Constant surveillance

2019 is upon us with all of its promises and challenges. It wasn’t that long ago that we shared the same sentiments about 2018. Did 2018 end the way that you had hoped a mere 12 months ago? Or was it a disappointment? If it was a disappointment, when in the course of the year did you realize that it was so? Was it a surprise at the very end or did you see it coming? And if you saw it coming, what did you do about it, if anything?

I’ll bet that you probably did nothing. You did nothing not because you didn’t want to, but because you didn’t know what to do or how to do it. You simply did not have the tools or know-how to address the situation. That’s the problem. Many green industry entrepreneurs have neither the tools nor the know-how to run and direct their businesses effectively.

The little picture.

To run a business effectively, a contractor has to be somewhat schizophrenic. You have to think constantly and simultaneously about the big picture as well as the little picture. You can’t focus on just one. If you do, you’ll get in trouble and wrapped up in minutia spinning your wheels.

First, you have to benchmark the little picture. By this, I mean that you have to ensure that every crew and/or service technician is producing a minimal amount of profitable revenue per day. You as an entrepreneur need to ensure that every crew or technician is achieving these pre-planned benchmarks. If they aren’t, you need to investigate and find out why.

I teach all of my clients how to calculate and monitor these little-picture revenue and profit benchmarks. Once they have them, their (and their managers) primary jobs are to ensure that every day is a winner for everyone. For instance, let’s say that a lawn care technician’s daily revenue goal is $1,000. If the season is seven months long, each technician should produce a minimum of $150,000 in revenue per year.

• 7 months x 22 work-days per month = 154 workdays
• 154 workdays x $1,000 = $154,000
• Subtract out 3 or 4 holidays and your benchmark goal is $150,000

The big picture.

This brings us to the big picture. It isn’t enough to have daily revenue and profit goals. You have to keep your annual end-game strategy in mind.

I prepare an annual budget for my clients at the beginning of each year. We benchmark the entire company and calculate costs and revenues for each division. These calculations are based upon each company’s historical data and/or national benchmarks that I’ve developed over the last 30-plus years.

Once these big and little picture calculations are in place, a green industry entrepreneur has the tools to price his or her work accurately and monitor everyone’s progress throughout the year. You should monitor this data on a weekly, monthly and quarterly basis.

How it works in the field.

Bill was a lawn fertilization entrepreneur in Oklahoma with annual revenue just over $100,000. We determined that he needed to bill between $900 and $1,000 per day for each technician. His season was roughly 200 days long. A technician at full capacity should generate approximately $180,000 per season. Bill expected to grow his company to $150,000 in 2018. However, he knew that he couldn’t pursue new sales while doing all of the applications and the office work. If he was on track toward the end of 2018, he planned to hire a technician. This would allow him to grow his company’s revenue to $250,000-plus in 2019.

An irrigation company in New Jersey had four service technicians billing 1,500 man-hours each per year for a total of 6,000 man-hours per year.

Upon analysis of its hourly service rate, we found that it was $20 per man-hour too low. The owner thought that raising his rate $20 per man-hour in one year was too high of an increase and he’d lose lots of customers. He raised his rate $10 per man-hour which added $60,000 to his bottom line the next year. Not one single customer complained so he raised his rate an additional $15 the next year.

Running a successful business is both art and science. You have to master both aspects. One successful entrepreneur refers to this as “The Art of the Deal.” If you want to be more successful in 2019, learn the science behind your numbers. Benchmark both the little picture and the big one in your business. Remember, if you ignore the science in your business, the art that remains may not be a very pretty picture at the end of the year.

Jim Huston runs J.R. Huston Consulting, a green industry consulting firm.