Originally Posted by GreenUtah
Since I came from that "world" and have directly competed with them for decades since, I'll speak up.
The notion of bulk buying and efficiencies of other fixed costs is correct. When you buy by the truckload, you save. When you buy in mass for insurance and fuel, you save. When you buy under a fleet account, you save.
Likewise, fixed costs like warehouse/storage space, office personnel etc. are far more spread out over a larger customer base, meaning less cost per job than you might incur.
So how come they aren't just setting a price so low that no one else can compete, drive out all competitors in each market and create a monopoly?
Because you are missing some costs that you don't have. Number one, layers of personnel. Your company is not paying for high dollar branch, regional and corporate managers. Their travel time and expenses, their enormous inefficiencies and their salaries which are often a multiple of service or sales personnel. Second, bond and shareholders. Sure, you as an owner count in your expenses but you are also likely to be a revenue producer, whether that's as a sales person or field operator. Theirs do no such thing, they are only negative cash flow with high demands. Third, as stated previously, their plans cannot change quickly, they do the minimum job, they turnover personnel rapidly. All of those things negate their route efficiencies by creating customer service issues on the backend, which leads to additional costs. The average TGCL branch churns 30% of their customer base each year and a similar, if not higher, number of employees. Retraining and marketing just to get even has a high cost that you likely do not.
Don't fear the nationals. They've got their whole host of problems to deal with too. Learn their weaknesses and exploit them with those that are unhappy and be glad that they are creating the market for you with their empty promises that go unfulfilled by their disconnected production arms.
very well said, couldn't agree more