April 1, 2020
Dodge the hiring problems a little bit longer
BY MARK BRADLEY
Before you take on 2020’s biggest challenge for landscape contractors, first focus on getting the most out of the people you have. Talk to any landscape contractor these days about their issues, and labour is the first problem out of their mouth. Finding people who want to do it, and can do it competently, is perhaps the single biggest challenge faced by the green (and snow) industry today. Companies with opportunities to grow are stagnated by lack of access to willing labour, and it’s having a serious impact on companies everywhere. You are not going to fix the labour pool overnight, you are not going to change the millennial mindset, and it’s unlikely you will come up with a hiring strategy that no one else has thought of (or tried) already.
So what can you do? Start by focusing your time and efforts on the things you can control. Here are several strategies to help you maximize productivity of the staff you have.
Stock up on equipment
There are many good reasons to use equipment instead of labour; the hiring problem is only one of them. For one, it’s cheaper. The average skid steer costs a little less than $20 per hour to operate, including depreciation, fuel and repairs. It will cost you the same (or a little less) than the average labourer, but it can produce three to five times the amount of work in an hour. Plus, it’s more reliable, takes fewer sick days, needs less management and overhead, and a skid steer won’t up and leave if the competition offers a little more.
Also, you will earn more sales in less time. Imagine doing patios entirely by hand vs. machine. The excavation and base prep will take two to three times as long, at least! Or imagine mowing large areas with a push mower. Working with equipment means each job goes faster. And the faster each job goes, the more time you have to do more jobs … without adding more staff.
Chase maximum revenue per hour
When focusing on “the best” jobs, most estimators and sales staff focus on net or gross profit. Both are good numbers to focus on, but you should pay close attention to another number, revenue per hour. Revenue per hour measures the amount of sales revenue, per man-hour, that a job generates. It is very easy to calculate. Simply take the selling price of the estimate and divide it by the number of man-hours in the estimate to calculate how much revenue — per man, per hour — the job is generating.
Jobs that maximize your revenue per hour help you hit sales goals (and recover overhead) faster. It helps to look at a real example.
You could have a 100-hour contract to mow grass — nothing more. You might be able to get $50 per hour to mow the grass, so the most you are likely to earn is $5,000 for the 100 man-hours you will invest. The gross profit likely looks good because the markup on labour is healthy, but it will be hard to generate big sales numbers, because you have to add a lot of people to get there.
Now compare that to a 100-hour planting job, where you are installing all kinds of plant material. Since your crews are installing material, and the customer is paying for it, your crews might generate something like $15,000. Your revenue per man hour is $150 — three times better than the mowing job. This company could hit the same revenue as the mowing company above, but with just one-third the staff. As a bonus, it would need less equipment and probably less overhead, with fewer people to manage. That is a very compelling advantage.
Jobs that maximize your revenue per man-hour will help your company grow its sales revenues, without adding more people. It keeps you focused on the jobs that maximize return on investment for your most scarce resource: field labour hours.
Automate your office
Ditch the paperwork for good. Pushing paper around is extraordinarily inefficient, time consuming and mistake-prone. Customer management, accounting, payroll and job costing can all be managed far more effectively with software.
You would not mow a lawn with scissors, so don’t manage your data with pencils and paper. It’s too little data arriving too late, and you are working way too hard and too long every day because of it.
A contractor commented to me recently he had taken invoicing for snow events down from 28 days to two, as a result of automating snow tracking and invoicing. Not only is he getting paid sooner — his overhead staff are freed up to work on other business-critical activities. This will allow him to grow and prosper without having to add overhead staff until much later. This helps with the hiring problem, and profit margins will be higher (or prices more competitive) given the lower overhead.
Engage and share goals
A very important step in beating the hiring problem is to reduce turnover, and get the most out of the staff you have. That is why it’s so important to use your estimates for more than just calculating a price. They should set up a plan for every job.
By providing your staff with a clear plan for profit on every job, you will certainly see increased productivity and profitability.
If you can use these plans to increase staff productivity by 15 per cent (and we have seen it happen), that’s an easy way to grow your business without having to hire more people.
But plans do more than improve productivity — they engage your staff in the process. When your estimates clearly spell out the labour, equipment, materials and instructions for each job, your foreman and managers have the opportunity to work towards goals. These goals engage them in the game, or sport, of business. They know when they are doing a good job, they know you know they are doing a good job and their job satisfaction will increase. And when there are problems, you will be able to identify and eliminate them much sooner — making their lives a little easier, and your business far more profitable.
Mark Bradley is CEO of LMN and the former CEO of TBG Environmental, both based in Ontario.