Staying in the Black
In the face of economic stress, people react in different ways. Some hunker down, count their dollars, and do everything they can to hold onto what they have. Others do more; they look for opportunities. Here are five ways to help keep a company in the black today and make sure it’s poised to surge ahead in the future.
1. Reconnect with your customers.
John Gachina, CCLP, president and CEO of Gachina Landscape Management, a Menlo Park, California commercial landscaping firm, is keeping his company on track by reaffirming what they do well and finding ways to do it better.
“We’ve always been fortunate before,” says Gachina. “We’re a growth company. We’ve been in business for twenty-one years this July and there has been steady and consistent growth every year… except this year. In the San Francisco and Silicon Valley areas, we sometimes think of ourselves as immune to all this stuff, but it’s not true. Not this time.”
His company has seen a dip as financially strapped customers shop for lower prices. “In better cases, they’re interested in negotiating for reductions,” he says. In other cases, they simply look elsewhere.
How is he coping? “One thing we’re doing is staying as close to our customers as possible. Instead of focusing on new business, we’re trying to retain business.”
If you have a strong relationship with your customers, they won’t want to go elsewhere. There’s a better chance they’ll approach you to negotiate before shopping around.
“We’re making a conscious effort throughout the company to touch base with our customers on a regular basis,” says Gachina. “Don’t bug them; don’t drive them crazy; don’t stop in unless you have something to say...but find something to say.”
Gachina is also making sure his company is quick to turn around proposals and requests and to deliver on promises. He says many contractors make the mistake of getting so busy chasing the next big opportunity, they forget about the people who got them where they are today. Sloppy practices like not showing up on time, not showing up at all, and not delivering bids when promised are big turnoffs in any economy.
Jesse Needham, president and CEO of Grant Landscaping, a Woburn, Massachusetts design/ build/maintenance firm, agrees. He and his wife, Meghan, have been in business for twelve years. While their company is younger than Gachina’s, they share the same emphasis on quality customer service and regular contact.
“We try to develop a relationship with each customer,” says Needham. “It’s not just, ‘Here’s your invoice; can I have a check?’”
Sometimes the simplest gestures speak the loudest. “One of the biggest things is always answering phone messages quickly,” says Needham. “People love to talk to a live person.”
Meghan Needham, who handles marketing and business development for the company, says they look for a customer service attitude in all of their employees. “For example, when one of our maintenance foremen first started with us, he went around and knocked on the door of every client. He introduced himself and told them what his goals were for their property. They fell in love with him. He’s still with us and hopefully, he will be for a long time.”
Cultivating good customer relationships always makes good business sense. It’s simple, says Gachina. “People like doing business with people they like.”
2. Don’t change what you do ...but do it smarter.
Gachina says now is not the time to reinvent your whole company. Instead, it’s time to take a closer look at what you do and find ways to do it more efficiently.
“We’re staying true to our core values and our business plan,” he says. “That involves continuing to be a leader and providing high quality work. We’ve never been interested in being the low-price leader and we’re not trying to do that now. But we are reinventing some of the ways we do business.” Focusing on the bottom line is a priority. “We’re paying attention to costs more than ever and reviewing methods and procedures. How do we do things? Where can we improve them?”
Mark Lay, CLP, CLT, CEO of AA Tex Lawn, a commercial firm in Indian Trails, North Carolina, agrees that close scrutiny is critical right now. In the early 2000s, his company’s carefully developed growth plan proceeded like clockwork. Then came the drought. “We doubled in 2003, again in 2004, and again in 2005,” says Lay.
“We went from $0.5 million to $3.5 million in three-and-a-half years. Then we were hit with a bad regional drought. With that and the economic downturn, we’ve been dealing with some very tough times for three years.”
To work smarter and improve profits, he keeps company goals in plain site. “We have goals for everything and monitor them continuously. We examine our expenses, what our labor is running and what our sales are. We have an executive management team and we play the gross profit game each week, so everyone knows where we are and what we’re doing.”
The company also carefully reviewed all its vendors and did cut out some expenses, like its cleaning service. “We shopped our phone plan, our insurance plan and other services. We looked at everybody to make sure we were getting a good shake, because everyone was looking at us to see if we were giving them a good shake.” He says open communication on the numbers has been one key to company stability.
“The single greatest thing we did was get more people involved in what it takes to make a financial win. We started doing this just before the economy turned really ugly. Now we all know what we’re shooting for; we’re not just listening to the boss rant and rave.”
3. Don’t get desperate.
Lay points out that it’s important to be proactive, not reactive. “We’re not hunkering down. We did go through and cut some expenses, but you can only cut so far. It’s better to be on the offensive then on the defensive.”
He cautions against the desperate strategy of underbidding just to get a job. “There are big dangers in underbidding. If you do, you’ll only get additional unprofitable work and create a further deficit. You’ll also damage your reputation because you can’t work for free. You’ll just accelerate that downward spiral.” Instead, focus on profits. “We have a part-time CFO who’s worked for us as a consultant for more than six years,” he says. “We know what we need to do to stay profitable while remaining within industry standards.”
A high volume of work can be deceiving. “We used to see some of our peers and think they were doing really well. They seemed to have a lot of business. But when we looked a little closer we’d see inefficiencies, like too many people on a truck for a particular job.”
That kind of inefficiency simply won’t hold up in the long run, he says. “What may have worked well during the good times is just not enough now. We’re in a no mistake zone. We’re playing for keeps.”
4. Get creative with staffing.
Streamlining and perfecting operations includes hiring and retaining the best team you can afford. Sometimes creative staffing is in order. When two long-time employees left Gachina Landscape Management late last year, Gachina didn’t replace them. Instead, he adapted to the change by shifting responsibilities among current staff. He also stepped into one of the positions, the role of operations manager, himself.
“I have a background in operations management, but it’s something I haven’t done for fifteen or more years,” he says. “Some people had never seen me in that role. But everyone has rallied around and been very supportive. It helped us cut costs and avoid cuts we would have had to make on some of the lower level staff that would have ultimately hurt us.” The change has also given Gachina a chance to take a closer look at the company’s day-to-day operations and offered him the perspective he needs to make any needed adjustments.
“Things have fallen into place nicely,” he says. “I don’t know if I want to work this hard for many years, but I’m happy to do it for the next year or so until we come out of this.”
Lay looks at this time as a great opportunity to hire quality employees. “We’re making sure we have the right people working here and we’re taking this opportunity to make some good hires,” he says. “There are a lot of unemployed people out there right now and this is a time to capitalize on that.”
5. Ask for Help
If there’s one thing successful companies seem to have in common, it’s the willingness to ask for help—in good times and in bad. There are seasoned experts everywhere who can provide cost-effective consulting services on business planning, financial management, training and more. Putting their knowledge to work for you can be an excellent investment.
Gachina has used industry experts to assist with a variety of tasks, including long range planning, evaluation of daily operations, customer service training, and accounting systems. He’s also hired a water management consultant to help with issues related to California’s drought conditions.
“We’ve got a great team of people internally who are working very hard day to day,” he says. “To be able to step back, evaluate the company and improve it using outside resources has been very good for us.” Gachina puts a great deal of emphasis on training and he sees hiring outside help for that as a great investment. “When we invest in training, we invest in our people. We’re looking to the future, and we know that when times get better, we’ll really benefit from that investment.”
Lay is also a big believer in taking advantage of outside resources. “We hired a leadership consultant, Dennis McIntee, who helped the whole management team stretch into their positions. This has given us the ability to talk and work as a team, to create trust and get the best out of everybody.”
“I think a big turning point for our business was asking for help,” he continues. “Nobody knows everything, especially those of us who are business owners. We’re really just good at one thing. That’s one reason we grew our business, so everyone could focus on what they were good at.”
Jesse Needham, who hired a consultant to help with long range planning, says he was one of those who hesitated to spend the money at first. “We talked about it for a few years, but then last year, with the economy starting to change, we thought it would be good to have someone look at our whole business approach, to see if we were being profitable and to learn different ways to calculate and bid jobs. I’m really glad we did. We learned a lot.”