The landscape and irrigation companies with the highest and most consistent profit have figured their business model.
They have figured out what drives their profitability, and thus how to scale their business with ease and efficiency.
Are you serving too many niches?
Too often, I see landscape company owners who are trying to serve too many client niches, with too many different products and services. Their efforts become diluted and distracted, and this greatly hurts their profits.
Earlier this month I traveled to Ohio to consult with Werbrich Landscaping and their 10-person leadership team. They run a great business, super efficient production, a strong brand and a very strong team, and still we found opportunities for improvement.
Together we made lots of tweaks to their business.
We spent a few hours unpacking their business model, and decided where they should best focus their efforts. When I left, the team was totally pumped and pulling together towards a set of proven goals.
Here’s a short list of what we addressed, which you can apply to your business.
A Great Business Model Makes The Following 5 Choices:
1. Pick the right sub-niches.
You have to pick not only the right client niche, but also the right sub niches. It is not enough to say you focus on commercial or residential, or on bid build or maintenance, etc.. You must identify the sub niches that you understand best and where you out perform the competition.
2. Get rid of the dogs.
Even when you pick the right clients and services, you still have to develop a short list of the types of work you don’t do well and should avoid, known as the “dogs”. For example:
- You may do hardscape well, but do poorly with vertical walls (ruff ruff).
- You may do patios well, but have trouble estimating large multi level patios (woof woof).
- You may love working with clients who know what they want, but do poorly with overly needy clients who suck away your time and energy (bark bark).
The trick is to be super clear what you DO well, and what you DON’T do well (Make a list with your team!)
Financially, you can track this by Gross Profit Margin and by Throughput ($/hr).
Good work brings in high gross margins, better work brings in high throughput, and the best work brings in both, high margins and high throughput.
3. Identify your hedge hog.
What’s the one product or service that you are most passionate about, that you do better than anyone else, that drives the growth of your entire company and all your divisions? Many companies have one service that stands above the rest, that brings in clients who then buy other services from their other divisions.
This is called the Hedge Hog concept (from the book, “Good to Great”). It is based on an ancient Greek parable that states, “The fox knows many things, but the hedgehog knows one BIG thing (how to defend itself).” What’s the one BIG thing your company should focus on?
4. Create synergy between divisions.
If you work in different niches where you can’t cross sell clients from one division to another, that is a huge waste and a bad investment.
A great business model shares clients between divisions, and has fine tuned how to “cross sell” services once a new client is brought into the company.
Last summer in Iowa during my Summer Growth Summit we visited A+ Lawn and Landscape; they have a comprehensive plan to cross sell between their many divisions. How about you, do you have a cross selling strategy?
5. Up-sales are given priority.
A common error in landscaping is being too busy selling new clients, and not giving your current clients enough service. Your clients want to buy more from you, if you would only give them the time of day.
Forgetting to upsell clients means you are leaving money and profit on the table, and it also means leaving your clients open to being stolen by a competitor. You must make an intentional choice to develop the people and capacity required to continually upsell throughout the year. It’s the best way to bolster your bottom line.
As the team at Werbrich Landscaping learned, there are 5 benefits to building a well thought-out business model:
- Profit is driven by selling work that is inherently more profitable, not by selling low profit and trying to make it up on volume.
- When divisions are built on synergy, marketing translates directly into revenue and profit, thereby lowering your cost of marketing and sales.
- Well serviced clients become more loyal, thus growing referrals and margins.
- Team work is at its highest with cross selling continually going on between divisions.
- Once you fine tune your business model, you become more defensible just like the hedge hog.
You likely already set your budget for the year, so how do you make sure you are focused on a great business model?
Before you kick off the season, take time to double check your assumptions.
At the very minimum, make a list of the work you DO want to focus on, and conversely make a list of the DONT’S (also known as the dogs) i.e. the clients and types of work you need to avoid in order to build profit.
Remember, profitability starts at the sale, so make sure your sales team is focused on the right opportunities!