The New Year is here, but there are still lots of things you can do to improve your business before spring. There are so many, in fact, it may be hard for you to decide where to start.
Let’s begin with your budget, the document that projects the revenue and operating costs you expect for your company in 2016.
Do you wait until early spring when your contacts or renewals are all in before wrapping up your budget? Why are you waiting? By mid-winter almost all of you have closed the books on 2015 and know last year’s numbers. Get to work and finish your budget now so you can accurately forecast what you can expect this year.
Take into account business variables such as the general economy in your market and your staffing needs for 2016. Dig deep. Carefully review each of your company’s departments and explore every opportunity to decrease operating expenses and increase revenue and profitability.
If your gross margin is low, put plans in place to boost it in 2016. The average gross margin for landscape contractors is around 51 percent. Smart operators generate 56 percent gross margin. If your gross margin is low, this may indicate a pricing issue. Take a close look at your cost estimating and pricing.
If you feel a small price increase will cause clients to go with a competitor, your problem is probably not pricing; it’s more likely your client relationships. What do your clients think about your service? It’s your responsibility to know.
Large service providers wrap up their budgets weeks or sometimes months prior to the start of each season. Department managers participate in the process and explain their forecasted revenue and expenses. Managers are also expected to report poor client relationships and offer recommendations to improve these relationships.
Know your numbers
Your total direct costs should be less than 46 percent if you expect to run a high-profit company.
If your company offers a broad range of services, landscape maintenance often generates the highest percentage of revenue. Put strategies in place to improve the efficiency of your maintenance operations while also boosting your marketing and sales efforts. Sales-per-employee is a good way to track productivity. Successful contractors have annual sales per employee more than $65,000.
Your Mid-Winter Checkup
- Create a budget.
- If your gross margin is low, put a plan in place to boost it.
- Know all of your numbers.
- Don’t skimp on equipment or equipment maintenance.
- Track everything because everything matters.
Stay up to date
Evaluate your production equipment and service vehicles this winter to determine if they are performing well. Also, carefully track your equipment expenses (maintenance, repair, fuel, insurance, depreciation, etc.), which should be between 13 to 15 percent.
What you do now in terms of budgeting and forecasting will give you a roadmap to follow for overall performance improvements. That roadmap will allow you to keep on eye on budgeted costs while putting in programs to increase sales and improve operating efficiencies. This year can be your best year yet if you plan it right and regularly track your results.