Whether you believe you can work successfully with third party providers or not is your opinion. There are however, some basic business realities that sweeping contractors need to think about when making the decision to participate or not participate in third party business.
The first economic reality is that the margin is not with the two entities that have assumed the risk. The sweeping contractor and the property owner have the liability exposure, but the guy in the middle, the third party provider, controls the transaction. Don’t believe me? Let’s take a look at the following example.
Recently, a big box retailer (who shall remain nameless) went out to bid for a new sweeping contract. The third party provider involved did not reach out to the sweeping industry to ask for pricing or ideas on how to improve service or lower cost. The third party provider submitted a price and then if they were awarded the work, started calling/emailing looking for contractors to do the work. In this process, there was no vetting of sweeping contractors. If you are willing to do the work for the price, you have it. However, it doesn’t end there. The contracts that the third party provider want to impose on the contractor are onerous and one sided. Some third party providers even go so far as to say that they do not allow for the contracts to be amended. In spite of the “no cross out” rule, if there is a term that you cannot agree to, do cross it out. Down the road, you may regret not trying.
So you may be asking yourself, “what do you mean the contracts are one sided”? Let’s take a look at another example. In most of the contracts that we have seen, if the third party provider doesn’t get paid, the contractor doesn’t get paid. However, the third party provider controls if the invoices are submitted properly to the owner. There could be an issue totally unrelated to the sweeping company’s job that could be causing a dispute and yet the legal document that the sweeper has is with the third party provider and not the final customer leaving the sweeping contractor unprotected.
Recently, third party providers have been adding a burden of proof for the contractor to prove they were on site. Some of these extra steps include taking photos of work in process while on the property each time with the store sign in the back, calling in at each location, putting sticky notes on the door or calling in the next day and getting tracking numbers that then have to be submitted with invoices. All of these steps add time. By adding 5 to 40 minutes is a 12.5% increase in work and all of this is done without additional revenue. To add to the chaos, each of the third party providers have their own way of being invoiced. There are numerous web portals and invoicing options, meaning that your back end office is spending more time than ever before on just generating invoices. All of this is done on the onus of the sweeping contractor to make the life of the third party provider easier.
The key to any service industry is service being provided up to the expectation of the customer but the third party provider doesn’t want the sweeping company talking to the customer. These two people need to be talking regularly to insure optimum performance and service but the business model of the third party provider wants to restrict the relationship making any sort of relationship impossible. To further solidify the impossible, they are often including a non-compete clause stating that you cannot work for the end customer for a number of years should the third party provider lose the business, even if it goes to a new third party provider. Sweepers really need to ask themselves if they are willing to walk away from potential business for a specific number of years due to a non-compete clause.
The final piece of advice that needs to be shared is that no sweeping company should ever rely on third party providers for the success of their business. The sweeping company can supplement their overall business with third party provider work, but in the end, this business can leave a sweeping company holding the short straw.
One key point to remember is that having too much of your business with any one customer is an unstable business practice. To be too closely tied to any single third party provider can be a business fatality so protect yourself and your business from becoming one of the industry horror stories where the phone rings one day and you hear, “You need to lower your price or we are going somewhere else.” It can and does happen.
Be smart and good sweeping.
The North American Power Sweeping Association (NAPSA) is a nonprofit association made up of 200+ contract sweepers, service providers and sweeping equipment dealers, manufacturers and suppliers. NAPSA is dedicated to providing beneficial support to the membership and enhancing services to the sweeping industry.
NAPSA is committed to promoting and educating the power sweeping community while enhancing the environment. For more information on NAPSA membership, please visit www.powersweeping.org or call (888) 757-0130.