Slow Period Survival
Every surveying and mapping business has slow periods. Whether those slow periods are the result of economic downturns, seasonal slumps or other factors beyond the control of the surveyor or mapper, the key to surviving those slack periods involves understanding that mapping and surveying operation.
Going one step further, a surveyor who “knows” his or her business cannot only survive those slow periods, but may actually profit from them. After all, in order to survive those slack periods, cost must be reduced and the business managed better. It is all a matter of knowing beforehand to expect that slow period.
That’s right, the majority of business downturns and slow periods are predictable. What’s more, there are a number of strategies for successfully maintaining the profits of your operation during those slow periods. In fact, with a little advance planning, those slow periods may never show up on your operation’s bottom line.
Knowledge is ProfitThe time-honored truism “truth is power” is especially applicable to most surveying professionals. To keep your operation pointed toward profits even in slow periods, you must keep yourself well-informed about the industry. Although some of this knowledge can be acquired from day-to-day personal observation and experience, records should be the principal source of information about profits, costs and sales.
To illustrate: the profit and loss statement (or income statement) provided by your firm’s accountants is one of the most important indicators of the business’s worth and health. Properly prepared, this statement can pinpoint each revenue and cost area. In other words, the P&L statement should show the profit and loss for each service, as well as the profit and loss for the entire business.
Comparison is the key to using a P&L statement. A properly prepared P&L statement will show each item for the current period, for the same period last year and for the current year-to-date. Few surveyors look only at a single month’s assets or at the company’s profit picture by itself. The figures on your financial statements (all of them, not merely the P&L) are meaningful only when the picture is put in the right frame. In other words, you should look at the figures in the context of what has happened and what is likely to happen. In that way, a downward trend can be detected well before it occurs.
It doesn’t take a crystal ball to forecast the trends encountered by the average surveying and mapping business. By carefully analyzing the historic trends of your business, as shown in your records for the past five years, you can forecast for the year ahead. Your records, your experience in the surveying and mapping field, and your general knowledge of the economy—national and local—will enable you to forecast a revenue figure for the next year.
Using that revenue forecast figure, a budget can be developed showing costs as a percentage of that figure. That budget, once again, properly prepared, will determine the health of your business, especially during those inevitable slow periods.
Cost-Cutting for SurvivalOne of the largest expenses in any business is labor. Unfortunately, because of the close contact with employees, some small surveying and mapping business owners/managers do not pay enough attention to direct and indirect labor costs. They tend to think of these costs in terms of individuals rather than relate them to profits in terms of dollars and cents.
Thanks to business forecasts, the surveyor can expect seasonal slowdowns. Why not encourage employees to take vacations during that period when their services may not be needed? This policy will not actually cut costs, but it should help utilize the workforce for maximum effectiveness and ensure that those workers are available when work increases after those slowdowns.
Consider, too, “renting” employees on a temporary basis or for specific projects. Crews available from Survey Unlimited, an Auxier, Ken., company providing field crews for limited periods, have experience and come with or without equipment. The work gets done and there is no overtime paid.
Marketing for SurvivalOne cost that makes no sense to cut during slow periods is that of marketing. That slow period might, perhaps, be a good time to refine and improve the marketing program for better—or more targeted—results.
Surprisingly, supermarkets, chain stores and many discount retailers design those end ads containing many products based on the amount of profit each of those items can be expected to generate. In other words, if bananas sell for $1, and direct and indirect costs add up to only 50 cents, they would warrant less space than laundry detergent or cereal that produces a larger profit margin.
For a surveyor, designing an ad and allocating space within that ad based on the profit margins of the products or services displayed also makes sense—at any time of the year. But why not go one step further and design that marketing campaign that not only promotes those services with the best profit margins but also those services or products that are less in demand during slow periods? Thus, not only are you refining the advertisement but also utilizing that media that will best reach the audience you feel will be most receptive to your products or services during those slow periods.
Financing SurvivalDuring seasonal highs and lows, many surveying and mapping businesses see their cash balances fluctuate widely. The budget you prepare for your operation will usually reveal when cost and profit levels will be at their highest and lowest. Based on those projections, costs can be reduced or money borrowed to beef up that cash balance.
Periodic borrowing, whether to help the surveyor survive a seasonal slump or tough economic times is best accomplished well before the fact. Budgeting and forecasting make it possible to effectively shop for economical financing before it becomes a question of borrowing at any price just to survive. One attractive option is a guaranteed line of credit.
With an established line of credit, your operation’s bank agrees to lend an amount of money up to a certain limit on an “as needed” basis. Interest is paid only on those funds that are actually borrowed, although most banks charge a minimal monthly fee for earmarking funds for your operation’s possible future use.
The U.S. Small Business Administration (SBA) offers a similar program to help surveyors survive those slow periods. Their program offers short-term loans to help small businesses get past cash crunches that are usually attributable to seasonal changes in business volume. The SBA guarantees the loans.
The SBA can guarantee as much as 65 percent of the loan, up to $750,000. For loans up to $155,000, the SBA can guarantee up to 90 percent of the principal. The term of the SBA’s seasonal line of credit cannot be more than 12 months and only one Seasonal Line of Credit Loan can be outstanding at any time. Each loan must be followed by an out-of-debt period of at least 30 days.
Surviving the slack periods of the year may be made easier by planning ahead. By acting before those slow periods occur, financing can be lined up, employees encouraged to take vacations, inventory and its related carrying costs slashed and costs evaluated and controlled. Or, costs could really be reduced by closing the doors of your company for an annual vacation.
There are three ways in which every surveyor can increase profit:
- Find new customers
- Increase the average service transaction or
- Give your customers more opportunities to use your services more frequently.