Risky business

Risky business

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McGill Landscaping dropped its steady maintenance division after a key person left and focused on the unpredictable new construction design/build.

July 14, 2014
Kristen Hampshire
Industry News

When a talented foreman who ran the maintenance operations at McGill Landscaping broke the news that he was pursuing another opportunity, his departure marked the end of an era for the Elkhorn, Neb.-based firm. The foreman was running two crews. “He was great,” says Brian McGill, who started his business about 15 years ago. At the time, the $500,000 operation employed about six people and maintenance was one-third of revenues. Today, the firm does $2 million with a team of up to 20 crewmembers – persistent growth in spite of a re-org.

“I knew once I lost him, I didn’t want to be in that side of the business anymore,” McGill says, relating that maintenance had become 90 percent headache and 10 percent profit. Without his key guy, McGill would have to dive in and lead that department. “I didn’t feel like I had the time to do that,” he says.

McGill faced a tough decision: Pick up the reins and run the maintenance division, or sell it off to an interested contractor who wanted to grow his own business.

Moving out of maintenance.

“It was a challenging position to be in,” McGill relates of his choice to take over maintenance or look for an out. “Maintenance had been the basis of my business for a long time, and it was a feeder for our landscaping division.”

Also, many of McGill’s clients had been with him since he began mowing lawns as a teenager. They trusted McGill, knew him well. How would he break the news to them that he was turning over the business – and how could he assure that they’d stay on to provide a return-on-investment for the buyer of his maintenance division?

Meanwhile, McGill Landscaping had grown a successful design/build division by working with contractors in the new home market and homeowners wanting property renovations. “The business has steadily grown over the years,” McGill says, “and eventually lawn care became less of a priority for us and we decided to focus just on landscaping – hardscape, patios, retaining walls.”

Let go the smart way

Transitioning ownership of a division, or entire business, requires a high level of communication. When Brian McGill decided to sell his maintenance business to a cousin’s friend, he first vetted the guy’s existing operation and did the due diligence to ensure his own customer base would be in good hands. “It was important that my clients be taken care of,” says McGill, referring to people who'd already been receiving maintenance services from McGill Landscaping.

But just as important was making sure those clients stayed on board so the new owner would get a return on his investment. McGill didn’t want to see his clients jump ship once they learned a new operator was taking over – especially since he trusted this new owner.

McGill offers these smart strategies for executing a smart transition:

Focus on people. “The people who work for the business are as important to that transition as anything,” McGill says, noting that relationships maintenance is part of the owner’s job.

Prepare clients. Keep customers on board during an ownership change by communicating with letters, email, by phone or in person. “Start the dialogue to explain why the change,” McGill says. His letters asked clients to stay on with the new company if they were happy with service.

Stay involved. “Turnover is what you’re trying to avoid,” McGill says. “You don’t want to buy a business and lose all the clients that you just purchased, so it’s important that everyone (including the previous owner) stay involved.”

So McGill decided to sell the equipment and accounts; then work with the new owner to make a smooth transition. That meant letters encouraging clients, if they were happy, to stay on board. And it included phone calls and checkups a year and beyond after the ownership shift.

“I felt like we found a good fit for the business,” McGill says, adding that his cousin’s friend is the owner. “It was an opportunity for him, and I knew he had a good reputation and was talented, so I wasn’t too concerned.”

On the other hand, replacing that recurring revenue was a stress at first. Some of the maintenance crewmembers went along with the new owner, and others were moved into McGill’s design/build operation. Meanwhile, McGill began to focus on growing the new home construction market, which today is 70 percent of its business. The other 30 percent is existing home design/build.

McGill has grown his builder base from five clients to 11 in the time he has focused only on design/build. “We chose to do more volume,” he says. “We hedged our bets in the last six years when the housing market was down, and we took on more builders than we could realistically service – and by doing that, we were able to stay plenty busy. And, we were fortunate enough to be involved with builders who were able to stay busy themselves during the downturn, for one reason or another.”

McGill doesn’t regret getting out of maintenance, even though it was a real revenue risk for his business. That decision allowed him the opportunity to focus on growing design/build – and to stop dealing with the maintenance headaches. “Margins were getting really tight in that business,” he says. “Our area is just littered with people who were coming into the market and wanting to butcher it, frankly, and lower their prices beyond what was reasonable.”

Expanding with retail.

With the design/build business in full swing, and new construction providing steady revenue for the firm – thanks to expanding builder relationships and a volume approach – McGill began to consider other revenue opportunities to feed the operation.

Then, a deal cropped up to purchase and sell outdoor furniture. McGill had completed a project for a gentleman in the import business. “He talked me into meeting some of his constituents, and we discussed some ideas and began to look at what (products) might be available for our industry, and we started talking about furniture,” McGill says, explaining how the concept percolated.

McGill received a shipment of furniture from the importer last year – and he quickly sold the entire lot. “The problem was, we didn’t have a place to display it,” he shares.

Now, McGill has a commercial property in town that he is renovating. It’s an old gas station that is being retrofitted. “It took us a while to get the EPA to clear it,” McGill says. “Now, we are going to start renovating and we’re thrilled to see what we can accomplish.”

Adding an outdoor living retail component to McGill Landscaping will offer increased visibility for the firm. Two associates who will work in the store will sell Christmas décor and seasonal landscape products. “We’ll have a large display area out front, which will give us an opportunity to showcase our furniture line,” McGill says.

“In our business, you can show a picture, but the people want to see it and feel it and get a sense of it,” he says of the retail component. “Clients are spending a lot of money on their landscaping, so this will be a good opportunity for us to grow.”

Overall, the Nebraska market has been good to McGill Landscaping. “We have grown quite a bit, naturally, in the last 10 years,” he says.

Looking toward the future, McGill says, “We work hard,” and the company thrives in new construction – but the people are why the company is successful. “You can have all the equipment in the world, and it doesn’t mean a hill of beans if you don’t have a good workforce.”