Redefining growth

Business growth isn’t just about creating a second branch or pulling in the most expensive jobs – Landscape Management Network’s Mark Bradley says it all comes down to revenue per hour.

Bradley is the software company’s CEO, but it wasn’t too long ago that he ran a $50 million landscaping company that operated out of a tiny office. It fit eight people, maybe nine comfortably, and it only had one yard for equipment. Bradley built the company from the ground up, and it eventually churned a significant profit.

Now, Bradley’s out on a Mastermind Sessions tour, bringing interested landscapers together for two-day segments where he walks through the process of growing a company into a “business utopia.” The sessions kicked off in October in Ontario and still have dates set for Boston, Chicago and Minneapolis, among other American cities. Lawn & Landscape made a stop at his Cleveland visit.  

Though the sessions were designed as in-depth workshops for landscapers hoping to elevate their businesses, Bradley offered a few key points to consider, including revenue per hour’s impact on a company. Whether an attendee is starting a company from the ground up or they already employ 100 people, Bradley says revenue per hour is a critical factor in developing a growth plan.

“Most landscape companies don’t think about this when they write prices, write contracts, or train staff,” Bradley says. “When your revenue per hour is great, you can grow exponentially.”

SETTING GOALS. All that in mind, the process of growing the company starts with knowing where it’s headed with a company growth plan.

First, Bradley told attendees that creating a company mission and vision statement, plus devising some core values, is critically important to developing a profitable business. That’s because these statements set goals for the company to adhere to as they work.

“If I didn’t really set goals, I couldn’t really set expectations for my staff,” Bradley says. “As I got a lot more transparent with goals and metrics, they started to actually grow the business for me.”

These statements are about one to three sentences in length; the mission statement is a brief description of what a landscape company does, why it does that work and what makes it different from other companies. The vision statement is more about the company’s long-term goals and how it affects the community it surrounds.

Bradley says talking about these statements with key company leaders is important. When everyone gets stuck on where to go next, he recommends using ChatGPT to revise those statements. During the Mastermind session Thursday, Bradley helped a landscaper workshop his own statement, encouraging him to figure out what makes his team special. The landscaper ultimately said it was his employee training processes and how fast they call back clients, so the emphasis on the mission statement became about employee development and customer service.

Bradley suggests using these statements to kick off every meeting to show people why you’re focused on what you’re focused on. These statements should also call to question the company’s target customers, which markets they serve and what types of services they provide. Bradley says this questioning process helps a company owner develop a market-focused growth plan.

KEY TO THE PLAN. Bradley says it’s at this stage when business owners should start restructuring their pricing model to grow their business. This doesn’t inherently mean raising prices alone; markets will always dictate the rate, but Bradley clarifies that the market doesn’t dictate a company’s profitability.

He remembers teaching budgets to people on pen and paper before his time at LMN, and the worst budgets almost always lacked a focus on revenue per hour. In the past, Bradley’s found that telling his sales team to grow revenue just leads to them selling more and more jobs. He’s also seen companies just buy more equipment or add more employees and hope it leads to more profit.

Bradley says that while this may lead to a higher volume of work, it doesn’t mean those jobs are making more money. It may actually just increase a company’s overhead costs and ultimately lose money if a business owner is not careful. He says the largest companies have exceptionally low overhead costs – Bradley’s percentage hovered around 3% when his company was at $50 million.

Bradley achieved that lower overhead by becoming more efficient, like by reducing travel time between clients. He also built in hourly costs in his contracts. He suggests landscape maintenance companies can add in hourly gardening costs or charge clients for things like disposal fees, whether that’s per visit or per bag of debris. He’s also charged clients per bag or per load for mulch, per application for weed control and per application for fertilization. He recommends avoiding a base fee for all those services.

“As an industry, we give this stuff away and at the end of the year, we say we didn’t make any money,” Bradley says. “That’s crazy.”

Bradley encourages landscapers to change their pricing model as soon as possible, even if it’s in the middle of the season. He has often received pushback – business owners fear they’ll lose their business.

“Well, that’s not a bad risk to take because you’re losing on all the contracts you’re doing now,” Bradley says. He adds that if a business owner wants to sample these pricing changes, applying it to a smaller set of contracts in the middle of the season might offer some reassurance. He once had a client who applied the hourly charges to 20 clients in the middle of July. Eighteen said it was okay, and two asked for it the following year. That company made an additional $380,000 that season.

Bradley admits he used to view contracts as a huge pain, but once he shifted his thinking on how to construct those contracts, the money came in much more sustainably. But a major factor in whether this works or not is earning buy-in from the employees actually out in the field completing the work.

“If you scale your company with everybody thinking like an entrepreneur, you will crush it,” Bradley says. “The staff will continue to unlock more revenue for themselves.”

GOING ALL IN. So, how do business owners align their revenue per hour goals with their employees? Bradley urges strong incentives and bonus programs for workers.

“People go to work each day for themselves,” he says. “They don’t go to work for you. They’re supporting themselves; they’re supporting their personal vision.”

Bradley says crew leaders should know what’s expected of them and should have micro-budgets that define their goals. Without those budgets, foremen might not know they’re succeeding or failing – which is a failure in itself. They should know what the revenue goal for the year is and how much that’s going to impact how much they’re paid in bonuses by the end of the year.

Labor cost typically occupies about 25% of total revenue, Bradley says, and bonuses should occupy about 10% of payroll. With that in mind, he encourages employers to structure their plans in a way that protects themselves from losing revenue on bonuses. He budgets for bonuses each year but won’t budget it under revenue – he’ll put it under a line item that won’t take away from profits if they fall short on sales goals.

Instead, Bradley encourages putting bonuses under areas for extra billing. He says many small business owners shy away from telling their employees how much profit they make each year, so he told attendees to be unashamed to say why they need the money. Profits are necessary to invest in the growth of the business and for a rainy day should there be any financial pinches.

“We need that profit for other things,” Bradley says. “There’s no fun in working at a company that’s not making any money. There’s no reason on earth to hide that you’re profitable.”

To know how much to pay employees in bonuses, Bradley suggests creating a clear scorecard for how they’re performing. Be transparent – it’s here where employees really start to buy in to adding on more revenue to the company. High performers will shine, he says, and underperformers will ultimately leave. It motivates employees to eliminate company waste like lost time at gas stations or inefficient work in the field.

He calculates the field staff bonus by saying that reaching the crew revenue goal is 50% of that bonus. Then, customer satisfaction factors into it – were there many callbacks? If there were, it’s possible the employees just completed the work quickly just to reach that crew revenue goal. And finally, the last 25% of his proposed bonus structure centers around the scorecard system. Was the employee on time to all company functions? Was the employee showing up happy to work? Was he or she completing the mandatory training? In the end, this scorecard also functions as an end-of-year employee review.

Bradley says that once a company reaches $1 million or more in revenue, the business owner’s job shifts from the daily operations into empowering employees to do that work for them. The truly become a business owner. In the end, he says a huge part of growing the company centers around focusing on revenue per hour. Bradley adds that incentivizing employees to increase that hourly revenue is the only way to stimulate that growth.

“Your people are your only asset,” he says.