Landscape and lawn care businesses should have budgets and sales plans. Budgeting and developing a realistic plan to sell your services will allow you to track your company’s financial progress. Some owners track their progress weekly, but monthly checkups are more common. Budgeting and sales planning keep you on the path to achieving your revenue, growth and profit goals.
Don’t drag your feet
One of the excuses I sometimes hear from owners who are dragging their feet in doing their budgets is, “I have to get my renewals in before creating my budget.” Several owners have told me they don’t prepare their budgets until they have at least a 90 percent renewal rate. That’s admirable, but why wait so long? Most of you probably have a good idea what your sales are going to look like for the coming season before you reach 90 percent renewals (or another predetermined renewal percent). Start your budgeting process in the early fall even if you haven’t hit your desired renewal rate.
A good plan is to share your client list with your account managers as you start your budgets. Challenge your managers to report the clients who may not renew with you. This early detection gives you time to resolve issues that could cause clients not to renew.
We all know service segment volumes change from year to year, especially snow/ice management and design/build. But, if you’re a full-service landscape company, your other service segments should be more consistent revenue producers. You should have a good idea how they will perform in the coming season.
Even if you don’t have a budget for this season, there are numbers you should be tracking closely to keep your company going in the right direction financially. One of these numbers is overhead, which refers to all non-labor expenses required to operate your business. They can be either fixed or variable.
Take Away Tips
- Create a sales budget early.
- Keep a watchful eye on your numbers.
- Labor costs can be reduced by automation.
- Benchmark your expenses against other industry leaders.
- Operate like a banker.
Fixed expenses include things like rent, depreciation on fixed assets (vehicles, office equipment), salaries and associated payroll costs, insurance, utilities, etc. Variable expenses include things like marketing/ advertising, telephones and office supplies.
I frequently hear from contractors that they struggle to calculate overheard and attribute expenses to their various service segments. Clean up your accounting procedures so you can track your overheard expenses. If you need help here, get it.
Advertising expenses should be consistent from year to year. Interest expenses are profit robbers. They should be incurred short term and only to grow the business or acquire assets that generate revenue.
Office labor expense is a good place to look for reductions. With today’s technology, you may not need as many employees in the office. Managers can now be responsible for recording data.
Manage overhead carefully
You’ll lose ground to the competition if you’re not operating at the lowest overhead and associated costs. Compare your expenses to other leading companies across the industry, and take action to keep your expenses in line. Every dollar you save on overhead, labor and materials goes right to your bottom line.
“Benchmarking overhead expenses helps me reduce costs and gives me confidence that I’m on the right track managing the business,” says Mark Lay, CEO of AA Tex Lawn Co., Matthews, North Carolina.
Ask your managers and other team members to share ways to increase employee productivity and recommendations for eliminating wasted time in all departments.