In 2016, we surveyed homeowners about all things landscaping to get inside the customer’s mind. Well, we did it again five years later, and the timing couldn’t have been better.
I keep hearing from landscapers who had a great 2020. They partially attribute that to people working from home due to COVID-19 and taking notice of their shoddy landscaping. So, I added a question about COVID-19 into the survey to see if that was the case, along with the other valuable homeowner information we collect. Here are a few takeaways that didn’t make the report.
• Regarding that COVID-19 question, we asked, “Thinking about your yard and the increased amount of time you have spent at home due to COVID-19, with which of these statements do you agree?” About 30% said they had become more aware than in the past, while 21% said they are investing in their yard more than before. Only about 7% said they have hired a professional since being at home more, while 19% said they are doing more yard work themselves.
• If you were fired, it was most likely due to the quality of your work than the cost. Second on the list was dissatisfaction with timeliness of the job. Next was “felt I was being taken advantage of/overcharged,” then “found a less expensive contractor. Last on the list was “decided to do the work myself.”
“Only about 7% said they have hired a professional since being at home more, while 19% said they are doing more yard work themselves.”
• Consumers’ interest in organic lawn care has made a giant leap in five years. Current results show 35% said all of the fertilizer, weed killer and insect control are organic. Only 10% answered the same way in 2016. 21% said none were organic in the current study while 33% answered the same way in 2016.
You can read the full report on page 26. I hope the information provided in the report gives you a better understanding of your residential customers and, overall, how consumers view the work you perform. – Brian Horn
Travels with Jim follows Jim Huston around the country as he visits with landscapers and helps them understand their numbers to make smarter decisions.
Walter had a full-service landscape company in Nebraska. Business was good, but he couldn’t figure out why his margins were as low as they were. He thought he should have more money in the bank as he ended the year and headed into winter.
He operated with two, three-man residential install crews and four, two-man residential mowing and maintenance crews. All crews worked a 45-hour week for approximately nine months. Install and maintenance crews would sometimes cross over a bit, but the amount of doing so was insignificant.
Walter calculated his labor rate at $55 per man-hour. He’d aim to bill $1,000 per day for his two-man maintenance crews and $1,500 per day for his three-man landscape install crews. The margin added to install materials, he thought, would bolster his bottom line. It was charging the same man-hour rate for both install and maintenance crews that caused a serious problem and eroded his bottom line.
The big mistake.
One of the most common mistakes that I see landscape entrepreneurs make is charging the same labor man-hour rate for their maintenance crews as for their landscape installation crews. In most cases, they are charging a reasonably accurate rate for maintenance, but they’re underpricing their installation rate. There are a number of reasons why this is often so and why a contractor should be charging $10 to $20 more per man-hour for the install crew.
Different crews and rates.
The first reason why an install crew is more expensive per man-hour is because install crew members usually are paid a couple dollars more per man-hour. The amount isn’t much, but it does account for some of the variance.
The second reason is because the general and administrative (G&A) overhead cost per man-hour for an installation crew member is significantly higher than it is for maintenance crew members. While the G&A overhead costs, as a percentage of sales, are usually the same for a maintenance division as they are for an installation one, it isn’t on a man-hour basis. Let me provide an illustration:Two different companies – one exclusively maintenance and the other exclusively installation – do $1 million in revenue each. The G&A overhead costs for each run 25% of revenue or $250,000. (This equal amount of G&A overhead cost at 25% of sales is an accurate figure and is one I’ve seen in hundreds of companies.) It requires approximately eight full-time field crew members working roughly nine months at 45 man-hours per week to complete $1 million in installation work. It takes about 16 similar full-time field crew members to accomplish $1 million in maintenance work. The G&A overhead per man-hour (OPH) calculates as follows:
Installation Company G&A Overhead per Man-hour
- $1 million x .25 = $250,000 G&A overhead costs
- 45.0 MHRs per week x 4.333 weeks per month x 9.0 months x 8.0 crew members = 14,039 man-hours
- $250,000 ÷ 14,039 = $17.81
Mowing and Maintenance Company G&A Overhead per Man-hour
- $1 million x .25 = $250,000 G&A overhead costs
- 45.0 MHRs per week x 4.333 weeks per month x 9.0 months x 16.0 crew members = 28,078 man-hours
- $250,000 ÷ 28,078 = $8.90
As you can see, the G&A OPH for installation work is much higher than it is for maintenance work.
Additionally, the installation man-hour rate should be higher than it is for maintenance because it commands a higher net profit margin. Commercial installation work usually warrants a 12-15% net profit margin. Residential installation work, especially in today’s robust economy, warrants a 20% net profit margin. The net profit margin applied to maintenance work usually ranges from 10-12%.
If you review the two MS Excel worksheets accompanying this article on the Lawn & Landscape website, you will see the $11.63 difference in the two labor rates.
Walter’s average rate of $55 per man-hour was actually $3.64 high for his maintenance crews. However, since his customers were already paying it, there was no reason to change it. On the other hand, his installation rate was $7.99 too low ($62.99 - $55). He should increase it accordingly. Such an increase would add to his bottom line. It could add as much as $84,128 (10,529 man-hours x $7.99). I would encourage Walter to make such a change.
Words of Wilson features a rotating panel of consultants from Bruce Wilson & Company, a landscape consulting firm.
Customers no longer seek landscape companies to execute tasks or simply be good at what they do. There’s a post-pandemic, pent-up demand for not only re-connecting at a relationship level, but customers are expecting their service partners to serve up a winning return on investment. Landscape businesses that cling to their tactically-driven past could lose out to smart and fast-thinking companies that place strategy at the core of their game.
When the coronavirus disrupted business last spring, agile CEOs were building flexible ‘what if’ scenarios that allowed them to scale, shift or pivot with their customers in real time. It was a smart approach that prevented upheaval and they emerged stronger and better, and with a sharper, savvier focus on their customer’s hierarchy of needs.
An analysis of some firms’ 2020 financials showed that many landscape companies made tactical gains and hit or got close to short-term targets. On closer inspection, they had little or no strategic growth in their core maintenance business. This is not to say that tactics aren’t important, but to generate real growth, strategy is the only way to get there.
Think about strategy as a critical leverage point for profitability in developing new business, for example. Identify the types of customers you want to serve in the future and the opportunities that will bring you success. You should know what your customers want from you that’s different from the past and how you can optimize your platform around new paradigms.
Strategy, in this case, should be based on selling profitable work. To do that, you must know what work is the most profitable for your business model and who your ideal customers are since loyalty and retention is important. Also, it’s important to know how to make referrals more profitable.
Referrals drive sales for most landscape maintenance business; however, when they are a result of untargeted selling instead of proactive relationship-building, they can be low-hanging fruit for your salespeople. While referrals can be an important byproduct of excellent work, it’s also true that referrals can lead to less desirable jobs. When you fill your pipeline with low-hanging leads, you run out of room for high-quality leads and your time and resources are spent following up on jobs that may negatively affect other areas of your business.
Prioritizing sales strategies can help you attract better clients in the future and boost your bottom line.
Most landscape companies attract abundant referrals through excellent customer service. But do they capture their fair share of the business that potentially comes from those leads? Sadly, too many of these opportunities are lost due to the transactional nature of some sales teams.
To work leads well, look at the opportunities they present through a strategic lens. Will it be challenging to implement? Does it offer opportunities for scaling, for cross-selling or upselling? Does it align with density goals, have retention potential or align with your mix?
Get as much information as possible. What are the lead’s broad objectives, wants and needs? What was their history and experience with other service providers? How do they feel about landscape value, and what role does sustainability play in their strategic plan?
Most importantly, why would they benefit from what you offer?
CEO involvement in the proposal process can help sales teams win the right kind of business. Proposals can be complex documents, with technical data and supporting information. But the bulk of the proposal should be devoted to what the potential new customer is interested in: his/her return on investment, landscaping and site infrastructure objectives and how your practices and approach can help them achieve a new level of success. Putting their strategy and objectives first will show that you have done your homework and ensure you don’t go home empty-handed.
Cream of the Crop features a rotating panel from the Harvest Group, a landscape business consulting company.
In today’s challenging times this rings true more than ever. When the Harvest Group is brought in to help organizations harvest their potential, one of the key areas that is reviewed is how well do the leaders of the organization truly lead? We certainly start with the ownership and then take a good look at the leaders who are currently in place.
With this in mind, perhaps now would be a good time to reflect on how you and your leaders are doing in their roles at your organization. There are many ways to assess leaders. Here are seven areas that are essential for being a solid leader at your organization.
Using the acronym of LEADERS, let’s review seven key attributes and qualities of a good leader.
Leads with a clear sense of vision.
People know where the organization is headed. There is a sense of destination and a solid unified understanding of their Why the organization is in existence. This gives purpose and inspires team members to aspire to reach their fullest potential. There is a clearly stated vision, mission and core value statement, along with the company’s strategic intent. These are written and clearly understood and embraced at all levels.
Encourages and inspires to aspire.
Serve as an encourager to others. Good leaders are even-keeled and enthusiastic about the company’s future. Leaders are clearly passionate and positive about the future of the organization and its people. They give plenty of recognition and praise whenever and wherever possible.
Acumen for business.
Good leaders are achievement-oriented. They are aware of their marketplace and they adapt to change quickly. They know their numbers and key performance indicators and are decisive when there is need to adjust to the challenges they face. They are always prepared and have options. When they are in doubt or lack knowledge in certain areas, they seek and take good council.
Develops others and self.
Good leaders create and embrace a continual learning culture. They not only have training and development programs for all team members; they also look closely at themselves and have a skill or behavior they are learning to improve. Ask yourselves, what one or two skills or behaviors would be good for you to develop or learn more about that would help you to be a better leader or your organization be more successful? Do you have a professional coach/mentor to help you or your leaders? If not, maybe now would be a good time.
Ethics, values and integrity: builds trust.
Great leaders have a clear sense of what is right and are consistent with their actions that adhere to being ethical, living and exemplifying their core values and being honest. Everyone in your organization is consistently treated with dignity and respect. Great leaders serve as excellent examples in words and action/behaviors. A good dose of humility also goes a long way here as well.
Results and action-oriented.
Leaders make sure that all of their leaders have clearly defined roles, goals and activities that are in place and reviewed regularly (at least quarterly and preferably monthly). Relevant goals are written down and understood by all. Results in key areas are tracked, reviewed regularly and accomplished! Key areas that need special focus include:
- Recruiting, onboarding, growing and retaining the right people
- Retaining the right clients at the right rate of retention of 90%+
- Working safely (no lost time injury accidents), effectively (quality of work) and efficiently (achieving targeted gross margins)
Great leaders set the tone of serving. They are a positive example of servant leadership. They give their time generously to others within and outside the organization. They pursue the success of others as if it were their own because it often is the case. You are a servant leader when you focus on the needs of others.
With this content in mind, take the leaders self-evaluation at bit.ly/lawnwebextras and see how you rate yourself. Now have some of your leaders do the same evaluation on you!
Remember: It all starts and stops with the leaders!