The Rules of Management
Planning is critical for business, yet most of us don't have a plan to guide us through the green industry business maze. You wouldn't travel cross-country without a roadmap to guide you; likewise, you should develop a roadmap for your business that will define where you want to be and how to go about getting there.
PLAN OF ACTION
The first thing you should do is contemplate where you want your business to be in five years. What are the obstacles in getting there? Think back to when you started your business and list what your objectives were then. Are you accomplishing them? Next, prioritize all those issues and work toward resolving them in a timely manner. Establish short-term goals to accomplish within the next three to six months, medium-term goals to achieve in maybe six months to a year and long-term goals that perhaps outline growth diversification or expansion over the next five years. Your objectives should be challenging, realistic and attainable. Once you have developed goals, put together an action-plan with the appropriate steps for each goal. Keep your objectives where you can see them daily, maybe in your office or taped to your bathroom mirror as a reminder of what you must do to be more successful. Make sure you set your financial goals based on profits and not dollar volume. Continue this practice each month and you will begin to see the progress your business is making and track its growth.
Managing your business information is critical for assessing where you stand, exposing what elements are holding you back and keeping you from reaching your goals. Sending employees out to do work should include tracking hours worked and productivity. Look at what was actually accomplished, what it cost you to send workers out and what your profits were for that particular job. Tracking this information will help you benchmark how long jobs are taking as well as pinpoint where your profits (or losses) are coming from. Couple this with a quality control system and feedback from clients. This will direct you in developing new service possibilities while you continue to build client relationships.
Do you have profit and loss (P&L) statements and balance sheets? Landscape contracting is a very seasonal business and costs and income fluctuate. Having this information on paper can provide you with a financial roadmap for your business by breaking out all sources of income, direct job costs, overhead expenses and profits. This financial breakdown can show you where you can reduce expenses, increase pricing with various services, what you are making by income stream or service, what months you are most profitable, what months you aren't, provide comparative data from period to period and can establish trends in finance. Tailor your financial sheets to fit your business. If you need assistance, contact your accountant.
Design your P&L statement in such a way that you can interpret the information quickly and manage your business from it. Make sure you are analyzing it no less than monthly. If you don't feel comfortable with P&L statements, get the book “Accounting for Dummies” to bring you up to speed on accounting lingo. If you want to keep it simple, put together an “income-outgo statement” listing how much money came in each month, how much went out and what was left over. You can do this by going back over your business checking account for the past year and categorizing income and expenses.
The balance sheet is another document that will tell you how much money you and your business have made since the beginning, your business net worth, long-term and short-term debt for financial planning, your assets value, etc. This document is a “picture in time” of your business and producing it at least quarterly will provide you more financial direction.
OFFER IT IN WRITING
Providing clients a written agreement listing all services you provide should include jobsite addresses, legalities, liabilities, job specifications, payment terms and due dates, service longevity, cancellation options and exclusions and disclaimers. If you have a “standard” agreement, I congratulate you. You are far ahead of most. But remember that all agreements should be tailored to each specific customer to maximize your income as well as provide year round income and profits.
Poor job costing and underestimating will cost you money. Pulling numbers out of the air or bidding what your competition bids will not work. You may even bid the job just to get it, profits be damned. To be profitable you must know your cost per man-hour to perform the work, how long it will take to accomplish it and then add a profit to your expenses. To make money on every job consider this: direct job costs plus overhead recovery, plus how much profit you need to make equals your selling price to the customer or prospect: Ideally, you are within the prospect's budgeted amount, and you will make the profits you need to continue in business. Typically, if it doesn't meet this criterion, you need to go elsewhere for new business and profits. Rely on your P&L, balance sheet and accountant for continued information.
MARKET YOUR BUSINESS
How is your sales and marketing program working? Many of us start our search for new maintenance customers in the spring to pick them up in the major growing months. This is particularly true in states such as Florida, California and Texas where the growing season tends to be year round. If you start these jobs in the summer, you may not make money on them initially or be only marginally profitable for five or six months and must get through the winter months to make the job profitable. If your agreement allows for a 30-day termination, which I don't recommend, the client may fire you the first dormant month, and you've worked for free. If you need cash flow, maybe you get new accounts. If not, take a look at your marketing plan and consider seasonal estimating techniques that can maximize profits. If you work in snowy states, consider snow removal and other winter services to supplement your monthly and yearly income.
Do you have the necessary marketing tools and selling skills to bring in new and profitable work? Being able to talk fast or giving prospects the old “gift of gab” doesn't work. Prospects today are looking for value. Ask lots of questions to determine the full scope of the job and a potential client's objectives. Then look at ways to resolve their issues by taking an on-site and personalized approach to all new prospects. And don't forget to follow-up with them about the job. It's your job to follow-up, not theirs.
Are you chasing bids, or are you providing proposals? Bids are simply a numbers game that you'll typically lose to the low bidder. Developing professional sales aids, tailor-making job specs, spending time with qualified prospects and targeting high-profit customers will take you where you want to go.
Diversification of services is now a must for green industry professionals. Customers and prospects are looking for one company to provide all services. This way, they can eliminate contractor finger pointing; it gives them one person to call if they need something or have a problem and provide them much better control of the situation. Mow, blow and go may not be enough to satisfy your prospects or your profitability. Additional and complementary services such as turf and shrub pest control, seasonal cleanups, tree pruning, aeration, fertilization, irrigation, seasonal color and mulch are all services that will produce big dividends. Many contractors have diversified into water features, sports turf, landscape lighting and hardscaping, such as retaining walls, brick pavers, curbing and design, to meet their goals and satisfy customer demands.
Structure, organization and discipline (SOD) are requirements for all businesses, especially in the service industry. Structure involves assigning accountability and responsibility to various personnel as well as instituting a reporting system for all personnel, including management, and sharing or splitting all tasks such as business operations hiring, marketing, finance, etc. Organization includes administrative elements such as billing, estimating, in house documents for gathering information and scheduling. Discipline relates to timeliness in action; compiling company policy manuals to establish standard operating procedures; and properly organizing equipment, trucks and trailers with all needed supplies.
CLASS IN SESSION
Can you clone yourself? Educating employees can save — and even make — you money. An informed employee can create more profits for you and your company. You may also want to teach some employees specific business skills. One of the biggest educational challenges in the green industry is a lack of horticulture knowledge for both employees and owners. Many owners can't progress beyond teaching their employees how to mow, edge, trim, prune or spread mulch. As a result, owners find themselves on each and every job making sure it gets done professionally. This takes away from more important tasks and their family life, resulting in 80-hour work weeks in an effort to make a profit. Enhancing horticultural understanding can free up many hours of management time and allow you to apply ownership skills to build and grow your organization. Some owners choose to share financial information with employees to give them a better understanding of why “we charge what we charge” or at least a sharing of cost information for the business. This information will increase their decision-making abilities in your absence.
INFORMATION IS KEY
It's also important to educate your customers. Tell them about pruning, when to transplant trees and shrubs, seasonal color, how and when to water and why you are performing or not performing a service. Try sending out quarterly or monthly newsletters with your invoices to let them know what you'll be doing during the upcoming season, what services you offer that could benefit them or what you can do to further enhance their grounds. An educated customer is a profitable customer.
Want to use this article? Click here for options!
© 2014 Penton Media Inc.