Last week I took my Irrigation Leaders Peer Group to Tuscon AZ, and I was reminded of a critical lesson that all entrepreneurs must heed, which I want to share you with you.
(But first let me say Thank You to landscape entrepreneur Brian Ham co-owner of Santa Rita Landscaping in Tuscon, for inviting us into his gorgeous mountainside home to watch the Super Bowl, amidst a surprising collection of hunting trophies from around the globe.)
There are two types of entrepreneurs in this world. Which are you?
The first type are those that are wholly focused on building the business, selling the vision, and creating something truly larger than themselves. They are wearing the “entrepreneurs hat” and do a very good job of building jobs and creating value for clients.
The second type of entrepreneur wears two hats…both the entrepreneurs hat, and also the investors hat. As an investor they are very focused on their business making a profit and building value in the business.
While in Tuscon, you could see that one of the business owners was really showing his entrepreneurial chops. He was not sitting still or being complacent, and was looking at all types of opportunities for growth: acquisitions, service lines, and geographic expansion. He was a young guy putting a dent in the universe (to borrow Steve Job’s quote). He has everyone’s respect…but there were times he was forgetting to put on his investor hat, and make sure the business was optimizing its profitability.
Whereas another owner there did a very good job of wearing both hats, looking at all the new opportunities while simultaneously ensuring the highest profitability for his company. He was creating jobs, building client value, while also creating a great return on his investment.
That’s why entrepreneurs needs to slow down…because if you are always sprinting to the next opportunity, then you are not taking the needed time to really learn how to be an investor of your own business. It starts with the basics of learning how to read and manage by the numbers, but it is so much more. You have to understand and believe what’s truly possible to achieve, and then set those benchmarks for your company leaders and managers to strive and reach.
Which hat do you wear more? Do you understand how to wear both?
Measure your success as both an entrepreneur and investor.
As an entrepreneur, measure your year over year growth (30% is what my top entrepreneurs achieve in this economy), client retention (depends on your niche, but never accept the industry norms), client upsales (the ultimate measure of your engagement and their satisfaction), and employee morale (in this economy you need to do better than your competition). You should also measure your “return on assets” (look for year over year improvement).
As an investor, measure your Net Profit and EBIDTA (compare yourself year over year, and with the best in your industry), Divisional Profitability (likewise), Return on Equity (year over year growth), the overall health of your Balance Sheet, and of course your Operating Cash Flow, among other things.
Scaling one’s business is the job of entrepreneur; scaling one’s business profitability is the job of a true investor and business owner. To learn more about Scaling Your Landscape/Irrigation Business profitably, join me here.