Planning for Profit

Introduction from Jim Paluch of JP Horizons

There is a single characteristic that all successful business owners have in common, and that’s awareness. These owners open their minds and easily see the things that will improve both their businesses and themselves. Successful owners learn to work on the person inside so that the success outside will come.

In contrast, the owner who believes his people to be the problem, or maybe the economy or the competition, without giving the first thought to improve himself, is working from a position of ignorance. I am not implying that these owners are ignorant. In fact, they generally are very intelligent, just not on how to improve their businesses.

We have all experienced both sides of the line as we have a high degree of awareness on some things and an abundance of ignorance on others. The opportunity is in making sure we are on the right side of the line.

The company owners you read about in this article are working from a position of awareness. They understand the importance of being proactive in creating a profitable company. They may admit that they had not always been aware of ways to work smarter or to be a better owner, but they realized they could learn how. This desire to be better helps the owner to increase the awareness of his employees, and ultimately more success for everyone.

For over 20 years Jim Paluch and the JP Horizons Team have been helping landscape companies Work Smarter and create A Better Way. Learn how they do it at ABetterWayCommunity.com, or email jim@jphorizons.com.

How Contractors are Staying Profitable

The majority of landscape contractors have lived through at least one of the following scenarios over the past two years: drastic decrease in design/build business, fairly steady maintenance business but at reduced margins, increased competition, and intense pricing pressure across the board. As a result, many of these same contractors have unfortunately had to deal with the reality of reduced margins.

Today, many contractors are optimistic about what 2011 might have in store. That optimism is partially attributable to the growing number of positive economic signs that began to emerge in late-2010. However, these contractors are really excited because of the lessons they’ve learned—and changes they’ve made—over the past couple of years.

Gross Margins Squeezed

“We definitely had to reduce our gross margin expectations last year because of pricing pressure,” says Tom Morin of Morin’s Landscaping in Hollis, NH. “You can try to offset that by doing more volume, but that hasn’t been very easy because we have more competitors than ever. Fortunately, we have strong relationships with many of our big clients, so the competitive pricing was communicated to us and we were able to make adjustments.” Roughly 60% of Morin’s Landscaping’s revenue is in maintenance.

In Rochester, IN, Tony Sellers of Sellers Services says he’s been pretty successful at holding the line with respect to prices, but gross margin has still taken a hit due to the rising costs of fuel, fertilizer and irrigation pipe. Roughly half of the company’s revenue is in maintenance.

D.J. Vander Slik of Michigan-based DJ’s Landscape Management has faced similar challenges. “We’ve learned a lot and have come a long way these past two years, especially with respect to the services we offer our customers,” he relates. The company is based in Grand Rapids but also has branches in Kalamazoo and Holland. Roughly 75% of revenue comes from design/build, maintenance and tree care work, while the remaining 25% comes from snow removal.

Value Engineering

Vander Slik says he’s gotten serious about a process called value engineering. The premise is that you increase the value of your product or service by either increasing function or reducing cost. When customers began telling him that reducing cost was their biggest concern, Vander Slik began looking for unnecessary functions/costs that could be eliminated.