Last year at this time, economists told us that 2009 was going to be a sluggish year for sales. “Nobody was saying, ‘Things are going to be terrible,’” says Al Bates, president of Profit Planning Group, who has been crunching numbers for more than 35 years in 100-plus industries.
For landscape contractors, depending on the service segment, revenues are somewhere between flat and down by 20 percent, Bates reports. “If they are down 20 percent, you have a real problem,” he says, noting that the sharp decline some businesses experienced this year was unanticipated to a certain extent.
“For a lot of people in the industry, this (recession) is an unprecedented situation,” Bates adds. “Not only is it unplanned, but many have never seen this before.”
That makes budgeting for the unknown particularly difficult, especially for businesses that do not regularly watch their numbers or design a formal annual budget. According to Lawn & Landscape research, only 55.4 percent of respondents receive monthly financial statements.
Bates encourages landscape contractors who see themselves more as “artisans” than accountants to attend a course on budgeting or adopt a mentor who can provide some nuts-and-bolts advice on the process.
This issue of Lawn & Landscape also contains the annual Benchmarking Your Business report (see page 23) to serve as a workbook and guide for creating and managing a sound budget.
In the meantime, consider these tips Bates offers as you budget for 2010.
Stay lean. When a down economy perks up, the tendency is to get a big head about what’s in the bank.
“Every time we get out of a recession, people get more euphoric than they should – they tend to forget fairly quickly all of the things about expense control they learned and promised they’d never forget,” Bates says. “I argue for continuing to be really tight on expenses until employees are screaming, ‘If you don’t hire someone else, we are going to revolt!’”
Perhaps that’s an exaggeration. The point is this: Hopefully you lost some fat in 2009 from trimming the budget. Don’t gain it all back if the economy upturns in 2010.
Price smart. Any price seems right in an economy where the bucks aren’t exactly rolling in. Don’t compromise your profit margin by under-pricing your services, Bates recommends.
Review numbers. “Make the budget a live, dynamic process,” Bates advises. It’s wise to avoid large capital investments this year unless they are absolutely critical to maintain operations. “Fix it and maintain it until you absolutely can’t fix it,” he suggests. Compare the budget to actuals and make changes soon if the numbers are off. Finally, while reviewing numbers, always be thinking about where you can draw more revenue, perhaps by increasing maintenance or adding a service you can sell to existing customers.
As for 2010, Bates isn’t promising a total rebound. “I don’t think 2010 is going to be a year we’re going to be dancing in the streets,” he says. ‘I think things will be better (than now).”
This month, Lawn & Landscape asked three landscape contractors who operate companies in different revenue categories to talk about how they are budgeting for 2010 based on their performance this year.
The author is a freelance writer based in Bay Village, Ohio.
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