It’s just math

I was fortunate to catch up with Dean Murphy at Terracare while putting this month’s issue together. After some discussion, he graciously agreed to participate in a webinar as part of our expanded Top 100 coverage (turn to pg. 69 to find out more about that), and we were talking about the nature of the list and of what he’s doing as president of the ALCC in Denver. One of his goals in the next year is to change the tone of the association’s conversations to focus less on plant material and technical matters and more on the business side of member companies.

He told me that many of the landscapers he talks to couldn’t tell him if they make any money at the end of the year – and likely don’t want to really know.

“It’s a very emotional mindset. It feels like failure,” he told me. “It’s not. It’s just math, and you can do something about it.”

Depending on how you define it, there are between 90,000 and 250,000 professional landscape contractors in the United States. Only a very small percentage of companies make it past a million, and another tiny sliver of those make it onto the Top 100 list.

One hundred is a nice round number, but it’s also an arbitrary one. It looks really good on the cover of a magazine. We could do 500, like Inc., or any number, really. If past experience has taught us anything, it’s that being on the list isn’t a guarantee of success. We don’t publish a list of the 100 most profitable companies, or 100 nicest owners or even 100 companies that pay all their bills on time. We could have any number of metrics. We choose top line revenue. It’s just a place to begin a conversation.

Most landscapers won’t ever make it to $15 million, and that’s OK. The profit margins at that level may not be nearly as good as they are at $150,000. A blind rush to the top of the list doesn’t do you any good if you’re not basing that growth on a foundation of sound financial operations.

It’s the classic walk, crawl, run. And running at a much lower revenue is great if you can really run there.

So many owners get fixated on that top line number and don’t take the time to sit down and think through their pricing, profitability or the financial sustainability of their operations. Because it’s scary to pull back the curtain and shed some light on what’s really happening on that P&L.

But even though it’s scary, it’s what any respectable business owner has to do. If you can’t do that – and this is me saying this, not Dean – you shouldn’t be in business, no matter how pretty a patio you can build or how well you can sell a maintenance contract.

Dean is right. It’s just math.
 

– Chuck Bowen