Single-Truck
Operator Competition
I've received several calls recently from PEI service organizations asking me about single-truck operators (STO) and how to compete with them. The intent of this article is not to criticize or degrade STOs. In fact, several PEI members who run very good service departments started out as STOs. This article is intended to break down the pros and cons of using an STO and what we, as multiple-truck operators, need to do to compete.
What Is a Single-Truck Operator?
A single-truck operator is usually someone who has worked for a larger service organization where he received various levels of training. He has left the company because it went out of business, it merged, it was purchased by another service organization and he didn't like the changes in his employment, was terminated, or just got tired of working for someone else and wanted to try it on his own. An STO is just what it sounds like: A single guy in one truck which he parks at his house, has various degrees of _experience and training, has no inventory, works for cash, has no insurance, no payroll and pays little tax. His hourly rate is usually well below the industry average, he rarely charges overtime, and he works when he wants. He is able to adjust his billable hours if he spends too much time on a repair or has to respond to a recall because his only loss is time. He communicates with customers from his cell phone, and he may have his wife take care of his books, or she may have another full time job with health insurance for the both of them. Except for his vehicle costs, this equates to an operation with virtually no overhead expenses.
This all adds up to a situation that enables him to work a lot cheaper than you and I. In fact, he can make a pretty good living for a while working on his own, and he makes our lives a little more complicated trying to compete against him.
So how do we compete against a guy like this?
Pricing
First of all, we are never going to be able to compete with him based on price. If you try that approach, you will end up losing a lot of money and probably go broke trying, plain and simple. You need to face the fact that there will always be customers out there who only are concerned about the hourly rate and the “cheap fix.” This will be even more common in areas where the economy is poor and dealers have their backs to the wall trying to stay afloat. We are seeing dealers who, because of low margins on gasoline, are not as demanding as they used to be in getting a dispenser repaired if they can save money by waiting. This negates the advantage a multi-truck operator would have in terms of providing quicker service.
Reliability
Multiple-truck operators have the advantage in the area of reliability. A one-truck operator can only be at one place at a time. During busy periods, after storms, heat waves, cold spells, etc., service seems to gang up on you, and it is easier for larger companies to give quicker responses than the STO. Same goes with vacations. The STO is out of business when on vacation. If he attends a service school, he is out of business when he is out of town. In our industry, 24/7 is important. How many hours can a single guy work without getting fatigued or getting burned out? What can he do if he is out on his boat on a Saturday afternoon and gets a call? Most STOs are best during normal working hours but become unreliable during crunch times. It is easy to sit back and say you will not respond to an emergency call from someone who normally uses the STO and is only calling you when he is not available. Be careful; it may not best serve your long-term interests by attempting to punish potential customers.
Offer your customers consistency by continually doing the right things at the right time.
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Parts Inventory
A typical STO keeps very little, if any, inventory. He cannot afford to tie up his money in inventory and keep his overhead low at the same time. This results in more downtime for the end-user, as he will have to wait hours or days for the part to arrive, depending on where the tech gets his parts. Will a customer continue to accept this added downtime to save $20 per hour, when he can call you and get same-day service? This leads to another question: Is it wise to sell parts and material to an STO competitor? Some would argue that a sale is a sale. Others would argue that you would be helping your competition. Tough call. I am sure there are different theories on this.
Training
We all understand that one of the most important keys to a successful service organization is keeping your personnel well-trained. This is costly and time consuming, but necessary. Technology is always changing, and unless you are receiving updated training, you will fall behind. Although an STO can be pretty well up-to-date when he starts his business, he will fall behind as time goes by. If he chooses to get updated training—provided he can get into a class—he encounters additional costs, and his business is virtually down while he is away at class. This contributes to his increased unreliability.
Patience
It is not uncommon for you to panic, or at least become a little concerned, when you learn there is a new guy in town. Customers may rave about how good he is and how much cheaper he is and that you have to lower your prices to keep their business. I believe this is where patience comes into play. Face it: There is always going to be a new guy in town.
The STO will not go away, and he will always offer a cheaper rate. It is my belief that if you develop a long-term strategy that offers your customers consistency by continually doing the right things at the right time, you will ultimately win these battles. In reality, would the customer rather save $20 per hour or deal with a contractor who will provide them with well-trained and educated technicians, have the right part at the right time, can be assured of someone always answering the phone and responding to an emergency on a 24/7 basis while offering fair pricing? Certainly there will be customers who will take the attitude: “Don't confuse me with the facts, my mind is made up, and he is $20 per hour cheaper.” But I bet they will always be in the minority.
STOs will come and go. Many will burn out because of the demands they will encounter with no back-up. Some will decide they feel more comfortable going back to work for another service organization. Some will decide to expand, thus making them a multiple-truck operator facing the same overhead battles we all face, and others will plod along working at their own schedule. But rest assured, someone will always be willing to give it a try. Your long-term strategy will prevail. Don't go broke trying to solve a short-term problem.
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