What’s the right amount of overhead you need as you plan for growth?
To answer that, let’s look at the 3 kinds of companies in the landscape industry:
Skinny Company 1, whose overhead is too low: They are running too lean, burning out their leaders, and not taking full advantage of this economy,
Fat Company 2, whose overhead is too high: They have inefficient leaders, confused org charts, under-trained staff, and growth that is possibly out of control.
Nimble Company 3, whose overhead is just right: Their trained leaders are pulling their weight, managing teams of people working in a good culture.
Which company are you, and how do you know?
Having said that, there is also a 4th kind of company; one that watches and right-sizes its overhead ratio as it grows year to year.
Tracking Your Overhead into Next Year
A few weeks ago, I wrote about taking my peer group through an exercise of assessing their Overhead Ratio (OH Positions vs their Field Positions.
Well, I did this again in Atlanta with another peer group, and we took it a step further. Let me explain.
When we measured the Overhead Ratio of this group, the majority of companies were in the 3 to 5 range, with some below and above.
A score of “3” means that for every overhead position, they had three fully chargeable positions. A Score of “5” means they have five fully chargeable positions.
After we calculated each company’s ratio, I went around the room and told each company where and why I thought they were high, low, or just right.
Then I asked each company what their growth plans were for the coming year, and how that growth would impact their Overhead Ratio.
it was an eye-opening discussion, and many of the companies tweaked or completely changed their 2022 plans on the spot
Your Challenge: As you grow, keep one eye on overhead and another eye on-field staff positions.
First, you must decide if your Overhead Ratio is too high or low, or just right.
Then you have to filter your growth plans through this Overhead Ratio and decide what needs to happen next year to right-size your growth. For example: growing more field positions, growing overhead in a key area, or limiting overhead growth?)
Growing overhead is not bad, and often it is a good thing if you aim for recruiting A players, streamlining accountabilities, and reducing overlap.
To learn more about your Overhead Ratio and how to plan for growth, join us for the Financial Master Class.
We will be collecting this data and diving further into this discussion during this two-day virtual class on January 5th and 6th.
P.S. The early bird special for the Financial Master Class ends in less than two weeks, Nov 30th. Sign up now and save 250 per attendee.