Easy mistakes lead to expensive problems

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tree careFrom the late 1990s to about 2005, companies performing tree pruning and removal were thriving along with the inflated real estate market. By 2004, out tree care company had diversified by adding two smaller divisions: an irrigation company and a renovation / building company. We were successful in all three divisions and our sales increased. Unfortunately, we were collecting the money, but not managing it well. We should have focused more on saving profits and looking for ways to reduce overhead. It is through these mistakes, that we have found that one of the keys to being successful in business and staying in business is understanding why and how improper money management starts in a company. To fix the problems in small business, I believe the solutions start with business owners keeping balanced perspectives on explainable losses versus manageable costs.

As we became more successful, approved work was rolling in, but the infrastructure of two of the three companies was not strong at the time. Small, but important details became lost in daily operations. Getting caught up in running the business was nearly as detrimental as the loss of profits themselves. We found we had become complacent in our jobs, and because the companies were still growing, a firm process of how duties should be done was not in full affect. Duties as simple as not tracking credit card charges against bank statements or ensuring that DOT logs were being updated as vehicle and equipment maintenance occurred started the decline. As complacency morphed into mistakes, we found that we were over compensating in multiple areas to correct inane blunders. For example, in our particular industry, we cross state lines to do tree work. To be legal, we carry and comply with DOT regulations. To be compliant we maintain and track vehicle maintenance and servicing all the way down to part replacement costs and labor hours. Mechanic fees can be astronomical, especially when you employ two to three vendors. It is also easy to continuously pay the same vendor to do the same work on the same vehicle every three months. While the root problem might seem obvious to us now, it took us two years and $60,000.00 to $90,000.00 annually to detect where in the process errors were taking place.

For this oversight to be completely understood in its correct context, we’ll briefly outline a near “theoretical” scenario using our tree service as the focus:

We were an established corporation opening up a second office that is still in development. Two of our tree crews started to show signs of vehicle problems that indicated the vendor we used wasn’t a top notch diesel mechanic. While he had a history of detecting difficult engine problems and fixing them quickly, it became apparent that the fixes were band aid type repairs. Since the vehicles were back on the road and making money, we became complacent about how the work was getting done. In reality, the quick fixes masked the root causes of the problems and we started having more significant problems. This eventually caused us to lose production capacity as we had to park crews while vehicles underwent significant repairs at a significant cost. This, in turn, created added workload in the main office, which degraded our ability to produce proposals and led to lost opportunities. So, as we continued to go through the motions, rather than solving the problem, we simply moved from one problem to another. This example demonstrates how complacency leads to mistakes, and those mistakes result in increased cost and lost revenue. If the vehicle maintenance was tracked properly, it ought to have been obvious that annual losses can be attributed to the mechanic fees. The correct analysis would have led us to choose a high quality diesel repair vender. Although the cost per repair may have been higher, the resulting increase in time between failures would have provided far better performance, cost, and schedule outcomes.

The “it’s only a dollar” attitude can bleed into all operating areas and break a business. It was easy at the time to blame our hardships on the situation. In truth, the situation was created and got out of control because we chose not to see the mounting signals of what was happening around us. Fixing the long term problem was not easy. In fact, today, we are still managing the same potential issues just in different ways. Keep in mind that the true talent of a small business owner is being able to locate where the weaknesses are in their company and successfully finding ways to mitigate the losses.

Last modified: February 28, 2013
Nikki Hall
Nikki is the co-owner of Aspect Tree Service in Alexandria, VA. Learn about her business at www.aspecttreeservice.com

This story is part of our Small Business Corner, a peek into the life and trials of small business owners.

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