“If we maintain the landscape right and provide a high level of customer service, the profit will be there.”
This belief is a common one among green industry business owners, says Bruce Wilson, former president of Environmental Care (now ValleyCrest) and principal of the Wilson-Oyler Group. “I think it takes more than that,” he says.
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Wilson spoke on improving profits through margin aggression to a group of landscape and tree care contractors at Husqvarna’s Green Industry Weekend, which took place in Charlotte May 18-19.
“You’ve got to do more than ‘the right things,’” Wilson says. “You’ve got to plan to make a profit or else you won’t.”
Throughout his talk, Wilson compared “margin aggressors” to “margin protectors.”
“Most contractors take a job with the idea that if they can just make the estimated gross profit margin, the job is successful,” he says, comparing this mentality to an athletic team that merely sets out to win more than it loses in order to be successful. “This contractor is margin protective and feels good if he can achieve target margin.” At the end of the year, the results are typically erratic and don’t meet expectations.
Conversely, the margin-aggressive contractor sees estimated profit only as the starting point – just achieving the profit doesn’t constitute success. This type of contractor seeks jobs that afford the opportunity for additional gains, Wilson says. For example, offering a fixed-sum price on a job rather than a time and materials price is being aggressive. It allows the contractor the opportunity to seek productivity improvements and material savings, which if achieved, drive up profits. While many contractors say “you can’t lose” with a time and material price, Wilson asserts that you can’t win, either.
In many cases, a margin-protective mindset is the result of poor planning, which causes contractors to assign too much labor for a job, get started late and/or make mistakes, which can be expensive to fix and cause customers to lose trust.
Margin aggressors, on the other hand, know the work and how long it should take, have waste-preventing systems in place for crews and examine every task, seeking ways to do it better and faster. One area where many landscape companies can improve is getting in and out of the yard, Wilson says.
Finally, margin aggressors are relentless negotiators. They’re always looking for profit-producing advantages like favorable service hours, on-site storage and free dumping. “Margin aggressors instinctively see these opportunities and capitalize,” Wilson says.
Margin-aggressive contractors negotiate with their customers, too. Before meetings they anticipate customer objections and pre-plan responses to these. Knowing where they can give concessions without giving up margin is key, Wilson says. In the case that a client asks for a price reduction, a margin aggressor would consider dropping the price, but not without removing corresponding service. In exchange for a 10-percent reduction in price, for example, an aggressive contractor may take out two mowings. “It’s not price cutting,” Wilson says. “It’s value engineering.”