Pondering Cost Control

Nish

Nish

Branched out member
Location
North Carolina
I'm reflecting on the fact that I'm now spending 100 dollar bills like the 10 dollar bills of two years ago. As I get better at what I do, the tendency is to get more selective with my clients and more pricey. That's okay for me, but it's bad for the trees if the costs of tree ownership are too high. It's particularly bad for the neighborhoods that can't afford good tree work. I despise frugality at the cost of efficiency, but I also dislike the ever-increasing the costs of the services we provide.

Most decisions involve tradeoffs of one sort or another. I'm curious about decisions that have been true boons to your efficiency. I'm also interested broader visions for cost control.

A lot of efficiency gains require scale increases. I'm wondering about scale increases via cooperation. I imagine a half-dozen small operations cooperating locally with their own specializations and strengths. Better, for example, to cooperatively utilize one company's big grapple truck in a few contiguous neighborhoods than to competitively run five overloaded F350s, breaking backs and cutting up saw logs.
 
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Nish said:
I'm reflecting on the fact that I'm now spending 100 dollar bills like the 10 dollar bills of two years ago. As I get better at what I do, the tendency is to get more selective with my clients and more pricey. That's okay for me, but it's bad for the trees if the costs of tree ownership are too high. It's particularly bad for the neighborhoods that can't afford good tree work. I despise frugality at the cost of efficiency, but I also dislike the ever-increasing the costs of the services we provide.

Most decisions involve tradeoffs of one sort or another. I'm curious about decisions that have been true boons to your efficiency. I'm also interested broader visions for cost control.

A lot of efficiency gains require scale increases. I'm wondering about scale increases via cooperation. I imagine a half-dozen small operations cooperating locally with their own specializations and strengths. Better, for example, to cooperatively utilize one company's big grapple truck in a few contiguous neighborhoods than to competitively run five overloaded F350s, breaking backs and cutting up saw logs.
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You've pondered a great question and theory - what if we had all subcontractors? I mean, there are a lot of climbers who are taking their skills, going solo, and doing well. Could we have one crane sub, log grapple sub, etc...?

In theory, a guy could buy a nice piece of equipment and cut down on his labor cost and other overhead immensely by specializing in one thing. He could also have 2,3,4x as much work by cooperating instead of competing.

I don't even know how this would work...it would take a lot of faith, lowering of egos, coordination, etc.

It reminds me of the saying - "if you want to go fast, go alone. If you want to go far, go together".

I too think - I can't afford to work for you, and you can't afford to hire me.

One of my future goals and ideas I'm toying with of our new corporate structure, and I'm not there yet, is to give x% back to the community.

1. Pro bono work for tree work
2. People are means tested by applying - they will have to be certifiably poor - fixed income (SS only), on Medicare, etc.
3. That tree work will be performed and used as a training day built into the budget.
4. We only do x amount of pro bono work once we've reached x amount of sales.


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I used a bicycle trailer in year one. It cut auto insurance, auto maintenance, and gas costs. I could haul up to 600 lbs. of gear to a job site. I stopped because the trees got bigger, the wood hauling was getting heavier, and I bought a mini skid steer (I should have bought a stein arbor trolley first...). I also developed carpal tunnel from pulling handlebars. The bicycle trailer business model can be very professional in appearance, and monetarily productive because of the cost cuts. Not saying it works in all circumstances, but it does remind me what is necessary to carry out my work. I can suffer a vehicle breakdown and still service most of my clients and carry out all of my projects the next day with my bicycle and trailer.
 
I agree with that philosophy, minimize to be more efficient. I disagree with the philosophy of getting bigger to become more efficient. I've heard it said and seen it first hand, "medium" sized tree companies are rarely efficient and highly profitable.

The co-op thing is interesting, I had similar ideas when I was first starting. I actually thought of making a website that was a database of sorts for people and equipment. A place where you could list your skills, equipment, rates and availability. I think it could still be a good idea.

Personally, I dislike most tree workers and would rather go it on my own or, with my brother, which is what I do. I believe that our clients get the best deal from us, their dollar goes further with us, we have little to no fat in our operation. We have an extremely low overhead, we own all of the equipment we use (which isn't much). A huge part of it is being able to identify which jobs and clients you are best suited for and pass on the rest.

As a far as giving the best value for the money, focus on the cheap things that can really help trees and encourage homeowners to do certain things for themselves, like coach them on how to properly install mulch beds. I think this industry does trees a major disservice by trying to squeeze every dime it can out of each specimen, I've found less to be more, more often than not.

After a few years in business you should have a good idea of what you need to charge in order to be profitable. Once you've established that, make slight annual adjustments to match inflation.:)
 
One more thing- there's always a way to bring down the cost for folks with low income. Leave debris, don't stump grind, etc etc.

Our city has a program, the name of which I have forgotten. Each year they ask all of the licensed tree companies in town to volunteer to do work for folks who can't afford it. It's usually nasty removal work so not everyone in town is lining up to do it for free, but some do. I imagine there is some sort of tax write off for pro bono work.
 
Royce, I seem to remember you wanting to network with local tree companies for emergency storm work.
Witch I also still think is a great idea. :D
 
96coal449 said:
Royce, I seem to remember you wanting to network with local tree companies for emergency storm work.
Witch I also still think is a great idea. :D
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Oh, I get it now!! I was looking more internal for cost savings. But, yes. Cooperation with other companies is the way to go. I gave my opinion on this in another thread.
I also worked with a guy who suggested a kinda co-op of equipment. One investor buys a large commercial building and inside the following is garaged.

Large Chipper
Small Chipper
Stump Grinder
Tractor
Skid Steer
mini-skid steer
Log truck
Bucket truck
Crane with operator:

Now, you would buy into this co-op which would be run by one management team. Your fees to be in this co-op would cover you to use any of the following listed equipment. The management team would do all the scheduling and maintenance. I think it is a good idea, not sure how it would work in the real world. Again, not my idea....just one that I heard about pretty regularly for 7 years driving to and from the jobs we used to work together.
 
It's an entertaining idea, but I don't see how it would work, if it is even reality, and there are a lot of variables:

Say you have five businesses all competing for available work. If each business owns a fleet, a crane, a log truck, a loader, a grinder, etc, then all the equipment costs are factored into each bid even when they aren't operating - while this might keep big jobs lower, it will inflate smaller jobs.

I think what the OP is saying the problem is, the more equipment he buys, the higher the cost of business increases.

I find, if the right equipment is purchased at the right price for the jobs at hand, equipment should lower your operating cost and increase efficiency - get work done more quickly and lower your labor costs, thus, increasing profitability and lowering cost.




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Years back in my early roofing days, we had a similar idea. 5 of us with separate DBA s would all team up with combined equipment and do the work all 5 of us generated. Each of us selling work and sub contracting out labor. Everyone would carry their own liability insurance to keep costs down. This combined skills branched out to masonary, framing, etc. Was an idea that never got pursued.
 
NorCalBrock said:
I find, if the right equipment is purchased at the right price for the jobs at hand, equipment should lower your operating cost and increase efficiency - get work done more quickly and lower your labor costs, thus, increasing profitability and lowering cost
Click to expand...
Spot on!
 
Nish said:
I'm reflecting on the fact that I'm now spending 100 dollar bills like the 10 dollar bills of two years ago. As I get better at what I do, the tendency is to get more selective with my clients and more pricey. That's okay for me, but it's bad for the trees if the costs of tree ownership are too high. It's particularly bad for the neighborhoods that can't afford good tree work. I despise frugality at the cost of efficiency, but I also dislike the ever-increasing the costs of the services we provide.

Most decisions involve tradeoffs of one sort or another. I'm curious about decisions that have been true boons to your efficiency. I'm also interested broader visions for cost control.

A lot of efficiency gains require scale increases. I'm wondering about scale increases via cooperation. I imagine a half-dozen small operations cooperating locally with their own specializations and strengths. Better, for example, to cooperatively utilize one company's big grapple truck in a few contiguous neighborhoods than to competitively run five overloaded F350s, breaking backs and cutting up saw logs.
Click to expand...


Why is everyone in this industry so concerned with being "affordable, cheaper,etc.?" We should concern ourselves with providing safe work environments for employees, good paying jobs with benefits for them and their families, and providing excellent service and science based care to trees. It's not our job to save people money or play funny "co-op" games to save a few bucks. Tree work is dangerous work that should be performed by professionals. So you think bankers have these sort of threads?!?

All that being said, I think setting aside a portion of our time to help our communities and those less fortunate is great and worthwhile.....but we can't operate charities.

I never understand the badge of honor for being the cheapest guy around. I'm the most expensive in town and proud of it! My team also makes more and has great equipment too. They go home safe every night.
 
Bankers do have these sorts of threads and there are a lot of co-op banks called credit unions, micro financiers, kick starters, etc.

It's just another "idea" to approach a challenge.

It sounds too complicated to me; but creative ideas are interesting to consider.

One of the largest co-op's is a bank and they do 103.5 billion a year and are profitable:

http://www.thenews.coop/49090/news/general/view-top-300-co-operatives-around-world/




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When you focus on cost control then you lose sight of how to enhance your revenues. It's not to say ignore costs just don't make that your driver. Too many undercharge for the work then underpay or can't afford to provide benefits, holidays and other perks to their employees. We give away our knowledge in hopes we will secure the physical work. The value is in the knowledge. All the tools are just a way of applying the knowledge in an efficient manner.

The bulk of our clients can readily afford tree care. They'll drop as much on a trip or a party, or any other number of fleeting experiences. What we provide adds value to their real property and a wide range of other economic benefits that put money in their pocket today and in the future.
 
IPMArborist said:
Why is everyone in this industry so concerned with being "affordable, cheaper,etc.?" We should concern ourselves with providing safe work environments for employees, good paying jobs with benefits for them and their families, and providing excellent service and science based care to trees. It's not our job to save people money or play funny "co-op" games to save a few bucks. Tree work is dangerous work that should be performed by professionals. So you think bankers have these sort of threads?!?

All that being said, I think setting aside a portion of our time to help our communities and those less fortunate is great and worthwhile.....but we can't operate charities.

I never understand the badge of honor for being the cheapest guy around. I'm the most expensive in town and proud of it! My team also makes more and has great equipment too. They go home safe every night.
Click to expand...

Dude, thank you so much for straightening all of that out! :vomito:





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IPMArborist said:
Why is everyone in this industry so concerned with being "affordable, cheaper,etc.?" We should concern ourselves with providing safe work environments for employees, good paying jobs with benefits for them and their families, and providing excellent service and science based care to trees. It's not our job to save people money or play funny "co-op" games to save a few bucks. Tree work is dangerous work that should be performed by professionals. So you think bankers have these sort of threads?!?

All that being said, I think setting aside a portion of our time to help our communities and those less fortunate is great and worthwhile.....but we can't operate charities.

I never understand the badge of honor for being the cheapest guy around. I'm the most expensive in town and proud of it! My team also makes more and has great equipment too. They go home safe every night.
Click to expand...

It's not about being cheaper; it's about being more efficient. The proceeds of efficiency can be put anywhere--towards lower bids, better salaries, better training, pro-bono work, or gold-plated Louis Vuitton chainsaw bars. Being a really expensive tree service is not a highly laudable achievement. That strike as where you just end up in this industry if you've got pretty good business skills and you've been around for awhile. I've not heard much about how this default trajectory of professionalization may be negatively affecting trees and communities.

Not too long ago I took an EHAP class from an instructor who helped manage a well-established tree service. He boasted of how his equipment trucks each carried red duffle bags with brand-new, complete sets of climbing gear ready to be broken out and used in the event of an aerial rescue emergency. He seemed to be emphasizing his no-cost-is-too-high approach to safety. Those climbing spikes had to be brand new! His high standards shamed and befuddled those of us from scrappy little tree crews. Later in that session, he mentioned in passing that his company only does commercial contracts--that he had been priced out of residential tree work.

With professionalization should come efficiency, and those gains should not be squandered. I did one removal job with a flatbed trailer before deciding that I needed a chipper. That little 6" chipper was a huge leap in efficiency. My 12" chipper was another huge leap in efficiency after that. If, with my 12" chipper, I'm still regularly being out-competed with the guy with only the flatbed trailer, something's amiss. With all the advantages that come from good equipment, higher skills, a good business network, and an established client base, I should not have to charge the highest prices to stay ahead of my operating costs.
 
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