Ten sure-fire ways to go broke, lose customers and go out of business before the end of 2015.
The most and the least successful landscape contractors share one thing in common: the local dealer or distributor who supplies them. These vendors hear stories of both triumph and horror as customers divulge the ups and downs of business. They see what works and what doesn’t in the landscape industry – successes and failures walk through their doors just the same.
We spoke with dealers and distributors across the country to see what they’ve learned from landscapers who rock and those who flopped. So, take it from them: If you want to succeed in the landscape industry, don’t make these 10 fatal mistakes.
1. Undercut and underbid.
A contractor’s most glaring error is undercutting price to nab the lowest bid without knowing if he can make a profit.
“A lot of contractors don’t have the savvy to get paid what they’re worth, so they bid very cheaply,” says Lowell Kaufhold, president of CPS Distributors, a wholesale distributor of landscape and irrigation supplies in Denver. “They get the work without understanding what a job costs, and then they wind up not making any money.”
Undercutting may win the project short-term, but it destroys a bottom line over time. Leading with low price leaves little room for profit. Smart landscapers know what their work is worth, and educate their customers to appreciate high quality over low cost.
“You don’t want to be the cheapest because that’s going to attract accounts you really don’t want. They aren’t going to pay, and it’s going to trickle down in your business,” says Jose Cantu, who founded Saw House with his brother Hector in their parents’ garage before becoming a STIHL dealer in Houston. “You’re not going to have enough profitability to maintain equipment or hire people.”
2. Ignore your numbers.
Undercutting is just one symptom of a larger problem: not understanding your costs at all. Dealers agree that financial acumen is the determining factor of a contractor’s success.
“A good landscape contractor really has a grip on what it takes financially to run his business, down to the penny,” Kaufhold says. “He understands what it costs to rent machinery, run trucks, win a customer, collect a bill – and consequently, the ones who don’t, fail. That’s the most glaring difference between winning and failing businesses.”
Dale Fronheiser co-owns Passmore Service Center in Bechtelsville, Pa., where he sells, services and rents outdoor power equipment. Numbers come naturally to his most successful customers.
“My best accounts have great mental math (skills),” Fronheiser says. “We’ll be working out the cost of a complicated purchase, and they’re a step ahead of me calculating payments and how it will make their business prosperous.”
3. Work only in the business, not on it.
Of course, landscape contractors have to understand landscaping on a technical level. But owners can’t always be mired in details if they want to grow beyond the one-man crew mentality.
“The most successful contractors implement processes and structures within their company to free them up from the day-to-day operations, so they can spend more time working on their business than in it,” says Jason Lewinski, a former landscape contractor, now assistant field sales manager for Power Equipment Distributors in Richmond, Mich. “They’re focusing on the bigger picture, whether that’s implementing a new service or a strategy to increase sales and profitability of the overall business.”
Smart contractors build repeatable processes to create sales, perform work and get paid, while controlling schedules, expenses and resources.
“The leading contractors create really good systems that they can consistently maintain and duplicate,” Kaufhold says. “That efficiency creates a profitable business.”
4. Undervalue your employees.
Finding quality employees is hard enough, let alone retaining them for seasonal work. Given the high cost of turnover, smart contractors are honing their hiring practices to secure reliable talent.
“Labor’s always going to be an issue, so have you asked the right questions and hired the right people to reflect your brand?” asks Phil Stephens, director of sales for Horizon Distributors, a full-service distributor of irrigation and landscape supplies based in Phoenix. “One individual can have a bad attitude one day, and wreck a year’s worth of revenue at that property.”
Some contractors are improving their health coverage, 401(k) options and other benefits to attract and retain high-caliber people. Many use job fairs to recruit young employees, or government programs like H-2B to employ temporary immigrant workers. But the difference between job-seeking applicants and career-minded professionals can be game-changing.
“The organizations that keep (employees) are the ones that give them responsibility and provide them training to make it a career versus a job,” Stephens says. “One of the things that profitable, well-run organizations do really well is invest in education. Certainly, the good organizations cross-train so they’re not stuck with one individual who can drive the lawnmower.”
5. Push equipment to the limit – and then a little longer.
Contractors who understand costs understand the cost of downtime, realizing that rundown equipment can cost much more than routine maintenance or monthly payments.
“A lot of the successful contractors replace their equipment every two to three years,” says Barden Winstead, president of Land & Coates, an outdoor power equipment dealership with six locations around Hampton Roads, Va.
“They run them while they’re under warranty, and then replace them before they get to 1,200-1,500 hours where they can start failing and costing money.”
Top contractors explore payment and rental options, then care for equipment with regular maintenance to maximize investments. For rental advice from dealers, turn to page 62.
6. Grow as fast as you can.
One of the biggest mistakes a landscape company can make is overextending itself to grow too big too fast.
Despite the appeal of large projects, smart contractors don’t hesitate to turn down work if they can’t do it well or turn a profit.
“Bigger is not always better,” Stephens says. “I see some folks pursuing projects and properties that are beyond their ability to do profitably.”
Cantu says taking out huge loans to build big fleets is a mistake. Start small with a dependable mower and work your way up, acquiring employees and equipment when you can afford them.
“If you’re a one-man crew, you need to treat it like that,” he says.
“If you don’t have it in the budget, charging it on a credit card is one of the biggest mistakes in this industry.”
7. Offer a service, not a solution.
Regardless of internal people and processes, contractors are only as good as their last job.
“Your product or service speaks for itself,” Lewinski says. “The more successful guys are focusing on the quality of their service, taking pride in that and having a customer-first mentality.”
Contractors who partner with customers to solve problems build loyal, long-term relationships.
“The ones that look out for the needs of the customer, keep them informed of products and how they work and how they save labor, time and resources – whether it be water or electricity down the road – are going to do well,” Stephens says.
8. Offer the same service forever.
There’s value in focusing on your core competencies, but the best contractors add new services when opportunities arise.
Since CPS was founded in 1983 as Colorado Pump and Supply with a focus on irrigation, the distributor has expanded beyond sprinklers to provide landscape lighting, water features, fertilizers and fire-pits as contractors have diversified.
“We keep adding product lines because customers keep adding product categories,” Kaufhold says.
“If a contractor’s not comfortable learning about those products, that’s certainly a problem. The more diversified you are, the more opportunity there is to grow.”
Becoming everything to everyone can be a recipe for disaster, so diversification should be strategic and driven by profitable services. Contractors who successfully launch new offerings understand how to effectively allocate resources for maximum return.
When the housing boom dented new construction, for example, successful companies shifted away from installations toward maintenance.
“When that dries up, you have to be smart enough to say, ‘I’m going to focus on maintenance now because that’s steady,’” Winstead says. “I’ve seen landscapers shrink their organizations or cut departments when installation’s not going on.”
9. Present a poor image.
Dealers, like customers, can gauge the quality of a landscaping company by its trucks. If the fleet is dirty, in disrepair, with crooked magnetic signs or if employees jump out wearing unkempt, mismatched clothes, the firm’s overall image and brand suffer.
“Creating and maintaining a professional image separates every (successful) landscaper,” Kaufhold says. “Whether it has to do with clean, labeled trucks or neat, uniformed employees – the top companies excel at that.”
But contractors today have to look beyond branded trucks, uniforms and signs. An effective web and social media presence can strengthen a contractor’s professional image online.
“If you don’t have a website, you’re in really big trouble,” Kaufhold says. “That speaks volumes to your inability to be professional. The first thing prospective customers do is go to the website, and the best companies have a lot of imagery to show off their work.”
10. Do it all yourself.
These failures can be tough lessons to learn the hard way – unless you learn from other contractors who’ve already faltered and prevailed. Education, training and idea-sharing are crucial to a landscaper’s success, whether it comes through industry associations like PLANET, trade publications, networking events or consultants.
“The guys that have been growing quickly, a common thread is their involvement with some type of outside guidance, whether that’s an industry group, a peer group, a consultant or a mentor,” Lewinski says. “Everyone needs to seek outside feedback or expertise on how to grow their business.”
Periodically take a step back from your business to tap into other examples of success in the industry.
“You’re crazy not to use those resources if you’re struggling in your business,” Kaufhold says. “That’s absolutely key to running a business that will last.”