In the last issue, I discussed why only a small percentage of green industry entrepreneurs make it to the $1 million revenue mark. This low number has plagued me for most of the 25 years I’ve been working in this industry.
In this article, I’m going to provide a model for building a million dollar maintenance business. Remember, this is a model that is general in nature and applicable for most companies.
It should also be noted that we are focusing on maintenance services revenue and excluding subcontractor revenue such as lawn fertilization, enhancement revenue and irrigation service revenue. These services have their own benchmarks and critical numbers and need to be analyzed separately.
The following information is what I told an 18 year-old entrepreneur from Atlantic City, N.J., who attended one of my estimating seminars, and asked me how to reach sales of $1 million.
Benchmarks and critical numbers.
An entrepreneur has to understand benchmarks and critical numbers. The first of three critical benchmarks for either a commercial or residential maintenance business is the annual revenue produced by each full-time field crew member. This critical number should range roughly from $55,000 to 65,000. The second is the total number of full-time field crew members in the company. It will take approximately 15 to 17 full-time field crew members to reach $1 million in maintenance revenue. The third critical number, just like an installation company, is general and administrative (G&A) overhead. G&A overhead should run approximately 25 percent of sales.
Stages of growth.
To reach $1 million in maintenance sales, an entrepreneur has to grow through the same three stages as an installation contractor. It’s between the first and second stage that most entrepreneurs get “stuck.” That’s why a large number of green industry companies have sales at or below $500,000.
Stage 1 ($300,000+/-):
At this stage, the entrepreneur has 5 (+/- 1) full-time field crew members. Sales should be near $300,000 (5 x $60,000). Like all green industry companies of this size, G&A overhead should be roughly $75,000 ($300,000 x .25) with half of it going to office salaries. The entrepreneur may be doing some of the work in the field but his primary focus should be business development (building a team, sales and marketing, customer service, quality control and implementing business systems).
Stage 2 ($600,000+/-):
At this stage, the entrepreneur has 10 +/- 1 full-time field crew members. Sales should be near $600,000 (10 x $60,000). G&A overhead should be stable near the 25 percent mark or $150,000 ($600,000 x .25) and half going to office salaries. The entrepreneur should focus almost totally on business development.
Stage 3 ($1,000,000):
At this stage, the entrepreneur has 16 (+/- 1) full-time field crew members. Sales should be near $1,000,000 ((16+/- 1) x $60,000)). G&A overhead remains proportional as with the previous stages. However, in order to grow while maintaining quality control and customer service, it is critical that the entrepreneur puts in place two key elements. First he must develop a solid team comprised of crew leaders, an office manager and field managers. Second he must implement sound business systems to include: accounting, scheduling, estimating, job costing and customer relations management.
Three critical pressure points.
The entrepreneur needs to focus on building a high-performance team, developing business systems and selling enough work to keep crews busy. If one of these elements is missing, the company will not operate at peak efficiency (profitability).
If you want to build a profitable million-dollar landscape maintenance business, you have thousands of fellow landscape entrepreneurs to show you the way.
Study the examples of successful people who have done what you want to do. If you are wise enough to take advantage of the successful role models who have done what you want to do, your chances of success will greatly improve.
Unfortunately, I lost track of the young entrepreneur, but I bet he’s well on his way to reaching $1 million in sales. He is wise enough to seek out role models, ask questions and not listen to the naysayers who want to steal his dream.
JIM HUSTON runs J.R. Huston Consulting, a green industry consulting firm. See www.jrhuston.biz; mail email@example.com.