Don’t you get tired of people thinking that a landscape business is easy to operate?
People think how hard can it be? You just need a truck, a lawnmower, and some people.
Anyone can do landscaping. Yeah, right.
You know the truth.
A landscape business has many challenges. These days it all starts with labor.
Labor is a precious resource (not just because we are dealing with real people). It’s difficult to find people who want to work hard. This country’s immigration debate makes things even more difficult. Congress was either purposeful or negligent in letting the returning worker exemption lapse under the H2B visa program. I have heard some horror stories. There is much uncertainty.
When uncertainty increases, profits should increase as well.
Sounds crazy, doesn’t it? But it is true.
Business owners are investors in their businesses. When you think like an investor, then you want higher profits when there is higher uncertainty or risk.
Why else would you take such a risk?
My passion and my purpose are to help CEOs, business owners and their managers optimize their company’s profitability – making sure the rewards make up for the risks. In the landscape industry, that reward or profit should be at least 10% of revenue.
For most landscape companies, that number looks unattainable. However, I have the reports to prove that it can be done. I recently completed the 2017 Landscape Industry Peer Benchmark Report. In the 2017 report (using 2016 data), 15% of the companies had pre-tax net income greater than 10% of revenue. In the prior year, that figure was 40%. It can be done.
Of the companies with profitability less than 10% of revenue, the average profitability was just 3.9%. What a difference it would make if the average company increased its profitability to at least 10%!
It can be done.
Here’s why I can make that statement with such confidence.
In every company’s collection of customers or properties, there are winners and losers. One key to increasing profitability is to identify them and analyze what makes them a winner or loser. When you understand your winners and losers, then you can convert your losers to winners, or you can fire the losers. Many people I meet don’t want to fire their losers because they help “cover the overhead.”
Unfortunately, in the landscape industry “covering the overhead” doesn’t work. At best, it is a short term solution. At worst, it is a ticket to low profitability – where the profits do not compensate for the risk. If this situation describes your company, don’t feel bad. You are not alone. The question is: What are you going to do about it?
There is another reason to fire losers if you cannot make them into winners.
It’s back to labor – your most precious resource. Why would you want to use your labor to serve customers who are generating losses when you can use that same labor to serve customers where you will make a profit? Just to be clear, when I talk about profit, I am not talking gross profit. I am talking about profit after all expenses, including general and administrative expenses and a salary for the owner. That calculation is the only way to determine winners and losers.
Winners and losers exist not just at the level of customers or properties, but at the division level as well. Do you have a full income statement with all costs appropriately allocated to each division? When I go through that exercise with clients, there is always a surprise. That surprise is one of the reasons that their profitability will increase after we go through that analysis.
If you are the business owner, then I want you to know that you have done what I couldn’t do.
You most likely started small with one crew. Maybe you have been the crew. You do good work and have been rewarded with more customers. You grew your crews and acquired new customers. As you grew, you hired key employees and managers. You embraced uncertainty and risk. You probably struggled to meet a few payrolls. There is no way I could do what you have done.
My path in business has been different. I worked my way up in some big companies. I was put in some difficult situations and had to figure a way out. All I could do was analyze numbers and talk to a few people to determine the solution.
Along the way, I learned from some great people and honed my skills. I learned how to see and communicate truth and reality from a financial perspective. I learned how to use financial data to inform strategic decisions. Now, I turn historical data into valuable information for CEOs, business owners, and key managers.
The Profit Engine System
Because I have had several landscape companies as clients, I have been able to package my learnings into a system. I call this system, “The Profit Engine.” Like a real engine, it needs a few things to work.
It needs a CEO or owner willing to make a commitment. It needs historical data. It needs people who are willing to consider reality from a financial perspective.
With those components, The Profit Engine webinar series helps landscape companies significantly increase their profitability.
People make better decisions with better information. CEOs can distribute more decision making to managers with great confidence. Everyone will know the factors that are critical to making the company more profitable.
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So, What is The Profit Engine?
The Profit Engine is a system just like a lawnmower engine: a system with different parts that work together to give the engine power. The Profit Engine includes a series of easy-to-understand principles that can be applied to all landscape companies.
These principles will set you free. You will no longer have to serve customers where you lose money.
The Profit Engine also includes Excel spreadsheet templates that can be used in your business to generate the analyses that will help CEOs, business owners, and managers to clearly see what is going on. You will no longer be “in the dark” about the financial realities of your business.
It includes a calendar to arrange consistent meetings designed to make sure that the right analysis happens at the right time. Just like a real engine, The Profit Engine is more than the sum of its parts. There is no power in a pile of parts. With The Profit Engine, I have assembled the parts in such a way as to help you increase your company’s profitability.
How do you know you need The Profit Engine?
That’s a great question. Of course, I think every company needs it unless they are following the same principles and practices. But truly, some companies need it more than others.
If you are consistently hitting pre-tax income (after owner’s compensation and depreciation) that is greater than 10% of revenue, then you may not need it.
If you have significant problems with quality that need to be fixed, then you probably should fix those problems first.
Everyone else probably needs it.
To keep things easy-to-use, I have packaged The Profit Engine into six webinars. You can buy the webinars individually, or you can buy all six at a significant discount.
The price for all six is $897
Wondering whether it is worth it?
You can calculate your lost opportunity. Here’s the calculation:
Multiply last year’s revenue by 0.10 (10%). This number is your profit if you hit 10%. Now, subtract your actual pre-tax profit last year (after owner’s compensation and depreciation). This amount represents your lost opportunity.
What could you do with that additional cash flow? Warning: Don’t ask your spouse.
Now $897 does not sound so expensive, does it? Actually, it sounds cheap. Maybe, I should raise the price next year.
You will find a complete description of the webinars near the bottom of this page.
Any questions? Use the form at the bottom to ask me. I am always happy to help.
So, What is The Profit Engine?
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Are you suffering from poor profitability?
There’s no good reason for you to suffer from poor profitability.
It’s like running on a treadmill – you’re going to work really hard and go nowhere.
Sometimes we think that we will be more profitable if we can grow our revenue and leverage our overhead more, or we can leverage other indirect costs more.
But what I’ve seen, and what you’ll see, is that profit growth and revenue growth are not always well correlated.
Profits require more work than just growth of new customers.
Are you pricing effectively?
If you do not understand all of your costs and how they behave, then you cannot price effectively.
Do you know how to improve certainty in your business and increase cash flow?
A lot of data is interesting, but not all data is actionable, and we’re looking to get some actionable data so that you and your teams can work to improve the profitability of your company.
How could you price your landscape services more effectively?
Understanding your business’ data can shape how you price your services, but do you know how?
Landscape Industry Labor Market
Labor is the landscape industry’s biggest cost and labor is in short supply. The labor market is a significant obstacle to the growth of some landscape companies, and sometimes to their profitability.
When that is true, then you don’t want to “waste” your team on jobs that are not adequately profitable. You want those workers to focus on much more profitable jobs.
And when that is true, then assessing the profitability of what we do becomes very important.
How can your team reach goals?
If you and your team don’t know whether it is possible to reach a goal, then you’re unlikely to try very hard to reach that goal.
Let’s say your goal is to get to 13% profitability (that means net income, pre-tax, is 13% of your revenue). But don’t actually believe that it’s possible, then you’re not going to work hard to get there because neither you nor the team think you’ll ever make it.
In essence, they have no hope, and without hope there’s not a lot of work to be done.
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CASE STUDY: Profitability of Commercial vs. Residential Customers
One landscape industry client I worked with was suffering from sub-optimal profitability.
While digging around his information, I realized that well over 80% of his business was coming from fewer than 20% of his customers. He was servicing a mix of residential and commercial, and he clearly wanted to only be doing commercial work. He said, “I just can’t get rid of the residential because it’s very profitable.”
So we looked at the profitability of the residential customers. We found out that residential was very profitable if you only looked at just Gross Margin.
When you considered travel time and other indirect costs, particularly admin costs – servicing all those residential customers, invoicing, collecting, taking phone calls, etc. – we quickly figured out that they would be much better off if they no longer served residential customers. They didn’t want that to be a long-term strategy in their business.
I recommended for them to package those customers together and go to another landscaper that was doing residential business in their community who wasn’t too formidable of a competitor for them. They sold that book of business to their competitors, and they got a little bit of cash from doing it.
They got a much more focused business with fewer headaches, and it was easier to manage. Plus, it was a great win for the buyers, because they got more of the business they were looking for and my client grew some relationships.
Who is Greg Herring?
When I see numbers, I see a story. That ability comes from how I am designed and from my experience as a Chief Financial Officer or CFO.
I have also been a Chief Operating Officer, so my focus is on actions — actions that produce results to change the story.
When I produce reports, they are actionable. The 2017 Landscape Industry Peer Benchmark Report is an important tool for my success and the success of my clients.
In my 25 years of experience, I have discovered that most companies do not do the types of things that we’re doing. Whether it be in the landscape industry or any other industry. So we’re going to be implementing some superior strategies and practices to drive superior profitability and superior value.
I believe that if you show the right people the right data, they will respond with actions that will improve the results. And that is what I have been doing for more than 25 years!
The 2017 Landscape Industry
Profit Engine Webinar Series
This webinar series is designed for Landscape Professionals to get methods for improving profitability.
How can I assess bidding and performance risks?
Bidding and performance risks stem from your pricing strategy
During the webinars, we’ll look closely at your historical pricing, the market competition, and how you can address these risks.
You will develop new practices and get methods for addressing these risks.
Which 5 to 10 customers are the most profitable?
Have you ever considered which customers produce the most profit for you landscape business?
When we look at your important internal reports, you will be able to clearly identify those customers and take action.
Which customers are the least profitable and why?
You can focus your team and business growth if you know which customers (or which type) are delivering the highest return on your investment.
What percentage of my customers comprise 80% of my revenue?
You will begin seeing opportunities and the actions required to realize those opportunities.
Together, we’ll set up reports that help you see clearly where you are making the highest and lowest profits.
You will be able to segment your income statement data so that the data becomes actionable.
Actionable data leads to more clarity in your decision making and greater profits.
What caused that sub-optimal profitability?
We will analyze your company’s revenue mix, gross profit margins, and indirect and overhead expenses as percentages of revenue.
You will get clear on where you have the largest and smallest NET profit margins.
Then you can use that information to complete bidding guidelines for each major service.
$247 per webinar for a limited time
Or save 40% by booking all 6 now for $897!
Tuning Up Your Company’s Profit Engine for Growth
In this webinar series, we will establish a proper foundation for getting the profits that you deserve and identify actions to achieve those profits. You will learn specific actions that can use your existing work and investments to produce greater profits. Greg provides a strategic financial perspective, plus the experience of helping all kinds of companies become more profitable, including commercial landscape companies.
- The Profit Engine Webinar Series Schedule
April 25, 2017 at 2PM CDT
Seeing Your Numbers Clearly
Many CEOs tell me their income statement is confusing. They look at it each month because they are supposed to do so, but the information rarely points to required actions. The income statement shows last month’s revenue, expenses and profit, but there is often confusion. Perhaps last month was one of those dreaded three payroll months. Then, each December, there is the depreciation expense surprise. Finally, in most places, the landscape business is highly seasonal; there are good months and bad months.
When I review incomes statements for the Landscape Industry Peer Benchmark Report, I understand their pain. Usually more than 1/2 of the income statements need substantial improvement. There is a better way.
As a CFO, I organize numbers so that people can see clearly how the business is performing. Removing confusion from numbers so that the CEO and managers can see clearly is the first step to taking action to improve profitability. In this webinar, I will explain the underlying principles and provide you with my Excel templates so that you can see your business clearly. This webinar will help you see the past and forecast the future. You will use these tools to measure the improvement in your company’s profitability. Your income statement will become the valuable tool it was meant to be.
May 2, 2017 at 2PM CDT
Creating and Hitting the Target – Essential Data for Accurate Pricing
Accurate pricing requires accurate data, organized in easy-to-use reports. Pricing seems complicated. You must deal with market pressures, customer expectations and the need to “cover” your overhead. You don’t want to miss out on a new customer. A 50% gross margin seems like a lot. You think surely I must be making money at that margin. But you see the bottom line and the result that you want is not there.
In this webinar, I will provide you with a new way to think about pricing. No more mystery. No more wondering. I will give you two key Excel templates that I use with my clients to make sure that they are satisfied with the bottom line. I will also explain why this pricing method works. You will price with confidence.
May 9, 2017 at 2PM CDT
Managing Day to Day Operations for Greater Profits
Managing day to day operations is a grind. It’s my least favorite part of business. Maybe that is just me. But I also know that managing labor hours and materials are key to achieving high levels of profitability in a landscape business. You already know that.
Some companies are overloaded with reports. Manager see reports and do not know what to do with them. This situation is no better than having too few reports.
In working with clients, I have developed some simple tools that will help you build just the reports you need to identify operating issues that are decreasing your profitability. These reports will help managers manage. The reports identify surprises early so that managers can act. No more information overload.
May 16, 2017 at 2PM CDT
Managing Your Collection of Properties for Greater Profits
Over the years, you have collected a group of properties that you service. You have some winners and losers in that collection. We want more winners and fewer losers. Many companies don’t know their winners from their losers. Some companies think they do but their analysis is not always correct. Because labor is in short supply and is your most valuable resource, we want to make sure your labor is working on winners, not losers. Why would anyone want to use a limited resource to generate losses?
In this webinar, we will talk about important principles that drive the management of your collections of properties. These principles include the critical constraint, the covering overhead lie, the binary lie and the true definitions of cost and value. I will also give you two key Excel templates that you can use to customize the application of these principles in your business. You will use these templates to find the winners, understand why they are winners, find the losers and understand why they are losers. Then with that valuable information, you can develop a plan to create more winners and fewer losers – an essential part of increasing your profitability.
May 23, 2017 at 2PM CDT
Making it Easy: People, Practices & Profits – Designing of Incentive Plans
You have good people. You have good data. But do your managers know what actions generate the outcomes you want? Most CEOs and business owners want happy, profitable customers and a workplace with no injuries. We will discuss the principles for designing effective incentive compensation plans for managers to get the results you want. We will also discuss how to avoid unintended consequences. Do it wrong, and things could get worse.
May 30, 2017 at 2PM CDT
Implementing The Profit Engine in Your Landscape Business
They say Rome wasn’t built in a day. And you and your team are already busy. The Profit Engine is designed to be implemented in steps – just one step at a time. You may even learn that some of the work that you are doing or some of the reports you are using are no longer necessary – saving you time. In this webinar, I will show you how to construct a calendar to implement The Profit Engine in a way that is customized for your business and your customers. The calendar consists of reports designed to generate actions before, during, and after meetings. In addition, I will show you how to identify which steps should be first – generating the most profit from the least work. Doing business is like a journey. The Profit Engine will help you generate more profit during your journey.
Copyright © 2017 The Herring Consulting Group Inc.