When the paving season begins to wane in the fall, contractors begin to turn their attention to winter survival strategies. Given the financial difficulties of the 2008 season, surviving the winter may require added creativity and ingenuity to make it through.
It sounds risky, but you do have equity in the equipment you own. Maybe it’s time to consider a sale leaseback plan to extract cash out of your equipment. There are buyers out there who will basically buy your equipment, then lease it back to you. Not only can you get cash in hand to use for any purpose, because the leaseback is defined as a new transaction, you can depreciate the equipment all over again.
Drastic? Somewhat. Risky? Sure. You are tampering with your equity, converting it into a debt. But if your cash flow is not going to take you to the point of survival for the next season, a leaseback is certainly less harsh than going under and losing your business altogether.
If gas and diesel prices have not yet driven you to economize on driving, and economical vehicle maintenance, now is the time to kick in and check for proper tire inflation and make sure your vehicles are tuned up to conserve fuel. Moreover, don’t accelerate toward red lights, run in the highest gear possible and use air conditioning frugally. It all adds up.
So often, people don’t bother to economize because they fail to consider the big picture. They figure, “Big deal – properly inflated tires save about 5 percent in fuel costs. That doesn’t add up to much.” The trouble comes when they think that way about every potentially economical move. “Big deal – recycling office paper probably doesn’t even add up to a dime a day. It’s not worth it.”
You know, if a single, simple wasteful activity costs even a dime a day, that’s $36.50 per year. What is your tax rate? If you are at a 40 percent tax rate, for example, that means you must first earn $51.10 in order to have $36.50 left over to waste. Sure, $50 is a drop in the bucket, yet the problem is, many people do not count the drops and before long, the bucket runs dry.
This is true of a number of activities, including things like water consumption, electricity use, paper recycling – even coffee in the break room. How many stale pots get dumped down the drain every day at your facility? Even if it’s just a dime a day, that’s another $51.10 you must earn just for the convenience or luxury of pouring out coffee every day. And what about those paper towels? Is it possible you might save yet another dime a day by laundering cloth toweling. Only you can figure the economies for your business, but it is often cheaper to launder cloth than it is to toss paper towels in the trash.
Make it a goal to stock up when you shop, assuring you don’t have to run out and make a special trip to pick up shop towels or a box of screws. Special trips are killers – not only of gas, but of your time and energy as well.
Study the list of supplies you routinely buy with a new, frugal eye. Maybe you can substitute something cheaper or lower the quantity on paper clips. Remember, we are looking for a dime here and a dime there.
Think about economies that can serve a double purpose. For example, consider uniforms or logo shirts for your staff. Everywhere they go, your people are then advertising your business, enhancing awareness about your services. And, most employees actually think of uniforms as a benefit, saving them wardrobe costs. With a small investment, you are doing something good for your people as well as for your advertising – tops on the list of things business owners typically cut first when the budget gets tight.
Painful as they are, payroll cuts are often the first place a struggling business goes when money is running low. It’s not easy to find good, experienced asphalt people and office staff, and when you do, it is a huge loss to the business if you have to let them go.
Before you whip out the hatchet, meet with your employees. Be honest with them. It’s probable that they already are aware of money trouble within the business. Lay out the problems for them and invite them to suggest solutions and potential ways to save that may save their job.
When their alternative is to be laid off, you might be impressed with the things people would be willing to do to save their job. They might accept higher deductibles in their medical plan, resulting in a valuable savings on your medical premiums. They might even take a temporary pay cut if they know you are reducing your salary as well. For sure, they will be more likely to tolerate a cut if they are allowed to participate in the meeting about the options and far less likely to swallow it if the cut is simply announced to them.
After cutting payroll, the advertising budget is usually next to be slashed. Be careful here, because study after study proves that companies that hang in there, and continue to maintain awareness with advertising always boomerang out of a recession better than those who eliminated advertising all together.
There are ways to cut your ad budget and rethink your advertising so that you can maintain awareness. Internet advertising can be much cheaper than print, so look into successful local sites where you might place an ad or a link. If you must continue to print, cut a four-color flyer to a two-color on colored stock. There is generally very little, difference in price if you buy a case of white paper or a case of yellow paper, then use red and black ink (two colors) on your yellow paper to make a perfectly acceptable flyer.
Do you use radio commercials? Radio is a good, economical medium for asphalt contractors to use, as it is regional, and efficiently covers your typical market area without much waste. If so, cut your radio spots from 30 to 15 seconds and/or, cut your frequency up to half. People may not hear you as often, but they will know you are still kicking.
Look at the things you outsource. If you have a cleaning staff, it may be time to pick up the broom yourself, or allocate a chore rotation among your employees.
If this still doesn’t seem to be adding up for you, suppose you could save just 12 dimes per day. That would mean each year, you would save $438, and wouldn’t have to earn $613 to have it.
When times are hard, decisions become hard. As you look for ways to save, take care of your employees first, and do whatever you can to keep your name out there in front of your customers. After all, the very best way out is to increase your income.