Outsourcing: Is It Right for Your Company?
|By Susan Maddocks|
AS OLD MAN WINTER BLOWS HIS frosty breath on us this month, I’m reminded of the old saying “No two snowflakes are exactly alike.” This saying can easily be applied to our industry, as no two landscape companies are identical, either.
Fortunately, individuality gives us the opportunity to be successful and profitable. But how profitable can you be if you’re limited by the expertise you can offer your clients?
Sure, your guys do installations and maintain beautiful landscapes, but when it comes to properly irrigating them, no one in your company knows the difference between a spray head and a rotor. Or perhaps your employees are experts at knowing the right kinds of turf and ornamentals to plant in specific spots, but can’t design an overall landscape plan.
Don’t feel bad. Given the wide breadth of landscape services that can be offered these days, many smaller companies don’t even come close to providing it all. In fact, a number of companies prefer to specialize in certain areas rather than be jacks-of-all-trades.
But here’s the bottom line: If you get a client who requests a particular service that’s not really in your company’s wheelhouse, are you going to say “no” to that business? And if you say “yes” to the business but don’t do a good job, what will that do to your company’s reputation?
But there’s a way to turn limitations into profits. It’s called outsourcing. Outsourcing (also called subcontracting) is a way for your company to offer any services a client may desire, including seasonal work such as hanging Christmas lights, even if your company does not provide that service.
It can also reduce your own overhead. By outsourcing, your company benefits from a specialist’s expertise, their specialized equipment and the personnel who know how to use it.
You may have already outsourced certain tasks. For instance, did you build your own website? You could have done it, or learned how to do it yourself, but you probably didn’t really have the time, as you were busy doing other tasks critical to your business. Chances are, you hired someone else to do it.
“Sounds great,” you may be saying. “But does outsourcing really make sense for my company?” “It’s makes tremendous sense for us,” says Mark Spuhlsatz, irrigation department manager for Ryan Lawn & Tree in Overland Park, Kansas.
“We’ll be a $28 million company this year because of it. We started outsourcing 26 years ago, and it has been one of the key components in growing our business.”
“Our business is centered on irrigation installation, maintenance, lawn care and fertilization,” says Spuhlsatz, “but we don’t mow lawns or remove snow. Our services include pruning for any size and type of plant and lawn care, including disease control and fertilization. So outsourcing gives us a bigger reach when it comes to offering additional services.”
“When we have a situation where a customer desires services other than those we offer, we go to our network of referrals and recommend a couple of quality providers.” Ryan Lawn & Tree doesn’t take a percentage amount of the sale, because they don’t outsource in the traditional way. Instead, just as doctors and other professionals do, they think of it as referral business.
In turn, they profit from referrals from other landscape companies based on established, trusted relationships they have with them. Says Spuhlsatz, “It’s about constantly building those relationships. If we see someone who has a well-mowed lawn, we find out who did the mowing, build that relationship and start recommending them.“ “In fact, we’re so committed to investing in quality relationships that every year, the company throws a party and invites rival firms,” he continues. “We include our top competitors, because we want to meet other professionals who could benefit our clients and, ultimately, our business.”
Spuhlsatz cites one more example to explain why outsourcing works for his company. “Would you rather have one maintenance company out there trying to upsell your business, or a network of 50 maintenance companies doing it?” Nick Voykin is vice president of customer care and a 25-year veteran at Mariani Landscape in Lake Bluff, Illinois. He agrees with the value added by outsourcing. Even though his company employs more than 400 people, most of their tree services, irrigation, masonry and landscape lighting services are outsourced.
“The reason we outsource is because we want to put our efforts into focusing on what we do best, which is landscape design, installation and maintenance,” says Voykin. “It’s helped that we can partner with a select group of exceptional contractors around the Chicago area, to provide a one-stop shop for our clients. It doesn’t take much effort, and we make a percentage anywhere between ten to 25 percent, depending on the scope of the job.”
“It is also a situation of, ‘We scratch their backs, they scratch ours,’” says Voykin. For instance, one of Mariani’s subcontractors happened to be on a job for someone who mentioned that he was looking for a landscape company; the subcontractor then recommended Mariani.
“On our end, there’s very little work involved,” he adds. “We want to provide our clients with the best possible service. Outsourcing is how we deliver the best work quality. It’s working well for us.”
Another company that benefits from outsourcing is Yardmaster in Paynesville, Ohio. Kurt Kluznick, a former president of the Associated Landscape Contractors of America, runs multiple branches. The main office deals exclusively with construction, so it outsources its irrigation needs.
Kluznick feels that “irrigation is one of those items that often seems to be a last minute thing. The window of opportunity is limited, so it’s useful to have sub-contractors who can throw a bunch of people at it.” He feels that the problematic part of irrigation is peak demand and fluctuating schedules, so “it’s a challenge to find competent people to do the work.”
He uses half a dozen irrigation subcontractors, one of whom gets about 50 percent of his company’s work. “To be successful, you need dedicated and reliable people,” he says.
Kluznick offers some tips to other contractors who might be on the fence about the decision to train current employees or to outsource. “It can be risky to bring irrigation inhouse, because it requires a lot of technical ability and can be a fairly complex operation. Because of this, outsourcing irrigation makes a lot of sense.”
Drawbacks to outsourcing
We’ve seen how outsourcing can help a landscape company. Now let’s look at the other side; the times when outsourcing shouldn’t be attempted.
It may be that no one in your vicinity is really “up to snuff” in the areas you need. “If you can’t find subcontractors with quality skills or people, you’re better off not doing it,” says Voykin.
“If you have a need for subcontractors only a couple times during the year, or you can’t find a good, reliable one,” says Jen Elfner, of Elfner Landscape and Organic Lawn in Columbus, Ohio, “it’s best to bring the work in-house.”
“One downside,” says Spuhlsatz, “is that with most companies, there’s usually some kind of crossover business. While most professional companies won’t cross the line and go after each other’s customers, there have been times when some who we’ve referred started taking over our core business. If that happens, we just don’t refer them anymore,” he said.
You can also find customers who only want to contract with one company. “We’ve lost some clients because we aren’t a one-stop shop.
We find, however, that the vast majority are okay with having multiple contractors on a job,” says Spuhlsatz.
Outsourcing is definitely not for people who like to micromanage. Whether you sign a contract to have another company perform the functions of an entire department or just a single task, you are turning that function over to someone else.
You lose the ability to rapidly respond to events, such as the outsourced company’s crews not showing up on time. If that prospect makes you too uncomfortable, then outsourcing isn’t for you.
The hired provider may not be driven by the same standards and mission that drives your company. “It’s tricky, because you want to make sure you’re partnering with people you trust and can depend on, because ultimately, they are representing you and your company,” says Voykin.
Bringing in another company can also be a threat to your company’s security and confidentiality. To avoid any problems, make sure the other company can’t get access to your confidential business information, such as payroll, medical records and so forth. Put a penalty clause in the contract should such a security breach occur in the future.
Make sure your intellectual property rights are also protected. Instruct your staff to keep mum about your company’s business strategy and future plans when the other company’s employees are around (or anytime, for that matter).
When you partner with another company, whether you choose to admit it or not, you’re somewhat tied to that company’s financial wellbeing. You can’t afford to be naïve.
Check out the other company’s financial health. If your partner goes belly up in the middle of a job, you could be left holding the bag. It wouldn’t be the first time that this has happened.
You may find a lack of customer focus on the other company’s side. The outsourced vendor has his other clients and other people to answer to. They may have taken on your business at a time when they’re spread too thin. In that case, your client’s needs may be put on the back burner.
Keys to successful outsourcing
Have an agreement in writing, where all the terms are spelled out. That’s critical. Make sure that it’s clear as to exactly what each party will be responsible for.
Warranties especially need to be explained in very clear and concise language. It’s a good idea to get help with the wording from your legal advisor. This can avoid potential legal disputes down the road, and help protect you should there be one.
“One thing we also do is let our clients know that we are subcontracting with another company for a specific part of a job,” says Spuhlsatz. “We tell them, ‘XYZ Tree Company will be showing up next week;’ we’re always upfront about it.”
“At times, we’ve had clients say, ‘I know XYZ; I’d rather deal with them directly. I don’t want to pay the percentage,’” continues Spuhlsatz. “And that’s fine as well. But most of the time, you’ll find clients just want to call one person and deal with one point of contact. For those clients, we take care of all their needs. We act as the general contractor.”
When choosing a subcontractor, use the same criteria you would use when choosing a business partner. That’s what they are, after all. Make sure you’re compatible. Are the goals of your company and that of the subcontractors the same, even though the services are different? Do you have the same philosophy when it comes to serving the customer? This will help make the process appear seamless to your clients.
Communicate objectives and goals of the job very clearly from the beginning. The time to be specific is before the job starts. In a partnership, the outcome is shared, both the good and the bad. You can’t have the attitude that once you assign a job, it’s the subcontractor alone who’s at fault if something goes wrong.
“Be careful when selecting any partner,” says Kluznick. “You want someone who can come through in a pinch, somebody who’s not going to let you down when you’re under pressure. For example, irrigation people can make or break a job. The safest bet is to find a good subcontractor and pay a premium, if necessary.”
Take the time to involve the key players from the company you’ll be outsourcing your business to. It pays to have a good working relationship with those in charge. Answers and solutions will be provided more quickly.
“Don’t underestimate the opportunity to network and build relationships with other landscape professionals,” says Spuhlsatz. “Working back and forth with each other will create more business for both of you.”
“I think everyone needs to ask themselves, ‘Does outsourcing make sense for our company?’ It sure has worked and continues to work for us,” says Voykin.
No two landscape companies are exactly alike. Outsourcing can capitalize on your company’s individual strengths while expanding your services. If you use it well, it can generate a blizzard of profits for your company—enough to keep you comfortable during those long winters.