December 4, 2022
Are you ready to grow?
BY GRANT HARRISON
Growing Your Business is a new Landscape Trades column featuring business management experts writing on the topics that matter to landscape and horticulture professionals.
It’s a great time to be a landscape business owner. The opportunities for growth are greater than they’ve ever been in my memory.
I am seeing a lot of owners expand by purchasing contracts from other contractors who are changing their focus or retiring. Some are instead building by focusing on their existing customer base. And then there are others who are going the route of mergers and acquisitions.
Virtually every business owner I talk to says growing is their primary goal. But it’s important to determine how you want to grow the company, as well as if you’re set up for successful growth before making the decision. Here are a few questions to ask yourself.
Be honest with yourself
The first question is: Why do you want to grow? Is it for your ego? If so, you’re not alone! There is often great peer pressure among business owners (not to mention friends, family and acquaintances) to grow simply for the sake of becoming bigger. If you’re just looking to increase the list of companies you own, you may want to reconsider.Is it to grow your top-line revenue number? It’s not uncommon to see large national providers focus on top-line revenue rather than profit. However, I’d argue this is not a game most contractors can afford to play. Is it to increase profit? This should be the primary reason for growing your business. Being profitable — and increasing that profit margin, should be the goal of every company It is the best way to ensure your company is strong and sustainable.
Is it to provide opportunities for your team? Many of our clients have attracted employees with their great culture and vision. But A-players want to be continually challenged within their roles and given opportunities for growth, which means you need to be thinking ahead and planning to grow the company in order to allow for those opportunities.
Is it because you’re bored and looking for a new challenge? Business owners are usually builders, creators, entrepreneurs, and visionaries. It makes sense that you would be intrigued by something new to build. And as long as your current company is running smoothly and is profitable — mostly without you — then this might be a great time to consider a new challenge.
Questions to consider
Once you’ve identified why you want to grow, some additional questions should be considered:- Have you maximize your services within your current customer base? We see contractors not up-selling to their existing clients, which means leaving lots of high-margin work on the table, especially when it comes to selling enhancements to existing maintenance clients. In our consulting work, we want to see clients sell at least 50 per cent of revenue in enhancements for commercial clients and closer to 100 per cent for residential clients. Instead, what we see is most contractors selling 10-20 per cent. What about offering your current clients more services, such as landscape lighting, seasonal decorations, turf care, or holiday lighting? All these services require low equipment and material costs, but offer high margins.
- When considering expanding your business, especially in today’s labour market, the most critical question you need to ask your existing team is: Are we ready to take on more work with our current squad? So often owners think the team is more prepared than they are to take on new challenges. You have to be an optimist to be a small business owner, but being too optimistic about the ability of your team to handle more work can create huge issues.
- Are you financially ready to grow? Growth eats cash like nothing else. Therefore, you need to have cash reserves to fund the growth. It’s also important to be profitable for at least two years before you consider taking on another company or expanding your current company.
- The final question I would encourage you to ask is, if you say “yes” to this growth, what are you saying “no” to? Will you be saying “no” to investing in your current team and business? Time with family? Greater cash flow? Peace of mind?
Growing for the right reasons
So often, owners want to grow their business for all the wrong reasons. For growth to be effective and sustainable, you need to grow with a plan, not simply because an opportunity fell in your lap. If you have answered the questions above and want to move ahead, here are some things you need in place:- Someone to challenge your assumptions.
- A business plan for growth, including: a budget; marketing strategy; staff requirements to do the work; roles and responsibilities for the team; cash; and great KPIs in the business.
Growing too quickly can be exciting, but it can also be deadly. Some signs that you’ve grown too quickly are higher turnover with clients and staff, increased expenses around equipment damage, warranty work, and low client satisfaction scores. Companies that grow too quickly often receive feedback like, “they used to do such great work,” or “it was a great place to work before the owner got distracted.
Finally, the systems, processes and people you have in place will often determine the sustainability of your growth. Companies revert to the competency level of the team, systems and processes they have in place. If you want to grow and to maintain that growth, you will need to ensure these things are in place, or you’ll need to make changes to them in order to handle the growth. Otherwise, you will likely revert back to the level of revenue and profitability you were at prior to the new business venture.
I’ve never met anyone who doesn’t want to grow their business. But it’s important to be cautious about growth and about timing. As hard as it is, sometimes the wisest thing is to say, “no, not right now.” It could save you a lot of pain and hardship. If you’re looking to grow, talk to someone who has been through these growth cycles. They will likely be able to help you identify if the timing is right for you.
Grant Harrison operates Nextra Consulting with his wife Marla in Ingersoll, Ont. He has previously held management positions with Clintar, and Gelderman Landscape Services, and owned and operated Escapes Outdoor Living.