To realize profits, know your margin numbers.
Michael Hatcher & Associates (MHA) has been able to grow its commercial landscape business by 50% YoY at a time when many companies are struggling to grow 5% YoY. Russ Sneed, CEO, credits his team and Kelly Ogden, GM, Commercial Maintenance at MHA for following a process at the end of every maintenance season that is a key part of MHA’s success. It includes:
- Analyzing the performance of crews across the portfolio site-by-site and calculating gross profit per customer.
- Identifying which sites in their portfolio made them money as per expectations and which didn’t.
- For clients where they didn’t make money, MHA goes through a gross margin checklist to determine if they need to ask for a price increase, improve their operating efficiency, or yes, fire the customer.
Here’s how it can work for you. Find out sites where actual hours are more than the hours sold. These are the sites where you turned a loss. Then do a step-by-step analysis to find out what went wrong and where. Follow the trail from measurements to estimates to job planning to actually servicing the site.
The Formula
First, make sure you’ve measured your sites. If you have the measurements, examine them and ensure they’re accurate. This is important because it determines whether or not you’re following the scientific method for estimating—which is dividing measurements by production rates. If you do not know your production rates, it is worthwhile to determine them.
Expected job hours = Measurements/Production rate
Did Sales Lower The Margin?
If your measurements are accurate and production rates fall into place, the next step is to follow up with the sales rep and make sure s/he did the job right. Your company should have a margin threshold (minimum margin that you would want to make on the job). Did they lower the margin threshold on their own to close the job? If they did, you need to have a conversation with them.
If they didn’t, then did your Operations team conduct a production review after getting the estimate from the sales rep? Getting a second pair of eyeballs on the site from the production side is extremely important to ensure your estimate is tight. If everything went right here, the discussion moves from sales to the realm of operations.
Crew Performance
If your measurements are accurate and the sales reps didn’t cut any corners, it’s time to take a look at crew performance. Evaluate their performance against your benchmarks to see if they performed as per your expectations. If they didn’t, then find out why. Did you give them everything they needed to do their job well?
As Ben Collinsworth, director of operational technology, Yellowstone, puts it, “[In the landscaping industry] we [tend to] tell our crews, just go figure it out. We hired you to do it. Well, they hire quarterbacks in football too, but they give them a plan. If we give people a plan that tells them how they can meet the hours that we planned, then we’d be better positioned to hold them accountable to meeting that expectation.”
One solution is to arm crews with site maps. Maps can tighten operations so crews see service areas clearly. You can even do motion planning on the map to help crews move through a property faster and more efficiently. Another option is Gantt charts, describing what each guy is supposed to be doing when and for how long. If you don’t currently follow these practices, try them on sites where you know you turned a loss.
As a final note, if a property is just too difficult to service for the budget the property manager is giving you, ask for an increase. If the property manager gives you a hard time, move on and find a better client.
Sharma is the Founder & CEO of SiteRecon – a mapping business he started one year ago. In one year, he built a deal pipeline of $1 million and closed $350,000 while spending only 30% of his time doing sales. Utilizing tech to increase the size of the funnel and automating data entry tasks has been the key to punching above his weight class. Sharma has a Bachelors in Mechanical Engineering from IIT Delhi – it’s like the MIT of India. One of his coolest feats has been leading a team that mapped 280,000 miles of parking drive lanes in five weeks across 110 metros in the U.S. and Canada. That’s 5% of the total road network in the US! In his free time, Utkarsh transforms into an armchair philosopher, film critic, MMA expert and a loving son, brother, husband, and friend. For more information, visit siterecon.ai.
For more software solutions for landscapers, see Which CRM Software Is Right For Your Landscape Business?
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