Or for some of you, the question may be “Why am I not making 10%?”
I hear this query from owners who know they can do better than the industry average of 5%. They know that hard work and smarter approaches can deliver higher returns, but they are not sure what’s possible.
Many of my clients make over 10%, and over 15%, and some even over 20%
They achieve this through a combination of focused revenue generation, confident pricing, and good, old-fashioned cost management.
One of my clients actually asked me if his 20 percent profit should be considered good.
He had already won the lottery, and was wondering if he should be satisfied…or should he shoot for more?
Always Room for More Profit
Depending on where you are starting from, I insist that all my clients budget for at least 10%, and from there they should climb the profit ladder to higher levels.
At any of these levels, you are already among the more successful in the industry.
And yet there is always room for improvement.
You may think your current profit level is as high as it gets. You are wrong.
Let me explain.
What Owners Get Wrong About Profit
- Comparing to industry average. I have never met an owner of a successful landscape firm who comes to me in hopes of owning an average company. Averages combine the winners and the losers. I’m interested in winners only. How about you?
- Comparing to their friend’s landscape or irrigation firm down the street. Each company has a niche that dictates the profit potential. And each owner has different expectations for what’s possible. It’s the combination that drives profit. You want to maximize the profit based on what’s truly possible, and not just settle for what your neighbor is doing.
- Convince themselves nothing big can be done. Cost management focuses on efficiency, cost-cutting and reduction. And while efficiency is key to profit, you can’t cut your way to prosperity. Big opportunities––evident to fresh eyes––also come from accessing service mix, contract structure, level of employees, overhead/overlap, selling skills, incentives, and employee buy-in, to name just a few of the strategies.
- Big profit increases don’t have to come with a 3-5 year plan. The way to increase your bottom line, for example by 5 percentage points, may involve making 10 half-point improvements, or 20 quarter-point improvements. But this does not need to take 3-5 years to accomplish. It is easier to make a series of bold moves upfront, than to spread out small changes over many years.
- They assume that when their company gets larger, they must give up profit for scale. Careful of complacency; some owners of large firms are satisfied to take ‘a small percent on a large volume’, this does not mean you must settle for the same. Hungry companies are in it to win it.
I have never seen a situation where profit could not go up. Ever.
