In Nashville last month, I got to hang out with a bunch of landscapers from across the country. We spent a few days talking about how the attendees could grow their businesses. The event, organized by our columnist Marty Grunder, offered tons of advice and practical strategies for contractors of any size and shape to improve.
It was my favorite type of conference: one where lots of smart people got together to share ideas. Here were some of my favorite quotes from the two-day conference:
“Saying yes gets you to $1 million. Saying no gets you to $2 million.” One of my favorite sessions at GROW! covered the art of delegation, and Marty mentioned this idea. The vast majority of landscape companies never make it past $1 million in revenue, and it’s not because they don’t do good enough work. They keep taking on jobs in too many segments, lose focus and end up in the weeds.
“Focus on the significant few, not the important many.” Matt Caruso, who owns Decrascape, said this about managing employees, but it applies to almost every area of your business. His message: Delegate the “important” stuff to your best team members so you can focus on the “significant” stuff yourself.
“Perfectionism is dangerous. … You have to keep that periscope running or you’re going to run into something.” Mike Rorie, who grew a maintenance company to $30 million before selling to Brickman, said this about delegating and managing a team. His point was that, as an owner, you can’t get too caught up in the minutiae. Stay focused on the largest problems and greatest opportunities.
“We’re a service company that does landscaping,” said Jim McCutcheon from HighGrove Partners in Atlanta. He gave a great talk that encourages landscapers to stop thinking of themselves as, well, landscapers. (You’ll hear more about that in a forthcoming issue.) He works in Atlanta’s commercial space, which is about as commoditized as they come. And the only real thing that makes his company stand out from his competition is the service he and his team provide their customers. Once he realized the real business he was in, he could focus his team on what they wanted to be really good at.
As your season starts up this month, take some time to think about what work you take on, what you focus on as an owner and, ultimately, what kind of business you’re in.
– Chuck Bowen
Whether you’re working in commercial or residential landscapes, designing edging into the property is an easy way to give it a polished look, and add some money to your bottom line.
Matt Michmerhuizen is in sales and design at Greenline Landscaping in Hudsonville, Mich., which has offered edging since its inception in 2001. The company sees about a 40 percent profit margin from the service from its client base, made up of both commercial and residential properties.
“We use edging in every job, and if not every job, then 99.9 percent of our jobs,” Michmerhuizen says. “It just makes everything so much easier – better lines, cleaner lines, it’s easy to install … and the future maintenance is far, far less when you’re using edging as opposed to just a spade-cut edge.”
If the existing property is a renovation project and doesn’t already have edging installed, Michmerhuizen says Greenline brings samples with them to show the customer how it works. “We’re pretty up front with them. It’s a product that you generally don’t see – you’re not supposed to see – but its benefits far outweigh the cost because of future maintenance,” he says.
When edging is already built into the design of a property, which is the case with most of Ruppert Landscape’s commercial clients, it’s as easy as making sure you’re the company that can provide all of the necessary services.
“Your typical customer doesn’t want to hire one company to do edging when they have another company that’s doing all of the beds and turf in the same area,” says Mike Ward, director of preconstruction services at the Laytonsville, Md.- based company. “They like to keep the scopes under one roof.”
Ruppert Landscape uses edging in such applications as separating turf areas from mulch and plant beds, gravel walkways, pavers, and even green roofs, Ward says. “As with anything else on the jobsite, it’s a component of the entire job,” he says.
Both Ward and Michmerhuizen say that their companies use aluminum edging products almost exclusively. Aluminum provides a nice midpoint between heavy, expensive steel and economical, less-sturdy plastic options, they say.
“It does not rust – that’s the biggest benefit,” Michmerhuizen says. “They just last forever.”
Another major benefit to adding edging to your service offerings is the short learning curve for your team members. It’s a self-explanatory process, Ward says. “The biggest things are making sure that you’re not damaging the edging as it’s going in, and that your lines are clean and the connections are all good, and that it’s set at the proper elevation,” he says.
According to Michmerhuizen, Greenline builds the edging installation training into a hiring seminar when an employee is first brought on board. This ensures that the installer doesn’t force the curves of the edging, which may end up creating a bend in the design.
“Down the road, customers will save,” he says. “They see a huge savings not having us go back each year or each spring and fall to re-edge their landscape beds. It’s already done.”
Alongside improved aesthetics and a relatively inexpensive addition to the overall cost, these should be compelling reasons for clients to agree to this service. The property owner may be investing a little more money up front to put in an aluminum edge, bed restraint or paver restraint, but in the long run, it cuts down on edging as you’re maintaining the properties, Ward says. “And when it comes to things like pavers, it maintains your hard edges and keeps the paver edges from sloughing off down the road. It provides some stability to the paver field.”
The primary test of a cost estimating system is whether it calculates your costs – all of your costs – accurately. That may seem painfully obvious but many estimating systems violate this principle. Secondly, cost estimating is a science. As such, all of the formulas and mathematical assumptions in a cost estimating system must be open to verification by independent third parties. Four of the five most commonly used estimating systems within the green industry use percentages (one, two or four of them) multiplied by the direct costs in a job to measure, allocate, recover and control (MARC) general and administrative (G&A) overhead costs. And since G&A overhead costs usually run 25 percent of a company’s sales, these costs are significant and need to be calculated correctly, and accurately included in one’s pricing for projects and/or services.
Unfortunately, all G&A overhead percentage-based estimating systems fail the primary test for an estimating system. They all have serious mathematical flaws when it comes to estimating G&A overhead costs for an installation project or green industry service. Their faulty arithmetic needs to be exposed using the methods of science.
An estimating system needs to calculate the following general categories of costs accurately: materials, labor hours and labor dollars, labor burden, equipment, subcontractor and G&A overhead. It also needs to calculate a reasonable amount of net profit margin to add to the project or service.
It is through job costing that you collect data, as the project or service is completed, and compare the budgeted amounts for each category to the actual amounts used. If your estimating is accurate, the difference between the two (the variance) will be zero. It is this data collection process that tells you if your estimating system is accurate, your production is on target, and/or if you need to adjust your estimating production rates for future bidding.
Here is how three of the four percentage based systems calculate prices for two different jobs. For ease of arithmetic, we’ll stipulate that our entire field workforce costs $10,000 (with labor burden) per month and our total G&A overhead costs are also $10,000 per month.
Using a materials factor of 3.0, your price would be $30,000. The GPM is -$90,000…Oops!
Job B (a one month job)
Using a materials factor of 3.0, your price would be $300,000. The GPM is $180,000… Whoopee!! See the problem?
Total Direct Costs
Total Direct Costs
Using a SORS factor of 1.3, your price would be $156,000 and the GPM $36,000 for both jobs.
Assuming a 10% net profit margin or $15,600, that leaves $20,400 for G&A overhead for both jobs. But job A requires ten months of G&A overhead ($100,000) verses one month of G&A overhead ($10,000) for job B. The arithmetic in the SORS method is faulty.
Total price for job A is $196,350. Total G&A overhead on the job is $58,500. MORS understates the G&A overhead by over $41,000.
Total price for job A is $151,580. Total G&A overhead on the job is $18,000. MORS overstates the G&A overhead by over $8,000.
I then added, as shown above, that all percentage-based G&A overhead estimating systems have serious mathematical errors embedded in their arithmetic. Materials factoring, SORS, DORS and MORS can get you into serious trouble. Furthermore, the three markup percentages used in MORS by just about all users to mark up direct costs to recover G&A overhead costs (the 5% on subcontractors, the 10 percent on materials and the 25 percent on equipment) have never been scientifically verified by independent third parties. The reason is simple. They cannot be verified.
I guess if you candy-coat materials factoring, SORS, DORS and MORS; you get SMORS. And while candy may taste good, a steady diet of it can harm your physical health…just like factoring used in your estimating system can harm your financial health.
JIM HUSTON runs J.R. Huston Consulting, a green industry consulting firm. See www.jrhuston.biz; mail firstname.lastname@example.org.
NASHVILLE – Landscape contractors, whether just starting out or pulling down millions in revenue, need to focus on three key areas if they want to continue to grow their businesses.
That was the main takeaway for the 140 attendees at GROW! 2013, a leadership and development conference put on by Marty Grunder, owner of Grunder Landscape Co. and columnist for Lawn & Landscape.
Conference presenters included Mike Rorie and Jim McCutcheon, as well as some strong, but relatively under the radar, owners like Jeffrey Johns, Matt Caruso, Lee Buffington and Benton Foret.
The main focus of the event was leadership and management development, and encouraging the attendees to think of themselves as true leaders of their businesses and not the guy who does the technical work. Some of the best-received discussions centered on time management, delegation and general business systems.
Time management – Here’s a quick, three-step process for delegating and tearing through a set of tasks. Ask yourself three simple questions:
What happens if I just delete it? This applies to email, certainly, but also taking meetings and conversations about your new truck. If the answer is “nothing,” then get rid of it.
Can or should someone else do it? Delegate everything you can so you can focus, as Matt Caruso put it, “on the significant few, not the important many.”
Can it be done in three minutes or less? If yes, do it now. If no, put it on your list and set a time to do it later.
One of the best ways to save time is to not go out on sales calls with prospects that aren’t a fit for your company. Here are some questions that Grunder’s team asks anyone who wants to work with them:
- How did you hear about us?
- What process are you going through to hire a landscape contractor?
- What are you looking for in this project?
- What is your timeframe?
Each company will have slightly different questions, but they should be asked by the receptionist or an inside sales rep to pre-qualify all prospects. Then, salespeople aren’t wasting time on people who don’t fit the company’s scope or ideal client.
Leverage. Mike Rorie, who founded Cincinnati-based GroundsMasters and grew it rapidly to $30 million before selling to Brickman, spoke about some of the systems he used to scale his company so quickly.
First, answer some the key questions: What do you want? What does success look like? Are you spending your time on the right things? Do you know what your key people want?
“Have you really asked yourself what you want from this business? ... If you don’t know this, nobody on your payroll has a chance. Are we going to work like dogs just to work like dogs? ... No, we’re going to celebrate. We’re going to have fun.”
Second, have a repeatable, scaleable and systems-driven business model. Rorie’s was commercial landscape maintenance, and there are many others.
Third, have focus. He cautioned attendees to stay out of markets that are too different (commercial vs. residential, for example) and away from lots of services. “Do they sell pizzas at a car rental place? Can you pick up your dry cleaning at a car rental place?” he asked. Complimentary services make sense when they’re built off a core silo of work and sold to existing customers. “The way I manage is through elimination. All this stuff shows up and I have to decide quickly what’s important to me and who’s going to get it, because it’s not me. I don’t have that aptitude,” Rorie said.
“You’ve got to keep the periscope running or you’re going to run into something.”
Fourth, have a handle on your sales pipeline. “This is your oxygen,” Rorie said. An owner has to know how many prospects it takes to produce a lead, and how many leads produce a sale.
And fifth, have an organizational structure. Keep it simple: sales, production, administration. You as the leader have to be the head of resources and accountability.
“You all are wearing that hat whether you know it or not, recognize it or not, appreciate it or not,” Rorie said.
Delegation. As companies grow, the role of the owner and leader changes. Before, he was responsible for practically everything in the company, but now he must relinquish some of that day-to-day responsibility.
“Saying yes gets you to $1 million,” Grunder said. “And saying no gets you to $2 million.”
Several discussions focused on the importance – and art – of delegation. Johns said his main tool for delegating is his org chart, which also helps him set expectations for his team, and focuses them based on their skills.
“A lot of us as owners impede growth instead of encouraging it,” Johns said. “Give your people the chance to demonstrate their skills, and they might surprise you.”
McCutcheon said owners have to realize and accept that their employees will eventually screw up. “As long as they learn from it, and can tell you what they would have done differently,” he said, “It’s OK.”
McCutcheon said the best way to get over that fear is to pick one person at your company and delegate something – anything – to them. “Start there and it will get easier and better,” he said.
Rorie suggested that owners delegate the tasks that they are best at. “You can always come in and fix it if it goes left or right on you,” he said. If you don’t give them the chance, “nobody else has a bat, so no one else gets to hit and therefore doesn’t get to train up on different skills.”
GROW! 2014 will be held in Atlanta. To register, visit www.martygrunder.com.
Love your neighbor
Community involvement was a hot topic at Mid-Am.
By Heather Tunstall
Mike Nowak, radio personality, co-host of Dig In Chicago and co-founder of Midwest Ecological Landscaping Alliance (MELA), talked to attendees about the importance of giving back to your local community. Not only does community involvement help your business in several ways, but it also just makes you feel good. Nowak delivered the message at the 2013 Mid America Horticultural Trade Show, which was held in Chicago in mid-January.
Nowak took a lesson from John Elkington, world authority on corporate responsibility and sustainable development, and amended it. Elkington touts the concept of a triple bottom line: People, Planet, Profit. Nowak adds to that, commending a local triple bottom line – incorporating local initiatives for social and environmental responsibility in conjunction with corporate profit.
His session focused on profiling several Chicago-area landscaping companies that take pride in local sustainability. As Nowak said, “What’s good for the community is good for the businesses in the community.” This was demonstrated through examples of charitable initiatives, employee engagement and corporate social responsibility programs.
Tom Lupfer, owner of Lupfer Landscaping, involves his entire team.
He looks at sustainability not just as an environmental idea, but also a social component. When considering whether or not to take on a proposed charitable project, he looks at three things: is it environmentally sound, is it economically feasible and is it socially equitable? If so, he and his team will likely partake.
Lupfer said this sort of ongoing activity gives his employees pride in what they do. It builds a strong community reputation, which in the long run, may add additional customers.
He was careful to say that charitable work and community reputation is a cumulative payoff – it doesn’t come quickly. But when it’s there, you’ve got a great base of testimonials and trust.
Likewise, Mark Moxley of Lake Street Supply participates in community outreach. He believes that completing work in exchange for signage and advertising isn’t very beneficial in the long run.
However, working together with other community members on a project of good will may not bring immediate impact, but will build relationships, which will lead to future business.
Meeting someone on a project and working together makes you recognizable, and gives you a good business reputation.
Christy Webber, of Christy Webber Landscapes, looks at her company’s contributions as industry “tithing.” She budgets 10 percent in dollar amounts to community projects each year.
She suggests selecting causes that supports a mutual respect – in other words, she supports those who support her business. Her company gives materials mainly, and she believes this is a great way for advertising her business, and it brings with it good karma.
There are many ways to be involved in community outreach, social responsibility and local sustainability that will benefit your business as well as build a sense of pride among employees and team members.
Getting involved with organizations such as MELA, which is a non-profit dedicated to promoting and developing sustainable practices and currently has 200-225 member companies around the Chicago area, can point you in the right direction.
Check with your local council to find organizations to help.
Groups looking for Mid Am replacement
While the Mid-America Horticultural Trade Show has been cancelled for 2014, it may be resurrected in 2015, but those details are still very unclear.
The Mid Am board of directors determined it was not financially viable to host the show in 2014 and recommended to the trade show owners to not host it in 2014, said Joe Khayyat, the executive director of the Illinois Green Industry Association (IGIA), the majority owner of Mid Am. IGIA sponsors the event with the Illinois Landscape Contractors Association and the Wisconsin Green Industry Federation.
“They want to see if the economy improves, how the landscape and nursery industry fares in the spring, before deciding anything more about Mid Am’s future,” said Khayyat, who is also the executive director of Mid Am. “The IGIA currently is working on some different opportunities, a show included, to fill the void left by the current Mid Am. I am not yet ready to say it won’t still be called Mid Am.”
Khayyat said attendance has steadily decreased over the last seven or eight years, which can be attributed to a general slide in trade shows, the fledgling economy and increased competition from other shows.
He said the competition also comes from technology providing opportunities for accessible and affordable sales, marketing and educational support year-round to people in the comfort of their own homes or offices.
“The membership was not being serviced to what each organization thought would be the best situation, and we felt the show needed to be reinvented, and that is what’s happening right now,” said Bill Vogel, Mid Am board president.
The ILCA has already planned a show for 2014 – iLandscape: The Illinois Landscape Show, which “will streamline show management, be placed in a lower cost but strikingly modern suburban venue, and infuse the fun reminiscent of Mid Am trade shows of old,” said Scott Grams, executive director of ILCA. “Education will complement but not compete with the exhibit space.”
As of press time, Grams said the likely dates for the event would be in early February.
Khayyat said IGIA is working hard to also develop an event because the members and industry people need a place to gather in significant numbers.
“Sure, education always is a need,” Khayyat said. “However, the people who have attended Mid Am and who participate in similar industry events continue to tell us that so much more comes from being together, whether it’s the chance to commiserate with others facing the same difficulties or challenges, or whether it is renewing old friendships and cultivating new business relationships.”