Over the past 30 years, we at the Harvest Group have learned a lot about how to grow profits in landscaping. One of the clearest things we’ve learned is that profitability has little to do with size. In fact, after visiting and working with hundreds of landscaping companies of all sizes, we have found that a lot of small landscapers have large profits, while a lot of large landscapers have small profits.
In fact, some of the high-profit landscapers used to be larger; but the larger they got the smaller their profits became. These landscapers told us the larger they grew the more hours they worked. After a few years of this they became tired and frustrated. To retain their sanity, they deliberately reduced the size of their companies and found their profits increased.
So size, in this case, did not have seem to be an indicator of success. How about education or business experience? We have seen owners and managers with advanced degrees in business or horticulture and others with Fortune 500 experience struggle in many of the same ways as those who launched their businesses with nothing more than passion, drive and a dream.
We have learned there are five things all high-profit landscapers have in common. It’s not where they’re from or what degrees they have or how dedicated they are to great customer service. It’s what they do.
- They measure everything that makes sense.
- They have processes.
- They invest in—and use—technology
- They understand people.
- They keep things simple.
So let’s look in depth at these five high-profit keys to success.
High-profit companies measure
Owners and managers of high profit companies are aware that their largest expense is labor, so they manage their people carefully. There are two labor percentages that are extremely important in this area.
The most important is the percentage of dollars used to actually do the work on a job. This is known as “direct labor” on a profit and loss statement. For example, if a job sold for $1,000 and labor as a percentage was 30%, the company needs to keep this labor percentage on budget; otherwise the company may lose money.
High profit owners don’t wait a month or more for a financial statement to learn these percentages. They spot check individual jobs to make sure the labor is on budget. They measure this percentage for all departments in their business, making sure their estimates, pricing, and efficiency are all on target.
The second important area falls into the overhead category, and this percentage represents the total unbillable hours their people are paid for each week. In our webinar we are going to review the areas that affect these percentages, especially how to reduce them.
High-profit companies have processes
The word “process” is defined as a series of actions or steps taken in order to achieve a particular end. When the Harvesters have assessed companies, they have observed that high-profit companies create solid processes and low-profit companies do not.
There are literally dozens of processes needed in a landscape company, i.e. in operations, sales, marketing, administration, finance, human resources, quality and more. I am aware of a number of companies that have hired professionals to painstakingly document all phases of the work to create these processes. This generally takes more than a year to accomplish. The result is a well-organized company with minimal waste of materials and labor which results in high profits.
For those interested, many of these processes have already been created for landscape companies and can be found on the Harvest Way Academy web site, www.HarvestWayAcademy.com. The Harvesters worked for four years to populate the information found on the Harvest Way Academy web site and we are continuously adding to it.
High-profit companies leverage technology
Most well-run landscape companies use all the technology that makes sense to help reduce labor and achieve smooth operations. Computers are used to produce company financials, create invoices, produce proposals, and communicate with their people and customers. But others are using the latest technology to create over the top landscape designs, track hours on jobs that feed into their payroll system and give them accurate job costing. I have personally observed employees in one company clocking in with a face recognition system. They also had a huge monitor that displayed all of the previous days hours on every job. With a click, they also had all of the jobs that would be performed that day with estimated job hours. This information could also be seen on each of the crew supervisor’s individual electronic tablets.
To improve management of crews and vehicles, company owners are beginning to realize the benefits of GPS tracking systems. Owners and managers successfully use GPS tracking systems like Verizon Connect Reveal to help improve their crews’ productivity, efficiency and even promote safer driving habits. With these systems, owners can see where their crews have been and whether they’re driving safely (which can also impact your company’s reputation). These systems provide critical information that helps owners reduce unnecessary idling, eliminate profit robbing side jobs, deter theft and improve routing and dispatching.
High-profit companies understand people
I always tell my clients that “we are not in the landscaping business, but in the people business doing landscaping.” High-profit company owners understand this. I’ve heard owners of these companies tell me their policy is to treat their people “firmly, but fairly.” They understand it’s important to build solid, trusting relationships, and when they do, a strong, positive fun company culture can result.
Volumes of books have been written on this subject so I’m not going to dive too deeply here. When I had my landscaping company for just short of 30 years, I lost very few employees, and we had a staff of 125 at the peak of the season. Why did I enjoy such loyalty? Because I love people and find them so interesting. I also always try to put myself in their situation. I treated them the way I wanted to be treated, and that means with respect. I paid them well, expected a lot, didn’t micromanage, worked to build trust among everyone, and we had fun whenever we could. I worked to build solid relationships with each of my managers. We had regular lunches, “one on one”, and as a management team had dinners together at least four times a year. Additionally, another way we built loyalty was with the common goal we all shared, which was to build a “learning organization”. We just wanted to be plain smarter than our competition, and that is exactly what we did.
On this subject I point my clients to an excellent book called Delivering Happiness: A Path to Profits, Passion, and Purpose written by Tony Hsieh. After reading his book I became even more keenly aware of the importance of building a very strong culture. Because of his incredible culture and customer philosophy, Tony and his people built Zappos and sold it to Amazon for $1.2 Billion.
Great companies become great because of their people. They hire great people who become loyal to the company and the result is great profits.
High-profit companies keep things simple
A landscaping business is very easy to start but far more difficult to build and make money. I tell clients and attendees at our seminars that this is an easy business, but it’s like “putting a puzzle together with 50,000 pieces.” Puzzles come in boxes and there is always a picture on the front of what it’s going to look like when you’re done. In the game of landscaping, the puzzle has no picture. So, you need to paint that picture in your mind and then build that picture through work. What is your company going to look like in 25 or 30 years?
I’m telling you this because there are so many decisions to make every day. If you make the wrong ones and don’t put the pieces together right . . . well, you’ll never see the picture or it will be pretty blurry. High-profit company owners see the picture clearly and work every day to make the right decisions. They focus. So, it’s an easy business but the infinite choices make it complex at the same time.
My bottom line advice to you, whether you are new in business or have years of experience, is to keep it simple. Focus on measuring the key areas of the business. Create processes for all to follow. Use technology to your advantage. Hire and keep the best people, develop a strong powerful culture, and keep things simple. If you do these things correctly, you also will be a high profit company. And, if you already are, there is always room for improvement.
Ed Laflamme, LIC, grew the largest landscape company in Connecticut and sold it in 1999. Ed then co-founded The Harvest Group with Bill Arman. He’s a professional speaker, author, business advisor and coach serving landscape owners nationwide. Visit www.harvestlandscapeconsulting.com to learn more about Ed and his company. Ed can be reached via firstname.lastname@example.org.