodium hypochlorite, caustics, acids and oil based stains and the insides of the vehicles get beat up quickly. This is why I don't lease. These are the things that make my decision sound for my business model. Each owner will have his/her own set of criteria upon which to make a decision.

Employees:

I pay my crew leaders $18 per hour and their helpers get $11. I pay my operations manager $42,000 per year. The crew leaders have valid driver's licenses, get drug tested, fill out all paper work, meet and greet customers, keep truck inventory, and log everything. Most of these are school teachers, off-duty cops, firemen etc. The other half of the crew comes from further down the labor pool. Outstanding warrants, no vehicle, no license, etc. They are interviewed and screened but with less of a discerning eye. They roll up hoses, keep grounds wet, haul equipment, etc. I think they are paid very well for their skillset.

Equipment:

I wholeheartedly agree about being very wary of buying used equipment. The stuff we use is too fragile and there is no way to know how rough that 500, 1000 or whatever hours was on the equipment you plan to purchase. I think I mentioned this a couple of years ago on here and some people scoffed.

Michael mentioned a great point about raising prices. Though to me, a combination of both raising revenue and cutting costs is where all business owners should lead themselves. Advertising is the key to ROI for a business. Not only should one do it, but they should track meticulosly where leads are coming from. This is how a new business can go from spending 25% per year on advertising to under ten percent once they get established.

Which leads me to one of the greatest cost cutting techniques which I failed to mention. Stay in contact with your customer base. You will be blown away by how much repeat business and referrals will come your way. If you are pricing and selling right, the referrals you receive will be more high quality customers. I believe not staying in touch with past customers is what many companies give away as the single greatest gift of being in business for 5+ years.

[Beth n Rod 1,279]

Scott, I only run 4 crews and will probably be lucky to break $400,000 this year in gross sales.

That sounds waaaay off to me....

Beth

[PressurePros 249]

Would you think more or less? Each crew averages about $800 per day. I figure between 375-400. Broke 300 last year with three crews running. We also had near perfect weather last year.

[Beth n Rod 1,279]

You're low. That's all I am willing to say. But if it works for you, that's great. :)

Beth

[PressurePros 249]

Hell no, that doesn't work for me. I am working on efficiency but there is definitely something holding us back.. probably me. I am anal about details and I think it is slowing everyone down. If you guys have some ideas to help, I'd gladly shoot down there and take a tour with Rod. I added a 10 gpm machine this season, that may help. In fact I am probably going to order two more as it is working out very well.

[Beth n Rod 1,279]

Best thing I can suggest is look at the number of sq ft per hour your crew is covering in all phases of work. Also look at what you charge per sq ft.

Beth

[5 Star Johnny 14]

Ken, excellent points as usual. You & I have spoke several times, and we have a similar business model & personality. I agree with the vehicle, advertising, equipment & inventory comments whole heartedly. One thing I would add is to try to negotiate better terms with your suppliers. We purchase much of our product from the local Sherwin Williams, and have negotiated good pricing structure and extended terms. Obviously this helps with cash flow, especially during season start up. To establish better pricing we gave them our yearly estimate of purchases, and they are making a bulk purchase and holding the inventory. This goes a long way in saving costs by avoiding in-house inventory levels. Plus, we know we don't have to wait for product when we need it.

We have also raised our prices to offset fuel & material costs. Because our competitive pool is fairly small & there's no real "pricing standard", so most prospects don't know the difference. The one major concern I see in cost cutting is "free" estimates. While I have no intention of charging for an estimate, it still costs me a ton to drive my F250 diesel from house to house. While I'm usually proficient in "routing" my appointments, there's always the occasion where that's impossible. I am considering purchasing something more fuel efficient for this purpose.

Equipment repairs & replacement are one of my biggest gripes. Last season we had few repair issues and our regular PM costs. This season, I'm already double last years' repair costs. My guys kinda' smirk at me when I bit*h about a $10 or $30 piece of equipment that gets wrecked due to negligence, or a $9 brush that's unusuable too soon because they didn't clean it properly. This is one area I'm determined to cut costs this season. We have a fairly dedicated staff, and we communicate our business goals with them (to a point), so they understand the complete vision. However, the cost of replacing tools & equipment still seems to escape them. I've considered payroll deducts for damage resulting from direct negligence. Beyond that, I'm not sure what to do.

Creating efficiencies through improved process usually relates to direct cost savings. Like Ken, I too have a hard time turning over responsibilities to my staff, or taking advice from them. I have lately been inviting their suggestions about efficiencies, equipment, etc. more, and have had favorable results. It also gives them more ownership in the company and their tasks. We recently completed a large commercial interior cleaning, and things were going a bit slow. An employee offered a different process idea and things sped up greatly. What could have ended up as a 2 - 3 day run over in estimated manhours, resulted in just 1 day over the estimate.

All in all, I don't see a large down turn in gross revenue for this year, and actually anticipate 30% growth. However, cost savings will be vital for acceptable profit levels. It doesnt' pay to increase sales 30% if there's no profit return. My .02 worth. Have a great year!

[PressurePros 249]

Hey John, great to see you over here.

Another way I cut some recurring costs this year.. bartering. Two house washes got me 100 silk screened, double sided, 4 color, Hanes Beefy T's and 2 inspections and 4 oil changes.