Without a doubt, waste is rampant in the landscape industry and inefficiency should be stamped out wherever possible. However, many contractors get too focused on small, frugal decisions and this mentality can drive all kinds of bad decisions. In this article, we’ll show you why some of the most common attempts to ‘save a buck’ can end up costing and ultimately hurting, your business.
From Frugal to Smart
There are three types of people in the world:
- People who are not good with money (perhaps most of our industry!)
- Money savers (probably the rest of our industry)
- Money-makers — People who put their money to work for them (very few in our industry)
It should come as no surprise that the most successful people in business are typically Type 3 but with a strong streak of frugality driving the landscape industry, these types are too few and far between.
Case in point: Not long ago, many contractors thought those who spent $50-70 per month equipping foremen with cell phones were nuts. It was seen as an unnecessary expense that promoted distraction during work hours. But if reaching out to someone in real-time can save just one mistake a month, that alone pays for the phone many times over. Furthermore, mobile apps like lmnTime can help foremen track material usage, log time, optimize routes, track crews via GPs, push schedules and more. The time and cost savings that result from equipping teams with phones makes it a smart investment vs. an unnecessary cost.
The Real Cost of Owning & Sharing Equipment
For a long time, the way to make money was to buy equipment outright or pay it off as soon as possible. This stems from the way we account for expenses. Once equipment is fully depreciated, it no longer shows up as an expense. So, we feel like we’re making more money. Sometimes we are, but we’ll likely end up spending far more on repairs, fuel, and ultimately, lose revenue.
When a machine breaks down, productivity can drop anywhere from 50% to 300%. This lost revenue doesn’t show up in accounting so most landscape business owners don’t factor it into their decision making process. All they see is ‘no payments’. And because their profits are low (due to equipment shortages or frequent break downs), contractors don’t understand that an investment in new equipment will offset costs through increased speed, productivity and therefore, revenue.
The same applies to properly equipping trailers. Contractors mistakenly think they’re saving money by sharing tools and keeping them at the shop. However, when a crew member needs a tool that another crew has or someone forgets to put it in the trailer, time and money are lost in transit between sites or buying a new tool from a vendor.
Time is money and ensuring you have the equipment you need to get the job done will guarantee bigger profits.
Learn more about How to Leverage Landscape Equipment to Boost Your Bottom Line
When it comes to labor, you get what you don’t pay for
It’s a common misconception: Want to make more money? Minimize wages. This can be an effective strategy in highly structured environments such as Walmart or McDonald’s but out in the landscape industry, where you have 100 variables a day and very little structure, the result of cheaper people is typically poor performance.
A poor performing team leads to low profits which further reinforces the belief that you can’t ‘afford’ higher wages. Unfortunately, the cycle repeats itself until you arrive at a point where a booming industry offers too few opportunities for rewarding careers.
If you hire cheap, you won’t attract great people. Without great staff, you’ll be forever micro-managing and fixing mistakes. You might save a couple of bucks an hour in wages but you could lose $1,000 per week, or more, in potential revenue because your people don’t work productively and have no reason or motivation to improve.
By increasing wages a few dollars an hour, the investment will pay for itself in increased productivity and better quality work.
The Return on First Impressions
Whether it’s recruiting new staff or new customers, first impressions matter much more than you think.
The majority of customers will never see the inside of a landscaper’s office so that’s usually the last place owners will invest their hard earned dollars. But what kind of talent will they attract with a dingy trailer decorated with torn furniture and a port-a-potty outside? They may save a few thousand bucks a year on rent and furnishings but at what expense? A shabby, untidy workplace has a negative impact on employee recruitment, retention, productivity and ultimately, profit.
In his book The Employee Experience Advantage, author Jacob Morgan found that organizations that scored the highest in culture, technology, and physical environment had 4X higher average profits, 2X higher average revenues and 40% lower turnover.
Prospective customers are doing their research, online and offline. It’s critical they get a professional, consistent impression. If any of the statements below apply to your business, you’re likely losing sales.
- Your website hasn’t been updated in 6 years.
- The most recent batch of business cards was printed on your laser printer.
- Your last Facebook post was weeks ago.
- Your team’s uniforms have seen better days.
In order to compete for premium work, you’ll need to market yourself as a premium business. Set aside time and resources to ensure your marketing is up-to-date and in line with the quality of service you provide and you’ll start winning those big jobs.
You Don’t Know What You Don’t Know
It’s no secret that most contractors come from non-business backgrounds and never had finances clearly explained. And when people lack knowledge on a subject, they tend to reduce risks and play it safe. Contractors will often choose the lean option on paper — not because they’re cheap — but because that’s the safest route. They focus on the numbers they can see on their financial statements versus those they can’t see, e.g. the revenue (or lost revenue) potential.
Software is a prime example of an expense that should be seen as an investment. Whether it’s accounting or business management software, the failure to adopt software can cost you thousands of dollars a year in revenue due to mismanaged accounts, billing mistakes and an overall inability to see the bigger picture. The lost opportunity isn’t quantifiable, so it’s easy to ignore.
Investing in software that will improve your business operations is only part of the solution. As your business grows, you need help making the transition from talented landscaper to great business owner so carving out time to absorb the knowledge and learn the skills will pay, in revenue and profit.
Imagine you went skydiving with no training; when would you be likely to pull your chute? Probably in the first few seconds after you left the plane. You don’t know what’s going to happen, how fast you’re going to fall, or whether your chute is even going to open, so you make the safest, most conservative decision you can. You pull that chute fast. And you survive, but your skydiving experience wasn’t very fun. The conservative approach got you down safely but eliminated the potential to have an amazing experience. But get the training on when to pull the chute and how to land, and you’ll not only survive, but you’ll make the most of the skydiving experience.
Moving past a frugal mentality will be challenging at first but the rewards will be worth the momentary discomfort. Scrimping on equipment, labor, marketing and training may save you money on paper but the hidden costs of doing business ‘on the cheap’ in these areas are bound to have a negative impact on your bottom line. When you know and understand you numbers, you can focus on where it makes sense to save and where you can invest for long-term profit.
Disclaimer: The numbers used in this article are realistic averages but are intended for example purposes only.
Wishing you every success in boosting your bottom line,
Mark
Mark Bradley is the CEO of LMN. Dedicated to transforming talented landscapers into profitable business owners, LMN provides the business management software and training owners need to grow. To learn more about how you can start transforming your business, FREE, with the LMN software platform, visit www.golmn.com. Interested in attending an LMN workshop? Visit golmn.com/workshops/ to register for a workshop near you.
