Travels with Jim follows Jim Huston around the country as he visits with landscapers and helps them understand their numbers to make smarter decisions.
I literally just got off the telephone with a young green industry entrepreneur. We’ll call him George. He’s been in business for five years and has one two-man mow crew and one two-man enhancement crew. His complaint was that he wasn’t making any money and that he could barely make payroll.
George talked with my assistant, Ashley, last week and she set up today’s telephone consultation as he thought that he could not afford to have me consult with him on-site. (Actually, he couldn’t afford not to work with me, otherwise he’d probably be out of business by the end of this year). Ashley gave me some preliminary information about George and his company. I immediately knew what the problem was and was looking forward to working with this young man. I also knew that if George would implement what I told him, it would put an extra $1 million in his pocket within the next 12 to 15 years.
I asked George if he was married, had a significant other or a girlfriend. The answer to all three questions was “no.” I told him that was a good thing because he couldn’t even afford Happy Meals at McDonald’s if he went on a date.
The good news was that, if he did what I told him to do, he’d be able to go on a very expensive date. I knew that a turn-around for him was possible because he was in a great market near Washington, D.C., and the same changes have helped hundreds of other green industry contractors improve their bottom line.
How it works in the field.
I started with his single two-man enhancement crew. His pricing needed to be as the chart below shows.
I told George that he needed to charge $1,100 per crew day or $550 per man-day. That translates to $55 per man-hour or $110 per crew-hour. And he needed to charge $55 per man-hour for all twenty man-hours. This would give him a 20 percent net profit margin which was realistic for this kind of work in his market. If he needed to get a bit more competitive, he could drop his man-hour rate to $50 or $100 per crew-hour or $1,000 per crew-day.
George told me that he was already charging $55 per man-hour. But as it turned out, he was only charging $55 per man-hour for 8 man-hours per day per man, not 10. He was not charging for two crew-hours per day or $220.
2.0 MHrs per day x 2 men x $55 =2.0 x 2 x 55 = $220 per day
George and I spent about an hour on the telephone. To his credit, he had a good man-hour rate as long as he was charging the client for all 10 man-hours per day per man. But he wasn’t. He was underpricing his enhancement crew by at least $200 per day. Let’s see now.
$200 per day x 22 days per month x 9 months = $39,600 per year
Add in a similar shortfall for his mowing crew.
$39,600 x 2 = $79,200
$1,000,000 ÷ 79,200 = 12.6 years
In a little over twelve years, George would make an extra $1 million. He’d not only enhance his clients’ property, but he’d also enhance his bottom line if he implements what I showed him. With an extra $1 million in his pocket, he not only could afford a high-maintenance girlfriend, he could also afford me.
Not bad for a one-hour phone call.
Contact me at the email address below for a free copy of the worksheet that I used to calculate the rates in this article.