Here is a proven approach to finding golden opportunities in your divisional numbers.
But first, the back story:
I just spent the day in Macon, Georgia, with one of our Leaders Edge peer groups, reviewing everyones 2022 benchmark numbers.
(Thank you, Tommy Thornton, Southern Eco-Scapes, Gray, GA for hosting!)
Benchmarking is one of the highlights of our peer group meetings!
Everyone huddles around studying their numbers and their peers, looking for blind spots, golden nuggets and affirmations.
Its always eye opening, humbling and exciting to watch the aha’s unfold.
The easiest way to create divisional numbers is to review direct costs and the gross profit margins they create. Its a critical step to financial mastery.
Here is one of our tricks we use to analyze your maintenance division numbers.
Five Steps to Improved Maintenance Margins
The trick is to divide maintenance into its 2 components and compare those components against each other, as follows:
1. Divide your maintenance” numbers into two (sub) divisions: Recurring Contracted Maintenance Services and Enhancement Revenue (upsales to existing clients).
2. Compare your performance: Review the gross profit margins on these two sub divisional categories; compare them with your peers and against your historical numbers.
Then identify whether you are performing above average, just average or in fact below average.
Note: Enhancement margins should be just as high (if not 6-10 pts higher) than Maintenance margins, despite the higher material component in enhancements.
And…Enhancement throughput numbers should be over twice as high!
3. Enhancements sales ratio need to be high, too. Identify if Enhancements sales are healthy percentage of Recurring Maintenance services.
They should be 100% for high end residential, down to about 33% for lower end commercial maintenance.
This depends on how your contracts are written, some of you will be higher or lower than this range, but most of you will fall in between.
4. Overall performance: If you have run these sub divisions correctly, you should be able to re-combine them and show strong overall financial performance boosted by strong upsales.
5. Client by client analysis: Take this a step further and do this analysis client by client.
- Are you making a good return when combining each client’s annual services with their enhancement services.
- Does each client buy enough enhancement services?
- Is this client a target client or a distraction to your team and growth plans?
Your Challenge – Staying in front of the right clients.
If you are under achieving on enhancement sales, its possible your properties look sad.
Or possibly your competitors are also sellling to your clients; that’s not good either.
Dont let the opportunity slip away to make your client happy: by solving more of their problems through upsales.
Make that a priority this Spring.
P.S. Mariani Landscape has always taken a smart approach to this opportunity of maintenance vs. upsales.
When we visit them this August 23-24 for our Summer Growth Summit, you will hear from their Maintenance leaders and their Enhancement leaders how they go about this sales and service approach; how they work separately and together to keep a win-win-win approach.
You don’t get to be the biggest by leaving it to luck!
Bring Your Team And Finish the 2023 Year Strong!