“We simply asked our customers what they really wanted and valued,” Vander Slik recalls. “We didn’t have to eliminate our core services; it was the little things. This presented a challenge for us because every client values something different. You have to ask them.”
One example of the simple changes that DJ’s Landscape Management made to help clients adhere to their tighter budgets was reduce the frequency of picking up and disposing of litter. “We recognized that doing it every week was wasteful because the bags were only a quarter full,” Vander Slik tells. “So we proposed doing it every third or fourth visit, which made a significant difference in allowing us to bring our price down a bit.”
Equipment Operating Costs
Sellers has decided to put his focus on equipment. “We’re going for uniformity, from the trucks we run to the way our trailers are set up,” he says. The objective is increased productivity, in addition to reduced maintenance costs and overall operating costs.
“Our facility is in a rural area, so we need to have a lot of parts and supplies in stock,” Sellers adds. Reducing the number of equipment brands, models and vendors the company must manage reduces their procurement costs and increases their buying power.
Sellers is also tracking each piece of equipment very closely. “We’re treating each piece of equipment almost like a job now,” Sellers says. He’s watching the hours each machine is used, downtime, and maintenance and fuel costs.
“Paying a $200 repair bill on a $350 trimmer doesn’t really make sense,” Sellers says. “We don’t like to spend our time working on things or hauling them to dealers, so we’re trying to upgrade equipment as much as possible.”
Sellers says the company’s rule of thumb is to upgrade handheld equipment at least every two years. Riding mowers are in the three- to five-year replacement range. “We have good relationships with our dealers and ask them to always contact us before going ahead with a repair,” Sellers says.
Sellers Services has also worked hard to maintain good relationships with its materials vendors. “I’ve learned that vendor relationships are just as important as customer relationships,” Sellers says. “We don’t like to price-shop; we like to remain loyal. When I have a bid where the customer says I’m way out of line, my vendors are sometimes able to help me out.”
Morin is taking a similar approach. “We’re paying much closer attention to our inventory now,” he says. “We’re also slowing down to negotiate better, especially on nursery stock. We’ve had a good credit and payment history over the years, so we are often able to negotiate good pricing.”
Strategies like the ones just described have helped contractors preserve as much gross margin as possible. Still, seeing 5-10% or more melt away has been common. To prevent net profits from taking an even greater hit, additional strategies to control overhead costs have been implemented.
“We work from a pretty solid budget, so we’ve been able to pinpoint areas of discretionary spending that could be cut or completely eliminated,” Morin says. There’s been a hiring freeze with respect to administrative personnel. The company is also holding back on computer and technology-related purchases. “But we’ve still seen our net profits dip 4% or so,” Morin points out.
Sellers Services has endured a similar reduction in net profit. But unlike Morin, he’s chosen to stop the bleeding by ramping up his investments in technology. “Internal efficiencies are going to be the key to growing our net profit,” Sellers says. “That’s why I’ve invested in Include Software’s Asset program. It’s helping us drastically cut back on the double- and triple-entering of information. From bidding to billing, information flows smoothly through the system.”
Back up in Michigan, Vander Slik has been taking a hard look at discretionary purchases, especially office equipment. He’s also re-evaluated the company’s approach to team building and social outings.