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Dustings Episode 18: Building an Enduring Snow Company Part 1
1.1k Plays1 year ago
The guys welcome back Jordan Smith of VSI/Storm Equipment as he kicks off a three part series letting us know in his industry experience, and what he's seen in his travels, what it takes to build a successful snow company that will stand the test of time!
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Transcript
Introduction of Hosts and Guest
00:00:10
Speaker
All right, here we go guys dustings episode 18 is coming at you as always i'm steve And he's jeremy one of the baddest motherfuckers of all time One of the best singers and one of the best looking motherfuckers you've ever seen hold my drink, bitch
00:00:25
Speaker
And together, we are the Snow Jobs. But the great thing about our Dustings episode now, as you know, is that the liquid legend himself, Jordan Smith, joins us for
Series Overview: Building an Enduring Snow Business
00:00:34
Speaker
these. So, of course, we have to play his intro music. Provided by an anonymous source. Cannot give up, my man. Jordan, how we doing? I'm doing great, guys. How are you? Good. Pretty busy. Busy day.
00:00:55
Speaker
Yeah. Getting work done. Recording all day. Well, there ain't no snow, so you got to do something. I think Jeremy's done. I think he's done recording for the day.
00:01:06
Speaker
No, he's had enough. No, I'm not. Oh, man. So what are we doing today? Where we're today, we're starting a three part, a three part series. Episode one is today. Jordan has it. It's called building an enduring snow business. All right. So Jordan's going to take us through some parts and we're going to kick it around and see where we come out. So Jordan, let's not waste any time. Get right into it, bud. Let's do it.
Industry Challenges: High Turnover and Culture
00:01:31
Speaker
Yeah. So, you know, this is something that
00:01:34
Speaker
kind of came to my mind all these years traveling around visiting all these different snow companies. I wish I had an actual tally, but I have visited a lot of companies over the years between VSI and Storm and honestly, trade shows and just trying to make my trips efficient and
00:01:51
Speaker
uh, you know, looking guys up on LinkedIn, Facebook and hitting them up when I'm in the area. So I visited all these companies and, uh, everyone does things their own way. Everything, everyone does things unique way, but, um, you know, we're all working towards the same end goal.
00:02:07
Speaker
But one thing I've noticed too, and I think most people in the industry would vet this out, that we see a lot of companies come and go. There's a fairly high turnover rate in our industry, even in our local market here. You'll see new guys pop up every couple of years and some of them stick around, some of them, they come and go and maybe they'll ask for one year, maybe it's five, but there's a lot of turnover.
Key Ingredients of Endurance in Snow Business
00:02:33
Speaker
you know, the topic as you framed up is creating an enduring snow business. So we're going to kind of talk through some of my observations. I know you guys have some observations too, and just talk about what, you know, what it takes to actually build an enduring snow business. And before we get into that, you know, let's talk about what we really mean by that. Yep.
00:02:53
Speaker
So, you know, enduring is the best word I could come up with, but really what that means is a business that's built to last. Someone that's going to be around for the long haul, someone that's building their business for the long haul. And I just want to, you know, kind of talk through what some of the key points that look like. So, like I said, an enduring business, I would consider that a business built to last, been around for decades, or is planning their business in a way where they plan to be around for decades, consistent growth,
00:03:23
Speaker
retention of market share, growth of market share. You know, that's kind of a very basic high level definition of what I mean by an enduring snow business.
00:03:36
Speaker
But then let's talk through some of the key points of what I've seen, what those businesses look like. The companies I visit that have been around for decades, what are some of the really consistent things we see from those companies that have helped make them that way? Yeah, they're all pretty the same. They all pretty much have the same characteristics.
00:03:55
Speaker
They do. They do. And I'm going to start with with the one I'm most passionate about. You know, you guys have heard me talk about culture and, you know, in a recent episode, you asked me what I'm most proud of. And it's our culture at Storm and BSI. And there is a really consistent trend that, you know, when you walk into someone's business and you meet their people and you can tell they have a great culture, like that's really, really foundational to an enduring business. Because if you don't have a place that people want to work,
00:04:24
Speaker
It's not something that's going to go that well because employee turnover, it costs a lot of money, it takes a lot of time and effort and it pulls away your ability to actually focus on growing the business. And another part of a great culture obviously is typically a company with a great culture is going to provide high quality service because when your employees care, when your employees care about your company, when your employees care about the work they do, you're going to deliver high quality service to your customers.
Fleet Management and Legal Compliance
00:04:53
Speaker
Another thing is, and this is also pretty consistent, a lot of times you can tell how the business is built by the quality and maintenance of their fleet. It doesn't mean it all has to be brand new and shiny. You can have 25-year-old machines that are maintained well, and there's great businesses that run older equipment that's maintained well. It's been taken care of, it's been washed, it's been maintenance, it's been serviced, and it's still good to go.
00:05:20
Speaker
You can also walk into a business that's got brand new shiny stuff that's rusting out, right? Yep. We see it all the time. So some other things, you know, when we get, when we get deeper into, um, the weeds on some of these visits, you know, I'll spend an entire day there. So we'll, we'll get into, to.
00:05:39
Speaker
other deeper stuff, and this is kind of boring stuff, but it's real. Companies that are legally compliant, they're following the rules. They have proper insurance. Their business is set up correctly. They're not trying to skate around the rules. In our industry, I think it's really common for businesses to see it as a very seasonal business, especially in markets that only snows five to 10 times a year, and they're just going to skate by without the proper insurance, without the proper documentation.
00:06:08
Speaker
You can get away with that for a time period, but eventually that can come back to bite you. When you start talking to these business owners and employees, if they start talking about things like, it's too expensive, we don't pay for this, don't pay for that. Again, you can get by for a period of time, but to create an enduring business, you got to be set up for the unexpected. No matter how good your company is, the unexpected will happen at some point.
00:06:34
Speaker
Yeah. And I think you just nailed it with those five or six things you just said. I think you take one of those things away and you're starting down that slope towards not making it because each one of those that you mentioned will erode something else. If you have constant turnover of your staff because you don't have a good culture, your frustration level is going to be high. Your service levels are going to go down because you're constantly replacing people with untrained and unexperienced people.
00:06:59
Speaker
If your stuff doesn't work, your service level is going to go down. You know, if you have, you know, the insurance is just frustration, nothing but frustration. You know, nowadays you're worried if you can even keep it. You don't know from one year to the next if a company is going to just call you and say, hey, guess what? We're not doing snow anymore. We're not doing this anymore. And then what do you do? So I mean, I think everything you just named all rely on each other. If you lose one of those, everything's everything else is going to suffer.
00:07:29
Speaker
Domino effect. Yep. I think another thing, Steve, you actually mentioned it pre-show here that I didn't have in my notes, but it's extremely true. And this isn't something I necessarily observe when I visit companies because we don't look at their books typically. But there is an element in our industry of, unfortunately, financial incompetence, people that don't know how to set a budget, people that don't know how to allocate costs, don't know how to price work.
Economic Adaptability and Impact
00:07:57
Speaker
And unfortunately, there's some great people who have had their businesses go belly up because they, they just aren't strong financially. So fiscal responsibility and due diligence is again, it's really obvious, but that's probably one of the biggest reasons for failure is, is there, there's some great guys. I've met some great guys over the year, hit hard times because they didn't plan properly. And I know we can't control the weather and when there's no snow, it can be challenging for anyone, no matter how good your business is. But.
00:08:26
Speaker
planning for the worst is part of creating an enduring business too, right? Yeah. I think if you made it, if you had a snow business pre-2019 and you're still functioning in the last four years with the, you can't possibly anticipate the extreme rises in everything we use equipment wise, material wise, across the board, labor, even, you couldn't possibly anticipate how much that would go up because your natural rate of inflation is what, 8%. So, I mean, if that's what your increasing is, and now you're up 40% over a three year stretch,
00:08:56
Speaker
I don't blame anybody for not being able to anticipate and see the crystal ball with COVID that companies were going to use this, manufacturers were going to use it as a way to inflate prices for the foreseeable future. Even though they're still claiming, some people are still claiming shortages due to COVID.
00:09:12
Speaker
And that's like, as soon as they throw that out there, it's like, okay, you can expect an extra 15% tacked on. So I think if you survived the last four years, then you probably had a pretty sound financial plan and you were probably in good shape. You're probably in less good shape now, but you're still kicking and you're able to rebound from it. If you weren't, if you were teeter tottering in 19, you're probably not with us anymore. And this is a little bit off topic, but
00:09:42
Speaker
You're totally right. The last four years have been fairly unprecedented in the grand scheme of most of us that have been in business for let's say the last 20, just with the inflation, with some of the unexpected things that have happened. Then with some of the extreme winters, we've had both directions, huge winters or winters with no snow.
Snowfall Levels and Financial Implications
00:10:04
Speaker
This is something I actually just talked to my team about recently, but
00:10:09
Speaker
The last four years have been interesting because, and really pushing five years now, because that 2018, 2019 winter for a lot of people was really good. There was really good snow. I think there was two or three nor'easters in the Northeast, the Midwest had good snow above average. And then, you know, 2020 rolled around and yeah, COVID messed a lot of stuff up, but there was also a lot of free money that got passed around, right? Yeah, I didn't get any.
00:10:34
Speaker
I missed all out. A lot of contractors did. So we kind of got a shot in the arm with that good winner in 18-19. I think 2021 was a pretty decent winner. Not phenomenal, but not bad. So good money coming in, not from snow, but from possible stimulus money, other places. And then you get into 21-22, and it's pretty light. 22-23, one of the lightest on record for a lot of major markets.
00:11:01
Speaker
and all the while inflation is running rampant. So now you have no more free money, no more good winter and the cost of everything's up 40%. It's a recipe for a lot of people to be in the tough spot right now. And that includes what I would consider to be an enduring business. I think it is a challenging time for most, if not all small businesses right now.
00:11:23
Speaker
Yeah. And I'm glad you just brought that up because I have a question for both of you because I think you can, I think you can go either way on this. Do you think more companies go belly up after a boomer winter, like a hundred inches because they low bid everything trying to get work and they, they're now forced to service well over what they're getting paid for. Or do you think it's on a light winter where they're not getting paid because maybe they have the wrong structure of contracts and they're doing too much per push or per hour. And you know, what do you think more companies hurt from?
00:11:53
Speaker
banner winters or bust winters.
00:11:56
Speaker
I think bust myself. Yeah. I would think that just cause there's using a booming, if you have a big winner, you can always find extra work or something here or there, you know, you can do extra jobs that aren't included in your contracts or whatever in charge or your little money back. But when there isn't a lot of anything, a lot of snow, I mean, it's, it's tough to find anything to do really. If you're a snow only business and you're, you're pretty well fucked.
00:12:26
Speaker
This is true, Jeremy. Good observation. No, you're totally right. And I would agree. However, just to put a little more color to it, I agree with everything Jeremy said. But I will say, when there's a boom winter, I do think there's a tendency for contractors to maybe overspend on the iron and new toys.
00:12:53
Speaker
Honestly, Minnesota is a great example. In Fargo, for that matter, Jeremy, sorry to rub it in. But we had a phenomenal winter last year. And obviously, we sell equipment. So we saw the effect that had on equipment sales. It was great for equipment sales. We sold more plows and more de-icers, liquid de-icers in the Midwest than we ever had.
00:13:15
Speaker
and we sold less in the Northeast than we ever had because they had nothing, right? Now we come into this winter, these guys got all these new shiny toys that they, you know, maybe they paid cash out of the bank account for and maybe they financed it at 8% or 9% because that's what rates have done. During that same four-year period, we just talked about being challenging, right? Rates tripled. I mean, that's tough. A lot of companies are financing equipment.
00:13:37
Speaker
And now they're, now they're over leverages in a year with literally nine inches of snow, you know, and, and if they're not set up on seasonal contracts and a lot of guys in the Midwest aren't because it almost always snows and it's pretty safe to do per inch per push. Typically speaking.
00:13:54
Speaker
They're hurting. So it can go both ways. But I would agree, Jeremy, that a bust winter is, you know, your overhead doesn't go away just because winter doesn't show up. So I think a lot of it has to do with what your contract structure set up is. You know, if you're 70, 30 like that, they always say that's that sweet spot is like 70, 30, 80, 20, you know, 75, 25 of seasonal to
00:14:20
Speaker
you know, hourly or per push. If you're set up with seasonals, I think you're, you're okay with a, with a bust winter, but, uh, you know, you're not making that gravy money, but yeah.
Pricing Pressures and Market Adaptation
00:14:31
Speaker
I was just saying just to piggyback on what Jordan said was, yeah, when you have a good winter, you're, yeah, you're buying stuff that you're like, like, I want this, this is nice. It's, it's going to increase, you know, our productivity and,
00:14:45
Speaker
Listen to that, and then it seems like every big winner is followed by just a shit winner. Like a new LaRue. Or if you buy something big, you know, next winner is going to suck. I mean, that's always the way it goes. Like I told you, the damn equipment blowers that I bought, I haven't used them since. We haven't gotten over 24 inches since we bought all the equipment blowers.
00:15:09
Speaker
So we haven't used them. They look great though. If we ever need to sell them, they're pristine, brand new, really never been used. And I think the other factor that probably makes a bust winter hurt more is it does drive pricing down. No matter how much we can educate our clients, even if you're on a seasonal, when they see they're paying X dollars,
00:15:38
Speaker
for no work. They totally forget about the hundred inches from last year. All they can think about is the nine inches this year and then they either want a reduction or they want to find someone who's willing to do it cheaper and there's always someone willing to do it cheaper. So I think bust winters not only
00:15:55
Speaker
create price pressure downward, but they also open the doors for people to lose contracts, even if they're good contractors, because these buyers, honestly, a lot of our customers are in the same financial spot we are. Their cost of capital is up, and their cost of labor is up, and their cost of everything is up, so their businesses aren't as profitable either, and they want to save money where they can. And you haven't even listened to the episode that dropped Monday yet, have you?
00:16:20
Speaker
I haven't. Yeah. You're literally, you're literally talking about everything we talked about on Monday's episode. Like contracts coming out of low snow winters. How, what are your negotiation strategies and stuff? How are you dealing? Are you approaching things any differently? Because that's exactly what we were saying was, you know, people are going to look to shop because they just paid a lot of money for no performance basically in their eyes. I don't care how much they love you. Somebody's coming in. Their belts are tight too.
00:16:49
Speaker
But like Jordan said, they don't remember last year when they were the 100. No. They don't remember that at all. No. That's why you got to play the average because it's going to average up. Yeah, you got to look at customers like wives or girlfriends. They don't remember what you did for them yesterday. What have you done for me today? That's it.
00:17:09
Speaker
And even on a, like we talked in that show, and I'll say it again, it was low winter in like for us, it's been low, but we had a lot of ice events or whatever. We still got guys running around and I checked lots and we're out salting and that they just don't see the big equipment running around. They don't see the big loaders all day long pushing me, you know, we're still servicing them. I mean, obviously we can show them what we've done, but you know, they just don't see it.
00:17:34
Speaker
I mean, yes, they want to watch their cameras and see us all talked right by or something, you know. Right. And I think a low snow winter, everything you just mentioned, all those points, your market share, your your culture, your employee retention. I think that all suffers after a mile winter or a bust winter because your guys are bored. They're not working. They need money. Everybody needs money. So they're going to find some way to make money if you can't pay them through a bust winter and you're only paying them basically on per call out.
00:18:03
Speaker
And then your market share is probably going to suffer because if you're a high price company and they didn't get any service and you're not willing to be flexible on your contract structure, then they're going to shop. Yeah. And I don't want to jump too far ahead because part of these episodes will be talking about creating pricing structures that last in that work.
00:18:26
Speaker
Yeah, you're totally right. I think that part of creating an enduring business is adapting to the market conditions and environment. As much as we want to be tough and stand our ground and to some extent, when it comes to pricing work, we need to do that. We have to look at reality too and realize that when
00:18:48
Speaker
conditions dictate that we may have to adjust the way we do things. It does not mean we drop our pants on price. No, it might, we need to add some flexibility to the way a contract structured and put a floor in there so that the clients feel as though you're, you're playing fair ball with them.
00:19:02
Speaker
Treat them as partners. Absolutely. Yeah. You should listen to Monday's episode. It's going to be eerily similar. Yeah. My bad. I should have listened first. Should have been required homework, I guess. You've had a busy week. I know you got more important people in town, so it's all good. What do you think like you break down? You were always talking about four types of snow companies out there. What's your breakdown?
00:19:25
Speaker
Yeah, you can't fit everyone in one box. And I think one thing I really love about this show is the show proves that. I mean, there are certainly similarities between guests that you have on. But there's also stark differences. And there's no way to fit everyone into four categories. But I don't think that it's worth breaking it into more, because I think we can encompass 95% of the industry with these four categories. And again, this is just based on
00:19:51
Speaker
observations of the industry in general. And then again, my visits to these type of companies. So, so, so really, in my opinion, we see four types of snow companies.
00:20:02
Speaker
The first type is your, your serious snow contractors. They, they, they focus on snow year round. Maybe all that they do is snow. Um, I think glacier is probably a good example, right? You guys do a little bit of dust control and some stuff in the summertime, but you're pretty much a snow company, right? We're pretty much a company. Yep. And the crazy thing is.
00:20:22
Speaker
People may or may not know that there are snow only companies all over the country and i'm talking about places you'd never expect there are snow only companies in saint louis missouri there's no only companies in north texas there are snow only companies in wichita kansas like they are more than you might think.
00:20:39
Speaker
It's always surprising to me that, like I'll use St. Louis as an example because I have three customers I work with there who are snow only. In St. Louis where they get like 13 inches of snow a year and those are snow only companies and they make it work. And not only make it work, these guys have been around for 25 plus years. Probably because they're the only ones in town doing it. That's the crazy part. They're not. They're fighting with all the type two, three, and four guys I'm about to talk about and they're still making it work. Nice.
00:21:08
Speaker
So that's kind of your, and that's not to say that these guys are the best. I think they're certainly companies in at least the first three categories that are phenomenal snow guys and snow contractors. So category one is snow only companies. They focus on snow year round. It's all they do. The next type is what I would call a serious contractor who maybe focuses on other trades.
00:21:32
Speaker
And then they also do snow. So this is probably the largest category, especially if you look at guys that are on your show. You get guys that do excavation. You get guys that do hardscaping. You get guys that do landscape maintenance. You get guys that do concrete asphalt. And that's their primary trade. But because they have the staff and because they have the iron, they also do snow. And a lot of these guys are passionate about snow. Again, I think your guest panel is like a perfect
00:22:00
Speaker
cross-section of this, like that's what I feel like most of the guys that you guys have on are. They are serious contractors who have great businesses who also are passionate about snow. Yeah. So then category three, similar to category two, except for, you know, these are contractors who do any type of trade and they'll basically take whatever kind of work they can get at whatever price.
00:22:27
Speaker
And some of them will even brag about doing snow for nothing just to keep their business open. Right. And I know a couple of those guys. Yeah. I hear this a lot actually guys that they brag about doing snow for free. They call it free. They're not actually doing it free, but, but based on the budget, they may or may not have.
00:22:47
Speaker
They're working for cost just to keep guys busy. Their argument is that I'd rather do that than pay unemployment. I'd rather do that than have them work in the shop. I'd rather do that than try to pour concrete in the wintertime when it's not efficient.
00:23:04
Speaker
I get all that stuff, but I actually view category three as, I don't want to use the word problem because someone listening might get upset at me, but I'm going to say it's a problem. Jordan didn't say it. I said it was a problem.
00:23:23
Speaker
The reason it's a problem is because they don't have to do that. They're doing it out of naivety to the fact that the snow industry is a serious business. Like we talked about, this is an emergency service. It is to be taken seriously. Because of that, it should demand good profit margin.
00:23:45
Speaker
By using the mentality they have, they are lowering the market price. And quite frankly, these are the guys that are mostly working for category four, which is the brokers. These are the guys that are taking the phone call from, I won't name the brokers, but they're taking the phone call from the broker, broker saying, I'll give you 25 grand. And they'll say, bet, I'll take it for 25 grand. That sounds like good money. And they, whether or not they're going to make a dime, they don't care because it's like their mentality is better than sitting around.
00:24:12
Speaker
And again, it's hard to fault people for wanting to survive, but something we'll talk about in the next category here is you don't have plumbers that are like, hey, I'm going to keep guys busy and take this job for free because I'd rather keep them busy than have them work around the shop. Other industries don't do this. This is a serious
00:24:34
Speaker
service that's important to keep critical infrastructure open to keep things safe. And we got guys that are out there bragging about doing it for free. And even if they're not bragging about it, they're doing it and just they're quiet about it. Well, they're not looking at snow like they're professional about it.
00:24:49
Speaker
They're literally looking at it as a way to keep their crew that makes them money from March through November or December together because training a new crew to do those specialized summer jobs is more costly than like I had one guy tell me I don't care if I lose 15% 20% on the snow contract. I just need to make sure I pick up one
00:25:11
Speaker
decent size contract that I can keep my whole 15 guys together over the winter. Because trying to replace them, he goes, I'll make that 20% back in the first month of the spring. You know, with with the work we do, we just tack a little more on to everybody. We make it back. I'm like, wow, that is that's pretty bad when you're underbidding the other three contractors by 60%, at least bring your shit up and underbid us by 10% and get it.
00:25:35
Speaker
Right. No. And that's, and that's really, you know, that that'd really be my plea to anyone who's in that category is like, you don't have to do that. If you, if, if you want to keep your crew together and you want to create a cohesive culture by keeping your team together, I get that. Like I can't even fault people for that, but don't fricking take the work for nothing and don't, and don't be proud of it. Like there is no reason. This is, again, no offense to people that cut grass. A lot of people do it because they have to, but like.
00:26:05
Speaker
There's no reason to take bottom dollar because this is a service that requires, again, if you're doing it right, it requires a lot of dollars of insurance, a lot of dollars in compliance, a lot of training, a lot of heavy iron, and whether or not you already own that stuff for other trades, there is no reason to do it for free. There just isn't. 100%. I don't get why people want to work for free. I just don't get it. There's just too much on the line. It's just too much on the line.
00:26:31
Speaker
Well, and I question that too, like the number three in that category, those guys we're talking about, I question whether if they're not snow oriented and they're basically just doing it as a way to keep their crews together, do they have proper insurance? Like that's a question. You know, if you have roofing, you know, insurance that usually doesn't have snow as an underwriter in there, you know, as a rider attached to that roofing policy. So I'm wondering if they're actually spending the money to get the proper insurance to do what they're doing.
00:27:00
Speaker
I would say a lot of times no. And that's, you know, again, part of the issue is, you know, some of them might, but a lot of them probably don't. And, you know, again, it's like, there's no reason to take the work for the price they're taking it for. And if they were to take it for the right price, not only would it help keep the market conditions better for categories one and two, uh, they would also make more money in the process. Yeah. 100%.
00:27:28
Speaker
Again, maybe some of it's just a lack of education. Maybe they don't realize that snow can be a profitable service when done correctly. Again, category one is people that only do snow. This is clearly a profitable business, but unfortunately, the price gets struck down by lack of knowledge, education, and professionalism.
00:27:53
Speaker
Would you say that frustration is probably the number one killer of Snow Guys?
Industry Frustrations: Insurance and Lawsuits
00:28:00
Speaker
If you've been doing this for a long time and you're just constantly getting kicked in the nuts by the insurance industry, the frivolous lawsuits, the guys, not so much this year and last year, because we're hearing not a lot of people had problems with labor this year.
00:28:15
Speaker
Like a lot of guys are saying, you know, we have plenty of guys. We're good. But would you say that that the frustration level is what kills more companies than maybe fiscal mismanagement? Yeah, I mean, yes, I think you're right. But but I also think that. I think that some of that frustration comes from maybe the business not being set up the way it should be, too. Now, there are outside factors like
00:28:43
Speaker
like people that are underbidding work, like brokers that are making the market lower than it should be, that cause that frustration that are out of their control. But sometimes frustration stems from not having built an enduring business or an enduring business model too. So it goes both ways.
00:29:01
Speaker
Yep. All right. Cool. So category four then is, is our favorite, uh, clown club, the brokers, and we'll, we'll, uh, we'll spend, uh, quite a bit more time on this in episode three. Um, that needs a whole episode. It does. Well, Josh already did one. So I think you guys are coming there. It never hurts to reiterate.
00:29:23
Speaker
So just for, I think everyone probably knows what brokers are, but brokers are companies that self-perform very little, if any work. Many of them don't self-perform any work, but they procure contracts and they hire other contractors to do the work. So they're basically a prime contractor that uses subs. And this has been incredibly damaging to the industry because
00:29:49
Speaker
A lot of these brokers are owned by private equity or they're publicly traded and they answer to investors and shareholders. And because of that, they need to hit a certain margin. And because they need to hit that certain margin, they need to
00:30:03
Speaker
keep a lot of the money and because there are willing parties, mostly in category three that we just spent a lot of time on, they are getting away with it. Now we're seeing that come to a slow death here it seems like. It seems like people are getting wise to what's going on.
00:30:22
Speaker
But brokers own a lot of the snow business. I wish I tried to find stats. I tried really hard to find legitimate stats, but most of them are private because private equity is not public, so I couldn't find it. But I would guess that probably 30% or 40% of the national major market snow market is owned by brokers.
00:30:44
Speaker
Yeah, I believe that. Pretty much all the big box stuff are usually packaged to a broker. Big box and I mean really any corporate national level procurement has gone to the brokers because the brokers have done a good job.
00:31:00
Speaker
pitching to these national corporations that it's cheaper for them to procure one service provider and let them do all the administrative work of finding all the people to do the work. So slowly as the sites fail, then it'll come back to normal that you can't really do business like this and they'll go back to the old way. But by then, like you said, they've driven the price down for so long to try and package this thing attractively to these corporations.
Brokers' Influence on Market Pricing
00:31:26
Speaker
It's gonna take a while for the the prices to catch up to what they should be or even close to what they should be now, right? Oh, yeah Jeremy, do you do you see much broker activity up in a market like Fargo? Oh, yeah. Yep Big box stores and stuff. Yeah big boxes. Yeah retail. Yep Yeah, not as much distribution or industrial type stuff though. Oh
00:31:46
Speaker
No, we don't really have a lot of that around here. I suppose not. Yeah, it's not really a, there's no highways, dirt roads, dirt roads. Well, you have like, you have Microsoft, right? Like, like, so are they, are, are you dealing directly with Microsoft on that? Or yeah. Okay. See that's good. Yeah. Yeah. I think actually Microsoft's an interesting one. Cause that that's a great example of a huge.
00:32:14
Speaker
national company that as I understand it, they direct hire all of their partners because I have four, for sure four. I'm thinking there's a fifth that is not coming to mind, but I have for sure four clients I work with that work directly for Microsoft. That doesn't count you Jeremy, so you'd be number five. That's an example of a national company that is directly procuring their own snow and I would assume that if you surveyed
00:32:44
Speaker
that company, they're probably getting pretty decent service. Yeah. Oh, absolutely. You're always going to get better service if you're not dealing with a broker, because you're going to get more money dealing direct than you will going through a broker. They take their fee off the top, assume no liability, and do they even care if the site fails? Honestly, I don't know. I really don't know. They've already cashed their check.
00:33:07
Speaker
It was still starting to get up and start calling other people and bring them in and they fail, they fail, bring them next. I mean, they might get their ass chewed a little bit, but, you know. How do they not lose? Like, if we like privately, you know, privately acquired contracts by companies like us, if we were to go out and we were to fail on a site, on one of our sites, we'd be fired. Like, how are they getting multiple chances over and over and over again?
00:33:34
Speaker
Yeah, I think a lot of it comes down to, again, it's procured nationally. And the companies that are hiring these brokers are so big that people on the ground level at the locations, their yells and screams for help don't get heard because there's so many layers. It's not even a blip on their radar. Right. OK. And until there's service failures that actually start materially affecting the bottom line, like let's say a distribution center. If a distribution center gets locked down,
00:34:02
Speaker
for three days because it's got two feet of snow on it, but that'll get up to corporate, uh, leadership level because that's costing millions of dollars. I mean, Oh yeah. Yeah. Yeah. A lot of those. Yeah. Absolutely. So that in those cases, they'll hear about it. But if, if the failures are just the fact that truck in a truck is, is doing the site, you know, a million square foot site with a single pickup truck, like the work will get done eventually. And, and, and.
00:34:29
Speaker
They're probably not happy with the service, but it's probably not loud enough for that to get hurt at a corporate level. That's scary. 20 layers. That's scary. Oh my God. So you broke down the four companies for us. What's next on the list? What's next as far as an enduring snow business?
00:34:49
Speaker
Yeah, so I kind of wanted to just frame up, this is something I have talked about before, but just because it fits the context of this discussion, I wanted to talk through it again.
Comparison with Other Industries
00:34:58
Speaker
And that is just kind of comparing the snow industry to other industries, because it continues to be fascinating and not always in a good way to me that we have some of the issues we have in the snow industry, because these same issues don't exist in other trades.
00:35:18
Speaker
And we'll kind of talk through what some of those issues are. But one thing again, I've talked about before, but I'll say it again is, is, you know, snow services are not, they're not a licensed trade. Like what you think of with plumbing, electrical HVAC, general contracting. And because of that, the barrier to entry to get into snow is a lot lower. You know, like we talked about with some of the snow contractor types, if you own any type of equipment, you can be a snow contractor and
00:35:48
Speaker
I'm a capitalist through and through, so I actually think that's pretty cool. The problem is that because the barrier to entry is so low, there's a lot of uneducated or undereducated or even unqualified people that are in the industry, and that again is what drives the price down.
00:36:07
Speaker
And the other thing is like, this is not a cheap industry, you know, especially with some of the cost inflation we talked about, like this is not a cheap industry to be in. Even just if you have a truck with a plow and a salter, now you're talking about 80 grand minimum.
00:36:23
Speaker
I mean, think about on a much smaller level, like think about how many businesses have an even lower dollar barrier to entry than that. You know, 80 grand is not a small investment.
00:36:39
Speaker
that probably have even more issues than we do. But the problem is that they're not in an industry that provides such a critical service. So something I talk about a lot is because of this low barrier to entry into the snow industry, we see this huge standard deviation in the pricing structure in the industry. Again, I know I'm repeating myself, but there's no other serious industry
00:37:08
Speaker
on earth that I've been involved with, where the high and low bid could be for sure 100, but probably upwards of 200% different for the same work. Oh, it's incredible. It's incredible. Yeah. The exact same work. And what's even more incredible is that there's people that are doing sites for a third of the price they were doing them for 10 years ago. Yeah. Yep. Yep. Absolutely.
00:37:36
Speaker
I know locally here, there's a few national retail type accounts. And I know what the pricing was 10 years ago, because we were either doing them or bidding them or in the hunt for them. And I've seen pricing now, and it's a third of what it was 10 years ago. Yep. So costs are up in the last 10 years. Costs are up at least 80%, 40% in the last four alone or three and a half alone. Probably another 40% over the other seven years, because that's kind of just normal inflation.
00:38:05
Speaker
Yet we're getting a third of what we were 10 years ago. I mean, that's, yeah, that's crazy.
00:38:10
Speaker
You wanna know how it happens? That is what we were just talking about where a company comes in like number three on the list and they say, okay, I got three guys that are bidding $100,000 on this contract, I'm gonna bid 35. And I'm gonna get it for a year or two, it's gonna be a total fucking disaster. And then two, three years down the road when they're shopping again, they're gonna go to somebody and say, what, 55,000, we were paying 35.
00:38:37
Speaker
Oh, okay. Well, how about we settle at 45 and then boom, you're already, that a hundred thousand dollar contract is going to take now 10 to 15 years to get back up to a hundred thousand where it should be a two, two, 500. Yeah. That's, that's where we're running into that. I guarantee that's a lot of how that's happening.
00:38:55
Speaker
Well, like you said, once that floor is set, why would the clients look to pay more than that? 100%. Once someone shows willingness to provide service at that price, even if they fail, again,
00:39:09
Speaker
Customers have short-term memories. So even if that contractor fails completely, they're going to come to you and say, well, the guy last year did it for 35 grand. You come back and say, yeah, they did a horrible job. Well, yeah, but they did it. They were here most of the time. I'll pay 40, I guess. We were getting 100 three years ago. Yeah, we don't pay 100 anymore.
00:39:26
Speaker
And now that account's racked. It's ruined, like you said, for probably 10 years. And some people have a much higher tolerance for shitty snow work than others. So that's where having the right customers comes into play too. Because some people can tolerate a really, you know, the snow is four feet in from the curb line. They don't care. You know what? There's a clear 10 foot lane down the middle. They can get in and out. They're okay with paying bargain basement. That's what not every customer is right for every contractor too.
00:39:57
Speaker
They'll, they'll get by with a guy for 30,000, but then they'll hire you for 40 to next year when you should be at, you know, a hundred or whatever. But if you come down to 40, but they'll expect that four feet to be cleaned from you from the last guy was fine. But from you, they want it, which as a professional, it should be done anyway. But that's just, that's just how it goes. They'll let this guy slides. But then if, if you're paying a little bit more than the guy last year, Oh, it's gotta be, which it should be because if you're a professional, it should be done anyway.
00:40:21
Speaker
Thank you.
00:40:27
Speaker
Right. And again, just drawing this comparison back, I'm not an expert in plumbing or HVAC or electrical, so I'm sure there are exceptions to this rule. But I have
00:40:44
Speaker
With other business ventures and with my own home, I have hired enough of those type of contractors to know, and I'm not a price shopper, but I've hired enough to know that when you get two or three bids on that type of work, you might see a 10% difference in the high end. And that's where we need to get as an industry, because that levels the playing field for everyone, and it makes the industry more profitable for everyone, and it sets clients' expectations correctly.
00:41:13
Speaker
because of the certain categories of contractors and because of the lack of education, we don't have that. And again, it just wreaks havoc on the market for the serious snow guys, and it's not good for the industry. And the other thing is, like I said, the investment to do this business is huge. And some of these serious snow contractors, even the guys who do focus on other trades but take snow seriously,
00:41:38
Speaker
They'll have hundreds of thousands or a company like Glacier, millions and millions of dollars of iron that is banking on the ability to book profitable work or at least be able to cover their costs. Hoping it snows too, right? We're already taking a gamble on the weather in some cases. So now not only are we in a risky business, we are also in a risky business at way too low of a price and it's insanity. It's crazy and that's why it's so much turnover in the industry.
00:42:07
Speaker
Yep. And then you throw in, you know, 700% increase on your insurance costs, the liability laws that are favoring the frivolous lawsuits and not you, the honest worker. You know, you're driving guys out, you know, if they're having a marginal time and they're like, well, you know what? We're okay right now. We could roll this another year and survive, or we could just get out now. If your frustration levels already through the freaking roof, are you going to do, let's go, let's give it one more year. Why?
00:42:37
Speaker
You know, I mean, you can only human can only take so much, you know, your your bullshit tolerance. It has a it has a ceiling. You can only take so much. I think that's another thing. If guys are having marginal years, I think that's driving them out and.
00:42:53
Speaker
You know, it might not be the, might not be the guys you want driven out. It might be the guys that are doing it right. They're, they're properly insured and they just, you know, couldn't estimate. You can't anticipate a 700% increase in 11 months, you know, from, from 11 months from renewal to renewal, but that's what some guys are paying. It's happening. So yeah. And I think to compound this.
Turnover and Professional Development
00:43:19
Speaker
issue is, you know, early on in the discussion here, I talked about how much turnover we see in our industry. So even if there was, you know, certification or programs or training or, you know, like they have for plumbing, electrical HVAC, that kind of service, it would take a long time for that.
00:43:39
Speaker
cycle to really catch up because the turnover in the industry is so high. So every time you get turnover of a bad company, they go out of business or they close or they quit doing snow, there's one right behind them to replace them. Unfortunately, they weed themselves out over time. But again, because of that barrier right now,
00:43:57
Speaker
to entry is so low, there's a lineup of people waiting to replace the category three guys and work for those brokers. It's just, unfortunately, it's really gonna come down to, I don't know what it comes down to. We've had this discussion with our team at Storm many times, like, does there need to be industry certifications? Does there need to be licensing to do this work? You know, I think there's pros and cons both ways, but again, if you look at,
00:44:27
Speaker
If you look at the number of, put it this way, you look at the number of plumbing companies in the US that have been around for a hundred years or 50 years at least, there are probably thousands of them. How many snow companies have been around for 50 years? I can't think of any right now. 25, yes, 50. I don't know that it exists.
00:44:50
Speaker
I don't know. I mean, has doing snow professionally on the level that it's done today, has that existed for 50 years? It's a great question.
Evolution and Recent Developments in Snow Industry
00:45:00
Speaker
I don't know. I don't know when it got to be a serious business where we're throwing a ton of iron and stuff. Were sites a lot smaller? Were there a lot less bigger sites that had to be serviced? This is true. 50 years ago, I think the infrastructure may have been a little different. That is very true. That's a great point. That is a great point.
00:45:18
Speaker
But yeah, I think you're absolutely right. Like I can, in my area, it was when, you know, IBM was always a big, that was, you know, we have a big IBM complex, so that was always a big one. But outside of that,
00:45:32
Speaker
We didn't have distribution centers. We didn't have anything major like that until the gap moved in in 2000. And then that changed the game. Then all of a sudden, you know, everything started getting developed around that. We got more distribution. We got more shipping centers. You know, and now it's you got a whole boulevard out, you know, on the east end of town that's got, I think, six, six distribution centers that are over a million square feet. You know, it's it's a lot of pavement.
00:46:00
Speaker
Yeah, I think 50 years ago, it might not have been a serious business that you've got to do all this stuff. It would be interesting in the context of what I was doing last week. Last week, I was at the NTEA showdown in Indianapolis. That's primarily a show of dealers and vendors, people that are selling equipment for the OEMs. The OEMs are there too, of course.
00:46:28
Speaker
And I actually talked to a couple of dealers who were celebrating 50 years in business, 60 years in business. And who knows, like maybe they were selling something totally different, but it'd be interesting to talk to like a company like Chris Steel Truck Equipment here in Minnesota. I think they were.
00:46:43
Speaker
celebrating 40 years like it'd be it'd be interesting to know what their snow implement business looked like 40 years ago because you might be right man like I'm only 35 so maybe I'm totally naive here and like snow was never a serious business until maybe it was never serious business until 1995. Well LADC just celebrated 40 years. That's right they did yeah they did yeah that's right.
00:47:06
Speaker
And I only know about that because of that dirty graphics rap. You know, that's why I remember it. But yeah, so the Riley's have been doing it for 40 years and their partner, whoever I can't remember his name, but.
00:47:17
Speaker
They've celebrated 40 years, so he might be a good guy to ask, at least his dad at Brandon's dad anyway. Yeah, that would be interesting. I need to do a little bit of historical research here. Yeah, maybe we should do that sometime. I actually might try to talk to a couple of those dealers too and just see what the snow equipment sales business was like 40 years ago because
00:47:40
Speaker
You know, maybe it was super small and maybe, you know, people that own small shops and stores, they probably just did their own snow work. Maybe they shoveled it or snowblowed it, right? Like it was, it probably was just different times. Just think of it. I mean, it was what was standard industry 15 years ago, two inch minimum, probably. And I think, you know, at least around me, when I was a young, probably
00:48:06
Speaker
until I was 15 or 16, you didn't really see anybody salting commercial properties around here. Like salting, you know, and ice and slip and falls. That's a, I mean, in the, in the span of time, that's a relatively new thing. It's in the last 30 years around here. Cause the, yeah, the town and the state would plow the main roads and salt them. But as far as parking lots for shopping centers and strip malls, I remember them being skating rinks.
00:48:29
Speaker
I remember always they were plowed, but it was always ice. So, you know, that kind of service. And I remember also behind shopping centers, there always used to be the beat up 86 Chevy or 78 Chevy with an old rusty plow on it, because that's what the owner of the plaza had that. And he would go out and plow his own lots. So, you know, snow companies might have been an evolution that started in my lifetime, actually, you know, for what the under the conditions we're talking about.
00:48:56
Speaker
Yeah. Well, and, you know, a little more got some, some memories flooding back here, but at the, uh, Simon leadership forum last summer, they had Bob Lipinski there to talk. Uh, and he had a company in the, in the Northeast. And I believe I remember him kind of talking about he, like he was one of the first guys to start using, using big loaders and push boxes instead of just problem with trucks. Mm-hmm.
00:49:25
Speaker
I could be wrong in this time. I want to say he was talking about like 2004, 2005, which is only 20 years ago, right? So, I mean, maybe push boxes haven't even been a thing for more than two decades. I don't think they have, honestly. I mean, I remember in 2000 when the gap came,
00:49:45
Speaker
New York snow pros was the company that was doing it the first couple of years and they had loaders and they had like, I want to say like the first push boxes. They had to look for, you know, basically somebody to fabricate them. I don't remember them being anything other than maybe a pro tech. Maybe it was a, maybe they were pro tech, but yeah, it was like a new thing. Like nobody ever saw push boxes. Like anything you saw on equipment was some kind of angle plow.
00:50:07
Speaker
Yeah, somebody had rigged up, but the ordeal bucket with extensions on the bucket. Yeah, a couple hours of welding and you got a modified bucket. Yeah, I think it's in the span of time. I don't think it was done in my grandfather's lifetime.
00:50:29
Speaker
You know, maybe maybe in my father's, you know, middle of his lifetime and definitely in the beginning of mine. I don't think it's older than that. I think you'd be hard pressed to find companies that have been doing snow like we're doing, like we're talking about doing it now 50 years ago. I think I think what we found here, guys, is another dustings episode for the future. I think I think it'd be really fun to actually do like the history of snow. Try and track it down.
00:50:55
Speaker
Yeah, I think that'd be fun. Go all the way back to the horse drawn plow days. I remember when Phil was doing that presentation at our PA event last year, he talked like really high level history. He talked about started with horses with a carriage with a plow on it and then it went to
00:51:15
Speaker
to motor vehicles with manual angle plows and then the power plows came out in the early 80s and then salting started becoming popular and I think it was like in the early 2000s and yeah, it'd be interesting to really track the history down and interview some people that have been around for a long time. I mean, you got your SEMA contacts there. Talk to how long? They're pretty new too, right? How old are they? How old's SEMA? 20 years?
00:51:41
Speaker
Yeah, I think 2025 years, something like that. I think the symposium is only 16 years. Am I, is that right? Yeah, it sounds right. You know, they're babies as well, comparatively to how long, you know, snow's been around all throughout history. What did they do? That'd be kind of challenging to find people. Yeah.
00:52:01
Speaker
All right, back on track. That was a fun segue. I enjoyed that. Probably sounded like an idiot because I didn't think about the history, but it was fun. It was fun. I apologize. No, it's all good, man. So a few other factors here.
00:52:18
Speaker
We've already talked about turnover in terms of companies, but another thing is just account turnover in general. And again, a lot of it comes down to pricing variability and variability in weather.
Client and Employee Relationship Challenges
00:52:33
Speaker
It's not super commonplace, at least in my observations, for someone to retain the same client for 30 years. Does it happen? Yes, there are exceptions, but what we generally see in the industry is people swap accounts. Someone works with
00:52:50
Speaker
Client for three four five six years and then you get a bad winter or one bad thing happens or there's a slip and fall incident and they're on to the next guy and then that guy goes and takes the other guys contract and that guy goes and takes the other guys contract and you just don't have the type of enduring relationships because of the variability of the business.
00:53:10
Speaker
And again, because there's plenty of guys willing to come in and do it cheaper. So that's definitely a factor in kind of the nature of the business. Another thing would be high employee turnover, seasonal business. There's nothing we can do about this, but when you have a seasonal business,
00:53:26
Speaker
six months, seven months, eight months, depending on what climate you're in, that that's enough time for people to get bored and go find something else to do. Oh, absolutely. So you're always going to have your, your OGs, your guys who have been around for 10, 15, 20, 25 years. Um, and they're great, but they're the exception, not the rule. Most of these companies I visit, they've got a couple 20 year guys and everyone else is between one and five years. And that's just kind of what you see.
00:53:50
Speaker
And because, again, it's a seasonal business because a lot of times cultures in this type of business suffer because they're either doing snow out of necessity only or they're doing snow because they have to or whatever the case may be. The culture is usually not
00:54:08
Speaker
set up in a way where people stay long-term. And again, there are absolutely exceptions to that. The company types one and two we talked about earlier, but you get into the categories three and the brokers and that's not the case. But then, and then the last thing I had here was just that, you know, in that category three, like Snow is an afterthought in some organizations, like
00:54:32
Speaker
All of a sudden you get to October like, Oh, we gotta, we gotta get ready for snow. You know, or the first forecast comes out for snow. It's like, Oh yeah, we gotta do snow this year. And some of these guys have a lot of accounts and they're like, Oh yeah, we have snow accounts. It's going to snow tomorrow. We should probably should check if the equipment's good to go. And it's usually not. Oh, it happens a lot. Oh, that would freak me out. I couldn't do it. I couldn't operate like that.
00:55:00
Speaker
It's pretty common, especially when the snow comes earlier than expected. I know once in a while the Northeast will get one of those late October or early November snowfalls, and it's always a scramble. Even some of the great companies are scrambling at that point. I was just going to say that. I start thinking about that freaking once every five-year October snowfall in upstate New York, probably about July.
00:55:23
Speaker
And that's keeping me up nights. I'm getting ready for it. We will get it. And a lot of guys cannot transition. And we've picked up a lot of work over the years because we were ready to go for the October or, you know, it's usually around Halloween. It's either, you know, the October 30th to November 3rd, 4th time period. If you're ready, you're prepared.
00:55:45
Speaker
How often did it happen up there, Steve? Once every five, six years maybe? Most? We're always good for an early or mid-fall something. Sometimes it's like nothing, two inches maybe, but there was one couple of years ago, I think we talked about it on one of the episodes we recorded today where it was six inches at rush hour, evening rush, and guys didn't think it would stick at all.
Preparing for Early Snowfalls
00:56:12
Speaker
Weather guy said, our weather guy at least said, it's going to stick. Put your plows on, be ready. And we ended up picking up a good chunk of business out of that, being ready for that. Jeremy, doesn't it seem like in the upper Midwest year, every, every three to four years, we get a, we get an October, even mid October, right? Like three years ago, we had like October 18th or something, right? I know I've had like October 12th or earlier before it's been crazy. Yeah, we'll, cause
00:56:39
Speaker
Like around here, October 1st means like sugar beets, you know, so. Right. Oh yeah. So they can't switch gears. I remember lifting beets and fucking snow. I mean, it was ridiculous. It's snowing. You can't get your farmers out of the field to operate the. Yeah, then they won't come in and I'm like, you're not actually working on the farm. You can come run a load. You're not out there doing it. But what do I know? Got to protect the sugar beets. No, it's.
00:57:04
Speaker
yeah it's uh yeah we'll definitely get an early one here and there so every couple years it seems like it i mean yeah yeah it's i don't know it's just gotta be ready yes some companies it's definitely an afterthought and that's not usually uh that's not usually on the trail for success at that for us it's usually not a big deal because we're so comfortable ready to go you're ready to go 365 well besides the you know besides the
00:57:29
Speaker
getting all the guys. That's one thing, but you know, people that aren't ready are subs, which can't really blame them. They're doing their, they make a lot of money. So, so their equipment's all over the country. So if it's, you got an early snow, you're going to have to handle their accounts, you know, cause they're not going to, you know, that's interesting. That's an interesting point.
00:57:50
Speaker
Well, and I think it kind of, it kind of wraps up the, uh, initial discussion here pretty well.
Conclusion: Creating a Sustainable Business
00:57:55
Speaker
Like there, there's a lot of different elements to, you know, creating a business that is prepared for anything, a business that can endure anything in a business that's going to be built to last. So, you know, we kind of framed up, uh, kind of framed up all the, all the key, uh, foundational things and, and really what I want to do in parts two and three.
00:58:17
Speaker
is just talk about, you know, collectively here, like what we think it takes to build an enduring business and then also just some of the things I've seen over the years that I've learned, things that I've seen not only work once, but work for many, many years in a row and kind of what that looks like. Amen. Yeah, I'll tell you, tomorrow if you got some time, listen to the episode that dropped Monday, because it's going to be eerily, a lot of the things we talked about on that, you'll be like, oh shit, we just talked about it all again.
00:58:48
Speaker
But that was great. That was that was absolutely great. So we'll we'll get part two set up with you to record that whenever you want. And, you know, thanks again for for doing these series for us. It's the guys. I know the guys love hearing them. I know you hear about it all the time. People love hearing from the the liquid legend here.
00:59:09
Speaker
I have a lot of fun with it. And honestly, I just love talking about anything related to snow and especially with you guys. So I appreciate the opportunity as always. Amen. We appreciate it. We'll always talk snow. Oh yeah, definitely. We were in a half an hour earlier than you just sitting here talking because we have nothing else to do. All right, Jordan. Well, if that's all you got for us tonight, then we'll wrap it here and we'll get ready for part two coming up.
00:59:38
Speaker
Sounds good. Everybody good? Good. All right, boys. Well, gang, that's going to do it for Dustings 18. As always, both of us want to thank Jordan for coming on, giving us the time and his knowledge to all of us out there that are listening. So be on the lookout for Dustings 19. That'll be part two of this series that he's got for us. Everybody have a great weekend. Be safe and keep pushing.