On the business growth side, your new administrative person should be following up with customers to confirm appointments, or even to simply make sure your customers are happy. They should also be answering the phone to enhance customer service, and more importantly, track leads.
Wasted advertising expenditures are another culprit of overhead creep. "I've seen a lot of contractors with boxes of flyers they've never distributed," Babigian says. "I met a guy who had a Yellow Page ad with the wrong phone number."
Tracking leads and making the most of them can help you cut back on other advertising investments. "Spend more money on making more money with the leads you're already getting," Kehoe advises. "If you've been in business five years, your phone is likely ringing enough for you to make good money. Set up a lead tracking system, which can be done in Excel. You should still look for new business, but it's even more important to manage the leads that are already coming in."
Chiera has wrestled with this for the past few years as his company has gone through a growth spurt. He's spending 0.6% on advertising, down from 1.1% last year. That's mainly because his business, like so many others, is built on referrals.
"I would still like to start investing a little more in advertising as we look to grow further," Chiera says. "Advertising can definitely help you get your foot in the door in other areas. We have a nice website (impactirrigation.com) and a small Yellow Pages ad. I wouldn't mind doing more, maybe spending up to 2% on advertising, as long as I can cut overhead in other areas so our overall profitability isn't hurt."
Equipment maintenance and downtime
Currently, Chiera is looking to cut his ballooning repair and maintenance costs, which have grown to a level of nearly 5% this year. As his company has expanded, he's added a full-time mechanic to service 17 trucks, an assortment of trailers and a sizeable fleet of equipment. That mechanic's salary is a big contributor to the creep, but other factors also play a role, and Chiera wants to get a better handle on them.
"We can help our mechanic control shop costs," Chiera says. "We put a limit of $1,000 on his credit card, or he'd probably spend more. When that card starts nearing the limit one month, I take a look at what's being purchased." There's not much you can do about needed parts. But other shop expenses, such as hand tools and consumable supplies, can skyrocket if controls like this aren't put in place.
"Another thing you should do is set up a repair order system, which can also be done on an Excel spreadsheet," Kehoe says. "Mechanics in this business are notoriously unaccountable. But they should have time cards just like your employees in the field do. In fact, a mechanic's time should not be applied to anything if it's not applied to a piece of equipment and crew. Then it's easy to track down any offenders."
Controls should also be put in place to encourage employees to take better care of trucks and equipment. Kehoe says that once you hire a mechanic, operators and foremen have a tendency to get a little reckless because "someone's there to fix it if it breaks, anyway." Training is the key.
"Aside from operating equipment efficiently and safely, a lot of operators don't know how to load and store equipment on trailers properly," Kehoe points out. "Sometimes, equipment takes its worst beating up and down the highway."
Coming up with ways to encourage employees to take better care of trucks and equipment is an ongoing process for Chiera. Two years ago there was an emerging problem with trucks leaking fluids. One employee blew out an engine because it didn't have any oil. Now, the morning routine includes filling out a checklist and turning it into the mechanic.
There are also incentives if an employee does a good job of keeping equipment in good order. On the other hand, if he doesn't, he's going to be held accountable. "Every one of our employees has a point sheet," Chiera explains. "At 12 points an employee might get in some trouble; probably a written warning. Maybe he forgot to strap a blower down on the trailer, and it falls off and breaks on the highway. That's six points."