Contract Sweeping Industry's Economic Outlook, August 2010

Mixed signals make prediction of near-future economic events more difficult than usual. One thing is clear: If you're waiting for 'business as usual' to return, you'll have a long wait.

Many readers know I've covered sweeping industry news and provided advice to sweeping contractors for over two decades. Less well known is that my credentials include a Masters' degree in economics and that I'm co-author of a book, with University of Washington Professor Emeritus, Dr. Jack Lessinger, that encompasses a theory for where the economy is headed in the next decade.

Based on his half-century of research and a body of statistical analysis that goes back to 1790, in "The Great Prosperity of 2020," Dr. Lessinger and I predict that enormous societal and economic (socio-economic) changes will be taking place in the next decade. Much of what we consider 'business as usual,' including the urban sprawl now supported by long commutes from suburban homes, will not be with us ten years from now. Still, that doesn't speak to the short run.

A current poll of CEOs of small-to-medium-sized businesses reports lowered expectations for the pace of growth in the overall economy. At the same time, however, they remain confident that there will be an increase in revenues and profits, as well as the hiring of new employees, over the next 12 months. (Source: Vistage CEO Confidence Index; 2nd quarter results.)

In the fourth quarter of 2008, CEO confidence indexed at 48.7 – an all-time low since the survey began in 2003. According to University of Michigan's Dr. Richard Curtin, who has directed the survey since its inception, CEO confidence rose to 94.4 this quarter, marking the sixth consecutive quarterly increase. That's good news.

According to Vistage International Chairman and CEO Rafael Pastor, the Q2 results are particularly significant, "CEOs of small-to-medium-size companies have adjusted to the lean economy, are doing more with less, and have positioned their companies for success. Their continued confidence sends a strong message that small and medium sized businesses will be among those who will lead our overall economic recovery."

This quote echoes what I have gleaned from contractors around the U.S. When business slowed, they reduced their employees and, of course, those who were considered to be the least productive were the first to go. Those still on the payroll have become more productive than before in order to not be next on the chopping block.

Although you do not necessarily want to involve rank-and-file employees too much in your business and the decisions you're making, avoid shutting them out entirely. Be real with them, but don't breed negativity throughout your company by sharing a 'gloom and doom' attitude.

At the same time, sweeping contractors have put expenses under a microscope. Costs have been reduced wherever possible, resulting in companies that are being run leaner and with more of an eye toward doing what it takes to improve the bottom line.

As a result, some contractors actually report increased profits, in many cases on a reduced level of business. A number are following my long-time editorial advice, as well, which is to find other services they can provide for their existing clients. This has allowed some to find new profit areas without having to find new customers.

Back to the data from Vistage: Planned declines in employment fell to just 9 percent in the 2nd quarter of 2010, the lowest level in three years. Among all firms, 47% expected to keep the overall number of employees constant, up from 44% in the prior quarter and the highest percentage in the past decade.

Growth in revenues was expected by two thirds of all firms in the 2nd quarter, unchanged from the previous quarter but well above the 50% of all firms that expected revenue gains a year ago. Increasing profits were expected by 54% of all firms in the 2nd quarter of 2010.

Of course there's no way to analyze the prospects in any given area of the country, since there is so much disparity between states in how the downturn is affecting retail and construction, the 'Big Two' when it comes to contract sweeping.

Unemployment in the construction industry climbed in 25 states between April and May of this year, and in most of the country over the past 12 months. Although road construction has been targeted for stimulus funds, few contractors have reported an increase in sweeping for road construction. There is an expectation by the American General Contractors association that both of these areas will see some improvement in later 2010 and 2011.

Perhaps that's already happening: According to CNNMoney.com, July 15, 2010, the number of Americans filing for initial unemployment insurance dropped to the lowest level in nearly two years last week, according to a government report released Thursday.

There were 429,000 initial jobless claims filed in the week ended July 10, the lowest level since Aug. 23 2008 and down 29,000 from a revised 458,000 in the previous week, the Labor Department said.

Retail sales of commercial trucks also rebounded nicely in the first six months of this year, according to figures compiled by Wards Communications. Sales of Class 3-8 trucks were up 17% compared with the first half of 2009. Class 6 trucks (GVW ratings of 16,501-26,000 pounds) were the fastest rising segment during the first half of this year, up 51% from the corresponding period of 2009.

My suggestions to contract sweepers? Work harder, but also work smarter. Keep a tight eye on every expense. Make sure each of your accounts is actually profitable, or make changes to ensure they are. Get inventive with every part of your business.

Perhaps a 'bird dog referral program,' where you pay for leads from employees and others that turn into customers, can make a difference. Cross-connect with other types of (non-competitor) contractors in your area to provide you with leads. Do the same for them. Get creative in every area of your business you can think of.

Get more involved in your local community. If you currently are a member of local/regional associations, see what kind of assistance they might offer. Go to meetings each and every time, get on committees, and expand your knowledge about others in those groups. Talk to them about what you do and how your ability to make their company exteriors look great can positively affect their businesses.

Utilize the internet more as a way to gain business. As examples, many contractors are finding that internet listings, including our own Contractor Locator, are more cost-effective than the yellow pages ads of yore. Also be sure you are listed with The Blue Book, so you get notices of sweeping jobs coming up for bid in your service area.

Utilize the vast resources in the WorldSweeper.com archives, especially our Tips Clipboard and Parking Area Contractors sections, to get business tips and ideas that will allow you to run your business more intelligently. Even small changes, when there are enough of them, add up to an enormous difference.

Be sure to 'mine' the ideas of your employees. If you have good people, you're sure to come up with good ideas. Make sure everyone in your company is in marketing. Do all your employees carry business cards they can hand out whenever they might stumble across a lead? Have you trained them to be on the lookout for leads?

The majority of CEO's surveyed by Vistage (87%) believe the federal government does not understand the challenges faced by small businesses well enough to expand their business opportunities. These CEOs are concerned about increased taxes, regulations and government interference that hinder entrepreneurship. I think the majority in our industry echo those sentiments.

We're in an unsettled economic time that, in my opinion, won't ever go back to the 'business as usual' we saw in the past. As the saying goes, "The best way to predict the future is to invent it." What can you invent for your own company that ensures its future in the changing world in which we find ourselves increasingly immersed?

Ranger Kidwell-Ross, editor of WorldSweeper.com, is also a Master's level economist and co-author of a book on socio-economics entitled The Great Prosperity of 2020: Fall of "What's in it for Me?", Rise of "What's in it for Us?". If you have new information to provide on this topic, let him know and we can add it in as an addendum to this article.

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