NO GUTS, NO GLORY. WHAT IS YOUR RATE REVIEW STRATEGY?
To say we are in unprecedented times is an understatement. Pandemic, war, inflation, material shortages, increased fuel cost and labor shortages are just a few of the challenges waste collection company owners and managers are facing every day.
The quote “No Guts, No Glory” was first credited to U.S. Air Force Major General Frederick Corbin Blesse. Put simply, the saying is a call for people to attack important tasks aggressively.
Blesse stressed that aggressiveness was needed for all involved. Without aggressiveness, it wouldn’t matter how well-trained any Air Force pilot was. He would let enemy targets slip through his fingers. The saying has applications for both the military and everyday usage. In the military, it helps to have accurate information so certain targets can be attacked quickly and efficiently. In business, it helps to attack the challenges that face your company boldly and with decisive action. A proactive rate review program must be a structured, regular, periodic activity championed by company leadership and communicated to all team members.
Since 2000, the average inflation rate in the USA has been 2.38% per year. Over twenty years, this has produced a cumulative price increase of 67.89%! This means that today’s prices are 1.68 times higher than average prices since 2000, according to the Bureau of Labor Statistics consumer price index. According to Kiplinger, the forecast for 2022 inflation will be 6.3%, well over double the average of the last 20 years. A 6.3% (or more) increase in operational costs will erase much of your company profit if left unattended.
In the past, a small company could outpace relatively low inflation simply by growing their business aggressively. The mistake that most small businesses make is they don’t pay attention to the margin between revenue and expenses. As a company grows, cash flow should increase but if your net profit is decreasing as a percentage of your top line revenue, you are actually going backwards!
A careful and complete study of your costs will provide an idea what your rates adjustment should be. Compare your profit margin from pre-pandemic 2019 to 2021 and year to date 2022. What do you see?
Don’t fall into the trap of “I can’t raise my rates, I’ll lose all of my customers!” Better to lose some customers than your business! Every month or quarter you delay a rate increase, you are experiencing lost opportunity (and profit).
So remember, “No Guts, No Glory” ! Be courageous when it comes time to adjust rates, and make sure your quality of service justifies your increase. Be intentional about tracking your operating costs. Make sure your rates provide a comfortable profit margin.
Need a strategy regarding rate adjustments and discipline? Call us!
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