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TOWING & RECOVERY November 2011 Keeping industry pros on their tows FOOTNOTES 3 ® AD Partn tow ers Se VI e P S ag O e 1 R www.trfootnotes.com Announcing Our NEW Website! Featuring: Classified Ads The TowBlog Useful Directories Past Issues Helpful Articles Shows & Demos Subscriptions And more to come… Kevin Farthing Stay on your tows at: www.trfootnotes.com Tow company owners discuss their best & worst decisions Schmidt said it was not an easy BY THOMAS J. DOLAN Many towers asked to participate in decision, and it took about two years this article refused. Why? “Knowledge of hard thinking before he made it. of what you do right might be helpful, “The numbers have borne out what I but you might want to keep it to your-originally suspected,” Schmidt said. self, as well as your mistakes, which “Sometimes we think with our egos can be embarrassing,” said Chuck and not with our heads. We think Schmidt of Charles Schmidt & Son, heavy duty means big time, even Inc. in Roslyn, NY. But Schmidt did when your bank balances don’t reflect agree to share his thoughts on his de-that. There were a lot of headaches cision-making record. Why? Because associated with heavy-duty towing, “knowledge means much more if you especially the operators, many of them share it,” he said.. prima donnas who thought they knew “My best decision was about six more than I did.” months ago, and that was to elimi-nate our heavy-duty towing division,” CHASING MONEY Schmidt said. “The reason is that more Schmidt said his worst business de-and more motor clubs and dispatch cision took place about two years ago services have gotten into heavy-duty when he decided to get back into the towing, profits were auto club and dispatch depressed, and we service business after couldn’t recover costs. severing himself from So we sold our heavy-that market about five duty equipment and years ago. purchased new, up-The reason he left that dated car carriers. market behind, Schmidt That service work has explains, “is because it been very profitable.” Chuck Schmidt was very difficult working PRST STD U.S. POSTAGE PAID PEORIA, IL PERMIT NO. 315 HARD CHOICES better than the others. We have a better chance tracking three rather than ten. It’s a little more controllable with only three.” SPOTLIGHT Repossession Business Management Advertise Now! Call David Abraham 877-219-7734, Ext 1 Volume 22, Number 7 x $3.95 © 2011 Causey Enterprises, LLC. All Rights Reserved. In The Towing For December: For January: “My best decision was to eliminate heavy-duty towing” Schmidt feels it’s a “damned if you do, damned if you don’t” decision, but still isn’t happy with it. “My feeling is the chain of command in the major corporations has become too long,” he said. “It takes too long to get an answer to a question. Every employee is afraid of losing his position. No one is willing to take the risk of fulfilling a promise. “When my dad started the business in 1951, and when I came on board, we did business on a handshake, not a contract. Now you do 20 jobs for a client, and he said he wants to pay for only 18 and let’s negotiate. We set our rates. If they wanted to use us, they should accept them. It’s like going to the grocery store, seeing the bill is $100, and saying, ‘Let’s negotiate, I’ll pay you $80.’” Towing & Recovery Footnotes P .O. Box 64397 Virginia Beach, VA 23467 ® with several of them. Integrity in the motor club/dispatch service arena is very hard to find. The feeling you are part of a team delivering services to their clients is neither appreciated nor rewarded. Controlling receivables be-came unbearable. All one girl in the of-fice did is chase money we had earned once and now had to earn again.” So why did Schmidt get back into that arena? “They control so much of the market so that if you don’t work with them that can spell death,” he said, “but working with them can spell death too. This time around I chose to work with just three that are a little JOB CONTROL For Robert Young of Robert Young Auto & Truck Corp in Roanoke, VA, his best and worst decision is one and the same: “Getting into the towing busi-ness!” The downside, he said, “is it’s so hard to make money. The auto clubs, law enforcement, insurance carriers See HARD CHOICES, page 3

HARD CHOICES

THOMAS J. DOLAN


Tow company owners discuss their best & worst decisions

Many towers asked to participate in this article refused. Why? “Knowledge of what you do right might be helpful, but you might want to keep it to yourself, as well as your mistakes, which can be embarrassing,” said Chuck Schmidt of Charles Schmidt & Son, Inc. in Roslyn, NY. But Schmidt did agree to share his thoughts on his decision- making record. Why? Because “knowledge means much more if you share it,” he said..

“My best decision was about six months ago, and that was to eliminate our heavy-duty towing division,” Schmidt said. “The reason is that more and more motor clubs and dispatch services have gotten into heavy-duty towing, profits were depressed, and we couldn’t recover costs. So we sold our heavy-duty equipment and purchased new, updated car carriers. That service work has been very profitable.”

Schmidt said it was not an easy decision, and it took about two years of hard thinking before he made it. “The numbers have borne out what I originally suspected,” Schmidt said. “Sometimes we think with our egos and not with our heads. We think heavy duty means big time, even when your bank balances don’t reflect that. There were a lot of headaches associated with heavy-duty towing, especially the operators, many of them prima donnas who thought they knew more than I did.”

CHASING MONEY
Schmidt said his worst business decision took place about two years ago when he decided to get back into the auto club and dispatch service business after severing himself from that market about five years ago.

The reason he left that market behind, Schmidt explains, “is because it was very difficult working with several of them. Integrity in the motor club/dispatch service arena is very hard to find. The feeling you are part of a team delivering services to their clients is neither appreciated nor rewarded. Controlling receivables became unbearable. All one girl in the office did is chase money we had earned once and now had to earn again.”

So why did Schmidt get back into that arena? “They control so much of the market so that if you don’t work with them that can spell death,” he said, “but working with them can spell death too. This time around I chose to work with just three that are a little better than the others. We have a better chance tracking three rather than ten. It’s a little more controllable with only three.”

Schmidt feels it’s a “damned if you do, damned if you don’t” decision, but still isn’t happy with it. “My feeling is the chain of command in the major corporations has become too long,” he said. “It takes too long to get an answer to a question. Every employee is afraid of losing his position. No one is willing to take the risk of fulfilling a promise.

“When my dad started the business in 1951, and when I came on board, we did business on a handshake, not a contract. Now you do 20 jobs for a client, and he said he wants to pay for only 18 and let’s negotiate. We set our rates. If they wanted to use us, they should accept them. It’s like going to the grocery store, seeing the bill is $100, and saying, ‘Let’s negotiate, I’ll pay you $80.’”

JOB CONTROL
For Robert Young of Robert Young Auto & Truck Corp in Roanoke, VA, his best and worst decision is one and the same: “Getting into the towing business!” The downside, he said, “is it’s so hard to make money. The auto clubs, law enforcement, insurance carriers all expect you to 1ose money.”

So how does he cope? “Have the best-qualified employees and the most modern equipment,” Young replied, “for this gives you a better chance to pick and control your jobs. If you can control the job, you can control the price. Let others do the easy stuff and make or lose money. You do the complicated stuff and make money.”

Young acknowledged that this is sometimes more of an ideal than a reality. “You are still going to get jobs that are not profitable, for there can be extenuating circumstances, and sometimes you end up just doing charity. But these jobs can be covered if you make sure that you are profitable overall.

Yet, despite these obstacles, Young said his best decision was getting into this business. “Towing is my passion,” Young said. “I love it.”

NO RESPECT
Kevin Farthing, who owns WAFFCO Towing in Lake Station, IN, also voices similar frustrations in that his worst decisions are providing good service only not to be accorded a reciprocal respect. “We give our good customers very special rates, and we’re very honest. If we say it will take four hours to get there, that’s when it will be,” Farthing said. “Now, when we get there we find the customer is gone. We find out he called around, then he tells us, ‘We found this guy who shot me a better price.’ We may have dealt with this customer for one to five years. Some are better than others, but at the end of the day, there’s no loyalty.”

On top of that, Farthing said, many customers are extending their payments- due to 45 days or longer. He would like to add these costs to his basic rates, but is reluctant to do so because he feels caught either way. “I can’t be too harsh,” he said. “If I charge a little more I might lose the business, but if I don’t charge, I get burned.”

His market area exacerbates the situation. He is near the nation’s largest steel mills in Gary, where large trucks haul in raw material and haul out the finished flat sheets and coils of steel. “With the rising costs of fuel, if you raise your costs, even if they pay, they’re going to raise their costs so it’s going to come back to you through your back door. It’s a vicious circle. Sometimes towing is your own worst enemy.”

FACE TO FACE
To cope with these hardships, Farthing relies on implementing a number of positive decisions, none that dramatic in itself, but cumulatively helpful in overcoming the obstacles.

To deal with the general lack of loyalty, Farthing works to strengthen what bonds he can. “As the owner, I make it a point not only to talk to customers on the phone, but to also get out to see them face to face. I’m always working on good customer relationships, constantly dropping thank-you cards, letting them know I appreciate their business,” Farthing said.

He’s also avoided being stung by bad employees by conducting thorough background checks and seeking prior useful experience, such as working in construction or driving forklifts or heavy-duty trucks. And he checks references.

Farthing also plans far into the future. For instance, he said, “In terms of new equipment, we do lots and lots of preplanning. We sit down with the manufacturer and have our equipment built from the ground up to meet our specifications, building the wrecker first, then going after the chassis.”

In dealing with erratic bank financing, especially in an uncertain economy, Farthing said, “We’re doing our planning for the future in terms of what we’ll need 24 months from now.”

GETS TO YOU
Mark “Da Moose” Sternberg whose Eagle Towing is based in Engadine, MI, said his worst decision “was getting to the point where I was not running the business. It was running me.”

Like most business owners, Sternberg wanted to grow, and, with towing, unlike most other businesses, you have the opportunity to work 24/7, without taking any time off for sleep if you don’t want to. But, as Sternberg acknowledged, it can get to you.

Sternberg lists some of the same complaints as the others, which tend to grow as the company grows. For instance, he said, “You’re dealing with more employees who don’t want to work, who don’t care that much for they know they’ll get their welfare checks.”

Then there are the problems associated with slow payments, exacerbated during an economic downturn. “Everybody is under pressure,” he said. “People are losing their businesses, houses, and are up to their ears in debt. That makes this a tough business to be in.”

To this list Sternberg adds high insurance rates he can barely pay, unscrupulous competitors who charge low rates, then rip off their customers to give towing a bad name, and, of course, the motor clubs. One solution Sternberg has to the latter problem is working only with Triple-A, which, he reported, pays on time.

These problems are going to be there in any event, Sternberg said, but the main problem is that they can escalate out of control if you grow too big, which he said was the case with him (see sidebar page 3).

Read the full article at http://mydigitalpublication.com/article/HARD+CHOICES/928184/94247/article.html.

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