This month, our three Turnaround Tour winners focus on solving some of their biggest problems before the busy season kicks in: hiring quality employees, finding profitable customers and actually getting paid on time for the work they’ve performed. Sound familiar? Read on to see how they’re overcoming these challenges, and hear from Bill Arman and Ed Laflamme at the Harvest Group to learn how you can fix the same problems at your own company.
Freedom Lawn & Landscapes: Find a value proposition
Jeremy and Heather Dirksen have been working to overhaul their client list, shedding $100,000 in unprofitable accounts from last year and replacing them with customers who actually make them money. And it hasn’t been easy.
“It is kind of scary at first, because you’re like, ‘Why would I get rid of work that I have?’ It does take you out of your comfort zone, but once you do it, you feel better,” says Heather Dirksen, CEO. “But you were losing money on those jobs ... and the clients need someone else to meet their needs, not you.”
Heather says Freedom has dumped accounts that hired the company only for maintenance, and added customers that fit its full-service estate management model: mowing, lawn care, holiday lighting and irrigation. In all, they’ve added on about $75,000 in new, more profitable work.
“It’s a huge relief for us and now we can say that we specialize in something,” she says. “We have our value proposition. It sets us apart from other companies that only do weed control or tree work, and we’re offering better service.”
Freedom also has been updating its fleet. Jeremy Dirksen, director of operations, says they replaced an old Toyota truck (that had been totaled twice) with a new Ford E-350 utility van that can tow and can be used for irrigation work. He also added a 48-inch Walker mower to use on residential accounts. The company’s older 61-inch Ferris was more suited to commercial properties, and using a pair of 21-inch walk-behinds took too long.
Vineland Landscaping: Get paid on time
Performing the work was never the problem at Vineland Landscaping. Getting paid for it was.
Will Gruccio, president, calls his company’s billing system “our No. 1 problem, financially speaking,” and its overhaul “our biggest undertaking.”
Like many companies, Vineland used to bill for its services after the fact, when a construction job was completed or at the end of a month of maintenance services. But because it took so long get bills sent out, customers wouldn’t get their March bills until the end of April, or sometimes later. At one point, the company had $130,000 in payments more than 90 days late.
“It’s still impacting us in a very negative way,” Gruccio says. “We were growing fast. We didn’t have a handle on the amount we were billing. Some people got a bill two months after a service, and we’re still paying for it.”
Over the winter, Vineland reworked its billing system. It is moving some of its customers to pre-billed contracts, so they will pay for maintenance services before they’re completed, and it is processing bills more efficiently so they are received the first week of the month after services are performed.
And much like the Dirksens in Oklahoma, Gruccio and his team are paying more attention to the profit margins on their work. Vineland has revamped its estimating process on construction and maintenance to make sure new accounts are priced profitably.
“We used to just bid on how long we thought it would take,” Gruccio says. “We kind of made up our per-hour pricing. We did it based on competitors and we knew what the market dictated, but we didn’t know our actual internal figures.”
Wade’s Lawn Service: Hire better people
Wade’s has spent the last few months revamping its sales strategy and bringing its fleet up to standard. The company has also had success using job fairs and social media to flesh out its crews, hiring three new employees to start the season.
“There’s so much competition around, everybody’s looking for good help right now,” Deborah Wade, co-owner, says. “Most lawn care companies are all out looking for the same thing. It’s a lot of competition out there.”
To stand out from that competition, Wade’s has raised the starting wages for its crew members from an average of $10-$12 an hour. And instead of dictating a starting wage to applicants, the company asks them what pay rate they’re looking for.
“We ask them, ‘What is your desired salary?” Deborah says. “We say, ‘We’ll start you at $13, we’ll start you at $14, we’ll start you at $15.’ We didn’t realize it, but we lost a of good potential employees because of that low starting wage. Our goal is to build loyalty.”
Deborah, the company’s main salesperson, continues to attend many networking groups and area chambers of commerce meetings, which puts her in contact with potential customers. But she has implemented a more structured system of cold calls and written follow-ups, which has been working well. The company closed a $44,000 contract, which puts them almost halfway toward their goal of $100,000 new business this year.
“We’ve done that, and it’s proven to be pretty good,” she says. “We have appointments set up to go see them and talk to them about their lawn care.”
Advice from Bill and Ed:
Slow down. Build a sales process.
“In this business, there’s so many pieces to the puzzle; there’s so many moving parts. They get inundated and don’t know where to turn,” Ed says. “They’re just running in circles. They just don’t stop and think about what needs to be done in a methodical way. These guys are trying to do everything, and feeling pressure from all sides.”
Determine your costs and build gross profit margin into your bids.
“The common thread is none of them know how to estimate and price a job. I’m just amazed how they arrive at their pricing,” Bill says. “They have a basic concept: They guesstimate how many hours and multiply it by their charge-out rate, but they don’t know their costs.”
Separate your divisions to find unprofitable work.
“Virtually every company we come across, 99 percent of them, the P&L is worthless. It’s like a big pile of spaghetti. We have to pull all the spaghetti out and put the meatballs on the side,” Bill says. It’s only when an owner can analyze the maintenance, enhancements, irrigation and lawn care divisions separately that he or she can identify where the problems are. “Drilling them to separate profit centers lets you know which sides are making money and which aren’t,” Ed says.
Pay attention to your vehicles and fix those dents.
“Your trucks are a marketing tool,” Bill says. “What happens is they defer maintenance, then it starts accumulating then it’s impossible to make your fleet look good because it costs $20,000.” Thinking a truck is just a way to get to the job is short-sighted. “They don’t realize what their customers are seeing, what the public is seeing,” Ed says. “The impression to the customer is bad, and the people who are working for you don’t like it. It’s a bad impression, culturally.”
Get better customers.
“I use a pond analogy. I can look in a lake and see if there’s fish. An active, live pond has freshwater coming in, stinky water going out. Don’t let your pond get stinky,” Bill says. “You have to have good work coming in. A lot of these guys will hang onto these low margin jobs because it contributes dollars to cover the overhead. … They work more to make less money. It’s a dangerous thing.”