You can learn a lot more from losing. Gary Mallory shares mistakes that helped make Heads Up great and growing for the last 40 years.
Forty years in business and Gary Mallory says Heads Up Landscape Contractors feels “40 years new” because the company is debt-free, powered by a motivated management team of business-minded young folks, and has the flexibility to move forward.
The Albuquerque, N.M.-based firm never stopped growing, even during the recession. Mallory, who founded the business in 1973 with three friends he played high school basketball with, says he’s made every mistake in the books. That’s why the company – with 280 employees in season and about $18 million in revenue – continues to grow, year after year.
“I think sometimes the failures are what really make you strong in the long run,” says Mallory, who was four courses short of graduating with a business degree from University of New Mexico. “I always say after 40 years with Heads Up, I could teach those four business classes,” he says.
Mallory and his partners, who have moved on, learned the hard way about how to properly capitalize a startup, why a single huge client can threaten your success, what happens when receivables get out of hand, and why strategic planning can change the way you think about business.
With a coaching leadership style (thanks to days on the court), Mallory mentors his managers to always do the right thing, and be sure to always clearly define any problem. “One thing I’m famous for saying is, ‘Let’s get the facts, and then let’s decide,’” he says.
Starting on a shoestring. When Mallory and three friends started Heads Up, they pooled their money – about $1,200 each – and bought a 14-year-old Ford pick-up truck, a brand-new trencher, a used tamper, various pipe wrenches and some shovels.
Their business was sprinkler installation, and Mallory was 18 years old at the time, jamming his college classes in on Tuesdays and Thursdays so he could work the business the rest of the week.
“Right from the get-go, we were undercapitalized,” Mallory says, relating that as owner-operators, their time was spent selling and doing. “One thing we learned was to get a dedicated accounting professional,” he says.
“You hardly ever see someone go out of business because they are not technically good at what they do, or they don’t work hard enough,” Mallory continues. “They frequently go out of business because they don’t devote enough resources to the business aspect. I see that all the time.” When Mallory attends industry events and talks with peers about growing a business, he says a common theme is the owner who propels his or her business to the next level and neglects to put the business systems in place to support the new growth.
Growing pains. When Mallory and his team won a significant city contract, they celebrated. Then, they realized what the $1 million account meant to their $3.5 million business. “Someone once told me to never take a job that is more than 25 percent of your annual volume, and we did that, and it really screwed us up,” Mallory says.
Heads Up didn’t have the personnel, equipment or cash flow to support the job. “We devoted some of our best technical people to that job, and then had trouble servicing our existing customers,” Mallory says.
After 40 years at the helm of Heads Up Landscape Contractors, Gary Mallory has more than earned a “masters” in running a business. Instead of keeping all that knowledge to himself, he’s ready to share it.
If Mallory could send landscapers to school, he’d recommend these three courses.
Build a Budget 101. Is your price right? Not enough landscape contractors ask themselves this question. “Reading some educational material about appropriate pricing and budgeting is a must,” Mallory says, adding that a budget is a roadmap for any business.
Cost Accounting 202. “Cost accounting is the basic pitch-and-catch of a business,” Mallory says of the process of analyzing every bit of input a job requires to ensure profitability. “The bid and actual cost have to match,” he says.
Befriend the Banker 303. Relationship management extends beyond building a strong rapport with clients. What about the all-important vendor, your bank?
This institution can make or break your growth initiative, if you’re depending on capital financing. “The big thing is to communicate with excess,” Mallory says. “That way, there are no surprises.”
Turns out the client didn’t pay on time and, at one point, owed Heads Up nearly a half-million dollars. “It was painful cash-flow wise,” Mallory says. He sought a home-equity line of credit at that point. And, the company recruited employees and purchased new equipment. There was no other option. Mallory says, “It’s like your dream comes true that you grow the business and sell a ton of work and then. …”
Ultimately, the account was properly serviced and the business ended that year with $5 million in revenues – but just not enough equipment to support a $3.5 million business, he says. “Uncontrolled growth can be really detrimental to your business,” he says.
Playing collector. What would you rather do: knock on doors to collect on past-due invoices or meet an exciting prospect? (Exactly.) “It’s much more exciting to meet someone about a new job than it is to call on receivables,” Mallory says.
But without cash flow from collections, a business limits its growth potential. That’s why early on in the business Mallory would set up weekly appointments with clients. Collections were always worked into the conversation. Today, Heads Up has a dedicated accounts receivables pro working on this task. “If owners delegate that role, it’s important to check in with that person on a weekly basis,” he says.
Constant contact can shed light on payment logjams. “People won’t pay you on a $50,000 receivable because there might be a $500 discrepancy, so they hold on payment until you call to resolve it,” Mallory says. “I always refer to (collections) as part of blocking and tackling in business,” he says. “It’s one of the mundane tasks that you have to do to succeed, and you can’t ignore it or put it off.”
Making it in maintenance. When Heads Up first broke into the maintenance business more than 20 years ago, Mallory admits, “We treated the service like a red-headed stepchild.” That’s because the company’s focus was divided between installation and maintenance – and the former had always been the firm’s sweet spot. “We didn’t put as much effort into maintenance as we should have, and we just weren’t good at it – and as an entrepreneur, it hurts like hell to admit that you’re not good at something.” But Heads Up cut its losses and sold off its maintenance business. Then, after five years and a non-compete agreement that expired,
Mallory dove back in with encouragement from his peer group. This time, Mallory had a partner who was devoted to maintenance and the company recognized that the service required a different kind of employee and approach. “I think the realization that it is a service business, and a different business than installation, was a huge part of being successful on the second go-round,” he says.
Today, Heads Up does about $10 million in maintenance, making up more than half of overall revenues. “I think we are excellent at it now,” Mallory says. “You can’t forge steel without a really hot fire. Sometimes, it takes those tough lessons before you can be successful.”
Photos supplied by Heads Up Landscape Contractors