Staying Strong in a Weak Economy
|By ELIZABETH LEXAU|
Focusing on efficiency, identifying emerging markets, building strong relationships, and keeping a firm grasp on the numbers are just a few examples. These may seem like business management basics, but often, the companies that pay the most attention to the basics during the best of times are the ones that continue to thrive during the tough ones.
Efficiency and focus
When Eric Mytko, president of Phoenix, Arizona-based Life’s a Garden, started his young landscaping company in 2002, he experienced the usual growing pains and had big decisions to make. One choice he made was to save on travel time by not going after new construction projects that were offering plenty of work in Phoenix’s outlying areas. “For awhile, our county was one of the fastest growing in the U.S.,” says Mytko. “People spent a lot of time going after the jobs on the outskirts. But rather than trying to go where all the new building was, I decided to focus on the interior.”
That decision several years ago pays off for Mytko today. It wasn’t based on the idea that the economy would slow down or that gas prices would soar. Instead, it was a conscious choice aimed at improving overall efficiency. “It really works in my favor now,” says Mytko.
Another decision Mytko made was to focus his work on a unique and growing niche: sustainable, edible landscapes. “Instead of using traditional plants, we use edibles whenever possible. For example, we create fruit tree hedges of citrus, apples, or peaches. We run grapevines up pergolas. We use herbs or vegetables as borders and accent plants. We don’t try to isolate and hide the edible portions of the landscape. Instead, we bring them right out front.”
These are just a few ways Mytko’s niche manifests itself. While this specialty might not work in every market, the important thing is that he found one that worked for him. “When people found out what I did, demand started growing rapidly and we started hiring. It’s all been word of mouth.”
Whether a company specializes in a unique niche or offers a broad selection of services, focus means not spinning your wheels on something that’s not a good fit. “We walk away from work that’s not compatible with our services,” says Mytko. “At first this was hard. It felt crazy to turn down work. But it means we’re not trying to do work we aren’t prepared for and it leaves us available to do the work we do well.”
Show me the money
Sometimes it can be difficult to establish lean and healthy business practices during good times, because, well, you’re too busy. One area that often gets neglected is financial analysis. Who has time to crunch numbers with so many new projects coming in?
But if there’s one investment that will pay off for entrepreneurs over the long haul, it’s an investment in the time and money they need to get their financial ducks in a row. A firm understanding of profits, costs, overhead and other key numbers helps make each job count. It also enables business owners to make quick, data-driven decisions in a changing economy.
“You always need a handle on where the money’s going,” says Jeff Chaffee, vice president of operations for Master Landscape Inc. in Manhattan, Kansas. “When they’re just starting out, a lot of companies are so busy trying to sell, they don’t pay attention to how much it costs them. A couple of years down the line, they realize they’re really busy…but they’re not making any money.”
Deborah Cole, owner of Austinbased Greater Texas Landscapes, says it’s easy to ignore the reality of the numbers when times are good. Her company got a wake-up call when it faced its first recession in the late ’80s. “When you hit that first stressful time, you realize you need to do things differently. You need some good business tools.”
Cole divided the company into different profit centers, and analyzed each one to look at which ones made a profit and which lost money. This analysis gave the company the clarity it needed to trim services that weren’t working. “We had started out doing work for residential clients,” says Cole. “But as we developed systems to analyze profitability in certain areas, we realized that the residential maintenance market was the least profitable for us and required the most management time. When you don’t analyze your data properly, the good and the bad get lumped together. All the money goes into one pot and if you have some left at the end of the year, you think you’ve done a good job.”
This experience helped Cole become a savvy financial planner. “Now, we analyze data constantly to look for trends. We look at reports line item by line item. We’re always looking at where the differences are.”
There are many ways to track finances and profitability—from generic computer programs to products specialized for the green industry to systems created for an individual company. The key is to find one that works for your company and use it. “We use QuickBooks accounting software,” says Cole. “It was versatile and user friendly. It enabled us to set up different profit centers easily.” Master Landscape also uses QuickBooks for accounting, and the company hired an independent consultant to help create spreadsheets tailored to their own needs for job costing, sales and estimating. “We struggled with this decision, because it was expensive,” says Chaffee. “But I thought it was essential and we haven’t regretted it.”
Mytko implemented the bidding method outlined by Jim Huston, of J.R. Huston Enterprises, Englewood, Colorado, after making what he calls the classic contractor mistakes of underbidding and missing labor by a long-shot.
“It was one of the best things I ever did,” he says. “It made perfect sense, once I started doing it. It involves knowing your true expenses for the year and recovering overhead. It’s about finding true costs rather than bidding a little higher or lower than your buddy.”
It’s the relationship
Building strong, loyal relationships is another business management practice that helps buffer companies from economic shifts. Solid relationships with customers, employees, other contractors, and even vendors all help create a foundation to help companies stay above the fray.
“Developing relationships is key,” says Chaffee. “You have to make sure you treat everyone on both sides well, both employees and customers. When things slow down a bit around us, we don’t feel it much. There are always people who need projects and some who do a little year by year. When we take care of them, they stay with us.” John Munie, president of Focal Pointe Outdoor Solutions, Caseyville, Illinois, has built a business around taking care of customers. “One of the biggest differences I see between us and other companies is our proactive approach to customer service,” says Munie, whose company provides comprehensive landcare, primarily for commercial and high-end residential clients. “If you’re calling the customer to report problems instead of waiting for them to call you, it totally changes the dynamics of the relationship. It changes your role from a vendor to a partner.”
Munie embraces the philosophy that, no matter what they’re buying, every customer is having a shopping experience. Often, it’s the seemingly small things that create a very positive experience.
“If there’s a newspaper in the driveway when our guys show up, that newspaper is propped up against the building when they leave,” says Munie. “The towels around the pool are picked up and laid out to dry. The patio furniture is straightened. The garden hose is rolled up. If it’s trash day, the empty trash can is brought to the garage. Our relationship becomes more than just a business relationship, and the customer has become vested in our success.”
Munie invests significant resources to reinforce these principles. “You need training and more training to get employees to focus on what our real purpose is out there. Customers aren’t hiring us to do landscaping; they’re hiring us to create a feel. On the commercial side, our clients are hiring us to reflect their corporate image, to help set the tone. On the residential side, we coach our employees around the idea that we are a life quality provider. Customers are hiring us so that they can have a certain feeling when they pull up to their home.” By creating this feeling, Focal Pointe has developed a loyal and growing customer base. “We do have concerns about the economy but they are more a reflection of fuel costs, and we are implementing a fuel surcharge to help offset this,” says Munie. “But as far as the economy affecting sales, we’ve been very fortunate. Last year we grew 75%. We’re budgeted to grow another 60% or so this year. The reason is that we keep our clients shopping experience the priority.”
Maintaining a happy, welltrained workforce is another way companies can remain efficient and stay strong in a weak economy.
Munie points out that high turnover has a ripple effect, especially when it involves front-line employees. “I think high turnover among front-line supervisors is an area landscape companies need to focus on,” says Munie. “They are the people who understand exactly what the customer wants, things you just can’t capture in a contract. A contract can’t reflect nuances or customize a service. People and relationships do that.”
Constant communication with employees is critical. “Monitor how they’re doing. Ask what you can do to help them succeed. Coach them when necessary. Remember, your good people inherently want to be successful. They’re looking to you to find out how to make that happen.”
For Mytko, employee morale has a lot to do with his sustainable edible landscape niche. “Specializing has given my employees more pride in what they’re doing, especially because homeowners are so enthusiastic about what they’re getting. They’re excited and that gets my staff excited.”
Having clearly defined roles for employees also helps, he says. “I modeled our career path after the California Landscape Contractors Association path. We try to promote from within, so people know that they won’t remain laborers forever. When an evaluation comes up, they know whether they’ve accomplished what they need to in order to get a raise or promotion.”
Mytko is also a firm believer in continuing education. “We offer tuition reimbursement. Anyone who makes it to crew leader can begin training for Arizona Landscape Contractors Association certification. We also pay for the Rosetta Stone language program for anyone wanting to learn Spanish or English. This way, communication is always improving. They don’t just learn jobsite Spanish, but conversational Spanish. They’re able to express important details that, if left out, would grow into bigger problems.”
Hiring for attitude is another way to retain satisfied employees. Both Cole and Munie use personality profiles in hiring. “We want to make sure it’s the right match,” says Munie. “After an hour or so, you might know whether someone has the potential to fit into your company, but you need to go beyond that. You want to make sure you’re hiring them for the right job.”
Cole is emphatic about the importance of professional development and networking with other contractors. Contractors who are actively involved in professional organizations will always have fresh ideas on ways to stay healthy in any economy.
“PLANET is the best,” says Cole. “We use it for many of our educational needs through conferences, the safety program and educational DVDs. I can’t imagine being in our industry and not using it. Some might think its expensive, but for what you get, it’s very inexpensive.”
She notes that state and local organizations are also very helpful, and she’s actively involved in several. “I see some new contractors come in and join everything when they don’t have the time to invest in them. Pick one and really focus on working that membership, not only attending the meetings but participating on committees and getting to know people. You’ll get out of it what you put into it.”