SchillA simple conversation with its nursery has allowed Schill Grounds Maintenance to streamline its plant ordering and delivery process, saving the company thousands of dollars.

Schill brings in $6.2 million a year from commercial maintenance, snow management and high-end design/build with 60 employees. Based in suburban Cleveland, the company has been working with nearby Willoway Nurseries for 16 years, and gets almost all of its container plants there. They spent $150,000 there last year, and, in a good year, can spend as much as $500,000.

“It was a convenient local relationship to start out, but they have worked with us probably way more than they needed to to make us happy,” says Vice President Jerry Schill. “They certainly offer solutions.”

Those solutions, he says, include a personable distribution center manager who, along with his staff, is proactive in asking Schill what he needs and if there are additional services the nursery could provide.

“It’s become more and more of a necessity over the last couple of years. We’ve leaned out our operation. We don’t have a plant procurement person, which we did three years ago,” Schill says. Cutting that position alone has saved the company a $50,000 annual salary, plus benefits. The savings in time and fuel from streamlining the ordering and delivery system streamlined is harder to calculate, but Schill says it’s been good for business.

“They’ve made life on us a lot easier,” he says. “They leaned out their operation, too. They got rid of things that weren’t winners in the marketplace. They’re very finicky on the quality of stuff they are keeping, and the material they do have is in much better shape. They’re not sending us (a shrub) that’s sheared into a ball or a birthday candle. They understand our expectations, which makes life a lot easier.”

How It's Set Up
A few years ago, Schill met with Willoway to set up a streamlined system. He explained the quality of plant material he was looking for, especially for the company’s high-end residential installations. Now, Schill’s team has access to Willoway’s electronic inventory database, and can find out quickly if a plant their designers specified isn’t available, or doesn’t meet their stringent quality requirements.

 “(We need) multiple pieces of the same plant, we need size matches, width matches,” Schill says. “The material has to have continuity.”

A week before Schill needs the material, Willoway’s assistant operations manager sends over customized tickets – “plant faxes” – that include the client’s name, material specified and purchase order number.

“They go through those lists, and if there will be any availability issues, they tell us,” Schill says. “They send us digital pictures on our phones if they’re not happy with the quality.”

Larger orders are delivered directly to the job site. Smaller ones come to Schill’s facility already organized and tagged by client. Matching tags are attached to the plant faxes, and all the material is staged and ready to go out the door.

With Willoway handling the drop-off, the nursery is now in charge of auditing its own deliveries – and picking up wrong orders – which saves Schill even more time.

“They will come to the job site and do the counts. They’re catching a lot of that stuff downstream,” he says. “It truly is a partnership, because the better we look, the better they look.”

Click here to see the Schill Grounds Maintenance Request for Quote form.

The author is editor of Lawn & Landscape.
 

When the phrase “board of directors” is uttered within a family-owned or closely-held business, the most common question that arises is: “Do we have to have one?”

According to Barry Graff, a consultant with RSM McGladrey, it’s a topic worth considering, especially if you’ll be transitioning the business to the next generation soon.

“You need to build confidence in the succession process and in what will come next for your family, your employees, your customers, your bankers/suppliers and for you,” Graff says.

Advisors or Directors?
Creating a board that brings outside expertise into your business is almost always a good idea. The question is: Should you opt for a board of directors or advisers?

A board of advisers, Graff says, has no legal authority over your business. In this incarnation, board members essentially “speak when spoken to.” The owner and management team can accept or reject the advice given.

A board of directors, however, can sometimes be held legally liable for decisions made about the company. They also have more power. A board of directors could elect to fire a CEO, for example. If this prospect gives you the jitters, it’s worth noting that board members serve at your discretion. They can’t take control of your business.

That brings up a big question business owners face: “Who should serve on the board?”

Seek out peers in similar, but noncompeting, businesses. Also consider principals in local companies you do business with.

Be prepared to compensate board members for the time they spend working on your behalf. Graff said these fees vary greatly, depending on the company, the scope of duties and the time involved. A very rough ballpark fee would be $1,000 per meeting, he says.

Step by Step
If creating a board is in your future, Graff recommends the following:

1. Form a council and use that forum to educate your family or executive team on the role shareholders play.
2. Decide on the compensation and the type of board you want.
3. Recruit outside directors and determine who in the family or shareholder group should be directors.
4. Make it clear how you’ll use the board (strategic planning, financial expertise, operations insight, etc.).
5. Begin to have regular board meetings.

If the process seems daunting or you’re having trouble getting “buy-in” from shareholders, consider contacting a consultant to help with the transition.

The author is managing editor of Garden Center.

Editors’ note: This is the second of a three-part series from Lawn & Landscape on exit strategies for business owners. Watch for next month’s installment, which focuses on ways to build your business with the end game in mind.

This month we explore three separate strategies commonly used by green industry business owners seeking to exit their company or to achieve some measure of liquidity.  When the day arrives for you to cash out – in whole or in part – chances are you’ll do so through a third-party sale, a private equity recapitalization or formation of an employee stock ownership plan (ESOP). Each of these three strategies will enable you, as the business owner, to trade a portion or all of your interest for cash. Here we’ll briefly detail the differences between the strategies, so you can begin to determine which path might be the best for you, your company, your employees, your family and your customers. Understanding your end game options will help you drive your company to the best position for achieving maximum value when the time is right.

Strategic Third-Party Sale
Perhaps the most widely known of the three options is an outright sale to a third party. Usually, a third-party sale means that you, as the business owner, will sell 100 percent of your ownership interest in exchange for cash. 

This type of transaction is typically referred to as a sale to a “strategic buyer.” The buyer is strategic in the sense that they are typically already active in the green industry and are looking to expand their business through targeted acquisitions. Your company must fit their acquisition profile, likely in terms of size, geographic footprint, customer base and business mix. There may be a strategic buyer already active in your area looking to add to their market share, density of routing and customer roster.

While there have been numerous strategic buyers in the green industry over the years, certainly the two most prolific are Brickman and ValleyCrest. These buyers are looking for good companies run by good people. While the equipment, facilities or other assets that come with the deal are important, the landscape industry’s strategic buyers are focused on your reputation, your ability to deliver the highest level of service at a competitive wage and your valued and valuable clients. 

While the third-party sale is perhaps the quickest and cleanest way to cash out, some business owners have reservations about the strategy as a solution. A strategic buyer will look to integrate your company into theirs, which could lead to some loss of staff. It also will mean a loss of the brand name and corporate identity that’s such a part of the culture you have built. This can be a tough pill to swallow, yet it might make the most sense for achieving your personal, financial and professional goals. The landscape business is a relationship-based business that thrives or dies based upon the people who make it happen every day. The strategic buyers respect the relationship aspect of the business and therefore are looking not just at you but the quality of your staff and the likelihood that they will stay if things go as planned.

PE Recapitalization
For the business owner seeking substantial liquidity, but willing to continue to lead the business for several years, or for the owner looking for capital to grow the company, a private-equity recapitalization might be the best fit. In a private-equity recapitalization, an institutional investor, like a private-equity group (PEG), acquires an interest in the company with the agreement that the owner and his team will stay on to grow the business both organically as well as through acquisitions. In a recapitalization, the business owner receives substantial personal liquidity and diversification for the interests sold. Although a PEG typically acquires a controlling interest, this strategy allows the business owner to remain a significant shareholder and continue to be the driving force behind the company.  Unlike strategic buyers, PEG buyers often look to maintain the brands they acquire, realizing the value in brand recognition and the loyalty of the management, employees and clients. Therefore, post-transaction, the company will likely continue to operate under the same brand name. As financial buyers, PEGs do not want to be involved in the daily operations of the business, but rather are looking to contribute capital and other resources to help leverage the talents of the existing best-in-class team. The PEG’s goal will be to partner with the business owner to grow the company over a period of four to seven years, on average, and then sell it to generate a return to their investors. Most equity groups have a well-defined strategy as to the type and size of companies that they invest in, how they structure their deals and their investment time horizons.

This deal is often the best choice for an owner who wishes to get substantial liquidity off the table, yet keep their brand and their team to grow the business with continued upside and significantly lower personal risk. The best candidate companies for a private-equity recapitalization will have a well-thought-out plan in place to grow the business more aggressively. In a recapitalization, size matters and only larger companies will likely attract a PEG. In fact, the largest strategic buyers in the market have received significant PEG investment. One such group is Yellowstone Landscape Group, which is financed by Gridiron Capital, the purchaser of a number of larger players in the Southeastern and South Central U.S. PEG-supported strategic buyers are actively focused on investing in new platform companies in specific markets as well as adding-on with acquisitions in their existing markets.

Employee Stock Ownership Plan
While perhaps the most maligned and misunderstood of the three options, the ESOP might be the only choice for some companies, and the best choice for those seeking to retain and reward employees while reaping the significant tax advantages the ESOP provides. An ESOP is another liquidity or exit strategy that allows the selling shareholder to get full, fair market value for any interest in the business that is sold, yet maintain operational control. The unique aspect of an ESOP strategy is the ability to reward employees with real ownership in the company.  Further, if properly designed and implemented, an ESOP can create exceptional tax benefits for both the selling shareholder and the company. Considering the projected 40 percent rise in capital gain rates later this year, an ESOP is a timely choice for maximizing value.

The ESOP strategy is similar to the others in that the starting point is negotiating the value of the company. Once value has been established, then the company must secure financing for a loan to the ESOP. The ESOP will use the funds to purchase the business owner’s stock, which is then allocated among employee accounts in the ESOP.
Over time, as the company generates profits, the bank loan is paid down and the employees’ ESOP stock accounts are filled with allocations of shares in the company. The ESOP can therefore serve as a qualified retirement plan for company employees, allowing them to retire with significant stock value in their ESOP account.

While the tax benefits of the ESOP vary depending on a host of factors, including what type of entity you have chosen for your company, they can be substantial. With guidance from excellent advisors, this strategy can result in tax savings for the company and for the selling shareholders, helping them to avoid paying capital gain taxes on the value received from the sale of their stock to the ESOP.  

The tax benefits and the prospect of sharing of real ownership with key employees are often the driving factors in the creation of an ESOP.  However, the ESOP may be the only real alternative for liquidity if a strategic or PEG buyer does not materialize with a value that represent a full, fair market return to the shareholders.

Understanding your options for exit well in advance is a powerful tool for growing your business in the right direction. Armed with your options and an understanding of your company’s EBITDA valuation, as we explored last month, you’re ready to take action to increase your EBITDA and achieve maximum value when it’s time to cash in on your hard work.

Next month we’ll explore concrete ways to build your business with the end game in mind.
 

The author is the managing partner of CCG Advisors. Send him an e-mail at bcorbett@gie.net
 

The giving started nearly 12 years ago with a sincere desire to beautify the superintendent’s office in Fort Payne, Ala. “We wanted the property to have a nice appearance for visitors who came to town,” says Lee Buffington, president of Turf Tamer and former board member of the city’s chamber of commerce.

Buffington is a civic champion who keeps close ties with city leaders. He applies his green industry expertise to local projects he’s passionate about – and that’s anything that will paint the town pretty for residents, tourists and businesses considering relocating there.

So after a series of donation projects like the superintendent’s site, Buffington founded Project GreenShape in 2007 as a community outreach effort. Turf Tamer volunteers time and materials to one local project each year, and the company accepts applications from organizations that want a chance at the pro bono services.
 
“We wanted to put a program out there that will be a legacy we can continue on, and something different from what other companies do,” says Buffington, noting the name GreenShape stems from the green industry and Turf Tamer’s ability to shape change in the community.

Before the program’s inception, Turf Tamer had already donated projects to the local airport, a city walking park and a child development center. And since launching GreenShape two years ago, the firm took on a creek/river cleanup project in the city’s walking park, and last year installed a $30,000 landscape at the tourism and economic development center.

Now, most materials are donated by vendors and Turf Tamer eats the rest of the costs, including manpower for the two days employee volunteers work for GreenShape projects. The payoff, Buffington says, comes in soft stuff that is not easily measured but more valuable than receiving a check: camaraderie, pride and a reputation for giving back.

On a grander scale, this concept that “doing good” is good for business has been highlighted most recently in national corporations’ efforts to achieve a triple bottom line (TBL) that includes people, planet and profit. This business theory underscores the importance of being community stewards (fulfilling the “people” part of the bottom line).

On an industry level, PLANET last year began influencing landscape firms to volunteer in their communities with an annual Day of Service tied in with Earth Day weekend. Shayne Newman, president, YardApes, New Milford, Conn., has participated in both annual Days of Service.

“We’re all on site together, having a real good time,” Newman says, remarking that he didn’t expect the “community” aspect of the project to evolve into bonding time for his crews, who treat the day as a team-building outing. Newman couldn’t be more pleased, and 90 percent of his staff chose to volunteer on PLANET’s Day of Service this year.

The payoff for YardApes? Newman doesn’t focus on this matter. “If you look at it as an investment you take away from what you’re trying to do,” he says.

The PR YardApes received by making front-page news in the local paper last year was a bonus – but not one that motivates Newman to participate in charity events. When asked, “What’s your return on investment?” for donating his services, Newman doesn’t want to crunch numbers. “You’re trying to do a good thing,” he says. “I believe in good karma. If you do something good for someone it will come back to you whether it’s months or years down the road.”

The Power of Participation
People notice when a business is doing good. Blatant marketing often is not necessary to build a positive image when an owner and employees are engaged in the community. This is what Joe Chiellini, president of Ameriscape in Tampa, Fla., has found when he volunteers with Habitat for Humanity sites alongside other members of his region’s Bay Area Apartment Association.

“When you’re out there swinging a hammer, painting or cleaning up, people see that and I think they appreciate doing business with you,” Chiellini says. “We’re on neutral ground, and I’m not in their offices trying to sell services.”

Chiellini’s company services 60 apartment complexes in his area, and all of his clients have become good friends. By supporting clients’ events – such as Habitat for Humanity work days and other fundraisers through the association – Chiellini sends a message that his company cares about their causes.

“When they see their vendors supporting events, they think, ‘That’s who we want to do business with,’” he adds.
Meanwhile, Chiellini packs his schedule with volunteer efforts, some sponsored through the fire department where he works 24-hour shifts (in between 48-hour-plus shifts spent managing his $3 million landscape firm.) It’s through his fire department comrades that Chiellini began hosting charity wrestling tournaments – and eventually participating in them as “Big Joe Bucks.”

Clients and others in the community purchase tickets to the wrestling events for $10 each. All proceeds go toward a charity. Chiellini shows off some dramatic smack-down moves in center ring, and his clients who attend get a kick out of the spoof (and really get some laughs when he’s down for the count). They know Chiellini is a fun-loving guy, and they appreciate his enthusiasm and anything-for-the-cause attitude. 

Does Big Joe Bucks draw attention to his business while on the mat? Sure. “I have close relationships with my clients, so when they buy the tickets it’s like they’re coming to see a friend,” he says.

Meanwhile, Chiellini leads by example at Ameriscape and instills a do-good mentality in his 48 employees. “Our guys know they need to go the extra mile,” he says. “If they see a lady struggling to put groceries in her car and they’re wearing an Ameriscape shirt, they know to go help.”

Chiellini also gives managers free rein to attend community events during the workday. “What I enjoy most in my company is building relationships with my clients and charity fundraising,” he says. “When I can get out of bed and do that, I feel like one of the luckiest guys in the world.”


Fulfilling a Need
There is no shortage of good causes out there, and now more than ever organizations with tight budgets and dwindling donations are looking for help. How does a landscape firm choose where to give its time?

Newman gives as much and as close to home as he can, talking to his local parks and recreation department to learn the community’s needs, and gets feedback from employees for options.

For instance, this year for PLANET’s Day of Service YardApes sent crews to a local playground that needed 50 yards of topsoil, turfseed and a handicap-accessible walkway. “This playground was a hot topic in town,” Newman says. “It was an area of interest for the community, and it’s critical for me to know that our work is going toward something the community really needs.”

Buffington follows a similar method of choosing projects. “We look for projects everyone will benefit from,” he says, opting to work on public spaces and not on church or other member-based properties. Sometimes, he learns about a private need and will quietly fulfill that, such as when a local man recovering from injuries after his car was hit in a drunk driving accident could no longer maintain his lawn. Turf Tamer discreetly provided those services.

Chiellini focuses efforts on client interests, which happen to intersect with his own. This summer, seven of his employees will participate in Orlando, Fla.’s Charity Challenge, where a team of five to eight Ameriscape employees will participate in canoe races, tug-of-war and other activities for a cause.

Chiellini’s team enjoys the day of team-building, and Ameriscape gets a marketing bonus. “It’s called client relations,” Chiellini re-emphasizes. “You’re out there trying to build your client relationships and show them you genuinely care about what they’re doing.”

How do companies make time to participate in such activities?

Buffington times his GreenShape projects in June or July, after the initial spring rush has ended. And Chiellini depends on his managers to keep operations moving when he’s fundraising or participating in charitable events.

“I surround myself with a good team that allows me the time to get out there,” Chiellini says. “I have six managers that handle things when I’m not around, and they also understand the importance of me being out in the community.” 

 

 
The author is a frequent contributor to Lawn & Landscape magazine.