Can you name your most profitable account? Have you performed a return on investment on the jobs completed in the last year? Do these seem like strange questions? If so, it might be time to slow down, step back and evaluate if your business’ prospecting, selling, operating and business management efforts are paying off on the bottom line.
Your business might be plenty busy — the books and the backlog don’t lie, after all — but an overflowing schedule can be a significant drain on profits and cash flow, as crews scramble to complete jobs within strict time and budget constraints and management and office staff struggle to keep up with daily demands. Logic says that an abundant book of business plus a high volume of work is the ideal formula for maximum profitability.
Reality, however, tells a different story. Why? For starters, indiscriminately serving a wide customer base guarantees there will be a healthy dose of those customers who demand high-end products and white-glove service at steep discounts and bargain-basement prices. And selling primarily on volume rarely works well for small businesses because they often lack the resources to consistently and successfully deliver on that volume.
Smart businesses do two important things: they target and sell to the right customers, and they plan for circumstances that threaten profitability. The former involves being unapologetically choosy and running fast and far from profit-drainers such as “scope creep.” The latter involves making accommodations for high-demand seasons and events and taking measures to proactively recoup costs associated with sluggish sales seasons and non-revenue-generating activities.
When done well, both result in more meaningful, efficient work with higher profits. Here are three more residual benefits you might not have considered.
1 Increased ability to prioritize. Whether completing day-to-day operational tasks or striving toward goal-based initiatives, prioritization is key. As you sharpen your focus on your optimal customer profile and begin to streamline processes in your business, you will discover certain things that once required immediate attention no longer hold you and your teams in the vice grip they once did.
In fact, you may find that reactive measures become a thing of the past, as being proactive helps mitigate obstacles and decrease the likelihood of events adversely impacting daily operations. This leaves plenty of room for the things that matter over the long term, such as strategic planning, personal and professional development and growth and sufficient attention paid to a healthy work-life balance.
2 Better use of resources. Many owners find that as their book of business becomes more clearly defined and their cash flow falls in line with a more profitable customer base, they no longer need to rely as heavily on lines of credit as they once did. They often no longer find it necessary to liquidate assets to pay vendors, suppliers and lenders. This frees them to use the extra cash to reinvest in and grow the business.
Cash that may have once been allocated for debt repayment can be rerouted toward the purchasing of better vehicles and equipment, improved facilities, valuable training programs and enticing employee incentives. Because a clearly defined customer base ensures that you only work with customers who return the investment of valuable time and resources, and because careful planning accounts for both expected and unforeseen factors that impact available cash, you can rest assured there will be plenty of cash in reserve during all seasons of the year for the things that bring the most value to the business.
3 Clearer big-picture view. The whirlwind of daily operations can leave many landscape contractors perpetually in the weeds, unable to see much farther than the immediate task at hand. When the bulk of your time shifts to spending time on the business rather than in it, you’ll find it becomes easier to envision the path forward. With fewer customers clogging the books and more efficient, streamlined processes taking the lead, you can take time each day to revisit the business’ original mission and vision and recalibrate as needed.
As you make this a daily practice, you will find you are able to think more strategically and creatively, allowing you to better guide and mentor your team members. The momentum created from an organization’s shared goals is powerful, continually moving everyone in the same direction and preserving and refining the big picture you envisioned for your business from the start.
The primary reasons many sole proprietorships struggle to remain solvent are a lack of understanding about the customer’s role in ensuring profitability and a lack of attention to proactive planning.
Conventional thinking about prospecting, selling and financial management has done little to boost the success of independently owned landscape contracting firms as teams throughout the industry remain overworked with little in the way of profits to show for the output of effort.
But with a few simple shifts in the way you and your teams think, plan, implement and execute systems processes, you can transform your business and reap the rewards. And you’ll still have plenty of time left over to enjoy the things that matter most, like hobbies, vacations and time with family.
Don Evans is president of Pittsburgh-based LandOpt, where he oversees day-to-day operations and provides leadership by establishing and implementing long-range goals, strategies, plans and policies. He brings a diverse range of experience, leading teams to sustainable growth in manufacturing and service industries. While he began his business life as a corporate lawyer, Evans has spent the majority of his career in customer-facing and solutions-focused roles. He can be reached at email@example.com.