Growth advice and the cost of customers

Q. I do consumer lawn care and I am considering buying another vehicle and hiring my first employee. What should I consider when doing this?

A. Don’t begin your truck or vehicle search until you’ve determined the type of vehicle or truck that meets your performance needs. Let’s concentrate on your truck needs. For example, if you do snow work or if you are pulling heavy equipment, trucks with more power are needed. Most contractors drive their trucks 14,000 to 18,000 miles per year. Gas vs. diesel depends on how many miles per year and your power needs.

Ron Lester, president of Architerra, in the Chicago area, reports that his truck rarely clock more than 10,000 miles per year. I know successful contractors that buy pre-owned trucks and get good performance from them. Kevin Rantanen, owner of Perrysburg Lawn and Landscape in the Toledo, Ohio area, has purchased a number of used Isuzu landscape trucks with excellent results and suggests not ruling out pre-owned vehicles as you grow your business. Gas may be a better option today for normal landscape service truck use.

Diesel trucks are the best choice for special power needs and if higher mileage is expected. Don’t feel that you have to spend big dollars on expensive trucks. Well-maintained, clean trucks give clients a positive first impression and will serve your company for many years.

As for hiring your first employee, job descriptions and your training abilities are the most important issues to consider when hiring, especially your first employee. Unless you hire an experienced lawn care specialist, look for someone with a can-do attitude and train to the job responsibilities. Do a background check and be sure a potential new hire has a clean driver’s license and no background issues that would prevent him or her from working in your job environment. This may cost a small amount but will prevent major problems down the road. When interviewing potential employees look for people that seem ready to accept responsibilities and want to advance their careers. A good candidate may ask questions about the potential to advance as the company grows.

Don’t be concerned by these questions and give detailed responses. Offer information about work hours and the expectations you have so everything is out in the open. Once you’ve hired the right person, train them in actual, on-the-job situations and conditions. Many contractors ask their employees to take industry-specific training courses and become certified in the areas of responsibility.

Remember, your competition watches what you’re doing, as well as your customers. Don’t lose customers because they see that your employees are unqualified or not properly trained. Or, never lose a good employee to a competitor that sees the value the employee brings to the company. Don’t rush into hiring your first employee, and don’t hire based on the low wage factor. Good people can accomplish great things; weak people can’t perform normal tasks.

Q. What is the average cost in obtaining a new customer?

A. While there’s a variety of ways to find and get new customers, some are better than others. The most effective and least costly way to obtain new customers is through referrals from your existing customers. A testimonial by a satisfied customer is the most powerful and compelling reason for a new customer to contact and consider your company.

Direct mail, door hangers, and local papers all are good for target marketing. You can chose your target area and concentrate on the potential customers in it, rather than the shotgun blast approach that is generally more expensive. Let’s say your current volume is $1 million and you plan to reach $1.1 million next year.

If your average revenue per customer is $2,000, you’ll need 50 new customers, including your current base, to achieve that number. Your advertising and marketing efforts should be focused on obtaining 50 new customers.

A budget of $20,000 for promoting the company and getting new customers means your cost to obtain a new customer is $20,000 divided by 50 or $400 per new customer.

This is simply a guide because your advertising and marketing budget expenditures also reinforce existing customer confidence, help to retain them, and can add additional business from them.

If you stop marketing/advertising, you’ll not know the impact of doing so, until it’s too late and competitors have started taking away your customers. 

Rick Cuddihe, owner, LaFayette Property Maintenance

Have a question for the experts? Send it to llexperts@gie.net