The last installment of our “Keys to Success” series offers some additional important insights from our first two pros—our 25-year executive from Florida (we’ll call him Stephen; he prefers to remain anonymous), and Gil Amado, whose 20+ years include his current position as president of his company—plus a couple of new ones from 20-year pro Sam, consultant to many and current owner of Life Care Ambulette and its 35-van fleet.
Capital, and a Business Plan
First things first. “You need capital to grow,” Stephen says. “You must be able to finance yourself through all of those hard times. As everybody gets to know you, trust you, and give you more trips, you need to insert more resources into your fleet to be able to grow. Eventually, you can no longer be your own mechanic, you can’t be your own HR. So, you have to hire people.”
Speaking of being your own mechanic, as mentioned in Part 2, there comes a time when it makes sense to take this expense in-house. “We currently own a shop where we service all our vehicles,” says Sam. “We also do our own inspections here. Again, it really saves you time and it saves you more money, because when you try to outsource, it unfortunately runs more expensive than if you do work in house.”
And all of this needs to be laid out in a comprehensive business plan. Stephen says, “You have to have a really well-drawn-out plan and say, ‘This is what it costs me to run one vehicle, this is how many trips I need to do to cover that cost. I can take on this many trips and make this much margin of profit with this many vehicles. And I need to keep a certain amount of on-time performance, so my service has to be good enough, or they’re going to take trips away from me because I’m not meeting my metrics.’ You have to have this mapped out; it can't be on the fly. You have to have a very good business plan. You have to look at your numbers and know where you’re losing money.”
“Most companies I’ve consulted for don't really look at what they’re really making,” he warns. “They see the lump sums coming in and they’re paying themselves salaries. They’re not understanding that they’re not really making money. They’re living check to check, and since Medicaid pays weekly, they’re able to survive. But the day that something happens and that check fails, they’re in trouble. They didn’t think about holding more money. The bigger you get, you need a bigger reserve. You must continue to build your reserve.”
Technology is King
If there’s one thing the three have emphasized the most, it might be the importance of technology. “Expanding your business is good,” Sam says, “but with that growth comes the need to evaluate and potentially change to better technology. It cuts your time in everything: billing, dispatching, organizing,” he says. Depending on the software, he thinks “if you have five dispatchers, it might cut you to three. If you have six or seven call takers, it's going to cut you to maybe four or five. That’s definitely going to help you cut your payroll costs at least 20–25%.”
“I’ve spent a fortune investing in technology,” says Gil, especially to automate his billing. “Say an average biller makes $60,000 a year,” he says. “And they work 40 hours a week, it means that they make $30 per hour. If they have to spend an hour chasing down a $50 claim, then you've pretty much lost money. Because you've already spent the money—the gas, the vehicle, the driver’s salary, the insurance, all the overhead. Let’s say the margin is 15% and it was a $50 trip. How much do you really make?”
Grow? Slow.
“We grew little by little. That’s how you grow responsibly,” Stephen advises. “You don’t say ‘give me 400 trips and I’m going to go find so many vehicles’; no, you think, ‘I have five vehicles, give me 50 more trips, then 50 more,’ etc. And you test yourself. ‘Can I handle it?’ Once you start understanding the point at which you’re giving bad service, you have to stop and fix that.”
In his consulting role, Sam says, “I have met a lot of companies that get to some level and they don't grow or they don't try to improve things, and that's where the business goes down.”
“You have to test yourself all the time,” Stephen says. “This thing of ‘give me a bunch of trips and I’m going to just load up my trucks, and who I can get and who I can’t get’ doesn't work anymore. The plans will not accept that, you will not meet your metrics, and it will take trips away from you. So it’s got to be a planned growth.”
Which is exactly what Stephen’s company did. “We purposely grew slowly. And every month we would buy a couple of cars and just keep growing, looking for other industries at all times.”
Why not grab a huge assignment and go for it? It’s dangerous. “Many brokers will say, for example, ‘I have a center with 150 trips. Can you take it over?’ And you say ‘yes!’ So you buy five or 15 vehicles, whatever, to do that center, and you hire the drivers, and then the facility says, ‘We changed our mind. We’re going to buy our own cars.’ The broker doesn’t run out and tell you, ‘We’ll replace it with these trips.’ My advice: incremental increases, so you don’t get stuck. We learned, because that happened to us a number of times,” he says.
Dash cams and . . . incentives?
As all TPs know insurance is a big expense for your company and unfortunately accidents do happen. What can you do to help protect your current policy? “We invested almost $75,000 to buy dash cams which saved us on our insurance—saved us on the claims where, before, it was a ‘he-said she-said’ but now we have a dash cam that shows what actually happens,” says Sam. “It worked well; actually brought our insurance a little lower for this year,” and helped his company get money for repairs because “we managed to prove [accidents weren’t] our driver’s fault.”
And one of the ways he tries to help save on insurance is part of one of Sam’s top priorities, “Incentives for your workers,” he says. He’s working on a project that will show drivers’ scores based on accidents, attendance, and other factors, and reward them in several ways to “keep our staff more united. We try to bring some incentives that will help retain our drivers.”
A Final Thought From Stephen
“You have to be honest, and a person of your word,” he says, because if you don’t do a good job you can quickly be replaced. “Keep your head down, do your little bit of work and grow slowly,” that’s the way to create success and become big enough to be resilient.