How Enviroscapes boosted profitability by shedding 70 percent of its clients.
When Todd Pugh founded Todd’s Enviroscapes in Louisville, Ohio, 15 years ago, he was consciously building on a family tradition. “I started in the dirt and my business was homegrown,” says Pugh, who first began mowing lawns for extra money when he was in high school. “My grandfather was a farmer, and I was raised on a hobby farm.”
Today, Enviroscapes has 125 employees and $8.5 million in annual revenue. Yet when Pugh embarked on his journey to become a successful business owner, he soon learned that his greatest asset could also be a liability.
“I had to change my mindset from being a technician to a business owner,” he says. “I was a right-brained entrepreneur that said ‘OK, let’s do it.’ We weren’t focused.”
Three years ago, Pugh decided to focus on larger clients that brought in a minimum of $10,000 annually. The decision to eliminate small jobs wasn’t easy. As Pugh puts it, “We had to tell Mrs. Jones we couldn’t mow her lawn anymore.” Yet while the change eliminated more than 70 percent of Enviroscapes’ clients, it cost less than 20 percent of its revenue.
Pugh’s unwavering focus on his goals is now yielding impressive results, as shedding smaller clients has made Enviroscapes more effective, efficient – and profitable.
When Pugh first started Enviroscapes, he was too busy to analyze his operations. “We were focused on the landscape side and not the business side,” he says. “About 80 percent of our business was residential, and we were doing $20-a-week cuts. That’s a tough business model – there are a lot of sites to visit and not much profit.”
Yet as Enviroscapes grew to become a $500,000 business, Pugh’s customers started asking questions. “It became important to have a business plan,” he says.
Cash flow and access to capital were major issues to the fledgling company. “We were making a profit, but we didn’t have much cash on hand because we had major capital expenses and a healthy accounts receivable,” says Pugh, who began building relationships with local banks. “If you’re not careful, you can go through all your cash in one bad month.”
It was also challenging to manage employees while running a business. “I used to run the mowing crew, and then all of a sudden, we had five mowing crews and three landscape crews – I had to make sure they were all running efficiently,” Pugh says.
After seeing a presentation by Mike Rorie of Groundmasters at a lawn and landscape conference, Pugh developed a business plan. Then he reached out to consultants and took a no-holds-barred approach to paring his business down to essentials.
“You have to know when to flip the switch and take things to the next level,” he says. “It’s about focusing on continuous improvement, and being good at what you do.”
From labor to operations
By focusing on operations, efficiency and innovation over several years, Pugh was able to grow Enviroscapes into a $5 million company.
During this time, Pugh also developed an approach towards pricing that he’s stuck with to this day. “We see ourselves as a value-added company,” he says. “We’re not the lowest priced, but we are competitive. Some people are cheap because that’s their business model – and if that works, that’s OK. But I was never satisfied with that.”
Pugh also began spending between $20,000 and $40,000 annually on consultants. “It’s a lot of money, but you’re bringing in someone that has knowledge of best practices from all over the industry,” he says. “It takes him two days to learn what might take you 10 years.”
Enviroscapes also continued to focus on the operations side of the business, including using technology to make the company more efficient. In 1998, when a consultant advised him not to use labor for work that could easily be mechanized, Pugh developed the Mulch Mule, a large container that saves on labor costs for mulching.
“The Mulch Mule was developed in the field to meet the needs of landscape companies,” says Pugh. “It holds 10- to 15-cubic yards and fills a wheelbarrow with mulch that you don’t have to shovel or fork. It also turns into a leaf trailer in the fall.”
Although Pugh says that the lawn and landscape industry is slow to adapt to new technology, he sees the future lies in becoming leaner and more efficient. “The lawn and landscape business is a mature market,” he says. “There is more competition and the construction market is not growing right now, so companies have gotten more efficient.”
Being smart with new technology does not necessarily mean being the first to use it, Pugh cautions. “I always say that the cutting edge is the bloody edge – let someone else get bloody and we’ll come in behind them,” he says. “We’re quick but we’re not fast.”
The next level
By 2007, Pugh had grown Enviroscapes into a major player in northern Ohio’s landscape industry, but he wasn’t satisfied. To take things to the next level, he needed to do something that seemed counterintuitive – he had to shed customers.
“We had so much work coming at us, and so during the winter of 2008 we started going through every customer that was in our database,” Pugh says. “We looked at profitability and asked ourselves, ‘Do we want to work with them going forward?’”
Pugh soon realized that Enviroscapes could become more profitable by shedding small clients. His challenge, to put it mildly, was to politely get rid of more than 70 percent of his customers. “When we did our analysis, we learned that small customers were less than 15 percent of our revenue,” says Pugh. “We asked ourselves, can we afford to give up a couple hundred grand worth of work? We ultimately decided we could.”
Fortunately, Pugh had an employee that was ready to start a business of his own, and Pugh eventually sold off Enviroscapes’ small, residential business.
Although Enviroscapes could have greater annual revenues if they accepted smaller customers, Pugh says the company’s focus has made it more profitable. By developing loyalty and deeper relationships with his clients, the relationship is a win-win.
“We began focusing on the bigger commercial sites – doing homeowners associations, colleges and universities and different kinds of public sector work,” says Pugh. “Our goal is to have fewer customers, but to do more work for them.”
It hasn’t always been easy to stay focused. “In the summer of 2009, we started to get slow, and one of our employees said, ‘Maybe we should go back to the types of jobs that we used to do,’” Pugh says. “We had to remind ourselves that the reason why we don’t do smaller jobs anymore is because we couldn’t take care of our customers.”
As Enviroscapes enters the next phase of its growth, Pugh has vowed to become even more focused. Next year, the company will again “clean the bottom of our accounts off,” he says. “Even in a bad economy, a bad account is a bad account. By focusing on efficiency and best practices, we’ll be poised to grow as the economy improves.”
Pugh is proud of the fact that 70 percent of Enviroscapes’ work is maintenance, while only 30 percent is landscape installation. To ensure success moving forward, he doesn’t want the company to have all of its eggs in one basket. “We’ve replaced unpredictable landscape work with predictable maintenance work,” he says.
“The future of the industry is in knowing your customer better than they know themselves,” Pugh adds. “If you do this, then you’ll have raving fans that want to help you. Don’t take your eye off the ball – and embrace building relationships.”
This story is one of three that appeared in Lawn & Landscape’s Growing Green e-newsletter. To continue reading about Todd Pugh and Todd's Enviroscapes:
Understanding your limitations: Todd Pugh uses consultants who strengths balance out his weaknesses.
Creating a new image: Enviroscapes rebranded to highlight the company's commitment to the environment.