The last three articles featured what I refer to as “young guns” in the landscape industry. These are young entrepreneurs who are building strong teams and implementing good systems as they build their companies and pursue the American dream. We now turn our attention to some “Old guns” or entrepreneurs who have been in business for at least 25 years. Old guns are the survivors, contractors who have weathered many storms. What once was a dream to pursue is now a story to tell with many lessons for those willing to listen.
The recession in Southern California was in full swing at this time. Margins were tight and Philip really wanted to get this job.
He had me spend a day with him bidding this project. We were unsure why the owners were putting Phase 2 out for bid, but thought they might be dissatisfied with the original contractor. Consequently, we felt that, if we won Phase 2, we’d probably get Phases 3 and 4.
In the late 1980s, Philip would bid large residential installation jobs with a gross profit margin (GPM) in the mid to high 30 percent range. (We calculate GPM by adding the general and administrative overhead costs on a job to its net profit margin.) Two years later, jobs were so scarce and the market so tight that he had to bid work in the very low 20 percent GPM range. Philip decided to bid this $300,000-plus job with a 17 percent GPM. He wanted to give it his best shot.
Of the four bids provided, Toddco. was the second lowest. We’d beaten the original contractor’s bid by $12,000, as he came in third. The fourth bid was much higher. The landscape architect and owners met and decided to throw out the low bid, which then made us the low bidder. My client was happy, and so was I, as I felt I’d done a good job for him.
However, the landscape architect called my client and informed him the owners decided that, for $12,000, they didn’t want to change horses in midstream. It was then we realized we’d been “shopped.” The owners and landscape architect probably never did intend to change contractors. Their intention, we thought, was to keep their guy honest but at the expense of three other bidders.
Imagine! We bid this project with a 17 percent GPM, and still didn’t get the job. The lesson is that things can get really ugly in a recession, and all the rules change. You had better know your numbers and know them well.
My response was that if the client paid it, it was alright. The client did pay Philip’s prices with the additional margin included. Cost for materials alone were over $500,000. Philip then bought himself a car that had just been introduced to the market. The personalized license plate on the Lexus read, “PAYDRT.”
What are Philip’s greatest challenges as he plans to retire in the next five years? The present economy is his number one challenge. Second is maintaining a solid team that will carry Toddco Landscape Co.. into the future.
His desire is to leave a legacy that carries forward all that he’s worked so hard to build. Thereafter, it’s fishing, biking, collecting wine and spoiling the grandkids.
Finish strong my friend. Your legacy will prevail!
JIM HUSTON runs J.R. Huston Consulting, a green industry consulting firm. See www.jrhuston.biz; mail firstname.lastname@example.org.