Prices, production and profit

A  panel discussion at CENTS in Columbus, Ohio, earlier this year revealed how three contractors have grown their companies – what systems they’ve put in place, what consultants they use and how they bid and price their jobs to ensure a profitable year. Steve Rak, Southwest Landscape Management, Columbia Station, Ohio; Dave Thorn, DTR Associates, Aurora, Ohio; and Joe Chiera, Impact Grounds Maintenance and Design, Norton, Ohio; brought together perspectives on high-end residential, commercial maintenance and full-service work for the audience.
 – Chuck Bowen

What forms of advertising and marketing techniques have been most successful for growing your business?
Dave Thorn: Customer referrals have been No. 1. No. 2 is home and flower shows. Currently, through shows, we’ve made connections with garden writers and editors. They’ll do stories on us. Those have been key to our marketing – which is free. People love a story.

Steve Rak: We don’t do a lot. We develop a lot of relationships with [property] management companies. A lot of it is word of mouth. I also enjoy writing, and I write for a magazine called “Properties” in the Cleveland area.

Joe Chiera: On the design/build side, we’ve done a lot of direct mail. We send it in the spring and follow up in the summer and fall. Also word of mouth – if you do a good job on a project, you should get two or three leads. On the maintenance side, all our trucks are the same colors with our logos. We used closed trailers. The more trucks you have out there, the more it does for all your marketing.

What are your internal procedures from the time a client calls the office to the first day of the job?
SR: We bid in October of the year before. To help get your foot in the door, it’s a numbers game. When they don’t know you, ask if there are any projects you want us do enhancements on. If we do a good job, they get some face time with us, and we get some face time with them.

JC: Our office manager takes all the calls. He has a sheet of questions to prequalify the lead. On design/build, it’s me or another salesman who takes the call. We follow up within 24 hours of the call and meet with the customer. On maintenance, an account manager handles everything. They supervise the job, sell enhancements. They own the property.

DT: Our approach is pretty basic. We tell a story when the client calls. We’re screening them as they’re screening us. If it’s a good fit, we set up a client meeting, where we’ll have a lengthy conversation. I try to be a good listener and keep telling the DTR story. We send a formal design proposal and create a final plan. We use that exercise to showcase our work. Then, we have an on-site project meeting, where I introduce the client to the head foreman. We give door hangers to the client, so they can leave notes for our crews if we’re not there at the same time.

At what point did you decide to hire a full-time office manager?
JC: Our office manager has been key to our growth. I was pulling my hair out doing payroll and answering phones. My answering machine was always jammed full with messages. We have two office managers, one answers the phone, one runs bookkeeping. They do our HR and are shopping for our health insurance. They’ve really helped out a lot.

SR: It wasn’t soon enough. When you start a business, you’re motivated to grow, but this whole paperwork thing gets out of control. We hired one three years ago, and I couldn’t live without her. She’d be the last person I’d get rid of. Can we afford to pay someone full-time? Definitely, yes. I’m principally a salesperson. I am spending more time on customer sales and customer relationships.

DT: Ours is sort of a business manager; she answers phones and does clerical work. But we divide and conquer on this and try to run very tight. It’s not beneath me to answer the phone or plant a tree. We also have internships with local schools, and have students come in to do CAD or clerical work.

What tools do you use to show your value over your competition?
SR: For us, it’s a simple message: Our core focus is on commercial maintenance. We don’t do design/build. Every bit of our resources goes into cultivating that culture of commercial maintenance. We don’t have to pull a guy off a design/build job. You’re going to get A players on your property every day. This is our meat and potatoes.

JC: Our main selling point is communication, and making the customer feel like part of our extended family. We try to have our account managers contact clients twice a month, get to know the property managers outside of their work. When you build that relationship with the customer, it goes beyond money, because they’ll continue to refer you.

DT: It’s selling the story. When I meet with clients, I ask, ‘What can we do? How can we better help you live? We’re here to be a property manager for you.’ We’ll clean gutters, sweep the garage, wash windows. I tend to become very close to my clients. Once you make that connection … they couldn’t think of using anyone else because of the connection we have.
 

As your company grew, how did you motivate your staff to accept the changes that were necessary to move forward?
SR: Just don’t keep it a secret. If you want to grow, your people need to be in on it. Give them a stake in it – maybe something they’re doing can help, like more snowplowing, etc. This is their company, too. But sometimes people don’t want to do that. Sometimes you have to let them go. That’s not a bad thing.

JC: We started with a core of four guys, all basic laborers. We brought in some consultants to help with our growth and challenges. We took a lot of their ideas, and most of those four guys are account managers now. You never stay the same. You either get better or you get worse.
 

How have you used consultants to help grow you company?
JC: I can’t say enough. We use Rod Bailey in Oregon. He taught us the basic principles of business. I never knew what a P&L was. After a two-day talk with him, we were quoting things accurately. That got us on the path to growth. We also use Ed LaFlamme. He helped us from an operations standpoint – what a company looks like and how to set up quality control for the whole job.

SR: We’ve been using them for ages. Frank Ross, a financial consultant, set us up to track costs. Steve Pattie, from the Pattie Group, and I meet once every other month. He knows my employees.We’re not competitors, so we don’t compete for commercial maintenance market. Just do your homework. Consultants aren’t cheap, but if you get the right one in your business, they can really halp you grow it.

DT: We’ve hired Tom Koobee in Chagrin Falls, Ohio. I did the Dale Carnegie public speaking courses. Frank Ross comes in every year for us. He’s been instrumental in guiding our ship. He’s helped me understand finances and P&L statements. I always want to have a good year because I want to show Frank we did a good job.

Subcontractors are vital to a successful business. In a down economy, how do you stay committed to those relationships while protecting your business?
JC: The only sub we have is snow removal. I treat everyone the same way I treat our employees. I don’t try to beat them down on price, as long as they’re giving us good service that’s worth the money.

SR: Pay them on time. Everyone who runs a business knows what it’s like to wait for your money. It’s irritating. Get these people paid. If we can’t, we need to work at our business. Nothing irritates me more than chasing clients. Treat them as part of your family. My subs do quality work. It might cost more, but I can call them any time and they’re out there.

DT: We have two irrigation subs, two tree removal, two electricians. I will get estimates from two people to make sure I don’t miss an opportunity.

How do you structure your bids? Do you price per square foot, or use a material-plus-labor approach?
SR: We do both ways. With production rates for mowers and plows, there are so many variables there – lakes, trees, hills, I don’t think you can look at it from a square-foot perspective.

JC: We don’t price anything on the design/build side on square feet. We do everything materials plus labor. The gross margin is key for my financial success.

DT: Our jobs are polar opposites from one to another. We spend a lot of energy and time working with labor hours, machine costs and overhead mark-up on top of everything. We start with profits and work backward from that.