It's safe to say that most landscape contractors would like to make more money. It's also probably safe to say that every contractor would like to make more money without having to work any harder. Well guess what? Most could.
According to entrepreneur Jonathan Pototschnik, who owns both a lawn maintenance company and a software company, many contractors are losing money left and right. And we're not just talking about getting out-bid on jobs or robbed. Profit leaks exist in just about every nook and cranny of a landscape company.
Pototschnik spoke on this subject at the 2013 GIE+EXPO in Louisville this past October. Here's a look at his top five ways contractors are losing money.
#1 – Internal project management
Sometimes contractors try to do too much at once, especially those who don't already have good systems and processes in place. But when you try to execute too many internal projects all at the same time, what often happens? None of them get finished.
Think about what you'd like to change or implement to make your company run better and/or increase sales and profits. Maybe it's reorganizing your storage yard or office, writing an employee handbook, or improving your website design and SEO. Determine which will provide the most payback, and focus on that first. Remain focused on that project until it is completed, and then move on to the next one. Set deadlines for each project and commit to seeing each through.
#2 – Marketing
Several profit leaks can spring within the broad area of marketing.
First off is bottlenecks. Many companies are generating leads—often when they are already crazy busy with existing work—from a variety of sources: website/SEO, referrals, outside sales, etc. Suddenly you have a bunch of leads, many of which are very promising but inadvertently fall through the cracks because you are just too busy to keep track of them or follow up on them. Money is lost in two ways. First, you're missing out on new sales. Secondly, the money you'd spent on marketing is down the toilet because you're not capitalizing on the leads your marketing is generating.
This brings us to the second point: nobody answers the phone. Ideally you have office staff responsible for answering your phone. If that task is one of the many hats you have to wear as owner/operator, at least get in the habit of checking your messages regularly and responding to customers in a timely fashion (ideally within the hour or two, for sure same day). Keep this in mind as you schedule each day; you don't want to cram your schedule so tight that taking a breath to return some phone calls is too difficult. "Speed wins," Pototschnik reminds. "The first contractor to respond often wins the business in residential."
In this day and age, these same concepts apply to any inquiries you receive via email or through your website and/or social channels. If people took the time to contact you, make sure you take the time to respond in a timely fashion.
Again, it's helpful if you have someone to assign this responsibility to. In fact, the third big profit leak in marketing relates directly to responsibility: not having someone in charge of marketing. If you're a smaller company with limited support staff, this will likely fall in your lap. That's OK, because many successful companies are successful because the owners spearhead the marketing and business development efforts. But that means you are going to have to delegate other responsibilities to others in your company; we're talking mainly about field production.
#3 – People
Next to the weather, people/labor represent the most decisive yet troubling component of the typical landscaping company. Unfortunately, leaks can occur all over the place.
Many landscape companies have a tough time attracting quality applicants so they "settle" on whomever they can hire. You owe it to yourself to really think about your company's reputation and how it may be influencing the type of people who apply for work with your company.
Training can prove to be another profit leak. All training is going to cost you in terms of time and/or money. When done well, training can be viewed as an investment. When done poorly, training is definitely a profit leak. Then, poor training can cause the leak to bust wide open in the way of poor quality and service, and ultimately lost customers and a bad reputation. Think about what you're doing to create standards and then train to those standards in your company.
#4 – Technology
The realm of technology is a tricky one. Tools like business management software, GPS in your trucks, and mobile time tracking of employees can help you ramp up your efficiency and reduce unbillable time. However, many contractors don't take advantage of these types of tools. And for those that do, many don't fully utilize them.
Think about the financial impact of helping each field employee save 10 minutes per day. Depending on what you pay your employees, you could end up saving at least $15 per week per employee. This adds up quickly depending on the number of field employees you have. The side benefit is that you now have more of your very-hard-to-find field employees' time to actually bill clients.
How does technology help you do that? It helps you better track employee time. It can also help you improve your routing and job costing. Daily reporting of key data, such as billable vs. unbillable time, also makes it easier to manage and establish accountability among your crews.
Finally, technology also helps you, your managers and/or your admin staff reduce the time spent filling out and filing paperwork, scheduling, billing, and so on. Now more time can be spent on customer service, marketing, and growing your business.
#5 – Cash flow
First of all, someone needs to be in charge of receivables. Technology can help here too. Devise internal systems to ensure that you get paid on a timely basis and that nothing slips through the cracks. Also define trigger points as to when you'll get a little tougher with slow-paying customers or maybe even send them to collections.
Also, think about ways you can get paid faster. This might include securing deposits on installation jobs, offering credit card payment options, or perhaps even slight discounts for pre-payment. Use your judgment and utilize these tools on an as-needed basis.