Wednesday, July 22, 2015
During his teenage years, Clogg was hatching ideas from his parents’ home in Farmington Hills, Mich. In his senior year, he got a taste of the landscaping industry, starting up BBC Lawn Care with two friends, followed by Troy Clogg’s Lawn and Snow Co.
“He was always a little bit more motivated than the other kids,” says Greg Counsell, who went to high school with Clogg and is now his shop manager. “It was all pretty small-time back then, basically a gang of push mowers, trying to make some extra money. I never would’ve thought it would be a career.”
Clogg may not have planned on a career, but he knew how to work with others to reach that short term goal, says his father, Bill Clogg .
“Even as a kid, he used to be sort of a leader of all the neighborhood kids,” says Bill. “He’s always been that way. He’s always had his own thoughts and ideas of how to do things.”
Clogg and his friends wanted to make some money, and Clogg had the business instinct needed to figure out how to do it, says Bill. Not only was he creative with the tools that were available, he enhanced his own product through observation of the people he thought did it best.
“He’s a very creative individual,” says Bill. “He watched what the professionals were doing on baseball fields before he started out. He took that and learned from that, using that for his customers.”
Business slowed down for university, but Clogg decided he had borrowed enough money and came back to his growing business to refocus. Building the company was less a passion at the time and more a way to pay the bills.
“I don’t have any romantic way to say it,” he says. “I got in the business to survive. I never intended to make a career out of it. When I started out, I just sat down and tried to make more money than I spent.”
He brought in employees and bought his first house in 1986, which doubled as the company’s operation’s center, now known as Troy Clogg Landscape Associates, through 1989. Though he and his friends were just trying to survive, Counsell felt pressure not to rely on Clogg’s business instincts. “My parents were really not happy about it those days. It was just two or three guys and a couple of lawnmowers,” he says. “We did our lawns, then fixed our equipment and went home. It was really hard work; lots of long days.”
Clogg built a five-year business plan to clear his debts and get out, looking for something else upon which to build his career. Five years later, though, he was married and supporting his wife and first daughter, Kristyn; no time to switch gears without some solid plans for providing for his family. With Counsell and others depending on him, he carried the load of bringing in the business that would help sustain them even outside of work.
“When it was just us, Troy was always out trying to sell work. He was working our books and just trying to get us more,” says Counsell. “Even after the work was done, he still stayed it pretty hard. He would have fun, but he kept at it.”
Clogg made another five-year plan, still intending to leave snow and landscaping once something else was in place. Partway into that plan, he realized that maybe he was in the right business after all, when he saw success and started getting more customers.
“There were some days in snow where we’d be working 30 hours in a row, just us couple of guys,” Counsell says. “We’d finally get done with one job and think we were going to finally get to go home and Troy would’ve just gotten a new condo site we had to go hit. He just pushed and pushed us, but it’s good he did. He was like an ex-Marine sometimes.”
As Troy Clogg Inc. grew, it moved to Wixom in the mid 1990s. The snow and landscaping business has grown from then on, adding employees and customers. While he didn’t go looking for success in the snow removal industry, it had started to find him, and he noticed a chance when he saw it.
“He had the foresight to see that he could develop the company into something very good. It’s great to watch and be a part of it with him,” Bill says. “We’re very proud of the work that he’s done.”
As a businessman, he is constantly reaching for new ideas and prospects, some successful and others less so, but always exciting, says Dan Weingartz, a vendor and friend who has served with Clogg on several industry committees.
“Being conservative is not him,” he says. “He’ll make more mistakes, but it’s because he’s always looking for ways to get better. He’s got a very entrepreneurial spirit. You never know what it’s going to be, but there’s always going to be a lot of energy behind it.”
His reach outside the company extends to land development, hunting equipment development and green resources. At one point, he even worked with a team on a robot lawn mower.
“For the amount I’ve spent in failures, I probably could’ve gone to Harvard,” Clogg says. “But it’s been good. I’ve met good people and had great experiences. When I’m looking at trying something new, I’m usually thinking, ‘Why not?’ When I’m telling my life story when I’m 90, I don’t want to say ‘Well, I thought about trying this, but never did it.’ I’d rather give it a try. I’m happier than ever with that.”
Seeing different plans come and go with different results has been a staple for Counsell. The variety may not always bring in money, but it improved Clogg’s business savvy.
“Clogg is a really smart businessman, and he’s learned a lot from the school of hard knocks,” Counsell says. “What makes him different is that he’s just managed to retain and reapply everything he’s learned. He’s able to leverage and spin things around. Because of him we’re working with people that 15 years ago we could never have done.”
Beyond his ability to learn from mistakes and see potential, Clogg capitalized on his personality as the company grew, reaching to the community around him and building business even in unlikely places because of a personal connection.
“He has become the people person,” Counsell says. “That’s his forte. There’s no question about it, the majority of our work comes from him knowing people. He just tries anything and does things differently and wacky things that people remember him for.”
“Clogg has always been very innovative in how he grows his company,” says Weingartz. “He really puts a lot of heart and soul into it. It’s really an extension of himself.”
In the industry, he gets involved in boards and industry groups. He’s a member of MGIA, SIMA, PLANET/ALCA and TEC, an international organization of CEOs. He contributes articles to several magazines, giving his advice on how to grow a company. His work has won awards from local organizations and industry affiliates.
“In these boards and in the industry, he really thinks outside the box. He challenges what we thought originally,” says Weingartz.
Clogg coaches his employees to grow and learn the business from the inside out. He keeps his door open to employees that want to ask questions, and is eager to help his employees get better at what they do to help the company overall, says Weingartz.
“He’s built it primarily around getting people that understand what he’s trying to do,” he says. “He’s very giving of opportunity. He encourages his people to set goals and then genuinely helps them reach those goals. He helps people make their own business inside his business.”
Pushing employees and helping them grow is another part of his business instinct, says Counsell. With all the freedom to move and build business, it urges employees to better themselves, which makes a better business overall. “We have so many resources to use, and there’s an awful lot of opportunity to be had here. There’s a lot of backing and connections to the industry,” he says.
Though he’s always building new strategies, one of Clogg’s most recent projects to help his employees grow is a nearly-complete system to teach them the best ways to make their own sales to customers.
“That is really much more fulfilling than my own sale,” he says. “Years ago, I had to teach a guy how to use a weed whacker so I didn’t have to be the one doing it. Now I feel like I’m really contributing with this. It’s nice to hear from a customer, ‘Yeah, Clogg, we’ll have you again this year,’ but it’s so much nicer to hear that one of my employees can do it.”
Helping his employees improve is about giving back to his group, but also delivering the best product and customer service, says Counsell.
“We’re a great group because of his drive,” says Counsell. “He likes to be on the top. He doesn’t want a truck with his name out there doing a bad job. He wants it done right and the customer happy.”
“We’re not alone in this market, obviously,” Clogg says, “but just to be one of the names out there, to be one of the ones with a reputation for doing stuff right, for being fair, and for always being there for the customer, I’m okay with that. I want to give back, as much as I can help out. I’ve mentored and coached up and coming contractors – I’ve got an open door policy for advice.”
One element that helps Clogg train his employees is the length of time they’ve been around. Though Clogg lives out of Grand Haven with his wife, Linda, and the most current in a life-long line of companions, Lucky, his rescued dog, many of his workers have been with him for years, and he considers them family too. “Everybody really cares about our success here,” says Counsell. “There’s a core group here, and without any one of these people, this just wouldn’t work.”
According to Clogg, they’ve been through some tough times together, both personal and business, and even when he wasn’t at his best they rallied around him. “I’ve grown close to my entire team,” he says. “It’s a really heartfelt thing. I’ve really got great people all around me. For me, all that stuff is really important. I wouldn’t want any part of running this business without my key people in there. Relationships are really the only things you have that survive the test of time.”
Though he might seem free-spirited in his business decisions, Clogg is more than steadfast when it comes to family, Weingartz says. “He’s the kind of guy, when you get to know him, he would do anything for you.”
Beyond that, the relationships from the business to the community aren’t just about a contract to Clogg. He is always contributing to the community, whether by donating a truck for a parade or planting the flowers at a local elementary school every year.
“He returns,” says Counsell. “That’s part of his personality. It makes him happy, being the guy that gives back.”
Beyond business ethics, being involved in the community holds the company to a higher standard.
“There’s always something going on around here,” says Counsell. “And you’ve got to follow through after all that PR. When we’re out in the community it means we have to work to rise to the top and do everything to the best of our ability.”
Being a part of the community is about more than encouraging his employees to perform better for Clogg, he says. “Giving is just the right thing to do,” he says. “If you don’t give, you can’t receive. When you give back, you make better people, which make a better community, which make a better country, which make a better world.”
Thursday, July 16, 2015
Ideally the perfect site is one with the drains and the low elevation around the perimeter where melting snow can drain harmlessly off the site. For those who do not have the ideal site, pushing snow to the perimeter of the site can lead to certain issues when that snow melts and the snow melt drains back across the parking lot to the drains which are located at the low areas. But there are some things you can do.
Plan of attack
Much of what snow and ice management professionals do is repetitive from year to year. Things change and your operations can be improved. Since a lot can happen in a few months, one of the ways of streamlining your operations and reducing your potential liability is to identify (and learn from) as much as possible about the sites you are hired to service and how those sites affect your operations.
As part of your snow response plan for any given site, one of the things to look at is maximizing the efficiency of the plowing effort. Another is how that work can affect your liability. Thinking through as many of the possible winter weather scenarios may be helpful. Different types of snowstorms and snow conditions have an effect on what you have to address. This is governed in large part by the weather. It’s not just moving the snow. It’s how and where the snow is stored and the conditions that affect that snow once it’s moved.
One method is to use a map to identify the basics of what is included and how to address them. Maps are a good way to look at the big picture and identify obstacles, drain locations, plowing proprieties and snow storage locations. Maps can also be used as part of a risk management program. A map of each account allows the snow removal professional to be proactive and document conditions on the site that may be the owner/property manager’s responsibility. Aerial photography of each site is readily available on the Internet from Google Maps or Bing. These can be analyzed for obvious site drainage issues. This mapping also provides a good method of documenting decisions made by the owner/property manager.
Your liability may be affected by site issues, but it is not your job to correct them. Identifying and bringing these deficiencies to the attention of the property manager should be considered so as place the liability where it properly belongs. Here is another benefit of a preseason walkthrough of the site with the owner/property manager.
A preseason walk-through is the opportunity to put the property manager on notice of the issues and take photographs of the problem areas so that it can be coordinated along with the terms of your contract. The benefit of doing a comprehensive preseason site inspection is you can identify these issues and hopefully have them corrected before the first storm. If not, you have put the property manager on notice about the issues which may help form another line of defense in the case of the slip-and-fall where you’re brought into the case. Where the owner/property manager directs how the snow is to be moved and where it can be stored should be clearly documented, with any concerns identified.
Another reason for considering annual site inspections is that while it may not look like much, the site may have changed since the last time you were there. Where an owner/property manager has to cut a trench through a parking lot for whatever reason, the site drainage may change. It may seem like a small issue, but the patch area now causes changes to the drainage which may affect your work and liability.
Pedestrians can rarely sue for active and ongoing snow conditions. In some jurisdiction, they even be may be legally precluded from this. Typically pedestrians do not slip on the water resulting from drainage of melting snow. A more typical scenario is a slip-and-fall due to melt and refreeze. Anywhere melting snow can drain, collect and refreeze presents a problem for pedestrians. Some of the physical conditions may not be your responsibility. They should be identified and addressed with the owner/property manager.
Since the job snow professionals are hired for is to remove the snow from a particular site to allow the owner/property manager to run their business, the first obvious question in addressing this work is, “What to do with the snow?” Most owner/property managers simply want the snow cleared from the parking lot to allow customers to come to the property. They rely on the professional snow removal contractor to do that in an efficient and cost-effective manner with the resulting conditions being safe for their business. Is there enough room to store snow on the site?
Another issue is what happens to the snow after it’s removed from the parking lot and sidewalks. This is a subject that many times gets little thought. In a recent investigation, after moving snow near to some site drains at the low elevation of the parking lot, the owner/property manager, in an effort to free up the parking spaces, directed the snow removal contractor to locate the snow at the perimeter of the site, a higher elevation next to a municipal sidewalk. Because of a lack of follow-up, the resulting fall due to melt and refreeze was completely foreseeable.
While no single strategy will prevent the snow and ice management professional from being involved in a claim, getting the owner/property manager to sign off on the recommended or directed storage location may assist in defending a liability claim, should someone be injured due to the conditions.
For those of you have been following my column, you may recognize a couple of reoccurring issues that affect your liability: notably drainage and site conditions. The way a site naturally drains should be taken into account when locating snow storage areas.
As pointed out by a trial judge in claim I was consulted on several years ago, snow melts. While simplistic, it is a true statement. Unfortunately the judge’s observation missed the point this drainage will inevitably refreeze with subsequent winter weather conditions. More importantly, where this occurs on a foreseeable pedestrian walking surface, who is responsible for the resulting slippery conditions? This scenario is exactly the cause of many winter slips and falls. This is also exactly why knowing the site drainage and where potential problem areas are is so important.
The positive side is the site drainage is readily foreseeable. Simply going out to the site after a rain will provide solid indicators of how the existing site is draining, where water collects and where icing problems are likely to occur. As addressed in some of my earlier columns, since some of the drainage starts at the roof, this is one area where snow removal profession should be looking at to identify potential risk to their business.
Risk management consultant Julius Pereira III owns Pereira Consulting in Chadds Ford, Pa. He is a frequent Snow Magazine contributor.
Thursday, July 9, 2015
While the man and his company have a long and storied past – receiving countless awards and honors – it is the future that drives him.
Founded in 1959, Frank has been in snow removal services since about 1965. He got started by adding the winter services to his landscape maintenance offerings for existing clients. It expanded greatly from there.
The typical Wisconsin snow season, in terms of precipitation, starts somewhere around the middle of November and ends by mid April, although the team’s preparation for the season – equipment, renewals and material acquisition – starts in earnest about July 1 each year. “Our firm is a leading landscape architectural, construction, design-build, maintenance, interiorscape, irrigation and nursery full-service firm, which fills in a lot of time during the other eight months of the year,” he says.
When asked to pin down his favorite season, Frank was unable name one. Instead he looked at the professional demands of each, rather than taking a view from the entertainment angle or ease to navigate. “I enjoy all seasons,” he says. “There are different challenges in each season and I truly enjoy the changing challenges.”
Terry Wakefield, chief executive officer of The Wakefield Co.s, has worked with David J. Frank Landscape Contracting for more than 25 years. When he built his award-winning Wisconsin golf course, The Bog, he had Frank provide services on the project. But the relationship goes much deeper and has been in place for much longer. The two have known each other since they were 7 years old and began mowing lawns when they were 9 or 10 years old.
“It was the beginning of David J. Frank Landscape Contractors and he never stopped,” Wakefield says.
Wakefield continues to work with Frank, not because of friendship, but ability. “What a lot of people don’t know about David is that he understands agronomy and has invested a tremendous amount of time in horticultural education,” he says. “His baseline of knowledge sets him apart from other landscapers.”
Knowledge aside, customer service and the personal touch means a lot, too. “He takes a very direct interest in the work his firm does,” he says. “I know it’s a very large company, but he’s totally invested in this business personally, which sets him apart. If there’s a problem, he responds immediately.
“He has very strong interpersonal skills,” Wakefield adds. “He interacts with people directly, looks them in the eye and is a good listener. He wants to know what pleases his customers and responds very well.
Monona Terrace Community and Convention Center in Madison, which was originally designed by Wisconsin native Frank Lloyd Wright, has employed David J. Frank Landscape Contracting for more than 10 years. According to Jeffery Griffith, Building Maintenance Supervisor at the facility, Frank’s company offers the expertise Monona is seeking.
“We demand a high level of quality and demand it on a daily basis,” Griffith says. “They are able to provide that for us. Everything we’ve asked them to do, they’ve done exceptionally.”
Based in Germantown, but with branch offices in five other locations, David J. Frank employees approximately 350 full-time people and hires additional part-time staff as needed. While the percentage of snow services is largely commercial (95 percent or more), the company does leave room for select residential opportunities.
“Our preference tends toward commercial,” Frank says. “We own a lot of larger equipment – wheel loaders; two-, three- and four-axle dump trucks – that is really unsuitable for residential work. We tend toward commercial as it matches the equipment and much of our client base.”
As is the case with most successful people, there is a strong network of support surrounding the company.
“My family plays a key role in my success – always having been very supportive and involved,” Frank says. “For more than 40 years, my brother Mike has run our landscape construction department and is really the ‘snow czar’ within our firm. He directs the snow production end of the business. I get more involved in the sales and marketing end of the snow.
“Several nephews are active in the company,” he adds. “My son, David, is chief financial officer and my wife, Jane, has been very active in the business and client relationships.”
Mike, chief operations officer, vice president of construction, snow department manager and the younger sibling by a couple years, says he would have joined the company sooner, but needed permission from his mother. Considering his older brother was building the business while he was in high school, Mike joked about the negative ramifications of having a “kid” operate the equipment.
With so much history between the two, Mike says his brother’s willingness to learn from the success and mistakes of those who came before him has aided in the company’s development. “He’s modeled himself after successful people and companies,” he says of David. “He’s always striving to be better.” The next generation – David’s daughter also works for the company – will be in charge of building upon this solid foundation.
Frank’s company participates in approximately 45 separate professional, trade, community and civic organizations – either actively sitting on the boards or in management capacities of these groups.
“We are very active in community service projects, choosing several major public projects to make a difference with,” he says. “I personally have spent about 15 years on the board of directors of the Wisconsin Landscape Contractors Association and went through all of the many committee head positions and all of the chairs, retiring as president in 1988. Frank has also been on numerous PLANET committees through the years, including the insurance, safety and awards committees.
Kurt Bartel, production manager in charge of maintenance division, joined David J. Frank in 1989 and rattled off a laundry list of his boss’s charitable contributions. From donating time and equipment to beautifying community parks to restoring the inner city, Frank is taking an aggressive stance toward the city’s improvement. “He’s one of the leaders of the community and is dedicated to keeping Milwaukee beautiful,” Bartel says.
In addition to helping the less fortunate, Mike added cemeteries, high schools, churches, and myriad charitable contributions to his brother’s philanthropic resume.
“As a person, he’s one of the most generous people I know,” Mike says.
Look no further than the David J. Frank Landscape Contracting 50th anniversary party as yet another example. Knowing there were going to be hundreds of people in attendance, the company set up a clothing drive, food drive and had a blood bus on hand for those wanting to make a potentially life-saving donation. The focus of the party was on celebrating a half century in the business, but the true beneficiary was charity.
“He built this company in one, single generation,” Bartel says. “It’s his life and I’m very thankful for the opportunity to work for David.”
While it’s not “wind them up and watch them go,” Frank puts a lot of faith in his work staff. It starts with bringing in the right candidates to the fold, giving them all the tools to succeed and being there to assist when help is needed.
“We work toward hiring the best people we can find, doing an excellent job training them, and providing support, encourage, respect and recognition to promote a motivational workplace,” he says.
Bartel reiterates Frank’s approach, saying his boss’s dedication to clients and his drive to be the best exemplifies this philosophy. “He’s driven by his employees and committed to a quality staff and surrounding himself with the best people,” he says.
Mike says his big brother is a planner and speaks of his management style in terms of teamwork. “He tries to create an atmosphere where everyone around him is successful,” he says. “We are 250 people being successful and working together.”
Speaking of teamwork, Mike recalls how area football coaches liked his brother employing many of his players during the offseason as they were growing up. Not only did the student athletes stay out of trouble, but they also began the preseason in great shape from pushing mowers all summer.
In a career that has extended through six decades, Frank has seen – and overcome – plenty of challenges. Competing with cut-throat competition – those who will stop at nothing to win a bit, though often fall short in delivery – is always difficult. Beyond that, it’s legal involvement that tends to rear its ugly head – such as hold-harmless clauses – provisions in the contract under which one or both parties agree not to hold the other party responsible for any loss, damage or legal liability – his customers are more frequently asking the company to sign these days.
Over the years, there has been far more positive than negative, of course, and Frank is quick to spin any possible hurdle into an opportunity to learn and grow. “If there is a disappointment, our philosophy is that it is possibly a great opportunity or stepping stone to ongoing success once mitigated,” he says.
Making lemonade out of lemons is one recipe for success, but those looking to build an award-winning business such as David J. Frank Landscape Contracting within the green industry should get involved.
“My advice for a person looking to get into the business is to join your local and national trade associations that promote education, best practices and professionalism such as PLANET, SIMA and local groups,” he says.
Tuesday, June 30, 2015
Oh yes, the rough winter also meant many clients were not prepared for the financial implications of almost daily attention to their properties by contractors struggling to keep driveways, parking lots and walkways clear of snow and ice.
“We had a tremendous amount of snow last year,” says Stephen Summer, president and CEO of About Time Snow, “and clients were overwhelmed with bills if they aren’t on a seasonal contract and they had to bring back upcharges to their tenants. It doesn’t make the tenant happy and that’s where conflicts come into play.”
Except for the Pacific Northwest, the above normal snow, ice and cold temperatures had a national footprint and affected pretty much everybody. “This was an unusual winter and nobody got a break,” says Kevin Smith, COO of Ferrandino and Son.
Contractors were left chasing the money, never a fun task when they have already transitioned into warm season tasks of landscaping, lawn and property maintenance.
By mid-summer, Mark Krog, president of KCG Management, was still dealing with the ramifications of the challenging winter for his clients.
“Some efforts to collect are still ongoing and other clients are paying very slowly. We have a customer who has been with us for three years,” Krog says. “We never heard a complaint, but as soon as we went over our cap and had to bill the client extra we were told after the event that they were not happy with the service and did not feel that they should have to pay for it.”
The uncomfortable situation happened three times in a row and the fourth event had Krog personally going to the site and helping the crew.
“Everything went flawless,” he says. “I was not expecting a phone call and my guys said there was nothing different they were doing. Two days after the bills were sent I got the phone call and the customer stated we were late, had missed areas, and he did not feel that it was a good job. He even said there was a different truck on site and that’s probably the reason that it did not go the same way. I explained to him that the odd truck was me that I wanted to see for myself the `bad work.’ He was sort of speechless, needless to say, and we continued to do the work.”
Long story short, Krog discovered the client simply didn’t have the money to pay nor wanted to pay extra. The matter will likely end up in court and the customer removed from the client list. It’s a worst case scenario, certainly, but it happens.
Summer shies away from suing a delinquent client, but will begin the process if need be. He uses what is called a mechanic’s lien against a property, which provides him with some leverage because the lien handcuffs the property owner to some extent.
“The owner gets a notice of a lien and gets upset and hopefully the issue gets resolve,” he says. “Suing is a big headache. Occasionally, if there are no issues between ourselves and the client, we will negotiate from time to time on payment.”
Summer estimates only one percent of his clients become dangerously delinquent or unresponsive to their contractual obligations.
Snow and ice contractors have an obligation to both their employees and their vendors to pay them in a timely manner so they can supply quality work and supply product as needed in these crisis situations, says Tom Canete, owner of Canete Snow Management.
“Customers may not be aware the impact it has on a company when they do not pay in a timely manner,” he says. “So, yes, it is very frustrating on all levels.”
Summer finds dealing with clients delinquent on payments personally and professionally disturbing.
“To me, I get a sense that they are saying they don’t have a regard for your business, what you do and how you do it,” Summer says. “They are saying they want to hang on to their cash.”
Krog concurs, “Yes it can be frustrating, but through the years that we have been doing business we have come to the realization that there are very few customers that pay on time. I’m asked why some customers are put at the top of the list. Well, these are the ones who are like a clock in payment. We service all the same but some are put in front of others.”
There’s a fine line between demanding payment and wanting to keep the client happy and on their client list.
“This line is finer now than 15 years ago,” says Steven Jomides, CEO of Lawns By Yorkshire. “It is not common to be paid in 60, or even 90-plus days, but it does occur and at times from someone who may be a good client. Once budgets are hit, the client needs to scramble for a solution that not only suits you, the vendor, but themselves first.”
Okay, so how should contractors deal with clients reluctant to pay?
“Snow removal payments for clients who need snow removal must be like paying for a root canal,” John Debold, a consultant with BCA Financial Services and a past president of the New Jersey Association of Collection Agencies. “You’ve got to pay it and you don’t have really much to show for it--the pain stops. When you buy a television set at least you sit there and watch it.”
Timeliness and accuracy of billing (and a dose of communication) is what will work in contractors’ favor.
“I shout about being timely with billing because there is no set time a person tends to bill,” Debold adds. “Think about it. That Visa bill, that car payment and that electric bill are there all the time, every time, on time.”
By the second month of non-payment “red flags” go up. As to getting paid, Debold says you get more flies with honey than with vinegar.
“Be firm with a smile,” he says. “You need all your ducks in order for all your accounts so you’ll be ready for the few who default. If a debtor finds a loophole, he will crawl into it and sit there.”
Debold recounts an applicable personal story. “Some of the collection process is to appeal to a client’s good conscience and honesty as a businessman,” he says. “I was at a very wealthy man’s house for a Christmas Eve party. His wife had a phone call while she was in the kitchen. It was the landscaper. He wanted to know if the Christmas decorations he put up were working fine. Contractors should make that follow up call. When it comes time to pay the bill, clients will remember that.”
Krog says he had a “good amount” of his customers who spent well over their expected amount for snow removal this year.
“If we don’t hear responses through email or phone calls then we need to take a different approach,” he says. “Nine out of 10 times if your customer is not responding to late notices or emails or phone calls it more than likely means that they are not going to pay. When we have these situations I always like to hear from the customer that either they’re out of money or they don’t expect to pay for the services provided. In the past, I have made the assumption that they were not going to pay and put it with the lawyers for collections. Later I found out that the customer was sick for a long period and that I had just ruined a relationship.”
Krog and his staff are now always polite to their customers. “In my earlier years of doing snow I would get on the phone and lose my cool, which ended up with us not getting paid at all and leading to court proceedings. That took all the profit out of jobs. And even if you get a judgment that still does not mean that you’re going to get paid.”
Smith says spending a few dollars on a part-time employee dedicated solely to billing and accounts receivable can be a matter of being penny and pound wise.
“If you are a small contractor you are probably doing a lot of the billing yourself, all the while being out in the field doing work for clients. All of a sudden, you get behind in your billing and that means it will take longer to get paid, especially if it goes two or three months. The longer the bill takes to arrive at the client’s desk the longer it takes to get paid. It might be a good investment to pay someone in-house to take care of invoices and chase the money, even if you are a small operation. It would be money well spent if it saves the owner-operator time and worry and the employee is good at his or her task.”
Canete’s firm requests payment in a non-aggressive yet professionally assertive way. “We have a mixture of per occurrence and seasonal contracts. Seasonal contracts will obviously help to ensure that the customer is properly budgeted for the season. Our company keeps not only financial records but operational records including, but not limited to, equipment used, labor hours and snow amounts. So any information that a company can’t access internally to help their budget process, we can assist them with our record keeping.”
Constant communication with the client is vital to a respectful relationship, Summer says. In the end, having the customer see the value in your work and paying on time or close to it.
“Around Jan. 1 of this year we expected some extreme weather in the Mid-Atlantic, snow but on top of that close to zero temperatures for three or four days,” he says. “We went to the phones to let our customers know that there would be a horrible event happening and salting at those temperatures doesn’t work. In essence, we lowered their expectations. But what we did was actually go beyond their expectations and had phone calls raving about our service. If we hadn’t been pro-active and in touch with them it could have turned out miserable for us.”
Smith’s firm engages its customers often, sending invoices, then following up with phone calls on a somewhat regular basis to determine if the client has received the invoice and when his firm can expect payment.
“You make them validate your work, you engage the customer to make sure they have no questions as to what they received for their money, and also allow them to ask questions,” Smith says.
An ounce of prevention is worth a pound of cure.
“But when an asset and or property manager is looking to balance a budget, fluff is often eliminated,” Jomides says. “I would assume many managers could be thinking this way; two years ago was an average to slightly above average, last year was defiantly above average, so we are trending toward a below average cycle coming up. This thought process would steer them away from increasing snow budgets. Not to say this is for all, but if I were on their side of the fence, I may hedge toward a below average winter as well for 2014-15.”
Of course, predicting the weather months down the road is a dicey proposition
Some clients will cite property damage as a reason for negotiating a snow removal bill down. “We always take photos of the property before the winter, so any damage can be clearly seen and shown the customer if there is a complaint that our crews did it,” Summer says.
Ask questions of your customers, Krog say, including: “Will your budgets be okay?” “Will this limit the amount of payments we will receive?” “Will our payments be delayed?”
“If we don’t ask then we can only assume, and our assumptions can be completely wrong,” he says. “I would rather know I’m not going to be paid before I spend my monies on labor and material then after its already done and it will only cost me more to receive pennies on the dollar.”
Being open and in touch with customers, asking them to budget realistically, pushing seasonal contracts, meeting and exceeding expectations, following up billing with phone calls, and having someone in-house to chase the money could well make next spring and summer less stressful.
John Torsiello is a writer based in Torrington, Conn., and a frequent Snow Magazine contributor.
Thursday, June 18, 2015
The year was 1976. America was celebrating the Bicentennial, Gerald Ford was President, “Rocky” was the silver screen’s hottest movie and David Dudash was beginning a business that would help lead the snow removal industry into what it has become today.
In his early 20s, Dudash and friend/coworker Guy McIntyre worked together at a landscape company in Northeast Ohio. They’d go out after a day’s work and talk a little about work and a lot about family. Confident in their knowledge of the job, they knew they had the skills to break out on their own.
“No fear,” Dudash says of their decision. “We just jumped in.” Now in his 35th year as the boss, his business – Green Estates Inc. – is an industry pillar and Dudash is recognized as a member of SNOW Magazine’s inaugural Leadership Award class.
“Being recognized by your peers is the most gratifying honor that we can receive,” Dudash says, comparing it to the feeling he felt when Green Estates received the Snow and Ice Management Association’s excellence in business award in 2007 or when the company was prominently featured in various publications for outstanding service over the years. “We have been very fortunate to grow the way we did and maintain the business relationships that we have maintained – from employees to vendors to customers, many over 20 years and one for the full 35 years.
“The only really meaningful thing that Guy and I have to show for ourselves after 35 years in business is our name and reputation,” he adds. “To be recognized by others in our industry for that accomplishment affirms our belief that you lead by example, and that if you don’t have your name, you really don’t have much of anything.”
Building a company
Based out of the Cleveland area, Dudash and McIntyre started with nothing, but bid some snow work and began to grow slowly.
“We starved the first couple years,” Dudash jokes.
According to McIntyre, the early years included Dudash driving while he sat in the back of a pickup truck, holding onto a fertilizer spreader and distributing salt. The company – and equipment – has evolved, but the two of them remain the same.
“I don’t think we’ve changed much,” McIntyre says. “We’ve always done what we says we would do.”
In a career flush with accomplishments, Dudash says his toughest challenge came early, but helped establish a blueprint to succeed.
“We were doing big properties and struggling to get through,” he explains. “That led to the development of what it took to get our business to where it’s at – the right equipment and right people. We’ve now got systems in place.”
Those systems include a comprehensive walkthrough of each property his team plows prior to the start of the snow season, which generally goes from Nov. 1 to April 30. With the client’s representative participating in this information-sharing session, the route foreman and all team members are able to hear the client’s concerns and requirements first hand. Any Green Estates expectations are addressed, as well.
This is an excellent opportunity to provide input and suggestions to best make the operation efficient.
Known as the “snow belt,” the area east of Cleveland often sees storms continue for several days, which can place an incredible burden on equipment and team members. By keeping equipment in top working condition and having dedicated and knowledgeable employees – many have an average tenure of 10-12 years with the company – Green Estates has developed an uncommon connection with its clients.
“Our relationship with the client has developed a level of trust that allows the property owner’s representative to talk directly with the route foreman during the course of an event to ensure that all areas of concern are being addressed,” Dudash says. “We want the customer to expect the highest level of concern and service from our company.”
Green Estate’s employees understand the need to meet and exceed client expectations, as well. Dudash says they sleep when they can and will make up for it later. After all, no one sleeps less during major snow events than the company’s owners.
Because Green Estates customers demand 24/7 wet pavement, Dudash says it is their goal to be on site prior to a call for service from a client. If there is a potential snow event around rush hour traffic, he will have the salt trucks sitting in position on site, allowing no chance to miss a service call due to stalled traffic conditions.
“Our business model for the plowing operation has as a goal ... to have all sites plowed within a three-to-four-hour window,” he says. “Our salt is stored on site and each team is self-sufficient. We do not depend on help from other teams.”
It is those storms, which present the most formidable challenge, that lead to Dudash’s favorite part of the job. And he’s not referring to the “light, fluffy stuff.” He’s talking about being hit with a half a foot of wet, heavy snow at 5 in the morning and need it cleaned up by 8 a.m.
“When the last bit of work is done, after a really challenging snow ... you’ve been on the job for two or three days ... the positive feedback from the customer,” he says. “It’s a great feeling.”
With its three largest clients – a pair of upscale shopping centers and Progressive Insurance company’s two campuses and multiple satellite lots – encompassing approximately 6 million square feet of plowable surface, Green Estates stands at the ready with a fleet of vehicles including: 11 dump trucks with plows and salt spreaders, four 4x4 pickups, a Ford Ranger service vehicle, five skid steers, two offloaders for box plows, and Dudash’s favorite, a 924 CAT Loader.
In addition to 10-12 full-time employees year-round, Green Estates hires approximately eight additional people during peak season and works with 30 subcontractors – each with up to five pieces of equipment.
“We’ve developed a nice network of long-term, reliable subcontractors who are part and parcel to the way we do business,” Dudash says.
Brian K. Smith, grounds manager for Progressive, is entering his 10th winter working with Dudash. When he first started in his position, the company’s policy was to split the bid in two – not allowing one company to handle the large account, which required 24-hour availability. This redundancy policy worked fine, provided both portions were handled equally well. In this case, however, the other half never lived up to to the standard set by Green Estates. It wasn’t long before Progressive changed its stance and awarded Dudash and his team the entire contract.
“We couldn’t get another company to provide the level of service of Green Estates,” he says.
Excellent work is a staple in this relationship, but it is also the personal attention to detail that makes Dudash stand out, according to Smith.
“The fact that he wants to listen to you,” he says. “He likes to resolve issues, rather than just put the fire out.”
While his customers have grown to know him over the decades, Dudash has also been very visible with his colleagues throughout the industry. He has been a presenter at the Snow and Ice Symposium, spoken at a Michigan Green Industry Association function, sat on a panel for the Ohio Landscape Association and has worked with the Gates Mills Horticulture Center – a vocational education facility where high school students interested in a career in landscape attend hands-on training – for 20 years. He estimates he has employed about 50 of its students over the years.
Family and Community
Being dedicated to growing the business and giving back to the industry is plenty on its own. Throw a family into the mix and you’ve some very difficult decisions to make. Work has caused Dudash to miss his fair share of holidays and birthdays, but the family understands it is part of the job ... a job that has produced a very nice lifestyle.
“You hate to do it, but you make it up,” he says of sacrifices. “When it’s time to do what you’ve got to do, you do it. You make up for them when it’s done.”
He’s been fortunate to be in a position to include his two sons – as well as McIntyre’s – in the business. They worked for Green Estates during the summers of high school and college.
Making up for lost time with the family has included coaching his three children (two boys and a girl) in everything from tee ball to Catholic Youth Organization basketball. While his sons are now out of the house, he still takes his daughter – now 16 – kayaking. Driving to Vermont and Cincinnati to visit the boys at college is also important.
Though three-to-four-day vacations – like they’ve taken to Lake Chautauqua for the last 10 years – may be the norm, it was about a decade ago when Dudash loaded up the family and drove across the country. They spent 22 days touring the national parks.
Because he and his wife both come from large families with many siblings, they also spend quite a bit of free time visiting to keep in touch with brothers and sisters, as well as both their mothers.
Giving back to the community means a great deal to Dudash, too. He’s headed the building and grounds community and has served as parish chairman at St. Francis of Assisi. He’s a lifelong blood donor at the American Red Cross and has been a platelet donor for the last 20 years.
He even grants employees use of the company’s equipment and vehicles if they are helping at their church or a community venue.
Most near and dear to his heart, however, is working with (and spending time as president of) Friends of Adoptive Families, a nonprofit organization formed by adoptive parents whose main function is to raise funds for medical and play equipment for the organizations from which the children were adopted. You see, two of Dudash’s children are adopted. He’s take six trips to Korea, where he escorts children back for adoption.
While “lead by example” is Dudash’s style of management, his philosophy goes much deeper than that.
“It took 25 years to develop,” he says. “Start with the right equipment and right people, listen to the feedback of the people who do the work ... Let your good people run with it. Divide and conquer and trust the people you have in place.”
Being friends for even longer than they’ve been partners, McIntyre knows this philosophy is a product of Dudash’s character.
“Dave is fair and honest,” he says. “He does a lot on handshakes, still. His word is his bond.”
As for his advice to someone looking to get into snow removal as a career, “Going in, project yourself to the end of your career,” Dudash says. “Your name and reputation is all you have.
“When you start out, whatever you do, make sure you do what you says you’re going to do and at the quality you says,” he adds. “Pay attention and listen to the customer. Stay one step ahead and anticipate their needs. Customer service is the most important aspect of the business. If you don’t know that and have that in your package, then somebody is going to take them away from you. You’ll always have more work than you can handle if you do it right.
“All we do is about relationship building and looking toward the long run,” he continues. “Places we’ve maintained and taken care of in the past know who we are. The level of service ... I’d like that to be copied.”
Tuesday, June 9, 2015
For smart snow removal contractors, though, the time to secure contracts for next winter is now, before last winter becomes a distant memory.
That’s what Tom Hougnon, chief operating officer of Reliable Property Services, says. Until six years ago, the Minneapolis-based company was strictly a snow removal company and had been so for the past 25 years.
Realizing that some of the company’s competitors were landscapers who moved in on their snow clients while working for them in the summer months, Reliable expanded into landscaping work so the company could be visible to customers all year.
“Many customers were looking for 12-month vendors. They wanted one service provider for summer and winter,” Hougnon says. “Part of it was a business decision to become a more predictable, viable company and make money each month.”
Last year, Reliable’s service mix was about 60 percent snow removal, 40 percent landscaping. Reliable also has branches in Des Moines and Racine.
Reliable employs 65 year-round employees that can ramp up to about another 400 seasonal employees in winters. The company yielded $27 million in revenue, with snow revenue another $2 million higher than the previous year.
“That’s a big change for us,” Hougnon says. “We really work to balance out our business model. Last year was the first year we made a profit every month of the year.”
Early and often
With Reliable being in contact with clients throughout the year, it has led to procuring snow contracts earlier in the year, well before Labor Day, which had been typical. Now, Reliable’s company retreat in early May focuses on the winter sales cycle.
“In effect, we’re putting that sales season into the late May time frame, especially on renewal customers,” Hougnon says.
He says the company usually has 20-25 percent of next year’s business locked up by the end of the winter season. “We are pushing three year contracts much more in the past few years,” he says.
Nonetheless, he says not every customer will want to think about winter that early.
Also, Hougnon says that many larger companies are pursuing multi-year contracts using in-house procurement departments, which has led to contracts being signed earlier in the year.
These can benefit the client, Hougnon says, as they often lock in the price for the first two years, leaving open a fuel and a salt clause if prices climb. “We are seeing more customized contracts than we used to see, so it is important to be more flexible with the customer,” he says.
While it has worked for Reliable, nationally recognized snow industry consultant John Allin of Erie, Pa., says that a year-round business isn’t necessary to keep in contact with clients.
“Keeping in touch on a more personalized basis is just as effective and doesn’t give you the added strain of trying to make another profit center work, though I’m not saying it’s a bad move,” he says.
Still, no matter how they are procured, timing of contracts is critical, and is often dictated by the attitude of the client or potential client. “Some very progressive companies will have the contract signed by mid-summer,” Allin says. “Progressive contractors know and understand, like any other business, that running a snow business requires planning. Those who wait till October/November aren’t planning, they are scrambling.”
Such planning includes material purchases and training staff, Allin says, as well as drafting preseason documentation.
“If you wait until two weeks before the first snowfall, it is almost impossible to get your preseason work out of the way in time. Then you are working from a position of weakness than a position of strength regarding planning for the season.”
Located in Oak Creek outside Milwaukee, Kujawa Enterprises (KEI) is a four-season landscape management company with 120-150 regular employees.
Depending on the year, the snow removal portion of its business comprises about 35 percent of its annual revenue.
Like Hougnon, KEI’s Executive Vice President, Chris Kujawa, says that his company has changed its practices regarding timing of snow removal contracts, from Labor Day/October to earlier in the spring.
“Nowadays, it’s really a year-round proposition to try to solicit that kind of work and lock it in place,” Kujawa says. “The whole industry has matured quite a bit, and that’s one of the results of it. You get out there early and get contracts and people in place and get equipment out early.”
Allin says contractors aren’t the only beneficiaries of early contracts. “There is no question that a client who signs up earlier will get a much better pricing structure,” he says.
The best time is between April and June, Allin says, both to get them out of the way and to get a feel for what kind of work they can take on. Customers who wait until winter will pay a higher premium.
Some of Kujawa’s clients still wait until August or even later. He says that KEI doesn’t do a lot of incentivizing other than bundling services with summer landscaping, for example.
“That cuts down on the number of contracts you need,” he says. Hougnon says clients like the single point of contact for all their services. “The players remain the same, expectations remain the same and you don’t have to repeat that learning curve all the time, he says. “That’s why it is very attractive to clients and to us.”
He says Reliable may offer a discount for early sign-up, but doesn’t guarantee to hold the pricing the same as the previous year. Hougnon says when it comes to renewals, the company will check profitability to make sure it makes fiscal sense to offer a discount.
“We also may try to incorporate a summer ‘coupon’ for some services, flowers, plant material, even if they are not a summer customer,” he says.
Hilary Daninhirsch is a freelance writer based in Pittsburgh.
Wednesday, June 3, 2015
Tom Jurasinski, director of exterior operations, would correct one very important item in the opening. “You work with Ron, not for him,” Jurasinski says. “You know he means it, too. They’re not just words.”
With “family” as an overriding theme in everything about the company, it is not surprising that Kujawa would share the spotlight of his success. “KEI has been delivering snow and ice control services since 1970, but we would not be where we are today if not for my son Chris leading our business development efforts and Tom,” Kujawa says. “They have built a team of loyal employees and subcontractors that can consistently meet the demands of our clients.”
After more than 20 years with the company - he joined KEI as a college student and went full-time upon graduating - Jurasinski agrees with the familial feeling. “Ron has been more of a father to me than an owner or boss,” he says. “He’s a moral compass to me. He reminds us that morals are not something you can bend or twist.”
Delivering what he and KEI say they are going to deliver has led to long and fruitful relationships with their many customers, which has, in turn, led to Kujawa being included in the inaugural group of SNOW Magazine’s Leadership Award winners. “We’re extremely happy and honored to be recognized by the industry’s leading trade publication,” Kujawa says. “Our experience and the expertise that we’ve shown can be recognized by the tenure of our clients.”
While KEI can trace its roots back to the 1920s, when Kujawa’s father opened a business selling agricultural seeds, supplies and equipment to area farmers, KEI began forming into a landscaping company in the 1960s and 1970s. A snow-removal arm was a natural fit with the other seasonal activities. “When we started, we were looking for winter work to supplement revenue,” Kujawa says. “We started doing sidewalks for some local businesses and hauling snow for our local municipality. It opened our eyes to the opportunities snow services offered.”
The typical snow season in southeastern Wisconsin begins in mid November and ends in early April. According to Kujawa, the heaviest snowfalls occur in December and January, followed by February. They have had measurable snowfalls and/or ice storms in late April or even May, but those are fairly uncommon.
April through October is busy for KEI, too, as the company is a four-season, full-service landscape management provider – also doing design and landscape construction and installation, interiorscapes and holiday decorating. KEI employs a staff of approximately 40 full-timers and adds between 50 and 60 seasonal workers, as well as snow subcontractors. The company boasts approximately 65 pieces of equipment – primarily Chevrolet 4x4s with some Internationals and UDs.
Being a child of the Great Depression, it is no wonder Kujawa considers the country’s worst economic periods his toughest challenges. Managing and leading KEI through the early 1980s recession and advising through the current one top his list. Keeping people’s morale and spirits up and managing controlled growth were (and are) key, he says.
Kujawa’s contributions to the industry are as impressive as anyone’s. A member of Associated Landscape Contractors of America/PLANET since 1972, he served as president in 1989-90 and received the ALCA’s Lifetime Service Award. He also served on ALCA’s board of directors for nearly 30 years. Kujawa was in the first group of contractors certified as professionals (Charter Certified Landscape Professionals) and in the inaugural group of ALCA’s Industry “Trailblazers.” He served as president and director of the Academic Excellence Foundation and as chairman and director of certification, board of governors. Further sharing his knowledge, Kujawa has authored numerous articles for most major trade publications and has contributed many chapters for industry manuals.
According to Kujawa, his single most important contribution was uniting the three trade groups – ALCA, Professional Lawn Care Association of America and Professional Grounds Management Society – to create the Green Industry Expo, which, since 1989, has become the industry’s preeminent educational event and national trade show.
If you’re looking for a testament to Kujawa’s popularity and recognition within the industry, look no further than that Green Industry Expo, according to Jurasinski. He says attending one of these shows with Kujawa is like walking along with a superstar. Everyone, young and old, is trying to get a minute with KEI’s driving force. “He’s got this ease about him that makes it so comfortable and easy to work with him,” says Jurasinski.
Proving the apple doesn’t fall too far from the tree, both of his sons – Chris and Joe – continue to serve the snow and green industries. Chris was the force and founder of the Academic Excellence Foundation of ALCA/PLANET and just completed a two-year tenure as president of Project Evergreen. Joe has served on the PLANET board and currently serves on its Landscape Management Specialty Group.
As for the community, Kujawa is responsible for two endowed educational scholarships, one from the AEF and another at Marquette University. Numerous annual charitable contributions are given anonymously and the company is involved in providing service to veteran’s organizations, school and church activities, community functions, blood banks, and more.
Away from work
While Kujawa’s successes in snow removal might lead one to believe winter is his favorite season, those who know him will not be surprised by his autumnal preference. “Personally, I like fall the best,” he says. “Football, hunting, fishing and the beautiful weather in Wisconsin.”
A doting grandfather to 13 and an avid fan of Green Bay Packer football and Marquette University basketball, Kujawa has also done a great deal of traveling – rattling off Africa, Europe, South America, New Zealand, Russia, Canada and Alaska as some of his many stops. A lion hunt in Tanzania and being on safari with wife Sally sit atop his list of those experiences.
The dichotomy of being a gentle, loving family man on one hand, while on the other hand being such a powerful presence and a person who tracks and kills big game for sport isn’t lost on Jurasinski.“He’s got this unbelievable knack of not only being a strong man, but also kind,” he says of Kujawa, noting how rare it is to find the two traits in one person – at each end of the spectrum.
Chris, who shares his father’s love for fishing, has also pulled something else from Dad’s DNA – brutal honesty ... with the emphasis sometimes on “brutal,” he says with a laugh. “You always know where you stand with him.”
Jurasinski echoes the sentiment, though sees the kinder, gentler side of the man who sat him down after college and told him there’s only one thing that’ll jeopardize his career at KEI – not asking for help when it is needed. “If there’s a problem, don’t try to solve it by yourself ... Let’s solve it as a team,” he remembers Kujawa saying.
“With Ron, there is no gray, only black or white,” Jurasinski says. “And when he addresses you, there’s never even a bit of negative spin.”
Kujawa handed over day-to-day responsibilities to sons Chris, who is responsible for sales, marketing and business development, and Joe, who handles operations and administration. Chris’ wife Judy is the office manager and Sally is the company’s president, CEO and CFO. Though he is no longer actively managing the operation of KEI, he is always available to offer support or consult on a project.
“I believe in leading through ‘big-picture vision,’” he says. “Get good people and let them loose with few, but firm, parameters.” All too often in today’s business atmosphere, companies are over-promising and under-delivering. Customer service is suffering. That doesn’t sit well with Kujawa. “Service cannot be purchased like a commodity,” he says. “It’s nothing more than the delivery of a promise. That can only be measured at the time of delivery. Everybody can promise, but who can deliver?”
The three tenants of Kujawa’s success are simple and straightforward: Don’t promise what you can’t deliver; if you see yourself getting into trouble, ask for help; and always represent the company with integrity and honesty.
Jurasinski admits that the term “open-door policy” is an overused cliche, but it is so incredibly accurate with Kujawa. “He takes great pride in mentoring us. It’s all about trust and his word ... his honor,” he says. Ron lives to be a good example and to him, you’re only as good as your word. It is all about integrity.”
While his family is aware of his undying affection, his customers never have to guess, either, thanks to wisdom gleaned from Kujawa. “Make sure the client knows how important they are to us,” he says. The KEI website, in fact, stresses that sentiment on its home page: You are why we exist.
For those looking to follow in Kujawa’s footsteps, he offered this advice.
“It takes more than being a good snow plow operator to be successful ... you must be a good business person,” he says. “Read Michael Gerber’s ‘The E Myth’ and other good publications. Join trade groups with peers, especially those in other market areas for a free and honest exchange of information, and give back.”
Sound advice and a recipe for success, but more telling, perhaps, are five simple words: “Don’t make sales... build relationships.”
Kujawa looks back on a life that has touched so many. No man escapes life without certain disappointments, but he chooses to embrace the positive. “No regrets,” he says. “Everything seems to work out one way or another, usually for the best.”
Wednesday, May 20, 2015
I often hear business development folks use it in their sales pitch to describe their snow management company [often without any real proof to make it credible.] I also see it in a lot of marketing communications and web-sites. It is becoming [what I call] one of those “ad nausea business buzz-words” like proactive, think outside the box or win-win. While all of these buzzisms represent important elements of business, when used without any real supporting proof or meaningful benefits to stakeholders, they lose their credibility, relevance and importance.
I don’t want innovation to go by the wayside of overused and abused business nomenclature, as it possesses way too much value. Innovation at its simplest is the introduction of something new generated by an idea[s], whether it be a creating a smarter site-pattern for more removing snow more efficiently, or creating a more effective process to alert and dispatch your service providers.
Innovation at its best creates value, and lots of it. Most people though often associate innovation with technology related to products or services, but that’s only a fraction of its worth. Don’t get me wrong, technological innovation in products and equipment is vital for business success. Simply take a look at the innovations embedded into smart [or as I call them brilliant] phones. If somebody told you a few years ago that you’d be able to photograph a site, do payroll, perform sight measurements, route and schedule crews, invoice, deposit checks, conduct training, or create a video via your phone, would you have believed them? Take a look at Apple with its market capitalization of almost $600 Billion, with a capital B. What’s their mantra and brand? THINK DIFFERENT and it’s all based on innovation. For those of you who haven’t read the Steve Jobs autobiography, it’s a testament to innovation.
Innovation at its heart is about thinking and doing things differently. Innovation was at the heart of de-icers, snow-blowers, extendible plows with wings, multi-functional compact utility loaders that push and remove snow [they remind me of a “snow Swiss Army knife. These innovations reduced labor, time and costs, while creating greater efficiencies and safety in the field. They created value for everybody. Research shows that companies that embed innovation into their culture are almost three times as profitable as their competitors. The great news is that you don’t have to be a Steve Jobs, or an Apple, in order to develop, execute and leverage innovation. You simply need to make certain that you build innovation into your culture and business model, so that the entire team knows that it’s part of their responsibility. In other words, innovation needs to become an ongoing strategic focus and process that needs to be managed, measured and rewarded.
Innovation should be nurtured and recognized at every level within your organization, as well as with external stakeholders. Sometimes customers, suppliers and alliances are some of your best innovators. Are your plow-operators and mechanics encouraged to enhance their existing processes, or brainstorm ways to reduce equipment damage, or identify equipment that can reduce cost, increase safety and save time? Make innovation a direct role and responsibility for your team especially around resolving company pain points.
Does your management team have any innovative strategic insights that could change your business model thereby creating a competitive advantage for the company? Think Dell who had the insights to understand that customers really wanted their laptops custom-built. Dell created the “mass customization” model for laptops and made “special ordered” computers a successful business model that took the industry by storm. Research shows that high-performing companies consistently combine new technologies, products and services with new business processes and models to go to market.
Changing your business model requires looking at your existing value proposition, meaning what you sell and how you go to market, along with your supply chain, target markets and your processes. For example, a change in your value proposition may include adding new services and products to your portfolio such as snow hauling and melting, or providing environmental de-icing agents, and installing shrubs and grasses as natural snow fences.
By objectively reviewing your existing supply chain, which is critical to your success, and inviting new players to the table with different products, capabilities and business models offer a host of opportunities for innovation to occur. And don’t forget to take a look at your target market. For example those companies who have built a green business model may want to target the LOHAS [lifestyle of health and sustainability] group and BOOMER’s [those born 1946-1964.]
Innovation is an excellent way to differentiate yourself, create a competitive advantage, retain and attract the industry’s best talent while creating value for all of your stakeholders. So what are you waiting for the sky’s the limit!
Tuesday, May 12, 2015
Surprisingly in today’s uneven and uncertain economic climate, two recent reports show that mergers and acquisitions (M&A) are on the upswing, with most of the action involving smaller deals. Obviously, not every snow removal and ice management professional is in a position to buy, but weak earnings and declining market share create great buying opportunities for good managers.
For many small business owners/operators, mergers are a way of cutting overhead costs, increasing efficiency or battling a larger competitor. Frequently, M&As are based on the belief that a profitable, better-managed business can get more out of the assets of an under-performing business than was possible under its current ownership.
Admittedly, most small snow removal contractors and businesses tend to grow “organically,” that is by slowly adding customers/clients, employees, new services or products, and equipment. Others grow by merging with or acquiring another firm –- or by being acquired. In fact, an economic downturn often creates greater opportunities for buyers to take advantage of depressed business valuations, providing an opportune moment to do a deal.
Mergers and acquisitions
Mergers and acquisitions typically take one of two forms: an “acquisition,” in which a snow removal business folds a new company into its existing operations (or vice versa, if the business is being acquired), or a “merger” where both businesses are typically dissolved and a new business entity formed or created.
A merger is a tool used by many businesses to expand operations, often aiming at an increase in long-term profitability. Usually, a merger occurs on a consensual basis where the owners/operators/management from the target business helps those from the purchaser to ensure that the deal is beneficial and profitable for both parties.
Acquisitions can also happen through a so-called “hostile” takeover by purchasing the majority of outstanding shares of a business in the open market against the wishes of the target company’s management and/or directors. This approach is, however, rare among smaller, privately-held businesses.
Buying a going business
In most cases, buying an existing business is less risky than starting from scratch. When a business is purchased, the target is usually already generating cash flow and profits. After all, to be acquired it has to have an established customer base and reputation as well as employees who are familiar with all aspects of the operation.
On the downside, buying a business is often more costly than starting from scratch. Fortunately, it is often easier to get financing to buy a business than funding to start a new one. Bankers and investors are more comfortable dealing with a business that has a proven track record.
Paying for it all
There are a number of strategies for financing mergers or acquisitions:
Use the seller’s assets. Finance companies, factors (companies that buy accounts receivable), and some investors will lend money based on purchase orders. Factors, finance companies and banks will lend money on receivables. Finance companies and banks often lend money on inventory. Equipment can also be sold, and then leased back from equipment leasing companies.
Joint venture. Where an acquisition may be out of reach for one snow removal contractor, buying in conjunction with another party may make the acquisition affordable. To find a likely partner, ask the seller for a list of those who were interested in the business, but did not have enough money to buy.
Employee stock ownership plans (ESOPs). ESOPs offer a way to get capital immediately by selling stock in the business to employees. By selling only non-voting shares of stock, control can be maintained; imagine using an ESOP to acquire a business for as little as 10 percent of its purchase price?
Assume liabilities or decline receivables. Reduce the sales price by assuming the business’s liabilities or having the seller retain the receivables.
Issues with tax issues
Unfortunately, buyers and sellers who fail to address the tax issues of a merger or acquisition risk leaving money on the table. Because of its significant impact on the bottom line of any M&A, formulating the right tax-efficient strategy plays an important role in the success of any deal.
No two deals are the same,. Every M&A transaction begins with whether it is taxable or tax-deferred. In a tax-deferred transaction, the seller gets a substantial part, if not all, of its proceeds in the form of stock in the buyer’s business. Because the seller continues to hold an interest in the surviving business – without realizing a gain – there are no tax consequences until the stock is sold. This alternative makes sense for sellers who don’t need immediate liquidity provided they think the buyer’s shares are a good long-term investment.
A so-called “qualified reorganization” is tax-free if it falls within the transactions outlined in the tax rules:
- A Type A reorganization is a merger or consolidation under state or federal corporation laws.
- A Type B reorganization is the acquisition by one corporation of the stock of another corporation in exchange solely for all, or part of its own or its parent’s voting stock. The acquiring corporation generally controls the other corporation after the acquisition.
- A Type C reorganization involves the acquisition by one corporation of substantially all of the properties of another corporation, in exchange solely for all or a part of its own controlling parent’s voting stock, followed by the acquired corporation’s distribution of its property under a reorganization plan.
- Type D reorganizations involve a transfer by an incorporated snow removal business of all or a part of its assets to another corporation where, immediately after the transfer, the transferor, or one or more of its shareholders is in control of the corporation to which the assets were transferred.
- Type E reorganizations would be better labeled as a “recapitalization.”
- A Type F reorganization is a mere change in identity, form or place of organization of one corporation; while Type G reorganizations refer to a transfer by a corporation in bankruptcy of all or part of its assets to another corporation on tax-free basis.
Taxable but flexible
In a taxable M&A transaction, where the government takes its cut in the first year, the most critical factors influencing the negotiations are:
- What the buyer is purchasing – assets versus stock;
- The legal structure of the seller
In most M&A transactions, the buyer either purchases the seller’s assets (after which the seller becomes a shell and is liquidated) or acquires stock. From a tax standpoint, buyers benefit by assigning more of the purchase price to fast-depreciating assets such as inventory and equipment – while allocation of the purchase price to longer-term assets such as land, generally favors sellers.
In general, S corporations and limited liability companies (LLCs) are the most tax-efficient when a business is up for sale. Since the tax liability that a regular ‘C’ corporation incurs on an asset sale is often subjected to the “double tax” (taxed both at the corporate level and again when the proceeds are distributed, they are taxed, at the shareholder level), snow removal contractors planning to put their operation on the market should at least consider converting to S corporation status.
Taxes and more taxes
There are other tax-related issues that will have to be addressed by both buyers and sellers. State and local governments, for example, assess income, sales, transfer and property taxes that vary considerably – particularly if one or both parties do business in multiple states. Above all, don’t forget that a merger or acquisition mainly for tax benefits is a no-no, easily and legitimately undone by the IRS.
Acquiring control of another business to evade or avoid income taxes by securing the benefits of a deduction, credit or other allowance also means the deduction, credit, or other allowance may be lost. The tax rules explicitly authorize the IRS to deny acquiring corporations, carryovers and other tax benefits including losses, acquired as part of the acquisition of another corporation.
Even if it is not a deal breaker, the tax aspects of an M&A transaction can be significant enough to make or break a deal helping sellers maximize their after-tax proceeds. Buyers can minimize their costs, and better position the new company emerging from the deal for success.
Yet another study recently revealed large numbers of businesses are looking to sell or spin-off businesses during the next three years. In fact, many of these deals are expected to involve businesses that the sellers attempted to get rid of before, but were never sold.
Now may be an excellent time for every well-managed, snow and ice management contractor and ice management professional to think about acquiring another business for increased profits, lower costs or strategic growth. Still others are thinking about the many benefits of merging with another operation, perhaps even a competitor. Obviously, professional tax advice is almost, always necessary.
Mark Battersy is an Ardmore, Pa.-based finance writer and frequent Snow Magazine contributor.