Each and every day I talk to owners and managers of landscape companies. We talk about solutions for mobilizing people and equipment. We talk about the Super Lawn Truck system.
With diesel fuel around $4.00 per gallon, fuel consumption is always part of the discussion. Fuel mileage varies based on the type of truck you drive and the load you put on it. Often, the conversation heads in another direction: how to be a success in this business even when uncontrollable costs rise quickly. Here are the secrets for dealing with this rise in fuel cost.
Successful companies have one thing in common, they know their costs. And when you know your costs, you will know that even when fuel is $5.00 per gallon, it is nothing compared to the amount of money you pay your employees for their services. Labor makes up 30 percent to 40 percent of the direct cost to provide lawn and landscape services. Fuel costs, even in today’s prices, makes up 2 percent to 5 percent of the direct cost of providing a lawn service.
So pay very close attention to what I am about to say. If you think your business profits are being squeezed by fuel costs, you’re wrong! Here is what you need to know.
In order to be a success in this business, you are going to need to know three things:
- You have to know your costs in order to price your work correctly.
- You must learn how to become a better marketing and sales person.
- You must be proficient in finding, recruiting and retaining super star employees.
The most powerful strategy you can deploy within your company to improve profitability is to improve the productivity of your labor force. If you are able to improve productivity by just 10 percent (six minutes per hour) you can grow your profits by almost 50 percent! Take a look at the two simplified profit and loss statements below.
| Company # 1 – Good Company | Company #2 – Great Company | |||||
| Gross Sales | $1,000,000 | 100% | Gross Sales | $1,000,000 | 100% | |
| Direct Cost | Direct Cost | |||||
| Labor | $350,000 | 35% | Labor | $315,000 | 32% | |
| Materials | $100,000 | 10% | Materials | $100,000 | 10% | |
| Equipment | $150,000 | 15% | Equipment | $150,000 | 15% | |
| Subs | $20,000 | 2% | Subs | $20,000 | 2% | |
| Gross Profit | $380,000 | 38% | Gross Profit | $415,000 | 42% | |
| Overhead | $300,000 | 30% | Overhead | $300,000 | 30% | |
| Profit | $80,000 | 8% | Profit | $115,000 | 12% | |
| A 10% increase in productivity | = | A 44% increase in the bottom line!!! | ||||
Some of you are saying…..I’ll take either company! Which company would you rather own, company number one ($80,000 net profit) or company number two ($115,000 net profit)? Company number two profits 44 percent greater ($35,000) than company number one and the only difference is labor costs are 10 percent lower (6 minutes/hour). How can this happen in your company?
Your Company Can Become a Great Company!
Knowing your costs is the very first step to building a really profitable company. There is no substitute for preparing an accurate operating budget each year. However, building a budget is not enough. You must track your costs as the year progresses and make adjustments along the way. During the summer months you make crucial decisions as you hire people, price your jobs and mange the workflow. Changes in economic conditions such as rising fuel costs may require you to raise prices. The most successful companies I encounter only raise prices when they know exactly how much to raise them. Furthermore, these successful companies know which accounts are the most profitable and only raise prices on the least profitable (or losing) accounts first. Secret number one has been revealed!
Your marketing and sales efforts must be effective. You must be able to generate enough leads to maintain gross sales volume and you must sell the jobs at the same price levels or higher as competition heats up and your prices rise. You must be prepared to deal with common price objections brought up during the sales process. Get mentally prepared to sell your company’s services even when you are not the lowest priced option. Learn what to say when you present your company’s proposal and the prospect takes in a big gasp of air. This takes sales training. Anyone can learn how to improve their sales results. One strategy is to provide prospects with two to three pricing options on every proposal your company provides. Your sales will improve instantly! Secret number two has been revealed!
Hire quality people and properly equip them to be efficient workers. It is true that some people outwork others. When you surround yourself with top performers, they can simply produce more work in less time. When you properly equip your people, they can get more done in less time. When you invest in training, your people get more done in less time. You must spend more time planning. You must meet as a team to plan your day, your week, your month and your entire year. How much time have you spent planning lately? You must discuss potential problems and common solutions to those problems. Forgetting to load the necessary tools and supplies onto the truck each day can rob your profitability. So, get your crews organized and stop time-wasting events. When you take these simple steps, you can save 10 percent on labor (just 6 minutes per hour) even if you don’t have super star employees. Secret number three has been revealed!
The Solution for Rising Fuel Costs!
For many small business owners, the enemy is time. How do I find the time to do the things that can transform my company into a great company? The transformation requires hard work! But the best news is that the steps you take to work on your business will be infinitely more financially rewarding than working in your business. As long as you are guessing at how much to raise prices or guessing which accounts are not profitable, you are out of control.
If you are reading this article I would be willing to bet that your company is doing quality work, you have a good client base and you have been in business for years. I would also be willing to bet that you could be doing a lot better! You are likely making a mistake in at least one of the three critical areas of business outlined above. Even one mistake is holding you and your company back from its true potential. I have to break the news to you. Rising fuel costs is not your biggest problem today. It may be the easiest problem to talk about. It could become the proverbial “straw that broke the camel’s back” but it is not your biggest problem.
Pricing your work correctly, marketing your company efficiently and effectively, and putting quality people on your team will always be your greatest challenges. Super successful company owners hire experts (also known as consultants or find a mentor with a track record of success) to help them get more accomplished in less time and with fewer mistakes. Their business grows. They earn more money. They gain more freedom from their daily work. They maintain better relationships with their families while spending less time at work.
Company Owners Share Information!
Learn from others who are going down the same road you are. Recent case studies on super successful companies can be found here: Robbins Landscaping, VA , Groundserv, AR and Phillips Landscape Contractors, MD . You will hear straight from company owners who have faced challenges and found ways to profit greatly.
Tony Bass recently wrote an article for Green Industry Pro Magazine on how to deal with rising fuel costs. The article is found here.
This article was originally written by Tony Bass, President of Super Lawn Trucks and Tony Bass Consulting in June of 2008. He can be reached at 866-923-0027 or tony@superlawntrucks.com
About Tony Bass and Tony Bass Consulting:
Tony Bass founded Tony Bass Consulting in 1998 to help businesses in the green industry succeed. As a consultant and through his entertaining keynote speeches, seminars, workshops and educational materials, Bass translates seemingly complex business procedures into easy-to-follow roadmaps and guidelines that sharply reduce the time and stress involved with doing things right. The results include better, more motivated employees, superior business practices across the board and the precious time required to shift from reactive to proactive thinking. Bass bases his counsel on 20 years of green industry experience, including founding, growing and ultimately selling his initially small landscaping business for a seven-figure profit. For more information or to purchase books and audio training products online, visit www.tonybassconsulting.com.
