thinkstock.comQ. I need some advice about sales and management in a very tiny market. We are based in a semi-rural area where many other people are trying to provide the same services as we do, albeit in a different way.
A. First, you need to know your costs; that is, the actual cost of a person in the field, the cost of a truck with a trailer full of equipment, overhead and the cost of unproductive time.
Become as efficient as possible to compete in a highly price-driven market. With a lot of small start-ups bidding on everything, a company must truly understand its cost of doing business to become competitive on price alone.
One of the first items you need to take a look at is the number of people per crew. Windshield time destroys profit, so look at the distance traveled to perform the job. For jobs that are 40 miles from your shop, complete a basic job costing scenario of unproductive travel time and how much it costs to work at this site. Basically, your bid process should be the same for a job within 4 miles of your shop.
PLANET is a great resource for books and CDs on estimating and job costing. I also strongly recommend working on your marketing through networking with other businesses that are not doing landscape maintenance and working with these businesses on referrals. In today’s climate, all businesses should be networking to increase market penetration.
You may also want to find a business coach, someone in the same line of work but in a different market. Although a consultant would be good, for a small-size company, I would recommend a coach instead. All businesses, no matter their size, need a sounding board. Find a person you get along with and with whom you can discuss business ideas and solutions. Remember that the key to success is to duplicate what a successful business has already done. Don’t reinvent the wheel.
Q. During these difficult economic times, I’ve tried to improve my operational efficiencies by reducing the amount of time the crew takes to leave the yard daily. What else can I do to improve my bottom line?
A. Every company is different. However, any reductions you find today without adding additional expenses will go to the bottom line of your income statement. Labor is the largest expense we have on the books. This is always a great place to begin to find inefficiencies. However, I must caution you that taking the “do more for less” approach will not work. Find ways to streamline your process and lay out every step in your operation.
A wise man once asked me, how many steps does it take you to make a peanut butter and jelly sandwich? Think of everything in your business that way and you will find many opportunities for improvement that will go directly to your bottom line.
Look into the administrative process your company is using. Is there a software system that will streamline this process and improve accuracy? With the availability of IT products out there today, you may not need as many people to do the back office work. Work on job costing; get a good handle on your cost to perform and what margin your company needs to make. If overhead is under control, then work on more sales.
As you increase production, you will be able to spread out the overhead cost and increase net profit. Negotiate everything. Often times we as business owners feel that certain expenses can’t be negotiated. I have helped companies negotiate insurance, buying products, buying equipment, terms on financing and terms on paying suppliers.
Bottom line profit is really a byproduct of revenue in versus revenue out. So pay attention to everything, as every savings or sale will eventually have an effect on your profit.
Rich Arlington III, Arlington Lawn Care; Rich Arlington & Associates