Turning A Profit
Show me the money! That now famous pronouncement from the Tom Cruise movie “Jerry McGuire” about a struggling sports agent sounds great on the big screen. We all wish someone would just show us the money, but in reality it just isn't that simple. While you won't match what major sports figures earn in one year, making money in the green industry is possible. It just takes a lot of planning and consideration — everything from setting fair prices and operating efficiently to minimizing costs.
PUTTING A PRICE ON IT
Setting fair prices sounds like a seemingly simple task. But, in fact, it can be very complex, and often something is easily overlooked.
“One of most important factors in setting your rates is knowing how much it really costs to operate your business,” says Chip Smith, owner of Smith Grounds Management in Charlotte, N.C. “This includes wages, equipment and materials costs, employee benefits, office supplies, rent, fuel and so on.”
Once you have the true cost of being in business, it will be easier to begin setting rates. First, begin to determine the hours it will take to complete the job. Assume you're pricing a maintenance contract. In this case, you'd measure the acreage to be mowed and determine what type of equipment will be required — riding, walk-behind, wide-area or zero-turn or handheld equipment. You will also need to establish the number of obstacles to be mowed around and trimmed, the linear footage of curbs and sidewalks that need to be edged, blowing time, the number of parking lots, etc., to figure the bid estimate.
Smith recommends noting whether the client uses irrigation to help establish how often you'll need to provide maintenance. “If a client does not use irrigation, then I may only need to mow once every two weeks in July, and that will impact my contract bid.”
To further refine pricing strategy, Jason Creech, owner, Creech Landscape & Construction in Atlanta, Ga., uses industry standards that outline how much time it takes a particular mower to handle different types of turf.
While industry standards are helpful, they can't always account for the many variables, such as weather impact on growth and operator capabilities, so Smith also relies on his 15 years of experience for estimating routine maintenance tasks. “If I know my crew can prune a shrub in about four minutes and we have 30 shrubs on a property, then I know it's going to take me about two hours to get that portion of the job completed.”
After determining operational costs, it'll pay to know the local market and the customer base. How much do your competitors charge for similar services? Does your bid typically fall way below or far higher? What are the customers' expectations for their property? Do they have a high-profile commercial property that demands professional appearance or a smaller property that only needs minimum maintenance? How much is the customer willing to pay?
“Typically, we aren't the highest- or lowest-priced contractors,” notes Creech. “But no matter the customer, we always provide quality work. As a result, we have long-term customers who are willing to pay for our services because they feel they receive more value per dollar.”
Though it's one of the trickiest parts of having a profitable business, smart pricing that accounts for as many of the variables as possible will certainly get you headed in the right direction. But there are other less complex ways of ensuring profits. Operating efficiently will also improve the bottom line.
With fair prices and efficient business operations, you can increase your profit margin. Accurately estimating crew sizes and then organizing them to work smoothly will have a significant impact.
Today, smaller, three- to four-man crews are becoming standard practice. But larger operations may have crews with up to eight people.
“Determining crew size is mostly based on the type of work you're doing, how much work there is to do and how many properties you need to do in one day,” says Creech.
Creech, who has 16 crews (half are commercial and half are residential), has divided the crews into specialized teams that handle maintenance, enhancement and installation. “We typically send three-man crews to our high-end residential properties. This allows them to provide the necessary detail work required by that customer segment.”
No matter the size of the crew, careful planning will further improve operating efficiencies. For Smith, this means having processes in place and accounting for the details on a daily basis. “We have three sets of keys for our equipment — one for the operator, one for the mechanic and a spare. Sounds simple, but if there's only one key and it's lost, then that equipment is not running and we're not making money.”
Because Smith's crews have a set number of hours to complete each job, he also created processes to help get the crews out to the properties as smoothly as possible, and they leave headquarters with all the equipment needed for the day. “Making sure all the equipment is accounted for and ready to leave saves time and hassle and, ultimately, money.”
To help keep business running smoothly, Creech closely evaluates drive time between jobs and places emphasis on location and routing. Every minute counts.
“We try to concentrate our routes as much as possible,” adds Creech. “Keeping our ‘windshield’ time to a minimum allows us to keep on schedule and finish the day's work in the allotted time.”
Not only are timesaving techniques important to efficiency, but also critical to the bottom line is equipment cost minimization.
“The more efficient you are with your equipment, the more money you can make,” says Brian McAnally, division manager lawn care/quality control landscape maintenance for Clarence David's in Chicago.
“Operator fatigue, unsafe practices and the like decrease productivity, so we try to minimize those incidents through smart and safe equipment use,” McAnally adds. “That means using the largest equipment feasible for the area and, whenever possible, using hydraulic, ride-on or stand-on machines.”
Additionally, contractors should consider using equipment that is versatile enough to handle numerous tasks. For instance, compact tractors, used primarily for installation projects, can also handle mowing tasks. Some front mowers can accommodate attachments such as blades and snow blowers and can be used to earn money year-round.
Everyone knows that in the height of the mowing season, downtime is debilitating to the profit line. Therefore, properly maintaining all equipment can not only keep you up and running when it's most important, but also will save money in the long term. “Our crews perform daily maintenance on their equipment. As a result, we can catch potential problems early and also extend the life of the machine,” Smith says. “When we do have equipment problems, we have two in-house mechanics and a large stock of parts to help minimize the time machines are out of commission.”
But it's not just maintaining equipment that reduces operating costs — protecting your investment also helps. For instance, Smith noted that he color-codes and assigns equipment to crews. “Not only does it help monitor usage for maintenance needs, but it also helps us keep track of equipment whereabouts.”
“We've started storing our equipment in enclosed box trucks,” Creech adds. “It reduces the possibility of theft and protects our machines from the elements.”
THE BOTTOM LINE
Having a good rate structure, operating efficiently and keeping costs in control — all of these elements add up to one thing and one thing only — good business sense.
“You have to be a business person first,” Creech says. “Keep the big picture in mind, find people you trust to work with and provide them as much training as possible — then you'll have a profitable business.”
Catherine Blackwell works with Epley Associates, a public relations agency representing the John Deere Worldwide Commercial & Consumer Equipment Division.
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