Live and Learn

Greg Isaac rode the housing bubble to the top. New home construction in Texas pushed him and his company to 32 employees and $3.2 million a year in sales.

Then the bubble burst.

In headier times, he was doing work at 70 houses a week. Now he was doing maybe six. He had to fire five crews and his office staff, keeping just five employees. Now, he brings in about $1 million a year.

“We had all our builders. They just kept getting smaller, giving us less work,” says Isaac, president of Cutting Edge Landscape Contractors in Spring, Texas. “It got to be a pain in the ass, to be honest with you. We just couldn’t float that.”

As the real estate market started to slow, homebuilders slowed down their payments. Where once they wouldn’t hesitate to pay for things like replacing sod after it was damaged by another contractor or dead grass after the electricity got shut off and no one thought about the irrigation system, now they would drag their feet, or tell Isaac that it wasn’t their responsibility.

“Those problems still existed, but once they started slowing down, they said, ‘We’re not paying for this or that.’ But I still had to pay for it. It just got to where it started to be a huge burden,” Isaac says.

“It was a really tough decision to make. I had so many people who relied on that type of work. The compensation didn’t outweigh the aggravation. I had to focus on the areas where I was making profit.”

He looked at his receivables compared to call backs. The builders needed a lot of hand-holding, he says, and were high-maintenance. It was hard to see it at the time, but those clients cut into his bottom line.

“We were making a ton of money,” Isaac says. “If the margins aren’t there, it’s hard to realize, but those people really cost you money. Sometimes it’s too late.”

Since cutting back on problem clients, Isaac says he’s seen a tremendous uptick in profits: Cutting Edge has made more money in the first six months of this year than it made in all of 2008. To get there, the company overhauled its service offerings and core clientele. They still do landscape design and irrigation work for a few high-end custom builders, but vegetation control and work for the county government make up 80 percent of the business now.

About three years ago, a cell phone tower company approached him about vegetation control. Isaac was still busy with his builders, so he turned them down. “But I started to think that could be a pretty good profit sector,” he says, adding that he took the work.

“Really I lucked out by doing that. I positioned myself to be in a pretty good place with where the economy is now. The trains are going to run and cell phones are going to be needed. If it wasn’t for that, I’d really be sucking wind. The builder work has really dropped to nothing.”

To drop the problem clients without totally losing out on the money he was still owed, Isaac let them know in January that their prices were going up effective Feb. 1. It was difficult, he says, but open communication helped.

“We got so big, there were some communities where we kind of lost touch with a lot of people. When we had to pull back, they were kind of blindsided,” he says. “When we had to say, ‘We can’t come out anymore,’ or, ‘This is the new pricing,’ they were affected.”

But the most important goal for any business owner is to make sure that some of the money coming in stays in.

“Really watch your bottom line. Scrutinize it constantly. That got me in a bind,” he says. “You’re doing so much work. You’re invoicing so much money, and every week, you’re getting pretty large deposits, but you kind of lose sight of where you are until it’s too late. That affected us. It affected me.”

Now, he’s holding onto his trucks longer instead of trading them in. Every purchase gets scrutinized.

“Before I buy anything I think, ‘Is that going to make me money?’ If it’s not going to make me money, I don’t buy it. Even down to a wheelbarrow,” he says. “I was just bleeding. We’re OK, and I was. I was paying the bills, but I was not making profit. It was a huge eye-opener.”

And while his company isn’t as big as it was five years ago, Isaac is happy.

“We’re still somewhat busy, not near as much, but it’s somewhat enjoyable,” he says. “If you have a strong presence in your community, if your name’s out there and you do good work, the work will come. You don’t have to work harder. You just have to work smarter.”