Weathering the Storm: Sound Advice for Business Survival
Professional Surveyor Magazine - February 2012
Tate Jones, PLS
Having been in business for 25 years and in the land surveying profession for 40, my intuition tells me that this economic recession, which has greatly hurt our profession, will continue to be detrimental for several more years. Some refer to this as a “financial crisis,” which is true, but it has direct consequences to many parts of our lives.
As a whole, bankers look at surveying as a subset of the construction industry. Due to that connection, as the housing and construction markets collapsed, the associated financial risks increased. As one banker told me in 2007, “We consider surveying a part of the construction industry, and if we can give you a loan, you will pay a higher interest rate.” That’s when you realize your industry is in trouble.
How Did We Get Here?
We’re all familiar with the current situation, and we can point at three main causes.
Just as with retail and commercial starts, my unscientific estimation indicates 60% of surveying firms relied on steady growth and expansion of the housing industry. This fuel for our surveying economy is no longer there.
Land survey product value:
In reaction to the downturn in their sources of work, many surveyors discount their services in an attempt to hold on to their clients and market share. This is a common occurrence, especially with ALTA surveys, and, unfortunately, I am not sure that we have hit the bottom in this downward price spiral. The current trend of price cutting may be the one long-lasting effect that will take our profession the most time to rebuild from.
Advancements in survey technology and data availability:
While certainly a blessing, technology is replacing jobs in land surveying at an astounding rate. What a survey crew used to do in a week can now be surveyed in a fraction of the time. What does this mean for the profession? And what about readily available GIS data? Ironically, one of the best tools available to the modern surveyor—Google—is also the largest producer of 3D data generated by our modern survey tools. Google is literally mapping the populated world. And most of the data, at least for now, is free.
What the Future Holds
Our ability to adapt will determine our ability to survive as survey firms and as a profession. The cost of not adapting to this changing business environment is extinction.
The firms of the future will be smaller with less permanent staff. Fees will be determined no longer by how many crews you have but rather by how smart you are at collecting 3D data and selling it. Fees will be better for those firms that understand how to find and use existing sources of 3D data.
In 2007, we had 49 employees in our firm. Today we fluctuate between 15 and 25, depending on workflow. You will see firms employ more 1099 or contract employees and fewer full-time, full-benefit employees who are often standing by, waiting for the next job.
The Achilles heel of all survey practices has always been that if you keep your staff busy 35 hours a week and they have no work for the other five hours, you have lost all of your profit. At this point, you are no longer in the surveying business—you are in the employment business!
How Do We Proceed?
Be a better businessman. The job of the owner of a land surveying firm first and foremost is to get jobs.
You must learn to market in ways other than price reduction and learn to expand and contract with your backlog.
There are only two ways to control your prices. The first is having a healthy backlog of profitable work, and the second is providing valuable services to your clients. The survey firms of the future will have a permanent staff large enough to process the workflow and provide quality control, but will also have a healthy list of tried-and-true subcontractors and associate firms that they can hire and use to expand their workforce when they have a wave of work that cannot be handled with permanent staff.
If you do this correctly, you will also be creating future clients when these other firms have intermittent work overflows and need your services. It should go both ways.
Begin thinking about profit and not billing as the goal.
Many of us bill our crews at some price ($1,000 per day, for example) and think that we are making $1,000. In fact, with proper accounting procedures and company overhead, your actual profit is closer to $150.
Instead of buying equipment, learn to acquire it in other ways.
If you can rent a piece of equipment for $500 and make $150, you have greatly reduced your cash flow and increased your profit margin. You can rent it on a project-by-project basis; we do that quite often. If you need a truck for 30 days, you can rent it and make more money in the long run. Build the rental cost into the job proposal. If you can do this, you have priced the job correctly.
Take a second look at all of the expensive equipment you have purchased and how you must pay for it every day. An unused piece of equipment sitting on the shelf is not an investment. I swap equipment with other surveyors on a regular basis. Seldom is all of our equipment out every day. We swap it when we can, rent it when we have to, and buy it when the conditions and workload point in that direction. (I purchased my second laser scanner when we looked out at our 90-day workload and realized we had 40 days of scanning approved by clients.)
Learn how to make your firm elastic.
Today the timeframe to complete projects is much shorter than it used to be. The amount of staff expertise is also thinner. The days of having four or five registered land surveyors waiting to review a project are long gone. This is the day of speed, efficiency, and technology.
Nothing has changed the need for high-quality surveys, but the time you have to produce them is much shorter.
Build relationships with AutoCAD technicians, retired land surveyors, out-of-work surveyors, and surveyors who provide services in geographic areas where you don’t compete with each other. I have friends and associates from Virginia to Florida to Texas. If I need help, I can call on them and hire them to help on a piece of a larger project, and they do the same for our firm. The result? When the project is complete, you don’t have extra, unnecessary employees, but you do have a satisfied client and a stronger firm overall.
Protect your firm from being abused by clients who want only cheap fees.
Make the signing of a contract the starting point of every job. Even with a client you have had for years, having a signed contract can save a lot of scope creep and misunderstanding even on the simplest jobs. It also makes your insurance company happy because it explains where your responsibility ends and what the client’s expectations are. It is amazing how things change when you ask your client to sign a real contract.
Two days before writing this article, I was given notice to proceed verbally by a client. I asked him to send me an email from his company stating this fact. I received the email, but it said that, due to a “funding glitch,” he could not give us notice to proceed at this time. If I had not asked him to send it in writing to me, he would likely have had a survey and we would have a long-term, accounts-receivable problem.
Don’t allow your clients to cut your prices without changing the scope.
Many lawyers have called to tell me my price is too high. I remind them that it is less than their price, and they don’t even leave the office.
Learn to use 3D technology. You don’t have to own a scanner to get and produce scanning jobs.
Getting into laser scanning in real dollars can cost more than $150,000. But if you hire a scanning company to scan the project, you can purchase the data-processing software for $6,000 to $8,000. Then you can use their services, reduce your permanent field survey staff, and increase your profit.
The fee for most 3D scanning jobs is 20% to 30% for the scanning, and the rest is data processing and CAD work. Remember: all the lidar platforms that are collecting 3D data with airplanes, automobiles, and helicopters get overloaded with data processing. The same software (continued on page 51)
(continued from page 45) can be used to process this data. See how relationships can be built?
Try to view the future as long-term. Just as the housing industry began its downturn in 2005 while most of us did not see it until 2008, the reverse will also be true.
There will be signs when the economy really begins to pick up.
County building permits are an easy way to see the future. If you have a relationship with a local bank, get to know the president or your loan service manager. They regularly commission detailed economic reports on the local economic outlook, and they pay a lot of money for them. If you have a business loan with them, then they also have a vested interest in giving you good information. Read their reports; they are very informative.
Lastly and most importantly, be realistic. If your workload goes down, you must immediately cut your overhead. For most of us, this means staff. No one wants to do this; it is by far the hardest thing we have to do. When our workload went down, we reduced our employees from a high of 45 employees to just seven at one point. (We have slowly built back up.) This reduction in staff, combined with tight cash management and a realistic outlook, is why we survived.
Hope is not a strategy! When I talk to an owner and ask how the business is doing and he looks at me and says, “Well, we are hoping some good jobs come in soon,” I know he is in serious trouble. I had good friends in our industry who are no longer in business today because they did not understand this simple principle.
Make no mistake: a huge paradigm shift is taking place. As of this writing, I am not sure anyone knows when our current economic situation will begin to return to where it was in 2007. Look for signs that are the leading indicators predicting increased construction activity in your area. Be realistic, be creative, and be adaptable. That is what it will take to survive these current economic conditions and grow out of them into better times.
Tate Jones is a registered land surveyor in Alabama, Florida, South Carolina and Georgia and a member of this magazine’s editorial board. He began in his business 1988 and has been in the land surveying business ever since. His firm, LandAir
Surveying, is currently a nationwide provider of aerial mapping, land surveying, and 3D laser surveys. For more information, visit www.landair
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