Never Too Big To Fail

The recent failure of a huge, national service provider is a stark reminder that snow removal contractors cannot lowball their way to prosperity.

After USM Services Holdings Inc. (commonly referred to as US Maintenance) was fired by Walmart and later sold to EMCOR Group, several snow removal contractors say there’s a lot to be learned from this experience.

Lesson 1: Individual contractors need to take action. Stephen Fuzinski, owner of Green Sweep Inc. in Toledo, OH, suggests that each company can take charge by knowing their true costs and understanding what they need to charge in order to provide excellent service and earn a profit from each job.

“You’ve got to look at each situation, and don’t be afraid to walk away. Don’t be afraid to know it’s not going to work,” adds Sam Granados, owner of Denver’s Integrated Snow Removal.

Many contractors who lose clients to lower-bidding competitors often win those jobs back within a few years.

“They always come back to us. People are expecting quality service, and we know snow removal is not a game,” Fuzinski points out.

Lesson 2: Customers need to know what’s going on. The management team of a large retail chain must understand the true cost of snow removal services. They need to know how much the subcontractors are being paid, the quality of subcontractors hired and the cost of store closings. When those factors are understood, the corporate offices can make informed decisions on the true savings or costs provided.

“It’s human nature to have selective memories,” Granados says, noting that retail stores continue to hire new national companies to provide services when others have failed. But, he adds, understanding the true costs of snow removal can only benefit the stores over time.

Lesson 3: National companies must follow a different business model to be successful in providing a quality service and turning a profit. Granados says national companies should understand the markets they are entering and hire quality subcontractors.

“I have nothing against the national companies, but some just have gone about it the wrong way,” Granados says. “It’s been a very reactive form of conducting their business. Some of these national companies don’t own snow removal equipment and don’t have the management in major metropolitan areas. The snow removal industry needs to be hands-on to be successful.”

Crystal Arlington, owner of the national service provider Affiliated Grounds Maintenance, says there is definitely a model for national companies to succeed. The businesses must define clients’ priorities, confirm the contracts are fair and provide the right types of education to subcontractors.

“One thing we can’t do is put everything on the backs of small contractors. As larger companies we need to educate them, go over clients’ expectations and provide guidance,” Arlington says.

National companies that follow a business plan that allows them to partner with contractors will lead the snow and ice management industry into the future, Arlington speculates.

“I think the large stores are realizing that the cheapest price isn’t going to give them the best value. If national companies are smart, take on regions slowly and do a good job, things will go well,” Arlington says.

Why “lowest price” isn’t fool-proof

When Fuzinski found out he’d lost his Walmart account, he later learned US Maintenance would pay subcontractors just 25% of what his company (Green Sweep) made the year before.

"We were getting $70,000 a season to plow the same Walmart,” Fuzinski relates. “The average Walmart should cost $68,000 to $70,000 a season. That’s a good number, and that’s what you need to earn to provide the level of service they need and expect."

Contractors across the country have shared similar concerns. They say US Maintenance—and some similar national companies—enter a market and drive the price of jobs so low that contractors cannot provide an adequate level of service to ensure customer satisfaction and safety.