Educating Your Competition

EDUCATING YOUR COMPETITION Subcontractors are vital to the snow removal industry; however, you want to guard against training your next competitor. by John Allin. September 24th, 2009. Snow Magazine. Some who want to grow their snow business become concerned about the most efficient and cost effective way to go about this. Selling new business usually isn’t the big concern amongst those who are established. Servicing new customers becomes the concern. On top of this, there are always concerns about educating others (who might work for you) about how to start up themselves and eventually compete with you in your own marketplace. Those concerns are not invalid. In fact, to a certain extent – they are justified. I know I gained about 5 competitors in the Erie market over the years as those who subbed for me learned about the business and then ventured out on their own. Some of them have done very well, and we are good friends still. However, one thing I was certain to ensure did not happen is that we never educated subs to go out and take our business. Look around your market – there’s surely enough work to go around. Contractors come and go. Most of the time, you’re not aware of them since they are “smaller guys” who you don’t pay much attention to anyway. Setting this up properly at the get-go will solve many potential problems down the road. A number of things go towards ensuring these guys don’t go after your business even if they do go out on their own. If they do go out on their own, you cannot stop it. The best you can do is curb their growth until such time as any agreement not to compete expires. This isn’t that difficult. In my mind – it’s a matter of properly educating them as to the pitfalls associated with trying to take your business. Education is key. As well as good paperwork. Plus a few other things. Taken alone and one-by-one, each likely is not a deterrent to unfair competition. But, taken together, as a whole – it works quite well. Maybe they are already employed elsewhere and are just looking for a few extra bucks. These fellows are unlikely to go out on their own because they simply do not have the time. Often, they don’t have the business background required to make a go of it on their own. They just want to spend 3 or 4 hours pushing snow before heading off to work and they want their check on time, when promised. These guys are golden. If they are already self employed in some business (muffler shop, building contractor, excavation contractor, some white collar office type deal, etc.) the prospect of going out and selling work on their own may not be enticing at all. And, sometimes you’ll get guys who ARE already plowing snow, but just have not grown enough to go after the big stuff themselves. This last bunch is where you may incur some heartburn, but if properly set up beforehand – these guys too will not be a problem. A tight subcontractor agreement is paramount. Establishing a covenant not to compete is a must. However, it must be reasonable to be enforceable. You cannot stop them from doing business – however, you can stop them from taking your business that they have become aware of during their tenure subcontracting for you. Two winter seasons is fair. More can be considered overbearing and put the entire agreement in jeopardy Interview the prospective subcontractor and tell them “the rules” upfront. You can get a look at their plow truck and related equipment so as to be certain they have what they claim to have at their disposal. Don’t hide anything from them that they do need to know. Response times, reporting requirements, equipment requirements, insurance requirements, etc. need to be made clear in the beginning. A fully executed agreement is necessary as well as valid and appropriate certificates of insurance in hand prior to the season. After the one-on-one interview, a group meeting where they can all come to hear what you have to say is a great way to foster a familial atmosphere. This is where you outline what accounts you have, what sites they will be servicing, additional requirements, etc. They can meet those who they will be working with during a snow event and in the office. What kinds of subs do you target?? Guys with a single plow truck. Guys who have loaders. Guys who are already employed in some fashion. These all work well, in my experience. Loader guys don’t want to be in the business of snow. They want to work hourly and just do what they are told. Small guys cannot compete with you anyway. Guys with full time jobs generally don’t want to be self-employed business men (or women). They will need the following: • A solid covenant not to complete is paramount. • A format for them to submit invoices to you. • Pay them at a set time – every time. Loyalty to you keeps them from competing with you. • Like with employees and children – reasonable RULES they can follow helps a lot. Also remember to have your lawyer review your subcontract agreement to ensure it “works” for your state or region.