From a very young age, fear has held us all back from doing so many things we now wished we’d done a lot earlier. Whether it was holding your head underwater, riding your first bike, asking your first girl out, flying on a plane, or going off on your own to start your business, we’ve all had fears that have held us back from doing things that, looking back, weren’t so bad at all. You probably wish you’d done most of these earlier, or more often. In that spirit, let’s turn the spotlight on some fears that will hold your business back in 2016.
Fear of Paying More for Better Staff
This isn’t just a company problem, this is an industry problem. The green industry has always been one of the lowest paying trades and that continues today. With low paying wages and seasonal highs and lows in available employment hours, it’s no wonder it’s so hard for us to attract talent. And without talent, it’s no wonder many owners are still mired with their hands pulling every string in their business. Could it be any different if you had better foremen running your crews?
Assume for a few minutes that you did raise what you’re offering as hourly pay for your foremen in an effort to attract better, more responsible talent to your company. Even imagine a big raise… try $5/hr. In a 2,000 hour season, a $5/hr raise will cost you $10,000 more in wages and approximately another $1,500 in payroll taxes and deductions. Total cost: $11,500.
Then assume that foreman’s skill/talent could increase his/her crew’s productivity by just 10%. A 3-person crew generating $300,000/yr in production would jump up to $330,000. I don’t believe that’s being overly optimistic, instead, I believe it’s a conservative bet.
If you did $30,000 more work, you’d need to spend more on materials, but your equipment costs and your overhead costs wouldn’t need to change at all.
If we look at the math behind this example, our sales increase by 10%. Wage costs increase due the wages for the foreman and material costs increase due to the 10% more work being done, but no other costs need to change. If this example played out in reality, you could expect an increase of net profit of $8,500 per crew. If you had 3 crews, that’s over $25,000 added to your bottom line.
So ask yourself. Are you really taking the safe route by attracting lesser-paid talent? Or are you limiting your profit, consuming all kinds of hours of your time, and requiring more-than-necessary supervision/management because you don’t have the necessary talent in key positions in your company.
Fear of Equipment Payments
Old school “wisdom” in our industry often preached that you needed to own your own equipment… to run your company without payments and that’s when you can really start to make money. Instead, this logic seems to have created an industry that fails to charge enough to recover the true costs of our equipment. Without “payments” equipment is treated as “free”. And it is, but only if you ignore fuel, maintenance and insurance…. and if you never need to replace it.
Instead of fearing the commitment that comes with equipment payments or financing, take a few minutes to really look at the cost of doing work without being properly equipped.
Sharing equipment between sites is a waste of time! While transporting the equipment back and forth, the driver could and should be working on billable production work. The cost of every hour spend transporting equipment is about $50/hr (or the amount you charge per hour) plus the materials that employee could also be installing in those hours. A half day spent transporting equipment from site to site represents about $400 in potential sales/production opportunity!
If it takes three crew members one hour to move material from the truck in the front to the backyard, you’ve spent 3 (man) hours moving material that could have been done in mere minutes with a skid steer. At $50/hr of “lost” productive time and no materials installed during that time either, this represents a cost of approximately $300 in lost “billable” opportunity (productive time)
You’re losing out on jobs! Crews equipped with the proper equipment can complete tasks faster. A backyard excavated with a mini-ex and 2 power wheelbarrows can be done in less than a quarter of the time when compared to a crew without equipment.
The benefits are clear.
The work could be done for 33% less cost, which will reduce my price on the bid.
The crew who finished in half a day gains a full day and half of production opportunity when compared to the ‘by hand’ crew. By the time the 2nd crew finishes their excavation, the first crew might just be finished the entire job and already on the next one. Equipment will greatly increase your sales capacity, or opportunity to produce more work.
What’s the more rational fear? Being stuck with equipment you can’t afford in a sudden economic downturn? Or losing jobs and profit each and every day because you don’t have the necessary tools to do the work faster and cheaper.
Fear of Being “Expensive”
One of the biggest concerns in our industry is “lowball” competition. These are the companies that price their work at a loss because “they don’t know what they’re doing”. So, in some twisted effort to keep our costs competitive with these companies, we’re afraid to take on the costs of better staff, better equipment, and better technology. This way, we assume, we can still be competitive.
Fact: A recent Unilock® study studied a series of ‘leads’ and followed them right through to the final invoice. In 80% of the cases, the customer did not select the lowest priced job.
Old school ‘wisdom’ in our industry often preached that you needed to own your own equipment.”
If you’ve got a fear of getting outpriced, spend some time looking at other markets. There are thousands of companies that get outpriced, and achieve tremendous success despite this fact. Starbucks, Honda, Coach, Lululemon, Nike, Ritz-Carlton, Oakley, DeWalt, 3M… all these companies thrive in competitive markets, throughout recessions, and, despite hundreds of cheaper options, they don’t worry about being low price. Why? They market themselves as a premium brand. Think about ways you could improve your company’s image to reassure your customers that they’re getting premium service.
Just like you’re the first time you dunked your head underwater or they very first time you asked for someone’s phone number, fear often prevents us from doing things that would make our lives better, easier, and more enjoyable. Running our business is no different. From the first time you asked for a sale to time you watched your first foreman drive your truck and equipment down the road independently, we’ve all been afraid of changes that obviously will make our business better. Now, older and wiser, just take that same wisdom and apply it to some of the biggest challenges you’re facing this year. You won’t regret it.Mark Bradley’s Corner is an occasional advertorial series sponsored by LMN. For more information, visit their website at www.golmn.com.
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