Cutting Costs

Adam LinnemanAdam Linnemann is setting aside money to launch a second full-time mowing crew in 2010. The maintenance division has expanded, and Linnemann reports gross sales are higher than ever. Net profit, he adds, is outstanding.

“I’m attributing that to the fact that we are watching our budget more and trying to become more lean,” he says.
A few of these expenditure decreases were out of his hands: His fuel bill decreased from $30,000 in 2008 to $15,000 in 2009. “That is a big chunk for a small business,” Linnemann says.

Materials prices are down, too. And Linnemann purchased grass seed in bulk in the fall, knowing that he can use it in spring and benefit from the price break. Last year, he paid $1.40 per pound for seed, almost double as much as this year’s 73 cents per pound.

Linnemann is pre-purchasing de-icer for his snow business, and collecting discounts by buying in bulk. “I always just purchase enough for what we know for sure we will use in the next year,” he says, referencing past year’s budgets when making buying decisions.

Another item on his budget-slimming spree this year was negotiating insurance costs. He was able to reduce monthly fees by raising deductibles on older equipment. 

“We cut out as much as we can already, I think,” Linnemann says. “The state of the economy forced us to be lean. When the economy turns for the better, we will aim for a larger sales volume.”

Already, the maintenance side of the business was busy enough in 2009 to warrant adding another crew a couple times each week when the workload exceeded what his one full-time crew could manage.

“I know people are worried about their home values going down and they are putting money into the landscaping to keep the value the same or to increase it,” Linnemann says, emphasizing that people in his region of Illinois are still buying services. “They are not spending money on vacations or vehicles. They are putting it back into their houses.”

 

With two salaried employees, including himself, Linnemann says watching overtime on hourly workers is a critical part of controlling labor costs, which are about half of his budget. “The time cards are watched real hard, and we make sure that (employees) are within their budgeted time to complete jobs,” he says.

He’ll continue to monitor payroll in 2010, and salaried workers will take on the excess hours if a project requires more time than was budgeted.

“For 2010, there isn’t an area we can tweak more other than, possibly, payroll,” Linnemann says.

But there’s always the big unknown: snow business. “That is what worries me the most – is that income going to be there?” Linnemann says. The company maintains about 60 accounts using five pieces of equipment, a mix of trucks and skid-steer loaders. He relies on independent contractors from industries that lay off workers in the wintertime, such as brick layers. “We don’t have to maintain the full 80 hours of week of payroll if it doesn’t snow,” he says.

Meanwhile, Linnemann scans his profit-and-loss statements every couple of weeks and studies his financials carefully every month. He uses annual comparisons to decide whether he should tweak his budget.

Going into 2010, Linnemann will continue running a tight ship and focus on selling time so he can book that new mowing crew solid. With these practices in place, he expects that profit to remain steady – or even grow. “We are not downsizing,” he says.

The author is a freelance writer based in Bay Village, Ohio.

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