Super Lawn Trucks

News & Press

2012-07-04

Are we making any money around here?: What Every Landscape Contractor Should Learn From A Fortune 500 Company.

By Tony Bass

Its July 1^st, the middle of the year, and theres an important event about to happen in publically traded companies.

If you live in the USA, you may take a guess at whats on my mind. You might say, I know, its the July 4^th Independence Day holiday. Its a chance to take a day off, reflect on our countrys good fortunes, celebrate our nations rich history, and eat some really good barbeque along the way!

Yes, this is one of Americas great traditions. It comes almost exactly in the middle of the year.....every year. And, I hope you will take the day off.... each and every year. Spend the day with family and rest-up. After all, banks and most government offices are closed. But thats not what I want you to learn today.

I want you to learn about the 10Q reporting requirement and 8K filing requirements for publically traded companies. The publically traded company is bound by law to report progress on meeting business objectives every quarter of the year and anytime an event happens that could affect the valuation of the company. Here is a highly simplified glimpse into these reports:

Publically traded firms must, on a quarterly basis, report to the shareholders of the company, the financial facts of the prior period. This is called the 10Q. The financial statements are published and management must inform the shareholders what has happened and how it could positively or negatively impact the financial performance of the company in the future.

Here is an example of how important this report can be. You may have heard this report (or one similar) on CNBC. "Mega Company filed their 10Q report today and missed earnings. Their stock price fell 10% on the news."

If you want an example of the kind of financial reports I am talking about, just look at Service Master's reports (parent company of TruGreen). http://phx.corporate-ir.net/Phoenix.zhtml?c=118856&p=irol-news (Although they are no longer publicly traded, they still report earnings quarterly for investors).

Earnings are an important part of this report. You simply must answer the question, Are we making any money around here? The 10Q report is a big deal! If a company misses the deadline to complete this report, stock prices fall, accountants get fired, and company management is in big trouble with the SEC and shareholders.

Now, if you work at the Securities and Exchange Commission (SEC) or if you are an accountant working on a team to prepare these 10Q reports, you will probably say my description is inadequate. Thats fine with me. But for my story and the small business owners I work with, its close enough.

An 8K filing is a little different. The SEC law states that publicly traded companies must report any significant change in anything that could affect the valuation of the company, positively or negatively, at anytime of the year. Again, my summary is likely way too simple for Certified Public Accountants (CPAs) or attorneys, but, my small business owners will get the point.

You might hear a report that goes like this. "In an 8K filing today, Success Brands announced an agreement to purchase the assets of Super Company for $500 million. This represents a 20% premium over todays closing stock price for Super Company. The deal is scheduled to close by the end of the year."

Publically traded firms report news on major contract acquisitions, lawsuits, changes in management, and just about anything that may affect the future of the firm. Reports, reports, reports, they never end. And each one of them is required by the government agency, the SEC.

What in the world does the 10Q and 8K have to do with running your small business? Everything! Successful companies review their goals, report their results, and adjust their business plans accordingly. Stick with me to learn just how important this is for your growing firm.

I was working with one of my mentors during a week-long business training event. My mentor had worked for one of the legends in modern day, publically traded business. I asked him a question between classes. It must have really struck-a-cord with him, because after the break, he asked me to repeat the question in front of the class. I asked, "What separates a million dollar business from a one hundred million dollar business?"

Here is what he said. "Tony, its really pretty simple. No one owns or operates a $1 million company without some form of written policies, plans, and procedures."

And, "The difference between $100 million dollar firms and $1 million dollar firms is the quality of the written policies, plans, and procedures."

You see, no one owns or operates a $100 million company without incredibly detailed business plans. Quarterly plans, annual plans and 5-year plans are just the tip of the iceberg. Highly detailed, tested, and legally reviewed policies are the norm, not the exception. And yes, there is a documented procedure for just about everything the company must do, will do, should do, or could do for the customer.

What every landscape contractor should learn from a fortune 500 company is simply this: business is about building plans, implementing plans, and reporting the results.

As a small business owner operating a privately held business, you dont have the responsibility of submitting 10Q reports or 8K filings. In my opinion, you should do them anyway. You should complete a report to your shareholders each quarter, even if it is a very simplified version.

When you complete this exercise, you are much better prepared to make business decisions based on financial facts and less on the emotions of the moment. And, you do have shareholders. Your family, your employees, your banker, and the government. Tony, did you say the government?

Yes, the government is one of your shareholders! You are required to submit payments for corporate licenses, withholding tax payments, unemployment insurance, and sales tax payments on time. Every owner of a corporation must submit their corporate tax return by March 15 of the year or deal with late filing penalties. And yes, there are serious consequences if you dont report on time. So we bust our butts to comply with our partners: the federal, state, and local governments.

So, as a small business owner, you should be able to relate to the significance of filing the 10Q or 8K.....even if you dont have a clue what these forms say or require. Ask any CEO of a public company. These reports are big deals.

Act Like A Publically Traded Company

And here is what you should learn. Many companies make plans, then fail to report the results until year end. That's not frequent enough! As the President, owner, or CEO of your firm, regardless of the size, you should file your own 10Q. I would like to simplify it though. Lets back up to elementary school. Your teacher called it a "Progress Report" or a "Report Card".

The only way you will ever know if you are making progress towards meaningful goals is to prepare your own written report. How are you doing towards achieving your financial goals this year? There are 5 critical financial benchmarks you must monitor. Sales, labor to sales ratio, overhead to sales ratio, gross profit, net profit. If you dont have goals in these areas, thats a problem. Just admit it in the report, and set a goal to enhance your financial education so you become a better CEO.

It matters if you operate a profitable company. The way to improve profits is with better financial education. When you report, you learn.

The 8k report is like a job costing exercise. Every time you sign a contract and later complete a construction project, a significant event has occurred......and your stockholders deserve a report. Are you making money, covering your cost, or losing your shirt? Your shareholders need to know.

So, have you written your companys 10Q? Its the middle of the year. We are taking a half-time break from the action. We must reflect on what we have accomplished. We must report on how the plans will be adjusted, and we get ready to jump back in and sprint to the end of the next reporting cycle.

Fail to report and you will suffer. Report, make adjustments in your business, and you will greatly increase your chance to prosper, just like a well-ran Fortune 500 Company!

*****

Would you like to learn more about the systems used by multi-million dollar firms to generate exceptional profits? Check out one of the upcoming Profit Builder Training programs. You can get started enhancing your financial education and learn exactly what you must do to make it to the top in the landscape industry.

About the author. Tony Bass is the Founder and CEO of Super Lawn Technologies and the author of The E-Myth Landscape Contractor: Why Most Landscape Companies Don't Work and What To Do About It. He can be reached at tony@tonybassconsulting.com or 478-822-9706.