Beware the Benchmarking-induced Cycle of Destruction

Contractors obsess over cost cutting so they can give customers more, but all that does is raise customer expectations while placing a stranglehold on profit and growth potential.

As landscape companies have become more obsessed with operational efficiency in an effort to reduce costs, they've become even more obsessed with benchmarking. That results in a lot of companies that are highly efficient, but look an awful lot like one another. That, coupled with economic stagnation, leads to lower pricing. What's the end result? All of those operational efficiencies don't even lead to increased long-term profits, much less sales growth.

“With the way things have been, contractors are focused on giving customers more, pushing that value button over and over,” says renowned business expert Tom Oyler. The problem is that landscaping is a low entry-cost, high-labor service industry. Unlike with manufacturing, there aren't too many ways to seriously cut costs.

"So when competency goes up, costs generally go up, as do consumer expectations," Oyler explains. "And we’re not even talking about price yet. But something is needed to pay for the competency. If the market won’t allow it, as has been the case for a few years, the money has to come from profit."

To stay in the game today, you definitely have to run a highly efficient company. So you do have to continually look at ways to improve operations. However, the real trick is finding a way to raise a customer's willingness to pay. That requires innovation.