Hats off to Outsourcing
|By ROBIN WESTMILLER|
REMEMBER WHEN YOU STARTED your business? You were embarking on what you hoped would be a lifelong career path. As a landscape contractor, you wore many different hats. On any given day, you’re mowing lawns, spreading fertilizer, controlling weeds and performing a variety of other routine jobs for your clients.
Then, there are those occasions when you may be called on to don the hat of an excavator, or work on hardscapes, or on an irrigation system. In addition, you wore the hat of the chief financial officer of your company, the office manager, and president—and you loved every minute of it.
Wearing all those hats would give anyone a headache. But before reaching for that bottle of aspirin— or something stronger—wouldn’t it be easier if you could simply remove one or two of those hats and hand them off to someone else, while still retaining a portion of the revenue generated?
That’s exactly what outsourcing is designed to do.
Outsourcing, or subcontracting, jobs to other companies is key for landscape contractors looking to expand their services without expanding their overhead. There can be many different areas in your business where outsourcing would benefit your company.
For example: If you have a client who has mature trees which need trimming, unless you have a certified arborist on staff, you’d be better off to outsource that work. If you need some hydroseeding work done, it would be much less expensive to sub out that work than to try to do it yourself.
Another important area where outsourcing would be viable is with your staff. There are companies out there that will take over the administration of your staff. Although they report to work at your facility, they receive their paycheck from another company.
There are a number of benefits to this approach. Because this company has other companies that they work with, they can offer lower cost health benefits, dental benefits, and more.
“When we first started the business 36 years ago, all our landscape, irrigation and snow removal services were done in-house,” says John Reffel, president, JLS Landscape & Sprinkler, Sedalia, Colorado. “We were maintaining a fleet of 19 trucks and a yard full of tractors for the snow removal division, which was fine when we had snowstorms. But if we had a mild winter, all the equipment—and all of the workers—would just sit around with nothing to do because there wasn’t any snow to remove.”
With his entire snow removal fleet sitting idle and still needing to be maintained, and his employees sitting idle and still expecting to be paid, trying to keep the snow removal division viable was draining all of the profits the company had made in the previous months.
But while Reffel knew he needed to shut down the division, he didn’t want to risk losing his warm sea son clients to a competitor because he could no longer service them in the winter. Reffel soon realized that by outsourcing the snow removal jobs, he could have the best of both worlds.
“In Colorado, there are contractors who only do snow removal, so we decided to outsource about 80 percent of that part of our business to them,” Reffel said. “Now, when it snows, we put in a call to our subcontractors and share the revenue, and when it doesn’t, we aren’t taking the loss.”
One of the best advantages to outsourcing, he says, is that it’s a fairly easy way to offer your clients services that you might not be able to, or want to, provide yourself. In addition to outsourcing snow removal jobs, Reffel also outsources some of his tree services that require a special license or equipment that he’ll only use a few times a year.
“Outsourcing eliminates the need for me to have to maintain the equipment to get up into 20- or 30-foot trees. And I don’t have to carry a special license or hire a trained specialist to prune the trees, or carry additional insurance to cover liability associated with tree work, which can be very expensive.”
Higher insurance premiums aren’t the only expense that can be avoided by outsourcing. You also won’t need to pay additional health insurance coverage, workers compensation, or unemployment taxes for the crews, because they’re not your employees. You’ll be relieved of other expenses such as fuel, vehicle registration, insurance and other maintenance costs for the equipment used on the job.
“Another plus to outsourcing is that you’re not paying the subcontractor out of pocket,” says Lynn Hinch, a landscape designer who opened her own firm, Lynnscape Design, in Milwaukee, Wisconsin, just over a year ago. “Many contractors don’t want to, or don’t have the means to hire a full time in-house landscape designer or architect. They’d much rather pay a licensed professional to work with the client at an hourly rate, which is figured into the job estimate that the client pays.”
Finding a good, reliable subcontractor to outsource a job can be a bit daunting. Even though the work crew may have a different name on their shirts, they’re still representing your company. It is vital that you develop a good relationship with the subcontractor, so that you’re confident that the job they’ll do will be up to the same standards as yours.
Kurt Kluznick, president of Yardmaster, Paynesville, Ohio, likes to use the term “partnering” to describe the relationship between the contractor and the subcontractor. A good partnership, as in a good marriage, is built on communication and trust, and it takes time to develop.
“We’ve hired subcontractors where the relationship started out slowly, and then grew into a long standing partnership,” says Kluznick. “Then there are those who started off strong, and for one reason or another didn’t last. We’ve had some problems with a few contractors who either weren’t able to perform adequately, or were unable to start the project when they were supposed to, but that’s very rare.”
Problems can also occur if you discover that the subcontractor doesn’t have the capability to do the job, or for some reason doesn’t get along with your client. This reflects poorly on your company, so it is vital that you have a good list of back-up subcontractors just in case.
“We’ve had a few occasions when a client asked us not to use a certain company because of their appearance, or their performance, so we just called the next company on our list and they took care of the client to their satisfaction,” Kluznick said. “The most important qualities for subcontractors is that they are dedicated and reliable and they have the level of technical ability to get the job done and won’t let you down when you’re under pressure.”
Kluznick says that most of the larger landscape companies have their favorite subcontractors, and are reluctant to refer them to other contractors for fear that when they need them to work on a project, they won’t be available. This exclusivity may work well for an established company, but if you’re looking to outsource for the first time, where do you find a good, reliable, trustworthy subcontractor?
There are, of course, referral services and internet social networking groups, but when you’re outsourcing part of your client’s project to a total stranger, some contractors say nothing beats faceto-face contact for finding the best people to work with.
“We outsource any job that is technically difficult and time consuming, like irrigation,” says Rick Longnecker, owner of Buds and Blades Landscape in East Olympia, Washington. “Our irrigation subcontractor list is compiled from fellow members of the Washington Association of Landscape Profes sionals
(WALP). We meet at the monthly meetings and really get to know each other. We know we can trust them to do the job, because we have an established relationship.”
Like Longnecker, John Michels, an irrigation designer with Milwaukee Lawn Sprinkler, Milwaukee, Wisconsin, is a firm believer in personal contacts. He networks with local landscape contractors and develops his client base by attending the Wisconsin Landscape Contractors Association (WLCA) meetings and social events, where he has the opportunity to discuss business and form strong personal relationships.
“I’m a bit old-school, in that I prefer to conduct business face-toface. The contractors get to know who I am, and who the company is, and I get to know them as well,” says Michels. “We’re on many contractors’ preferred lists and some contractors’ exclusive lists of irrigation subs to call when they need to outsource an irrigation job. And in return, if there’s a landscape job that we see that we think they’d be interested in, we also refer that business to them.”
This quid-pro-quo relationship is one that is highly beneficial for both you and your subcontractor. You’d much rather be in the field working than going door-to-door looking for work. By building good relationships, you can almost guarantee that when the phone rings, it will be someone you know on the other end, offering you a job.
“Over the years, we’ve built up strong relationships with a lot of local landscape contractors, so they know us really well,” says Doug Trost, Trost Irrigation, Orion, Michigan. “With direct clients, we have to place a bid then wait to hear if we got the job. But when we get a call from a landscape contractor, it’s a sure thing and we just go out and do the work.”
Trost says that his company gets about 60 percent of their work through subcontracting. “We typically get our large commercial jobs by working with landscape contractors,” says Trost. “They trust us to get the job done in a timely fashion, and we back our service, so if there is any kind of problem, they know we’ll handle it. We also offer landscape lighting and holiday lighting services, which most of the local contractors don’t have any experience with, so they call us,” says Trost.
Being selective about who you work with goes both ways. Jerry Grossi, of Spartan Irrigation in Lansing, Michigan, is careful about the contractors he provides irrigation services for. About 20 percent of his business is subcontracting, usually involving installation of the entire irrigation system for the contractor.
“We’re discreet,” he says, “we pick and choose who we work for. One thing that’s prudent to be aware of is the lien laws. If you’re not working directly for the customer, you need to know the state regulations and you also want to know that the contractor you’re working for knows them as well. You don’t want to have payment problems down the line.”
Establishing a long-term partnership with company business owners isn’t the only relationship that benefits from outsourcing. Crews from different companies—who all know each other—help make the jobs go smoother, when everyone is working together. Sometimes, the crews share their expertise with each other which also helps to expand the company’s ability to offer additional services.
“When we first started, we outsourced some masonry and carpentry business,” says Kluznick. “In some cases, the sub’s crews would work with our crews and teach them certain skills we didn’t have at the time, so when we opened that division in-house, we already had trained workers who could do the job.”
Trost is also aware that there are specialists who he’ll call for help on a job where he might be in a bit over his head. He defines outsourcing as a matter of sticking with what you know and doing it well, and not trying to do everything and not doing anything well.
“If we find that we just can’t do it, we’ll find someone who can. If we were to take it all on, that’s a lot of responsibility and a big headache,” says Trost.
Outsourcing can be an important tool in your business. It allows you to offer many services to your clients, and relieves you of some of the stress in areas where your expertise may not quite be up to speed.
There’s an old saying about being ‘A jack of all trades and master of none.’ With the outsourcing resources available to you, you can be a jack of all trades and master of all.