Start small if you are thinking about adding design/build services to your portfolio.
Iowa City Landscaping launched its design/build services in 1982 with two pick-ups and one ton truck. It rented equipment until it could buy its own while renting office space next to its garden center.
Today, the company runs a fleet of 17 trucks from a dedicated design/build office on 17 acres – but slow and steady was the key.
“Start small and build your business up, rather than buying everything at once,” says owner Linda Dykstra. “It takes years to build. We ran one crew, then two, and now we’re running five or six. If you have a goal of running five or six teams or making a couple million, that just doesn’t happen in one year.”
Building a business.
Adding design/build services to your company requires resources over time, but the initial upstart can be as simple as a shovel and a wheelbarrow. In fact, Chase Mullin wouldn’t recommend purchasing other equipment until you can sell enough work to justify it.
“Hold off on purchasing specialized equipment until you’re sure your business will be able to sustain the new services,” says Mullin, principal of Mullin Landscape Associates in New Orleans. “The most costly mistakes for me were buying equipment that we didn’t use as frequently as we thought we would, or not buying the best equipment because we didn’t do adequate research.”
Mullin advocates renting because there are so many types of landscape equipment with such high prices. Now, Mullin tracks rentals and only purchases equipment when the backlog justifies that he’ll use it often.
Before you shop for skid-steer loaders or excavators, you need someone to run the equipment – not to mention design and sell the projects. People with skills to design, build and sell these services are foundational.
“If you have a maintenance business and you just think, ‘Oh, we can do design/build for our customers, too,’ but you don’t have the proper personnel, keep subbing it out until you can find the people to do it,” says Jerry Merrill, president of Merrill Quality Landscapes in Rexburg, Idaho. “It takes people who know what they’re doing to do it right.”
That being said, good talent is hard to find. Merrill often hires graduates from the local university’s landscape horticulture program. Dykstra typically looks to the nearby community college as well, but that school didn’t even run its landscape program last year.
That’s why Mullin recommends training your existing team instead.
“It’s easier to train people how to do things the right way than hire people who already have some general knowledge but may do things the wrong way,” he says. “One way we’ve learned proper construction methods and trained our people is by relying on our vendors.”
Several times a year, vendors come to Mullin for full-day training sessions at no cost. Even in his business’s early days, Mullin would visit suppliers to ask for guidance.
Whether you train your talent or hire experience, design/build work should be done correctly from the start.
“You can get into a lot of trouble with design/build by not doing things right,” Merrill says. “I’ve seen a lot of companies come and go because they didn’t do things right. They either had to go back and fix things – which cost a lot of money – or they got a bad reputation, and pretty soon, they’re out of business. The most important thing is making sure you get people who have enough education or experience, or both, to know what they’re doing.”
Your first project.
Although your capabilities will largely depend on your team’s skills and experience, it’s best to start with small design/build projects. Ease into residential with simple lawn renovations and plant a few trees before you start bidding on complex patios, water features, or commercial jobs.
“Walk before you run,” Merrill says. “You need to get a little experience under your belt and make sure you can complete smaller projects before you take on bigger ones.”
Small projects incrementally build your credibility and experience for larger projects. So by the time you sell your first garden installation, you’ve established your capability through similar jobs on a smaller scale.
Another perk of residential work, Dykstra adds, is that it often pays sooner. Down payments on a residential project can help cover inventory costs, whereas commercial payments may lag several months – and hold a retainer for one year. In a new business where cash flow is already strapped, payment schedules make a difference.
It takes time to understand your cash flow and price jobs appropriately, but the sooner you figure out your costs, the better. When Dykstra sees young companies bid low on commercial projects, she wonders if they’re considering all the costs – like the additional workman’s compensation insurance required for heavy equipment.
“I’ve seen new design/build contractors get in trouble pricing their work too low. Then pretty soon they owe their suppliers money, and then pretty soon they’re out of business,” Merrill says. “With design/build, there are a lot of material costs involved, whereas maintenance is mostly labor. You’ve got to make sure the costs of materials, labor and overhead are all covered and you have a reasonable profit on top of that.”
Merrill’s rule of thumb is that he needs to sell six or seven times the salaries he pays, so salaries should account for less than 20 percent of total revenues. If you can’t sell that much, sub it out until you can.
The advantage for existing companies adding design/build is that the client base is built-in. A lot of Iowa City Landscaping’s projects, for example, come through the garden center. Mullin suggests launching new services quietly to existing customers through word-of-mouth before you start advertising to the public.
“You’re trying to maximize what you can do for each client,” Mullin says. “Not only does that allow you to do more revenue per client, but it also allows you to see that the project’s completed the way you want. If you’re doing good work and offering a good experience, this allows you to give the client a complete experience.”
Visit bit.ly/llsplurge to read more about outdoor kitchens, and bit.ly/lldecks for the pros and cons of adding deck services to your company.