Honest day's pay

It’s budget time. Time to analyze in the present what did and did not work in the past, for the purpose of developing a strategy for the next 12 months in the future. In my system, budgeting isn’t really just about future costs; rather, it’s more about understanding your team not only in the field but also in the office. The primary question that surfaces is, “Are you creating a high-performance team that requires minimal supervision?” Unfortunately, too many entrepreneurs are in the process of creating just the opposite — a team that requires an inordinate amount of supervision. It’s more like adult day care rather than a high-performance production machine.

Budgeting 101

The first question that I address as I look into the future is, “How many full-time equivalent (FTE) field employees will work in each division?” This includes crew leaders and laborers, as managers are usually budgeted for in general and administrative (G&A) overhead. The next question that I ask is, “How much annual revenue will each FTE crew member generate?” If you think you can keep a three-man installation crew busy for the year with each crew member producing $175,000 in revenue, your projected revenue is $525,000 or 3.0 x $175,000. (See my MS Excel budget sample at bit.ly/llextra). I do this for all divisions.

This is the most difficult part of budgeting because you not only need to understand your team’s productivity, but you also need to attempt to crystal ball the market place and the economy for the foreseeable future.

Assumptions about the future (2024)

When I create a strategic plan (and budget) for a company, I address a section titled, “Assumptions about the future.” In it, I identify key factors that I think will remain constant throughout the upcoming year. The only such assumption that I feel comfortable making regarding 2024 is that it will be one of the most chaotic and unpredictable years in recent memory. Unprecedented is the word that constantly surfaces as I discuss the political, economic, geo-political, social, legal and cultural issues of the day with friends, clients and business associates. And who knows what the 2024 presidential election will be like? Who will be the candidates?

Going into the fall of 2023, the mid-range residential installation market is experiencing a significant downturn. Gregory Maroun, president of Stecks Nursery and Landscaping in Southern Connecticut, has seen his high-end design/build market all but collapse. Greg Wrenn’s company Past The Gate, a residential landscape design/build firm in the San Francisco East Bay region, is experiencing a serious downturn. Eric Wewerka, president of Wewerka Construction Management in the Northern Virginia market, has seen his residential landscape design/build and bid-build business slow down. Fred Anderson, president of Anderson Landscape Construction, a high-end landscape bid-build company near Boston, says his market has softened significantly in the last six months.

While the ultra-high-end landscape markets in such areas as Aspen and Vail, Co.; Jackson Hole, Wy.; Lake Tahoe, Ca.; Lake Winnipesaukee, N.H. haven’t experienced such a hit, the same could currently be said of many of the markets in the U.S. Heartland. These markets appear strong for the moment but they appear to be softening.

Solidify your budget’s foundation

Successful entrepreneurs build teams, create systems, network like crazy, diversify and understand the role of a CEO. The residential installation market is usually the first to suffer in a downturn. This includes Christmas decorations. The commercial installation market follows this pattern about a year later. It’s the repetitive services like lawn mowing, maintenance and fertilization; weed control, pest control, irrigation service and tree service that provides dependable cash flow.

During the 2008/2009 recession, the residential installation market dropped about 50%. It wasn’t until 2010 that the commercial installation market took such a dive. Holiday lighting fell by about 40%. However, revenues from the services named above remained fairly steady.

Conclusion

Your team is the foundation of your company. I build a budget around that team. The company in our sample budget plans to employ a three-man install crew, 3 x 2-man maintenance crews, one irrigation service technician and one lawn care technician on a full-time basis in 2024. Projected revenue is just under $1.4 million. The management team needs to focus on keeping these 11 people busy and billable throughout 2024.

Preparing your budget from the ground up and building it around your team helps you to analyze and understand your team more thoroughly and its capabilities more consistently. It also provides you with crucial benchmarks and key performance indicators (KPIs) that assist you and your team in monitoring its success throughout the year. Next time, we’ll fill in other key elements in our 2024 budget.

Travels with Jim follows Jim Huston around the country as he visits with landscapers and helps them understand their numbers to make smarter decisions. He can be reached at: jhuston@giemedia.com.