Interview with Independent Mover Jim Simpson
Question: Please give us your thoughts on making the transition from a van line agent back to an independent mover at this point in your career. What motivated you to make this change? And once you reached this decision, please explain your thoughts and next steps?
In my opinion, most movers or business people have an independent mindset to begin with. If you accept that postulate, then it is easy to see the transition. When I finished college and decided to work full time at Victory, I had seen the opportunity for growth in a vibrant industry. The early 1980’s was the heyday for the modern moving industry. Business and qualified drivers were plentiful, fuel surcharges were 18 percent, and all pricing was full tariff. Besides, corporate America was moving its employees as expansion was the name of the game from telecommunications to banking. It was the birth of the “Information Age.” One in five Americans moved every year. America was the mobile society.
Victory was a small company and as a salesman, I had begun to service companies like AT&T, IBM and other Fortune 500 firms. The majority of van lines and their agents, for the most part, were haulers with several large booking agents. The van lines filled the void for all the businesses we could not service, until we developed a significant hauling fleet. Even then, we relied on the agency family. Don’t get me wrong, today we still rely on other agents but the network domestically and globally has become more transactional rather than exclusive agreements based on the color of the van lines fleet. Additionally, there were tremendous economies of scale with the van line headquarters regarding handling, safety, permitting, billing dispatch, claims, marketing, etc.
As the modern industry of the information age matured into the 21st century, due to pricing pressures from third party-relocation firms, changing demographics, deregulation and more, all of the van lines began pushing the work load back onto the agents, increasing our cost of doing business. This is not a complaint but merely the way things had to go in order to improve the overall van line system. And as time went on, we began to witness a consolidation of agents into mega-agents and a huge reduction of the systems hauling fleet. Mom and pop moving companies that were owned for generations began disappearing. While smaller in size, most of those firms were the highest quality companies because of the ownership structure.
With changing demographics yielding smaller shipments and less overall volume of shipments along with less face-to-face and voice-to-voice communication with the customer as a result of the internet, we discovered from our international network of movers that agency networks can be informal, with fewer rules, policies and no exclusive relationships or in-network only relationships. Using the international business model as a template, we realized it was actually much simpler to build informal business networks for agent-to-agent business domestically and become truly independent and creative as to how we would market our services. We asked our clients about some of this and most did not even know we represented a van line!
Our first course of action has been to grow profit, not revenue. As a matter of fact, we terminated clients that were marginal, tendering business to our firm that made no logistic sense for us or the client. We also let clients go that were high volume, low margin. We tried chasing revenue, and in my mind, that is a race to the bottom, especially with low unemployment and a lack of qualified industry drivers. For the first time in over a quarter of a century, we are re-imagining the company. It is not an easy process and there has been much pain and cost associated with the process. We are just over a year into our journey and business is robust and the future is bright, not just for us but I believe for anyone else in the industry who has a continuous process of inventing and re-inventing.
Question: How big is containerized shipping in the business today?
I have been bullish on containerized shipping since I returned from public service at the end of 2014. Before that, most of our international business and storage business had already been containerized. In the early 90s, we began buying curtain-side and pallet trailers, and every storage shipment coming into our warehouse facilities has been containerized using the standard 250 cubic foot, Kontane storage container. Containers cut down on claims and labor costs. Additionally, containerization has put everyone in the interstate moving business and many without ever buying one over-the-road vehicle.
The traditional van line industry is continuously losing market share to the containerized moving and storage companies like PODS, which are increasing their market share annually. I only mention PODS as they have become a dominant player, and if you talked to the investment community, they have put their money on the PODS-like companies and given them valuations at excessive multiples to what they would for the traditional van line firms. Still, PODS has a very small piece of the industry pie. In other words, the smart money is on the containerized moving companies, not the traditional industry.
I am an operating partner at a private equity company on the West Coast and we have bought two containerized storage and moving companies. One that is significant in size was purchased from a Fortune 500 company. When I attend the board meetings, I am amazed at the quality of management and how attuned the leaders are to market share, pricing, consumer preferences and where the industry is headed. The annual growth is something the traditional van line industry has not seen for decades. I expect the containerized industry to dominate and surpass the traditional industry in profitability and growth in the next five years or so.
Question: Do you find that using these alternate means of transport increases claims on shipments?
Compared to years ago, today all shipments are going on air-ride trucks and shipments are packed differently so claims do not seem to be an issue.
Question: As an independent, will you incorporate your containerization with a Zippy Shell or other company?
No, we have purchased some new equipment and will be handling our own shipments as Victory. We are on I-95 and we have access to the capacity and the power lanes for ourselves. We also know that there is a driver shortage but also drivers that are getting older and may not want to handle traditional household goods. We can offer them an option that keeps them happy and employed.
Question: Have you looked at the concept that David Budd is bringing to the market?
David Budd and I have never met but I consider him and Dave Graebel the two biggest visionaries in the industry over the past 40-plus years. David Budd has made a significant investment in the industry with his containerization concept and he should be making a premium over the rest of the market place for his high-quality service and innovations. We have shared clients with Budd for almost 40 years and if it wasn’t for their outstanding service we wouldn’t have to run so fast to keep up! They are great competitors and independent!
Question: I see that you had a major advantage as you already had your company up and running and a client base, financial advantage …… What would you say to the newer independents and start-ups in our business?
I was just talking with a start-up that has an app for moving people, not in the traditional sense and they have a million dollars in financing behind them. Today you don’t need to own a truck to be in the moving industry. You don’t need to own a warehouse; you don’t even need to lease a warehouse.
Today I would say to the new mover—start with good principles. I would have a list of the things I would do to be a better mover than anybody else, and I would make sure that everybody that walked in the front door saw those too.
Secondly, I would go out and sell business and I would rent equipment at the onset and/r have an arrangement with someone that could service my customer according to my principles. If I needed warehousing, I would make a deal with someone that had existing warehousing and work on a percentage on the storage.
Our company started in a two-family house with six trucks parked alongside it and a garage they rented. Look at any companies that started and did well for themselves. They started with a single truck.
You can fuel your expansion working with other people. Good will goes a long way.
Question: How do you continually grow your business?
As I stated earlier, we do not want to grow our business but grow our profit. When I say profit, I mean the amount of free cash available after paying all of our expenses. By growing our profit, we can reinvest in our employees (i.e. bonus, raises, quality of the work experience), our systems, facilities and equipment. By continuously reinventing in your business, you will become more profitable and cost effective. There has been too much dis-investment in the industry from chasing contracts at or below cost as well as chasing revenue. I should know as our company was on that course for some time and when I returned to my business from eight years of public service—things looked pretty ugly industry wide!
For the past 30 years, the moving industry has been “price takers” and now for the first time I see the industry becoming “price makers,” which makes me feel good about being in the industry again.