Tag Archives: Management Success

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5 Levels of Financial Management: Terrible, Poor, Good, Better, and Best!

Growth Tips, Management, , , ,

There are five levels of financial management in the landscape industry. They range from Terrible, Poor, Good, Better to Best.

Where does your company operate financially?

The following framework will help you identify where your company stands from a financial management perspective and where you can improve. 

Read through these five Levels of Financial Management and get clarity on your next steps:

Level 1: Terrible

Companies that do only a year-end review of their numbers are greatly underperforming. This is a Terrible way to manage your business because you are in effect not managing by your numbers at all. Most companies who operate this way are simply so deep in the weeds of their day-to-day operations that they don’t take time to budget, monitor, and course-correct, which costs them double-digit points of profit. They follow the “wing and a prayer” method, which usually doesn’t keep you aloft.

Level 2: Poor

Companies that do a quarterly review of their P&L and Balance Sheet are doing better than Level 1, but it still qualifies as Poor because they leave so much to chance. For example, your company can go off track in July, and you will not find out till October. Companies like this often rely upon outside accounting services to pull this together. If that is you, then upgrade your investment to get monthly reporting, or better yet, take this critical role in-house.

Level 3: Good

Companies that do a formal monthly review of their P&L are doing better than so many unprofessional competitors out there. This is a Good level, but to truly benefit from his, you must make sure you are comparing monthly actuals to a monthly budget. This allows you to do the double comparison of actual v.s. budget, and actual v.s. last year. Once you create budgets, you can implement a Rolling Budget and use this to both steer your performance and teach your finances to your team.

Level 4: Better

Companies that do a monthly review of their divisional numbers, and a weekly review of operational metrics, are doing better than most all landscape firms – professional or not. Managing with divisional numbers (monthly v.s. actual) allows you to empower your managers to run and own their divisions. Using weekly reports (with daily check-ins) allows your production teams to take ownership and steer their own results. This Better level of financial management allows a business to really scale and frees up the owner to be more proactive and entrepreneurial in leadership. 

Level 5: Best

Companies that tie their budgets, commissions, and incentives to a high-profit goal are achieving the highest level of profit by not leaving extra monies on the table. This is the Best way to manage because it gives you the consistency and empowerment of Level 4, with the winning strategy of having company goals dialed in to achieve breakthrough results. (20% net profit and above for residential work, and 15% net profit and above, for commercial). Surprisingly, many companies hit level 4 and think they have hit the top, but they still leave a lot of money on the table. 

Here are a few questions to consider as you assess your next steps: 

  • Which of these levels do you operate at?
  • How well does your team understand and support your financial goals?
  • What do you need to do to get to the next level?

Because so many issues that you face are ultimately tied back to proper financial management, I recently created a Financial Masterclass. You can learn how to master your numbers and implement the tricks and strategies needed to operate at Level 5, where the most profitable landscape firms operate. Check it out here.

Your Challenge:

The challenge of improving your financial management is four-fold:

  1. Make this a priority.
  2. Get the systems in place to operate at Level 4.
  3. Implement the strategies to then raise you to Level 5.
  4. Get the buy-in of your team to achieve this high level of performance. 

You can’t do this alone; you need your team to support these efforts.

For those of you who want to improve your financial decision-making and actual financial performance, register for the Financial Masterclass now, while the early bird pricing is still valid. 

It is a one-of-a-kind event that has never been offered before in our industry. Have your second-in-commands attend as well if you want to improve their buy-in and financial literacy. 

According to Kevin McHale, owner of McHale Landscape Design in MD, “Don’t miss this exceptional event run by one of our industry’s most insightful leaders, Jeffrey Scott. He provides an honest and clear path to understanding the financial and management components of the Landscape Industry.”

Dramatically Change Your Company Culture in Just One Week

Employee Retention, Employees, , , ,

What if you could dramatically change your company culture in just one week?

In a way that would foster deep leadership buy-in, sharpened leadership focus, and surging employee morale?

It may sound like pixie dust, but I have seen it happen over and over.

This is not meant to be a brag, but rather to show you what’s actually possible in your company.

Last week, Wade Vugteveen, co-owner and CEO of DeHamer Landscaping outside Grand Rapids, MI, brought his executive team to visit with me in New Orleans for a strategic retreat (see photos below).  In his words, here is what he experienced after the first five days after returning to work.

 “I told my wife that I don’t really recognize our company this week. It feels like a different place.” – Wade Vugteveen

Here are seven specific changes they made –– out of probably 20 motivating and profitable changes they implemented in the first week:

1. Hold an all-leaders team-building meeting.

They held a company meeting with all leaders where they played a fun game for everyone to get to know each other and then laid out their new company values. (Their Sales Manager, who is usually quiet and in the background, led this meeting with enthusiasm.) Each foreman took the time to talk about him/herself by answering a list of questions they created. Wade said it was a great meeting that felt entirely different from anything they have ever done. It was very well-received by their team; the energy and attitude were amped up! 

2. Nominate Chief Energy Officers.

During the strategic retreat, Wade and the team decided that Adam, one of the owners, would take on the role of Operations Manager. When they got back to work, Adam set up a three-person team to be responsible for the energy and attitudes of the entire production group, with the goal of leading everyone to more positive attitudes in the workplace. Adam named this team the Chief Energy Officers. 

3. Set up a personal database.

Adam, as the new Operations Manager, created a database of all of their team members and set up a schedule to give them formal reviews (which had not been done before). Adam collected personal information from all of his new direct reports so that the executive team could get to know and care for their people better. Within the first week, Adam had already met with half of the team, giving raises and re-setting expectations. This caught a couple of unhappy team members by surprise. It worked out super well!

4. Take the team to lunch.

The bar at my favorite restaurant, where I took the Dehamer executive team for a pre-event, southern creole meal.

Their Sales Manager had lunch with his salespeople and re-set much clearer expectations. Sounds like a no-brainer, but this was not part of the original Action Plan we had set. He simply made it happen. This should be happening a couple of times a year; lunching with your key leaders. When is the last time you took your people to lunch one at a time?

5. Find out what irritates your team the most and fix it.

They paved their parking lot, and oh-man did everyone really appreciate that. What’s one thing you could do to elevate everyone’s mood?

6. Remove the fires and decisions from your plate.

As CEO, Wade has been much less stressed and has had time to really focus on his role – there has been much less distracting discussions around the office and more people taking responsibility and just getting stuff done. Gotta love that. How freed up is your time?

7. Gain buy-in for cross-selling services.

Hard at work, the Dehamer executive team at my strategic retreat in New Orleans.

Their install salespeople have already sold a few lawn care and snow contracts in this first week, and they have become excited about supporting the growth of services, which was not the case before the strategic retreat. We laid out an entire cross-selling strategy where everyone will have responsibility for growth, not just the service sales team.

Wade also told me that on the flight back home, they decided to step up their plan to grow their sales team. And they already made an offer to a lawn care salesperson as a way to really accelerate the growth of their services division.

I am told that their executive team has gelled and bought into the growth plans that we laid out. As Wade shared with me, he does not recognize his company after just one week – It feels like a totally different and better place. 

Your Challenge:

It’s one thing to do a strategic planning session with your team, be it quarterly or annual.

But, it’s completely different to transform the energy of your team and actually create a plan that dramatically improves your culture and your financial results.

Your challenge is to think outside the box next time you hold a strategic planning session with your team.

To help this, create your own R&D program (rob & duplicate). Steal one of these ideas from above and implement it in your company.

Female athletes running towards finish line on track field

The Fourth Quarter Sprint: Seventeen Strategies to Drive Profit by Year-End

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Your performance in the final quarter of 2020 will have an oversized impact on how much net profit your company earns this year.

Weekly Throughput: The main driver of net profit in the final quarter is measured by your company’s Weekly Throughput i.e. the amount of billable production work your company can produce (“put through”) each week.

Here is why this is so important: Even though you estimate for a net profit with each and every sale, starting with your first sale in January, the fact is that all the profit from those sales goes towards covering your overhead (OH) until all your overhead is paid for. Once your overhead is covered, you have reached what accountants call your break-even date.

Once you hit your break-even date – all the profit you then make from every sale goes straight to your bottom line.  Not only the net profit, but also the operational profit (that previously went to pay for overhead) now goes straight to the bottom line.  This date is generally hit right before or in the 4th quarter.

Operational Margin: My high-performing clients are able to achieve an Operational Profit Margin in the upper 30%, some even up to 45% depending on the type of business they are in and how long they have been working with me on continuous improvement. If your operational margin is, for example, 40%, then after you hit break-even, every dollar that gets produced will put approximately 40 cents towards your bottom line, and even more given that some of your operational costs are fixed.

To this end, the more sales that your team can produce and bill in this final quarter, the more net profit you will ultimately earn.

Conversely, if you have too many hiccups this fall, you put your net profit at risk.

Here are 17 ways to increase your Weekly Throughput:

  1. Keep salespeople motivated to continue selling strong up through December. Use situational and year-end incentives to keep up the selling momentum. Having an increased backlog puts positive pressure on the crews, so they have more than enough work to chew through.
  2. Decrease the non-billable time (morning, travel, deli and gas stops, evening) so more time is spent on billable work.
  3. Eliminate the unnecessary go-backs needed to complete a job by ensuring crews are properly equipped and dispatched, with trucks and tools operating smoothly.
  4. Ask crews to be flexible in bad weather, so you can hit your Weekly Throughput goals.
  5. For those who pay overtime (OT), use it to get your extra backlogged work done; the incremental cost of OT will be more than offset by an additional operational profit that will drop straight to your bottom line. Do the math!
  6. Sell more fall and winter add-on services. Remember, enhancement sales can be sold at a much higher margin than your standard work anyhow, so it is a double win.
  7. Avoid lower margin install work, but take it only if you can be guaranteed that doing it will not displace other high margin work.
  8. Walk every maintenance property and sell them services to be done a.s.a.p. (and in the spring.)
  9. Find extra work that can be performed by crews already on maintenance properties.
  10. Sell holiday decor now to be done this fall. This should be very high margin work!
  11. Sell fireplaces and hardscapes to be done now (and during the milder winter.)
  12. Raise your 2021 hourly rate right now, and apply it to your fall work. Who says you have to wait till January to raise rates?
  13. Deliver your holiday presents to clients early (now through Thanksgiving); and they will likely give you more work to take care of.
  14. Incentivize your crews to increase their Weekly Throughput. Make crews accountable for their weekly production goals, and motivate them to be as efficient as possible. Share the winnings when they sprint through the finish line.
  15. Create fun weekly internal competitions for crews to outperform their peers. Use forced ranking each week to show the winners.
  16. Borrow or rent equipment in order to increase the amount of work that can be produced in a given week. Make use of equipment to increase your throughput.
  17. Keep your company vision and purpose front and center. In the end, people are motivated by a higher purpose and not just a paycheck. So show them the greater virtue of following through on your client promises and giving your clients the beauty that only you can provide.

Connect the dots:

Many employees may not immediately grasp how sprinting through the finish will benefit them and their families. Take the time to explain it to them by connecting the dots on how it benefits the company and how it benefits them directly. Using an incentive plan on its own is not enough. You have to explain the details and what’s in it for them.

YOUR CHALLENGE:

Pull everyone together and explain to them which day in your calendar you hit break-even, and how the production during the 4th quarter will help the company hit and beat its year-end profit goals, thus benefiting everyone.

Make it a rally cry, make it fun, and celebrate the wins!

Young male constructor worker in orange hardhat thinking with one arm crossed and the other on his chin

Poach or Be Poached?

Employees, , , , ,

A recurring question that you face—and one that I am asked occasionally—is it okay to poach employees?

And/or what should I do when someone is poaching my employees?

First off, when someone offers one of your better employees $10k more and they leave, either they were unhappy with you, or you were underpaying them, or underutilizing them, or all three.

However, what if they leave for just a $2-4k raise? or for no raise at all?

That is why I believe this question, “Is it okay to poach?” is the wrong question to ask because it covers up (hides) the larger dynamic happening in the market place.

It’s a seller’s market.

Your company is either growing or shrinking when it comes to talent retention and acquisition.

The growing companies in your market are winning employee market share—and the shrinking companies are losing out on the best employees. And poaching has nothing to do with it.

By my definition, growth means growing in reputation, career opportunities, and client opportunities. These companies are becoming a true Destination Company®️.

Since I published my prescient book (Become A Destination Company®️) over three years ago, I have seen the competitive nature of attracting and hiring employees become even more acute.

The newer generations of good employees have even higher standards on what they want from an employer. It is a race to the top!

Your challenge: Build a company culture that promotes growth from the inside out. Where all the leaders at your company are focused on developing and retaining top talent.

Back to the question – Is poaching ethical? It is not professional when it involves you walking onto job sites. But your company should be so attractive that great employees want to walk across the street to work for you.

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20 Hour Work Week Challenge

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Do you work full time, or are you able to take time off –– and diversify your interests?

I am currently working with a seasoned but young business owner who has moved his family overseas to live in the promised land. I am coaching his GM and working with his team; he works an hour a week.

What would you do if you had an extra 10, 20 or even 30 hours free each week? How would you spend it? Continue reading 20 Hour Work Week Challenge →

Jeffrey’s 5 Ps of Sales Management Success

Management

The tragedy of sales management is that good (and sometimes great) salespeople are promoted to sales managers, where they often fail. The skills that make up a good salesperson are different from those that embody a good sales manager.

Ironically sales management is a role you can’t study for in school; you mostly learn it on the job, and yet if you want to grow your business you need to master this role – and then be able to manage the person overseeing sales once you have grown beyond doing this job yourself.

A common mistake a new sales manager makes is that they under manage their salespeople because they themselves needed no management to succeed. Being a good sales manager is in knowing what to manage; here are the five fundamentals to give you a good footing: Jeffrey’s 5 Ps of Sales Management.

  1. Pipeline—is the tracking and measurement of activities and results that the salesperson is responsible for. It’s starts with the monthly sales target your salesperson should hit, and then breaks down further into activities per month: # of proposals, # of face to face appointments, # of property walk-throughs, and # of phone calls. A sales manager’s job is to keep the sales backlog full; he (or she) should never be surprised at what is (or isn’t) coming down the sales pipeline.
  1. Performance pay–outlines how the salesperson gets paid and thus what they focus their energies on. I have seen all kinds of plans –some disastrous and some decent–the best performance pay plans are very simple and have two attributes:

1) A commission percentage for sales above a certain gross margin (with perhaps two levels of commissions hitting two levels of margins). It can be based on actuals (as built) or estimated, depending on who is doing the estimating.

2) An achievement bonus for reaching and exceeding a high level of cumulative sales. This can be monthly or quarterly though annual is most straightforward and lines up with the actual budget. For example, a very smart contractor I work with in Michigan had 3 salespeople selling around 600 to 700k, until he added the achievement bonus (at an amount higher than 700k) and his sales team immediately started selling up towards the million dollar mark. Salespeople and owners love the achievement bonus–it’s win-win.

No matter how you tweak it, it’s critical that the performance pay reflect the sales volume and gross (or net) profit you are budgeting to hit.

  1. Pricing–salespeople need consistent pricing systems, for two reasons. If they don’t have confidence in the pricing mechanics then they won’t have confidence in their own performance pay. They need to believe in the system, and it must be relatively straightforward to use. Secondly, they also need the confidence to sell at full price. If they doubt in the pricing it will show through in the mark up they are able to attain and in their tendency to give things away.

Most important for the company, if you don’t get the pricing right, you could sell yourself out of business! (I have seen all to many companies do this; sell work that doesn’t cover their overhead, and then when the growth stops they realize they are out of cash.)

  1. Profile—the underlying key to sales management success is having salespeople who have the right personality and skill set (get this wrong and no amount of sales management will help). Too many people are promoted into sales because they have the technical smarts, or a pleasant personality that their customers like, or because they have the gift of gab (yikes!) These first two personality traits are nice to have, but the following traits are “must have”:
  • A history of successful sales, reflected in a prospective salesperson’s earnings history.
  • Personality traits of: self confidence, ambition, thick skin, listening skills, social graces, organizational aptitude, and a reasonable IQ all of which can be ascertained in a professional personality profile. (I have my proven favorite, but you can find many out there)
  • Experience with the sales cycle of your particular service (someone who can sell a quick hit $99 item will have trouble with a $25,000 multi appointment item, and vice versa.)
  • A good fit for the type of sales position: an account manager won’t make a good business developer, and vice versa.

If you are taking over an existing sales team, you will want to analyze the profile of your team and see what cards you were dealt and develop a subsequent strategy to address their strengths and weaknesses.

  1. Process–As I have covered in-depth in recent articles in Landscape Management (LM) magazine, the right sales process is critical to success, where the bad (Red Light) leads are filtered out, and the good (Green Light) leads receive the preponderance of the salesperson’s time and energy.

This requires a screening process and a clear understanding of who the company’s target client is, and isn’t. (For more insight, see my related article in LM magazine.

In total, if you get all 5 Ps of Sales Management right your chances of success are greatly multiplied. But get these wrong and no amount of sales management will save you.