How much does your sweeping company need to generate per route to be profitable?
Katsam’s Jim Larko and Sam Nicholas would say if you don’t know the answer to that question your company is already in trouble.
“There are a lot of ways people estimate what their cost of doing business is, and we take it to the extreme, but however you do it you need to know your cost of doing business,” says Larko, president of the St. Louis company and vice president of the North American Power Sweeping Association.
Outside of paving contractors, the industry segment hit hardest by the current economy is probably contract sweepers, especially those that specialize in parking lot sweeping. Over the last few years more and more sweeping contractors have seen their business decline, mainly in frequency of sweeps per property and sweeping service fees.
Katsam LLC in St. Louis, MO, is no exception, and over the last few years the contractor has made a variety of efforts to control costs. “We looked at everything and we tracked everything,” says Nicholas, operations manager.
One example is tires. He says when they first started tracking, each tire would be given a number when it was purchased, then that number enabled them to track that tire throughout its life. The miles of use and cost per mile for the tire was applied to each property swept and factored into each sweeper’s route (along with trash bag costs, all vehicle maintenance and service, insurance, operator costs including benefits and overtime, and administrative overhead). All these costs (and more) are charged back to each property, which gives Katsam a pretty good handle on what it costs to sweep a particular property. Perhaps even most important, it also gives them a basis from which to bid.
“It probably was overkill and we’ve probably over thought it but we know what our costs are on a daily basis for each route,” Larko says. “We know what our base number is for a route to be profitable.”
In 2009 Katsam was sweeping more than 350 properties at frequencies ranging from once a quarter to seven days a week, and over the last few years that number has fluctuated between 330 and 350. Today Katsam’s 30 employees generate 65% of sales from parking lot and garage sweeping, 25% from power washing, and 10% from day porter work. In January 2010, coming off of a good 2009, Katsam moved into a new building renting with an option to buy. “That year capped 13 years of growth in parking lot sweeping but the last two years have been negative,” Larko says.
Larko and Nicholas credit their long-time efforts at managing costs with helping them survive since then, because the market has changed and Katsam’s approach had to change along with it.
“I’ve always been a problem solver. I solve problems for my customers when they’ve presented me with a challenge -- that’s how I got into power washing and sweeping in the first place,” Larko says.
“But in the last couple of years there’s been a big change because now the market isn’t interested in us solving their problems -- they just want everything done more cheaply, and that conflicts with our approach. We can do it cheaper but we can’t provide the level of service we want to provide -- and that they want us to provide -- for that amount of money. Our challenge has been communicating that to our customers.”
But that’s an external challenge. Internally Katsam has been fighting – and winning -- the costs battle by examining hiring and training practices, payroll, routing, and even equipment, which the contractor has put on hold.
Making Routes More Profitable
One cost-saving option available to all contract sweepers is an examination of all their sweeping routes. Katsam has established a base revenue they need to generate from each route and they are vigilant to make sure routes reach at least that target level. Properties can be shifted from one route to another as accounts are added or removed, and driver times are monitored to make sure routes meet the minimum level. Through the same process routes are monitored so they can be as profitable as possible.