Dealing With Cost Reductions And High Expectations

A reader writes: “We have had a contract for several years and have always been able to pass on wage and benefit increases. A new management team has recently come in and have stated that they not only expect a reduction (20 percent) this year but they also want us to ramp up services. Any ideas would be appreciated.”

This is becoming more common. I really believe that there are classes on how to beat down the vendor that many managers attend. The idea is that they can usually find another service who will promise anything to get the business and in so doing they can squeeze a few extra tasks out of the vendor. Unfortunately, this ends up driving some good companies out of business and turns others into bottom feeders as well.

If you do not know your numbers you may be tempted to cave on this demand and then wonder why you are not a profit. Of course, if you are making a very good profit and can give them this concession while still keeping acceptable margins then please do so. However, NEVER automatically accept the reduction without some sacrifice on their part, even if it is cosmetic. For you to unilaterally give in means that it was obvious you have been overcharging in the past. Even if that is true, do not admit it since it will only create more mistrust and angst.

Look at your productivity (SF/Hour rate) and conduct a major retuning of the contract. Could you do the same (or even better job) by switching to backpack vacuums, enhanced training, converting to microfiber mops or something else? If so, then meet with the customer and explain that due to new technologies you can actually meet their goals but will need them to partner with you by buying better walk off mats, instituting a strict policy about eating at desks and disposing of food wastes, etc. Get the idea?

Facts and a reality check are your best defense since this new management team may have already picked your replacement. Look for a win/win. Your comments and questions are important. I hope to hear from you soon. Until then, keep it clean…..

Mickey Crowe has been involved in the industry for over 35 years. He is a trainer, speaker and consultant. You can reach Mickey at 678-314-2171 or CTCG50@comcast.net.