Don’t Fall Asleep at the Wheel – Keeping Your Business Plan Up to Date

We all create annual business plans, and then attempt to get our proforma budgets in line.  But how many of us revisit those plans on a regular basis?  Are we monitoring the environment for changes that could impact us – a change in minimum wage, a new entrant into the marketplace, or a disruptive technology that catches us napping. Not planning for developments from competitors or governments can put your plan, or possibly even your business, at risk.

Reality check – there just isn’t enough time in the day to monitor every environmental risk that could impact us.  That’s why we belong to industry associations, subscribe to newsletters, and follow blogs.  These act as our early warning systems for new things coming on the horizon.  There is no way that any of us can keep up with all the changing regulations that the various levels of government impose on us.  Some are in response to emergency situations and get pushed on us with little notice.  Others (such as the ELD mandate) are publicized years in advance, and have lengthy implementation periods before enforcement begins.

So, lets look at some things that we can control ourselves.  Let’s start with your target market – have you really spelled out what it is?  What is your preferred network? Your hot lanes? How will these affect your retention efforts? Have you spent enough time doing your research so that you know what your customers really want and value?  And even if you did that once, have you revisited those assumptions to make sure that they are still valid?  If you have the target market right, have you crafted your marketing and sales efforts to appeal to the needs of your current and potential customers. With 10-25% unseated percentages, and 250% over-capacity. It’s easy to fall into the trap of forgetting that the economic tables will eventually turn, and you’d be wise to heed one of Warren Buffett’s famous warnings – ‘only when the tide goes out do you discover who has been swimming naked’. Now is the time to make those technological investments, get lean, build that competitive advantage.

Next, what sort of branding have you done?  Have you positioned yourself as a premium provider, or are you competing purely on price, effectively telling the market that you are a commodity?  Playing the low-price game will eventually put you out of business.  Similarly, have you focused on a market niche or are you trying to be everything for everyone?   If you want to be a premium player, then you need to focus on parts of the market where you provide real value and can command a higher price.  Think of the mistake that Cadillac made in the early 1980’s with the Cimarron.  At that time Cadillac was known for large luxury vehicles like the Fleetwood Brougham or the Eldorado.  The Cimarron was essentially a rebadged Chevrolet Cavalier with leather seats and a Cadillac logo on it, poor performance and a significantly more expensive price tag than its sister vehicles.  By trying to compete against some of the smaller luxury import models Cadillac rushed the Cimarron to market with a vehicle that didn’t meet the needs of those buyers.  They misread both the threat and what buyers wanted – they even had a four speed as the base transmission, not exactly something that your average Cadillac buyer wanted at that time.

A more recent example was Build-A-Bear’s “pay your age” fiasco.  For those of you that aren’t familiar with Build-A-Bear, they take buying a stuffed animal to a higher level.  The child gets to pick out what one they want, gets to custom fill it and then picks from hundreds of outfits and accessories to customize their new friend.  And guess what, they were able to charge a premium because of the customer experience.  Pay your age has probably put that premium image at risk.  Why? Partially because they failed (massively) to deliver – by 11AM most malls had forced the stores to shut down because of the large lineups.  But also, because now they have put the thought into the minds of parents and grandparents that $1 to $10 is all that they really should cost!    In one poorly thought out and even more poorly executed swoop some major damage was done to their brand image.

Your reputation is something that could take a hit, especially with social media sites where some people have no concerns about sharing negative opinions.  Unfortunately, you really must wow someone to get them to put up something positive about your business, but all it takes is one little slip up (and it probably seemed like something insignificant to your employee) to have someone start a rant against your company.  We all need to be monitoring social media constantly and be prepared to give some honest and real answers when someone posts criticism or something that is plain old nasty.  It’s going to hurt but if you respond in a thoughtful and respectful way you will be on track towards regaining people’s trust.

The last risk we will look at is having too much of your sales tied up in one place – whether it is one customer or with one salesperson.  Too much concentration, regardless if it is internal or external, is not good.  Relying too much on one customer puts you at too much risk of something like a management or ownership change causing a serious reduction in your volumes.  Even worse is if they go into bankruptcy leaving you not only with lower volume but also with the potential of your receivables from them only being worth pennies on the dollar.  A similar risk occurs if you rely too heavily on one salesperson.  She manages your top five accounts and is very hands-on with them.  Now what if she moves to one of your competitors?  If she has such a great relationship with those customers, will you be able to overcome that to keep them?  Depending on your state, courts may be reluctant to enforce non-compete clauses for much more than 6-12 months (if at all).  You had better have a backup plan for either of these scenarios.

These examples only scratch the surface of the risks that your company could face and that you really should have a plan “B” for.  Depending on your local market, there may be others that are more important, but these will give you a start.  Don’t try to cover off every possible risk – the idea is not to make this the full-time job for a team.  Devise realistic probabilities of any of these risks happening and what the potential cost would be.  Determine what a realistic number of threats that you should (or can) mitigate against and start from there.  However, ensure that these probabilities are reviewed on a regular basis so that new threats are being considered and any old ones reviewed to see if they are still relevant.  It’s sort of like insurance, you hope you never need it, but you will feel significantly better if you already have a plan should any of those threats become real.

Safety – It’s Our Number One Priority

As the new school year is approaching many of our terminals are a hive of activity.  Whether it is doing preventative maintenance services and checks on our school bus fleets, training new drivers or reviewing policies and procedures with our returning staff, the common theme is the importance of safety in our industry.

A school district in Merced, California ran a training session in 2011 where they reviewed a crash that happened in 1931 and claimed the lives of seven students and the driver (see the full article here).  While the technology we use may be different today, there are a lot of items that our drivers deal with every day.  The training session brought in one of the few remaining survivors (he was 88 in 2011) from the crash to allow the drivers to hear first-hand what such a crash is like and how it affects the survivors.

On May 7, 1931, driver Floyd Cregger was transporting a total of 57 passengers from several elementary schools in Merced.  Cregger had a clean 5-year record of driving with no accidents and he had driven over the rail crossing more than 3,500 times.  Neighbours near the site told investigators that they had never seen Cregger make the crossing without coming to a complete stop.  The statement Cregger made before he passed away indicated that he had stopped 10 feet back of the crossing before proceeding.  He said that the wigwag signal was not swinging, and he did not see the train until it hit the bus (the bus had been recently serviced and was in good condition – a fact verified afterwards by crash investigators).

The key take-away from his statement was that he was not accustomed to expect a train at the time he crossed the tracks – the freight train was not running according to schedule that day.  How many times have any of us relied on what we consider to be the “normal schedule” while driving or other activities?  Most of the time our instincts are correct and nothing bad happens.  However, we all are carrying precious cargo and it is imperative that we always follow all safety procedures.  The responsibility for this starts with us as leaders – if we are not leading by example then we should not be surprised when our employees take shortcuts.

The bus had only picked up its last passenger seven minutes before the accident.  After stopping 10 feet in front of the crossing (California law at the time), the driver had just reached the middle of the crossing when it was struck in the middle, pushing it 40 feet down the tracks before it rolled over.  The bus had been overloaded with 57 students (there were seats for 35).  Survivor Jesse Gaines recalled hearing the screams and cries of the other children on the bus – seven of them died because of the crash.

The fireman on the train stated that he was watching the bus as it was moving towards the crossing.  He jerked the whistle as the bus was a mere 20 feet away.  The engineer stated that the bell on the engine had been ringing for 2 miles before the crossing and that he was only going 15 miles per hour at the time.

One of the passengers said that he saw the wigwag signal moving.  This fact was reinforced by numerous witnesses, including the father of an 8-year old passenger who saw his daughter fly out of the bus and land 30 feet away.  The girl was seriously injured but did survive.

The key lesson here is that regardless of which sector of the industry that we operate in – school buses, motor coaches, activity vehicles or contracted public transit – our driver’s attention to their surroundings and to following proper procedures is crucial to ensuring that our passengers get home safely every time they use our services.  In this case the driver assumed that there would not be a train passing at that time and that blinded him to the warning signals – the wigwag, the bell and even the whistle.  Driver inattention was the root cause of this tragedy, at the cost of 8 lives!  Imagine being that father, watching YOUR child fly through the air because someone was not paying attention.

Every day, each member of our teams has an obligation to make the safety of our passengers our number one job.  This crash from 87 years ago acts as a stark reminder of why that is the case.  Our drivers can’t control the actions of the other members of the driving public (as proven by the April crash that claimed the lives of 16 members of the Humboldt Broncos), but we can all make certain that we do everything in our power to make preventable accidents not happen.

Stay safe and bring them all home.

Prioritize and Profit

Any successful executive will tell you that prioritization is one of the key elements to success in business, and in life. Unfortunately, prioritization is easier said than done. During the course of the day, I speak to an average of 10 executives from small to mid-sized transportation companies throughout North America. One of the most surprising, and consistent situations that I notice every day is that many of these executives are ‘covering’ for one of their employees/colleagues.

The tasks they are covering a range from financial reporting, dispatching, and even driving a bus. Don’t get me wrong, I think it is an incredibly powerful tool for company culture when the boss shows that they are willing to roll up their sleeves and get dirty with his/her colleagues. However, I believe this happens too frequently in all businesses, and there is an opportunity cost to this behaviour.

As an executive or an entrepreneur, letting go of the reins in certain ‘comfort zones’ is a very difficult task. However, it is absolutely necessary to build the value of your company. Your time is valuable. Instead of covering for your Accounts Payable person, perhaps it might be better to call your top shippers to see if there are additional business opportunities available. Instead of spending your time in the shop, perhaps your time may be better spent negotiating a better fuel program, or service contacts.

In order to optimize your time and the value of your business, you MUST attach an hourly value to your time. You already know what your employees/colleagues are making. From the outside looking in, it doesn’t make sense to replace (albeit temporarily) a $20/hour job, with a $200/hour executive. Again, demonstrating to your team that no task is beneath you is valuable. However, if this behaviour is consistent and prolonged it can stall or erode the growth of your company.

With respect to prioritization, one of my business heroes is Warren Buffett (I highly recommend picking up a copy of Buffett: The Making of an American Capitalist by Roger Lowenstein, he uses a very simple process for prioritization and focus, called the “Two List Strategy”:

1. List your Top 25 Priorities or Career Goals
2. Circle your Top 5
3. Avoid the other 20 “At All Costs”

Hard to argue with someone as successful as Buffett. A pretty simple, but powerful exercise for moving your business and your career at a higher trajectory…..

In closing, here’s a great video from Simon Sinek: “How Great Leaders Inspire Action”

Time to Look for a New Home – Have You Outgrown Your Terminal?

It’s Monday morning and the yard is packed.  The sound of 40 buses running while the drivers do their circle checks has caused you to get yet another neighbour complaining about the noise.  Your shop is repairing yet another hood and bumper that were hit by someone trying to back into too small of a space.  And now Jimmy is coming into the office all steamed up because his parking spot is blocked in and there is no way he’s going to make his run on time.  Oh, and the dispatcher is running late because of more construction on the Interstate and the surface streets are full of people trying to bypass the mess.  As you get yet another cup of coffee and start to wonder if maybe it’s time to look for a new yard.

Now don’t get me wrong, growth is a good thing (if it is profitable of course).  Unfortunately, it sometimes means that the terminal that you have already paid off has become too small.  Maybe it’s a block building that can’t be easily expanded to increase your shop.  Even if it is curtain wall construction, perhaps the perimeter wall is already too close to the fence.  Maybe you are just land locked and the person with the empty lot around the corner wants too much for it.

Alternatively, you may have recently lost one of your school districts because they are forever asking you to “sharpen the pencil”, playing you off against Fly by Night Bus Lines and treating your services like a commodity to the point that they are causing a negative return.  Perhaps in the latest negotiations the bulk of your work is now on the other side of the state.

Regardless of why your business has changed, there will come a time when you think about moving to a new location.  Before you pick up the phone and call a real estate agent you need to create a list of must haves, nice to haves and any show stoppers.  Examples could include:

  • Easy highway access to reduce deadhead and travel time
  • Close to your major customers
  • Access to public transit or a relatively short commute so that is not a constraint to hiring staff
  • Close to where you drivers live so that does not give them a reason to leave

Sometimes you will have to do trade-offs.  If one of your major customers is a school board in Marietta, GA then you will not want to put a terminal down in Forest Park, near the Atlanta Airport.  It may cost you more upfront to be in the north end but the payback of drivers not losing an hour or two each trip running through (or around) Atlanta could be huge.

You might want to start by looking for an existing facility.  The best option is a terminal that someone else is selling.  Terminals are an unusual beast – the building may not need to be large but there must be a lot of open land available for parking and maneuvering equipment. You will likely have to do some renovations to make it fit your needs but at a minimum you should not run into any zoning issues.  If you are not certain what your longer-term needs will be, sharing a yard with another company through renting their unneeded space could be an option.  However, keep in mind that if that company experiences growth you may be asked to move again.

If you want to build a new facility, keep zoning at the top of your mind.  There are a lot of municipalities that are outright hostile to our industry.  Part of the problem is terminal buildings tend to be small relative to the size of the lot (generally less than 20%).  That will result in a lower property tax bill compared to a warehouse that covers 75% of the lot.  Check the local bylaws in case they require a minimum percentage of building footprint to the size of the lot.

Avoid irregular shaped lots if possible.  A rectangular lot will maximize the amount of equipment parking.  A pie shaped lot will end up with areas that are no good for parking buses other than older equipment that has not yet been sold.

Another consideration is what neighbours you will have.  You don’t want many houses nearby as they will probably make noise complaints to the municipality.  I once had an inherited facility in a mixed residential/industrial area.  I could count on at least one phone call a week complaining about the backup alarms waking them up at 5:30-6:00 in the morning when the buses started heading out on their routes. You may be forced to put in fences or berms to abate the noise, adding to your overheads and detracting from your ROI.

Another consideration is the existing grade and soil composition of the land.  You are going to have to do some grading to put down the appropriate aggregate and then compact it.  You will want to avoid having to build up areas so that water is not going to pool or require additional drainage.  Also, how stable is the soil – is it heavy compacted clay or is it sand? The site preparation work could be your largest expense, so you will want to find properties that naturally minimalize it.

Finally, what sort of utilities are already servicing the land you are looking at?  Is it a fully serviced lot or will you be required to bring in the utilities at your own expense?  What utilities are available?  For example, what sort of internet connections are in the area?  If you are using cloud-based technologies, will you have enough bandwidth available?  If you’re planning for the future, fiber should be a priority.  What sort of right of way is available if you need to service the property yourself?  For example, does a specific utility have the exclusive rights to the poles in the area?  You could end up needing to trench or drill conduit to bring in electricity, telephone or fibre optics lines even though there may be poles on the property already. Is water and sewage available or will you need to drill a well or use a septic tank?

As you can see there are a lot of things to consider before you even think about hiring an architect to design the building.  There’s a lot that could go wrong in this process.  Make sure you are using a real estate agent who understands industrial/commercial or have a consultant who can walk you through the process.  There’s a lot of work before you even get a shovel in the ground.  There will always be something that pops up during the process but avoiding as many of them before the purchase can keep the project on its timeline and keep it within budget.