Budgeting restructure aids with growth

Southern Botanical’s switch to branch-based budgets is helping the company hone in on gross margin.

Photos courtesy of Southern Botanical

A recent change in company structure and budgeting practices is helping Dallas-based Southern Botanical to increase gross margin and hone in on their most profitable services and projects.

“In order to provide a little more clarity, not only from a financial standpoint but from an operational standpoint, we decided to apply the branch approach and to divide into branches,” says Dale Selby, director of corporate finance. “This also fed into the whole budgeting part, where we started to budget our financials by branch as well.”

Southern Botanical was founded in 1995 and offers landscape maintenance, enhancement, installation, design/build, large construction projects requiring landscaping, tree care and interior plant maintenance. Clients are both residential and commercial, but a little heavier on the commercial side.

In 2016, the company reorganized into branches, each of which now has a branch manager who is tasked with managing a budget just for that branch. Prior to this, there was one budget for all operations.

“It has provided a lot of great information, where we were making money, where we could make more money, where we needed to improve,” Selby says. “It was really an eye-opening project that allowed us to really dig deep into the company and explore where we needed to improve and where the opportunities for growth were.”

Restructuring the books.

The idea for the reorganization was hatched about two years prior, when discussions to upgrade the company’s bookkeeping software began, Selby says.

“It made sense, in order to maximize the value that we were getting out of that (new software), to organize into branches,” Selby says. “It’s not uncommon for a lot of landscape companies to do that (move to branches).”

Southern Botanical was growing so fast they had outgrown QuickBooks, Selby says.

“QuickBooks is great for smaller companies and even some mid-size companies, but we were getting to the point where we were just outgrowing the capacity that QuickBooks was able to provide, and so that prompted the change,” he says.

The new software gives the company a breakdown profit by type of job, tracking of hours per job. It also aids the company in staying on budget with materials.

The official move to budgeting by branch happened on Jan. 1, 2016. “It took a little tweaking,” Selby says. “It wasn’t perfect on the roll-out, but we had to not only kill the infrastructure here inside the company and get buy-in from our employees, but also build the infrastructure within Viewpoint so we could get the reporting out of it that we wanted.”

Preparation for the restructure was not arduous since management knew how they wanted to structure the company, Selby says. “Prior to the change, we were divided into, in QuickBooks they call it classes. Our financials were divided up into classes, but it was really more of a broad brushstroke.” That brushstroke included classes such as maintenance, construction or irrigation.

Southern Botanical now budgets based on its branches.

“It was more of a 30,000-foot look versus what we have now. We’ve broken our maintenance into commercial and residential branches, and we’ve taken the irrigation branch and split it within the construction side and the maintenance side,” Selby says. “We can get a little bit more focus in on residential versus commercial maintenance, because they’re very different entities, with very different customer bases and different strategies for growth.”

As part of the restructuring, a few employees were moved into different roles but most stayed in the same area where they had expertise. Branch manager positions were created and filled internally, Selby says.

“Really, structurally there wasn’t a lot of difference,” he says. “It was more or less a way of looking at the company and organizing it on paper and getting more of a strategic view on how we could grow those different divisions differently, because they had to be treated a little bit differently than one another.”

The five branches today at Southern Botanical are: commercial maintenance, residential maintenance, construction, tree care and interiors. Prior to the reorganization the company was organized more by activity, Selby says.

Southern Botanical’s staff of 275 employees, with about 55 being seasonal, pull in an annual revenue of about $30 million.
Careful budgeting.

Today, branch managers control their own budgets, which are finalized at the beginning of the calendar year, Selby says.

“The finance team works closely with the branch managers to go line by line, starting with revenue and then going through cost of sale and then expenses, to reach the bottom line, and they’re held to account to that bottom line throughout the year,” he says.

Branch managers are tasked to meet or beat their budget, Selby says. “The budget is never a perfect prediction of what’s going to happen, especially in our industry. You take what comes in, you set the expectation. If the expectation falls short, you dive in and figure out why, and figure out a strategy for making that up in future months,” he says.

Budgets are based on the prior year’s revenue, expenses in that branch and the company’s overarching five-year plan, which includes the expectations for the market and long-term sales goals, Selby says.

Today Southern Botanical has almost 300 employees, about 55 of whom are seasonal workers, pulling in an annual revenue of about $30 million.

“There’s absolutely seasonality to the budgets,” Selby says. “That said, we still want to look at it monthly, if not weekly. Those branch managers know exactly what their numbers are for that month, and they’re going to do their best to beat it with the expectation of, ‘Based on seasonality, we expect this quarter to be high or low.’”

The company’s executive team has monthly reviews with branch managers to go over the numbers, but most branch managers look at their numbers on a weekly basis, he says.

“We decided to apply the branch approach and to divide into branches.” Dale Selby, director of corporate finance
Eyes on gross margin.

Two years after the restructure, Selby says the changes are still a work in progress, but the new internal structure has already allowed management to hone in on gross margin and determine which projects and services are most profitable.

“We do have to sometimes adjust our business mix to accommodate those gross margins,” Selby says.

Everyone is paying closer attention to the numbers, he says.

“Just greater accountability for the numbers, I think, with the branch managers. I think that’s been the key for us, is really having good people who can understand numbers and realize what’s affecting them and how to change them,” Selby says. “Having that sharp person in there as a branch manager to have that set of eyes looking at it as well helps out tremendously.”

Selby says there are plans to add more branches and branch managers in the future. The software and budgeting changes have added a little more work, which other companies should be aware of if they plan on making this type of change. In terms of advice, Selby says planning is vital.

“Make sure you’ve got your roadmap laid out well in advance. Make sure you have the right amount of resources freed up to work on it, particularly with regard to a software installation or a software changeover,” he says. “Those things can be really tricky. But, really, just make sure you’ve got everything mapped out how you want it on paper before you put it into action and try to anticipate everything you can in terms of your structure and how you want that to look.”

In retrospect, Selby says more manpower should have been utilized during the software install and changeover period. It’s also important to keep the client’s perspective in mind, Selby says. “It had to be seamless for them,” he says. “Try not to change things up. The clients don’t like a lot of change.”

The author is a freelance writer based in Ohio.

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