February 15, 2011
By Mark Bradley

Mark BradleyLast time Dan and Bill met, Bill revealed his secret to becoming a profitable company. “You need to be a planning company,” Bill insisted. At the time, Dan thought it was a great idea in theory, but he was a little lost on how to actually become a planning company. Bill showed Dan the best way to start is with an operating budget. He then demonstrated how to use it to price work profitably and better manage decisions.

With a year under his belt, Dan felt a new confidence in his numbers, his decisions and his pricing.  But something was still missing.

“OK,” said Dan, “I feel more ready than ever. My budget and pricing system have given me new confidence in my business this year, and more so than ever before. I feel like I’m starting to work on the business, as well.  We’ve never had this much momentum moving forward.”

“Great,” said Bill. “Be sure to stick to it now. Systems are only as good as the people who use them,” he explained.

“I’ve been meaning to ask about that - how do you get your people buying into the systems?  I know I’ve got guys who are going to laugh at this.  Not to my face – but you know what I mean?  As much as I get charged up about this, I also feel that, the wheels are going to fall off by late May,” Dan said.

“Why would it fall apart?” asked Bill

“It always has.” Dan trails off, as he thinks about his crew, “We do it for a few weeks, then the guys just stop.”

“Why would you let that happen?” asked Bill.  

“I don’t know,” said Dan, hesitantly. “I’m just trying to be realistic. Most of our past changes and improvements just haven’t stuck. We go back to the way things have always been done.”

“But you’re telling me those ways are broken, right?” Bill asked. ”Don’t let it fall off. You’re the owner, and you call the shots. This is your job. Hold people accountable.”
“How did you do it?” Dan asked.

“I guess, if I looked back, I could track it back to two things. Good people and a system that tied their wages to their performance.”

Good people

Bill stressed the importance of having a team of good people working for you. “If it weren’t for some of the great people I’ve had over the years, none of this would have happened,” he said, confidently. “Hiring and training people are top priorities. A long time ago, when I was working with the crews, things ran fairly smooth. It wasn’t until I stepped back into the office that I realized just how fragile our success was. I needed a few leaders who could think-on-the-fly, make good decisions, and manage a job like I would.”

“I hear you,” said Dan.

“It’s not easy to find good people, Dan, but finding and developing leaders are critical to your success. The more great people you find, the more you can grow your business. It’s a simple recipe,” said Bill.

Systems that reward

Bill continued, “You can’t expect great people to work in a messed up company. They won’t stick around. Great people need two things to thrive:  good management systems, and a pay-for-performance system that ties the company’s success to their success.”

“So how’d you do it?  How did you pay for performance?” Dan asked. “I’ve struggled with this for years at Danscaping.”

“So did I,” said Bill, “until I really started looking at each crew like it was a small company. If you think about it, that’s not too far from the truth. Your foremen are mini-owners within your company.”

Mini-owners? This is a concept Dan had never considered. But all of a sudden it made perfect sense. “Go on,” Dan said.

“It started when I was reviewing my budget, trying to earmark money for bonuses,” Bill started to explain. “It dawned on me – I was planning to reward people before I’d even measured their performance. I took a step back and thought about it. An owner doesn’t get rewarded for performance until after the job is well done, and that bonus is called profit.”

“Profit sharing? How does it work?” Dan questioned.

Bill said, “Profit is what’s left of sales after expenses, and overhead is paid.  I needed a system that paid the employees like I got paid. It changes the way my employees make decisions. So I simply broke my company operating budget down into crew budgets.

“Take your company budget and divide it across your crews. Each crew has a specific sales goal, and gets assigned a percent of those sales to pay equipment, overhead, materials, and other expenses,” explained Bill.  

“My job and your job, Dan is to sell the work, price the jobs using a pricing and overhead recovery system that’s tied to our budget, and manage our spending accordingly,” explained Bill. “The foreman’s job is to bring each project in on-time and on-budget. If we both do our jobs, we can assume that:
  • On the date we hit our sales goal, our overhead is paid (our pricing system helps to ensure that).
  • On all sales over and above our sales goal, what was overhead recovery is now bonus money.
  • The earlier we hit our sales goals, the bigger the potential bonus.

Bill advised Dan to set up his company with systems that turn foremen and supervisors into mini-owners. “You don’t have to share every number. But you need a system. You need foremen to think about their work like you thought about it when you were in the field, growing the company. You’ll find that some people won’t fit your new system, but the ones that do will help you turn your company from average to incredible.”

Want to build a budget to help you start the process? This winter, Landscape Ontario and the Landscape Management Network are offering Plan for Profit and Estimating to Win courses. Get yourself to a course.  Learn how to:
  • Build a plan for profit
  • Estimate with a system that’s based on the plan
  • Turn your estimates into a plan that improves productivity, sales, and your profit.

Information about Landscape Ontario’s and LMN’s Plan for Profit and Estimating to Win courses are available in the Professional Development Guide, or online at www.horttrades.com under the Professional Development heading. 
Mark Bradley is the president of The Beach Gardener and the Landscape Management Network.