Preparing Your Business for Next Year... and the Next Year... and the Next Year...
You might be familiar with the song that opens Monday Night Football, the one that goes, “Are you ready for some football?” Well, if you’re hearing that song, you probably are.
But how about the future? Are you ready for that? Even more importantly, is your landscape business ready for it? The end of the year is the perfect time to take a close look at your operation and see if it’s ready to charge through the goalposts, or merely hang onto its yardage.
“There are four significant fundamentals for growth,” said green industry business consultant Judith Guido. “They’re called People, Execution, Strategy and Cash. It doesn’t matter if a landscape company is focused on maintenance, design/build, lighting, irrigation, tree care, or a hybrid of services, those four fundamentals apply.”
People. Do you have the right ones, with the right skill sets, performing the right responsibilities?
Of course, you may not be able to employ someone to fulfill every single function. Most companies are small, and have limited resources.
That’s why it’s important to develop relationships with subcontractors and suppliers who can help you ‘fill in the gaps.’ You may also need advice from experts, such as an accountant, a consultant, or even an attorney on occasion.
Are your people aligned with the culture of the company? Do any of them ‘wow’ you on a regular basis? Or, are any of them just not a good fit?
Of course, people should usually be given a second, or even a third, chance to prove themselves. But once it’s apparent that he’s never going to ‘get it,’ it’s time to say goodbye.
Guido recalls meeting with a company owner over breakfast, after his crews had been dispatched for the day. “Within the first 30 minutes, he’d excused himself four times, saying, “I’ve got to help this guy out.”
“I could tell that by the fourth call, he was really angry. I asked him, ‘How long has that person been with you?’ He said, ‘Five years.’ I asked, ‘Why on earth, then, is he still with you?’ He replied, ‘Because it’s really hard to get good people.’ So I had to ask him, ‘And you consider that a good person?’” Have a process for attracting, retaining and rewarding good employees. Putting a good training program in place is one way to accomplish all three of those goals. It’s essential for keeping good workers with you, and attracting new ones, as it shows the company cares about them. Besides, it’s been shown that people that are well-trained work better, smarter and more efficiently, with fewer accidents.
Many landscape company owners complain that they just don’t have time to train their people. Actually, you don’t have time not to, especially when there are so many great training resources available through green-industry associations.
Schedule tailgate meetings regularly. Pay people extra to come in an hour early for it, if necessary. Reinforce the message by offering rewards and incentives to individuals and crews for accident-free work records, and for following safety rules.
Of course, you want to retain those good workers you already have. Landscape companies in the wintry-weather belt often lose their best workers when they shut down for the season. Some companies hang holiday lights or do snow removal to keep people earning money when there’s no landscaping to do. It increases the chance that those good workers will still be around in the spring.
If you don’t want to take on an additional service, have an alliance set up with another contractor, inside or outside our industry, and sub your people out to them in the off-season. Maybe it’s a construction firm that does snow removal, or a property management company that needs workers to clean out apartments and homes.
Establish a clear career path. Let your people know how they can move from position A up to positions B and C. Let them know what skill sets they need to learn to get to the next level, and have a way for them to acquire those skills. Finally, show them your appreciation with incentives and rewards.
Execution. It’s good to have rules and procedures in place, but not so many that employees don’t know which to focus on. Instead, establish a handful of critically important rules, procedures and policies, and keep acting consistently within those parameters.
Policies should be spelled out concerning things like cell phone use, smoking, uniforms and safety equipment. Create systems and procedures, such as spelling out the right way to load a truck: this is how you pack your truck in the morning; this is how you unload it at the end of the day. Other examples include designating who fuels the trucks and when, who puts equipment back, who reports that a piece of equipment was broken, and the procedure for doing so.
Efficiency is part of execution. Keep your routing tight, so that when a crew heads out in the morning, it goes to the furthest site from your headquarters, and works its way back. Don’t have people hopping from spot A, then going all the way across town to spot D and back again, wasting time and gas. If necessary, employ routing software to help plan the fastest, most efficient routes.
Last-minute changes destroy efficiency. Establish a rule that says that any time a client asks for something that’s above and beyond the normal scope of work, a change order is written up, and the customer signs off on it. “One of the things I see repeatedly, is that people don’t write change orders; they just do the work, and then, wonder why they didn’t make any money,” said Guido.
Strategy. To grow, you must sit down and think about the future of your company regularly—about where you want it to be in five years, ten years, and beyond. Strategic planning shouldn’t be something that’s done just once a year, written down, and then laid on the owner’s or manager’s desk, where it’s forgotten. It should be talked about weekly.
Gary Hamel, one of the leading experts in this area, says that a successful strategy must first answer two questions. First, does what you’re planning to do really matter to customers? Second, will it really differentiate you from your competition? If the answer to either one of those questions is “no,” a rethink is needed.
In a two- or three-person company, the strategic thinking may be done by everyone. A bigger company needs a different approach. Jim Collins, the author of “Good to Great,” created the concept of creating a small, qualified group of people, called a ‘Headlight Team.’ If you think of your company as a truck, these are the people at the front, spotting what’s ahead, and creating a vision for going forward.
The Headlight Team can include people inside and outside the firm, such as consultants. It should gather input from your customers and all your employees—everyone from the person who answers the phone to your foremen. They should look at market dynamics, compliance with regulations, your competition and industry trends.
Strategic planning should be followed by strategic execution. That should be done by a larger group of people—your frontline folks that are in the field, as well as the ones that are in the back office, doing the accounting. It includes your foremen, business developers, account managers and sales and marketing people.
That group should have daily huddles, no more than ten or 15 minutes long, to go over what happened the previous day. For instance, a call came in overnight, who is following up? Someone called in sick, how do we cover for him? Everything this group does should align with the strategy set by the Headlight Team.
One of the challenges in our industry is that it’s difficult for a customer or prospective customer to see the difference between your company and your competition, so they ultimately base their decisions on price.
To get them to see beyond that, you need to clearly articulate the difference between you and them.
Find out who your competitors are, what they do, and how they do it. Then sit down with your people and brainstorm about how you’re different, and then, how to communicate that to your potential clients.
Companies that’ve really nailed the differentiating strategy have seen growth anywhere from three to five times the valuation of the company, and almost twice the cash flow.
To help a potential client see the difference between you and your competitors, Guido created the “No, but,” test. Here’s how it works. The potential client says, “Company X will apply herbicides to our lawn.” Without disparaging your competitor, you ask, “Is what they’re going to use sustainable?” When the client says, “No, but,” you point out how his property is near a lake, and if Company X isn’t using sustainable products, then chemicals are going to leach into that lake. Then, tell him that your company uses only sustainable products.
One of the most important questions you can ask in business is, “What’s wrong with our industry?” If you can answer that question, and then fill that gap, it’ll set your company apart from the pack.
Another good way to test your strategy is to ask if your company ‘owns’ one or two important words or phrases that convey concepts that really matter to customers. For instance, 3M owns ‘innovation,’ Nike owns ‘competition,’ and Disney owns ‘happiness.’ Maybe you’re the company that owns xeriscaping, green walls or low-maintenance landscaping in your area. Get that message out.
Borrow great ideas from other industries. For instance, one of the things that makes Southwest Airlines so efficient and low-cost is that they use only one plane.
Guido can’t count how many times she’s gone into a landscape company’s shop, and wondered if it was really a parts-supply store. Running too many different equipment brands wastes a lot of time and money. Your mechanic has to figure out how to repair all those different machines, and maintain a large inventory of incompatible parts. Why not keep to a minimal number of models and brands, and be able to interchange parts when things break down?
Cut back on downtime. When someone is riding in the truck, en route to a job, have him get on the cell phone and follow up with clients who had questions or problems. While he’s doing that, another crew member can be writing up work orders. Have only one person unload a truck, or fuel it, not three. Use tracking software to cut unnecessary stops.
Instead of wasting time chasing deals from one vendor or supplier to another, establish a relationship with one or two. They, in turn, will reward you with discounts and incentives for being a loyal customer.
Cash. Cash flow is the oxygen that fuels growth. Growth sucks up cash, but generates it as well.
You can speed up the rate at which you receive cash from your clients. Most people will be happy with your billing method once you explain why you’re using it. A lot of landscape companies bill once a month, because ‘That’s how our industry does it.’ But there’s no law that says you have to. Why not bill twice a month, or even weekly? Remember that other service industries make clients pay 50 percent down before they start work.
There are certain times a year when you’re performing more services, and spending more, than others. Why not bill accordingly? For instance, in the spring, you might be doing 40 percent of your work, with 40 percent more labor cost, and outlaying more cash for product, such as fertilizer, topsoil and plants.
Say you had a $9,000 contract for which you charged the customer $1,000 a month for nine months. Sounds good—except that in the first two months, you spent 40 to 45 percent more than you did in the next seven. You billed one-ninth of that cost, but you paid out two-fifths. The math doesn’t work. You essentially gave your company a loan while you waited for the rest of that money to roll in.
Instead, why not bill the customer 20 percent in the first month, twenty-five in the second month, and then, divide the other seven months equally?
Pay attention to how every decision you make affects cash flow, and teach your employees that, too. Explain to them how the ‘cash conversion cycle’ works; how long it takes for a dollar that’s spent to find its way back into your pocket. How, when a check for $1,000 comes in, $910 of it goes back out in overhead, and only $90 is profit.
Work with your salespeople to cut the time from sales to delivery. Make sure they don’t waste time on prospects that will never ‘get to yes.’ Have one person dedicated to creating strong relationships with accounts payable. And do daily cash reports that include short explanations of how and why cash changed hands in the last 24 hours.
Offer incentives to clients who pay on time or in advance. Ask for prepayments and down payments. Give discounts for preseason work, and reward clients who pay on time with gift cards to Starbucks or some other place. Set up automatic friendly reminders five days ahead of when payments are due.
Simplify your invoices. Set up automatic credit card authorization for clients with recurring bills, such as fertilization three times a year.
Finally, consider leasing equipment versus buying it. In some cases, it’s smarter. For example, by leasing your mowers, you’ll get a brand-new fleet every three years. You may think you’re saving money nursing old equipment along, but not if it’s causing downtime, or clients to complain that their lawns look ragged.
We hope this will help your business tackle whatever challenges may lie ahead in the new year 2018.