I often have contractors tell me that someday they want to be just like the Big Box Landscaper. The big guys have nice new equipment, all of the account managers and supervisors have their own vehicles, they have fancy offices, and they seem to be able to purchase whatever they need whenever they need it.
Before you get too excited, I will warn you that the Big Box Landscapers have their limitations as well. Somewhere up the food chain there is a group of individuals that is watching the day-to-day operations, and many people are accountable to produce results. The pressure is constantly on to make it happen.
All contractors—small, medium and big box—are faced with the same issues on a daily basis. Whether it is managerial, marketing, operational or financial, these issues confront all of us at different degrees, day in and day out. The question is: Who can handle them more effectively?
Let's take a look at nine key areas where the huge landscape companies might not have it as great as you think.
1. No Such Thing As Endless Capital
Many landscape contractors assume that if they had the “endless capital” like the big guys, their troubles would be over. Let’s get one thing straight: There is no such thing as endless capital.
Capitalizing your company takes time, a great plan, discipline and hard work. The Big Box Landscapers would like you to believe that they have cash available anytime they need it; that it's as simple as making a call to corporate and the funds will be sent. Though they probably have access to more capital than most landscape contractors, it does not mean that they can slide their ATM card and access cash whenever they want.
All businesses, large and small, need to operate within their budgets and financial plan. I work with small and large companies that have ample capital. Successful companies develop relationships with their bankers, and operate within their business and financial plans. Over time these companies have set up processes and controls that have produced financial success by continuously building up capital which has allowed them to grow.
Remember that most things are relative. The Big Box Landscapers may have to answer to investors, private equity firms, or even stockholders that demand an ROI. Most of us have to answer to ourselves and sometimes a banker.
2. Bad Cash Flow
When it comes to inadequate cash flow, size does not matter. In fact, small and medium-size companies may have a distinct advantage over the Big Box Landscapers.
Most contractors learned a lot about cash flow management over the past several years. When the economy took a slide back in 2007, it was easier for many of my small and medium-size companies to immediately scale back in order to preserve their cash. They did not have the pressure of having to deflate this fat and sassy operation that was fed by the ability to obtain cash whenever needed. When the well runs dry, it is dry!
It is a myth that the average landscape contractor is at a disadvantage when it comes to cash flow. The Big Box Landscaper may have a larger credit line and the ability to infuse more cash during tough times, but when they are forced to tighten their belt, it is much more difficult to loosen it as the economy improves.
All companies should practice proper cash flow management. Those where the owner signs on the dotted line have a much stronger pulse on the need to strictly manage their cash burn rate.
3. The Planning Process
Poor planning is the reason why problems like capitalization and bad cash flow can happen to landscape companies of any size and scope. All landscape companies need to map out as comprehensive a business plan as possible, covering financial issues, marketing, operations, growth, and an array of other elements. Granted, for the small and medium-size company, this can be time consuming, as a well-prepared plan can take weeks or months to complete.