The Business Side-Company planning for the future, Part 2.
October 1, 2007
This second installment of my series on company planning will deal with management of the company on a day-to-day basis.
Every issue in business revolves around management, including clients, geographic location, employees, state and local agencies, and type of services offered.
Client ManagementA good client base is the backbone of any business. The No. 1 reason for buying an established company is to acquire its client base. Most people buying a product want to deal with a company with a proven track record, and many buyers will ask around for a company used by friends or business associates. This is why most mission statements written by companies focus on service to the client.
Your client base should understand your need to make a profit on all jobs. We can all throw in a cheap job now and then or lose money once in a while, but most of the time we need clients who understand our need to make a profit. Good long-term clients should expect to sign a contract before work begins. It can take years to build a good client base, and it must be founded on service and dependability.
The best way to manage a client base is to study and understand your best clients. To do this, list your 20 best clients by total amount of money spent and the profitability of each job. You should also consider the variety of clients you attract and set up your company to provide a good mixture of services. We are affected by many different economic factors such as prime lending rates and availability of government funding. This is why having clients in different market segments is important for a steady workflow. A company focused on just one market segment is immensely impacted by changes in the economy; therefore, your company plan should address working in more than one market segment.
Geographic LocationA major part of your company plan needs to address two items related to geographic location. First, you need to operate your business in a location where clients buy your survey products. In most cases, this means in or on the fringe area of a larger city. In rural America, very little survey work is performed on farmland, so it is a hard place to make more than an hourly wage. This does not mean you need to live in a city, but near enough to take advantage of the work available in the larger population areas. I know a number of companies that started out on the fringe area of a large city. Over time, the city grew to include them in the urban area. During this time period, the companies purchased land farther away from the city and moved out to the fringe area to be able to enjoy the rural life but still serve the growing city. This is all part of company planning.
You can, however, establish a company in a rural area if you make the conscious decision to work over a larger geographic area. This office could be an equal distance from a number of larger cities. The increasing cost of transportation makes this more difficult to make a profit. Companies that choose this option often drive vehicles in excess of 50,000 miles a year. With fuel costs near or over $3 a gallon, this places an additional burden on making a profit. This company’s crews also jump aboard an airliner or stop in the first motel available at night. With many of the airlines flying booked solid and many motels booked most nights, the travel required by this scenario makes it a more difficult business option. This type of company has made most of its profit from a specialized product called the ALTA/ACSM survey. But here the problem arises again of only working in one market segment.
Employee ManagementWe all know by now that our industry is changing. The company of the future will need fewer employees to maintain the same amount of billable work. This affects the company in two ways.
First, the skill level of employees needed has greatly increased in the last few years. Many companies use employees to work in both the office and the field. The training of employees never stops; there are always new instruments to master or new software skills to be learned. This greatly increases the investment in each employee. And with this level of skill comes the employee’s demand to be paid a livable wage with benefits. With fewer employees working for you, the need arises for more dependable staff available on a daily basis. Your company plan needs to address employee training and wage and benefits packages. It is in your best interest to keep employees long term.
Second, more company owners are in the field themselves performing survey work. For the surveying profession, this is a healthy development. But this change in roles challenges the management skills of the professional. Each employee should have a job description and a good understanding of his or her role in the company. Specific instructions about job performance need to be given to each employee, along with the results expected on a daily basis.
This is more employee management than we have operated with in the past; the company plan needs to address these issues.
State and Local AgenciesIn the past, most companies operated under the radar of government. Sure, we filed our tax returns and purchased business licenses, but operated exempt from many other regulations. Those days are over. Today governmental agencies want sales tax and mandatory recording of plats with stiff fees attached. I think this is only the tip of the iceberg of what will be asked of our companies in the future. Since it’s “all about the money,” you as a business owner need to go for outside help in the management of many different aspects of your company. All accounting and bookkeeping aspects can be contracted out, including retirement planning and vehicle maintenance. Your business plan should address all these issues. Work toward building a business module for the future in your plan.
Types of ServicesYou as the company owner have many options in terms of services. Many companies offer three or four different services. The most common is surveying of large parcels of land, along with subdivision work and some engineering surveys. Some companies specialize in smaller surveys, such as the mortgage survey. Construction surveying plays a major role in some companies but is changing rapidly because of GPS machine control of construction equipment. One of the best ways to judge the right market mix for your company is to look at the profitability of your past jobs. This should give you good insight into the right mix for your company. This issue, like all those mentioned above, should be addressed in your final company plan.
In my next column in December, we will look at how technology is affecting your company now and how it will in the future.