Diversification is OK . to a Point
Many successful professional landscape company owners start modestly and go down one of three well-trodden paths in growing their services businesses. They begin their career journeys by either:
1. mowing properties in their neighborhood;
2. providing relatively modest install projects (plants, pavers, etc.); or
3. fertilizing and providing lawn weed control services.
Of course, there are other avenues into the industry. But regardless of how you start your journey in the landscape/lawn service industry you will, sooner rather than later, approach a crossroads. It’s called diversification. The direction you choose will have big consequences for your company.
You will have to decide what to do when customers start asking you to perform services other than what you’ve been providing for them. In addition to mowing and trimming perhaps they will ask you to clean up and mulch their flowerbeds or cut down a tree. Or they may ask you to repair a sidewalk or install a patio for them.
Some of you will see these requests as opportunities. You will figure out how to to do the work. If you do it successfully you will probably began offering that service to other customers, too. As you travel farther down that road (sooner than you ever planned?), you realize that you are morphing into the industry’s equivalent of a one-man-band.
Some of you will stick to your original plan. If mowing/maintenance is your game, it remains your game. And those of you with a more creative temperament and the talent to deliver incredible outdoor living spaces have decided that the design/build arena is where you want to excel and be recognized as best in class in your market. You avoid getting too far away from your firm’s core competency.
Neither model – neither the multi-service approach nor the expert-in-one-service approach – is inherently better than the other. The landscape services industry has its share of very good companies on both ends of that spectrum.
Even so, most of you will give yourselves a better chance to build successful and profitable companies by keeping a calculating eye when it comes to the number and types of services you offer.
The key to adding and integrating services into you operation might well be contained in a single sentence: Provide only those services and to those customers that actually help your company grow and be profitable.
That, in essence, is what Mike Rorie advised in a recent post. Rorie built a successful commercial maintenance company in and around Cincinnati, Ohio. At one point it was the largest landscape company in that state in terms of revenue. He eventually sold his company to the The Brickman Group.
Under the heading “4 Ways to Determine If You Are Over-Diversified,” Rorie shared these thoughts in his Greenmark Senior Managers Linkedin site (http://linkd.in/Q8VAyN):
Audit your revenue: Determine where your revenue comes from. If you have several profit centers, you need to know which one is in first, second and third place. If you are losing money by participating in one segment of the business, you are probably too diverse and you should eliminate it.
Audit your fleet: If you have too many profit centers, you will have too much equipment. If you decide to take on a job that requires you to bush hog a field and you have to buy a bush hog to do the work, is it worth it to take on the job?
Audit your invoicing: Know exactly what you have billed for. You should know how many, what size and what kind of thresholds you have if you do this. For example, you will know how many invoices under $500, $1,000, $10,000, etc.
Audit your customers: Look at what each customer brings to your company each year. Evaluate the cost to provide them service to determine if you should service someone. How far away from the office are they? How demanding are they? How do you bill them?
Agree? Disagree? Want to share your thoughts on this topic with Turf ‘s audience? Email Ron Hall at firstname.lastname@example.org.