Contact Greg Herring
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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%!
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.
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.
Get Updates on the next series, upcoming events, and more
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.
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.
The Profit Engine Webinar Series Has Ended
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.
The 2017 Profit Engine 6 Webinar Series Has Ended
Get on the List for the Next Series
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.
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!
This webinar series is designed for Landscape Professionals to get methods for improving profitability.
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.
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.
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.
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
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.
Contact Greg Herring
Enter your email address below and Greg will reach out to you.