January 15, 2010
Important to determine growth strategy
By Mark Bradley
In last month’s article, we introduced Dan and his landscape company, Danscaping. We illustrated some of the problems that Dan is struggling with while running his company. We also introduced Bill, Dan’s long-time friend and mentor, who after carefully listening to Dan’s account of the problems, agreed to try to help him fix his business.
On Saturday night Dan’s phone rang. Bill’s number came up on the display, and Dan jumped to answer the call.
“Hello Dan, I’m just sorting through your business plan and I have a couple of questions. Do you have a minute?” asked Bill.
“Of course,” replied Dan.
“The other day you mentioned that your company has some big problems, both in terms of cash flow and operations. But the plan you put together forecasts a 10 per cent increase in sales next year. Is that right?”
“That’s right. I’ve got to find a way to do more sales,” said Dan. “The business isn’t turning any profit right now, so we need to get our numbers up.”
Dan paused for a second to think. He had always associated growing his company with increasing sales, but now he began to suspect this strategy wasn’t the right fit.
Bill continued, “Over the years I’ve watched a lot of good owners lose their businesses by growing too fast. They were out of control. The reality is that your problems aren’t going to disappear with growth, they’re going to get worse, and you’ll need to spend more time to fix them! I think what you‘re looking for is financial stability at this time, so I want you to revise your plan to focus more on profit and less on growth. For some companies, growth is a good goal, but it’s not always necessary to make more profit,” said Bill.
Dan could see what Bill was getting at. “What you’re saying does make sense. I definitely can’t handle any more growing pains right now.”
Looking further down Dan’s business plan, Bill focused on the next issue he wanted to discuss: planned new hires. “I see here that you plan to hire more staff to achieve this growth?”
“I needed more production people to meet the increased sales goals.”
“And exactly how many more people did you plan on hiring?” asked Bill.
“At least two more labourers; I think our skilled positions are set. I also thought that by hiring a true field supervisor, I could spend less time managing the work and more time improving customer relationships and selling jobs. I know I can manage the business better if some of the day-to-day problems were taken off my plate.”
“And how much will these people cost you, relative to your projected increase in sales?” asked Bill.
“I figure the new wages will cost the company an additional $120,000 per year.”
“But you forecast a $190,000 increase in sales. What makes you so certain this is going to make you more profitable?” asked Bill.
Dan paused for a second to think. He was caught a little off guard by Bill’s questions.
Bill continued, “And which costs will drop, and by how much exactly?”
“I couldn’t tell you off the top of my head,” scrambled Dan, “but I’d guess…”
“That’s not good enough,” said Bill. “You need real numbers to back up such important decisions. The problem is your business plan doesn’t include any meaningful numbers. There are goals here, but there are no plans to meet them. How are you going to lead your business if you don’t know exactly where it’s going? How am I going to help you by debating your opinions and beliefs?”
Bill continued, “Our first project will be to build you a proper operating budget. An operating budget will quantify your opinions with numbers, and it’s going to inject logic and thought into your business plans.”
Dan felt a little uneasy about Bill’s plan. Dan had built budgets before, but he never actually used them.
“I’ve never seen the point of a budget,” said Dan. “I’ve tried them before, but my projections never seem to work out. Really, what good are they if they’re not in sync with reality by the end of the week?”
Reassured by the certainty in Bill’s tone, Dan committed to try again.
“So, a budget is really that important? No problem, then. Listen, whatever you say is best, I’ll do. Where do I start?” asked Dan, eager to get his company back on track.
“You already have.” said Bill. “But let’s first clarify your company’s goals, because the future you see is the future you get. Vague, non-specific goals lead to random, ineffective execution. The first step for you is to clarify your goals.”
Wish you knew a Bill to help steer your company in the right direction? Join LMN and Landscape Ontario for the Seize Control at your Operating Budget workshop series. Bring your company’s numbers, and leave with an operating budget and pricing system built specifically for your company. At only $100 for three full days of education, guidance, and advice, there has never been a better opportunity to improve your business. For more information, go to www.horttrades.com, or www.landscapemanagementnetwork.com, email at workshop@landscapemanagementnetwork.com, or call 1-888-347-9864.
Mark Bradley is the president of The Beach Gardener and the Landscape Management Network.
In last month’s article, we introduced Dan and his landscape company, Danscaping. We illustrated some of the problems that Dan is struggling with while running his company. We also introduced Bill, Dan’s long-time friend and mentor, who after carefully listening to Dan’s account of the problems, agreed to try to help him fix his business. On Saturday night Dan’s phone rang. Bill’s number came up on the display, and Dan jumped to answer the call.
“Hello Dan, I’m just sorting through your business plan and I have a couple of questions. Do you have a minute?” asked Bill.
“Of course,” replied Dan.
“The other day you mentioned that your company has some big problems, both in terms of cash flow and operations. But the plan you put together forecasts a 10 per cent increase in sales next year. Is that right?”
“That’s right. I’ve got to find a way to do more sales,” said Dan. “The business isn’t turning any profit right now, so we need to get our numbers up.”
Improvement and growth are not the same thing
“Listen Dan, improvement and growth are not the same thing,” said Bill. “Ask yourself, are you looking to grow your business, or grow your profits?”Dan paused for a second to think. He had always associated growing his company with increasing sales, but now he began to suspect this strategy wasn’t the right fit.
Bill continued, “Over the years I’ve watched a lot of good owners lose their businesses by growing too fast. They were out of control. The reality is that your problems aren’t going to disappear with growth, they’re going to get worse, and you’ll need to spend more time to fix them! I think what you‘re looking for is financial stability at this time, so I want you to revise your plan to focus more on profit and less on growth. For some companies, growth is a good goal, but it’s not always necessary to make more profit,” said Bill.
Dan could see what Bill was getting at. “What you’re saying does make sense. I definitely can’t handle any more growing pains right now.”
Looking further down Dan’s business plan, Bill focused on the next issue he wanted to discuss: planned new hires. “I see here that you plan to hire more staff to achieve this growth?”
“I needed more production people to meet the increased sales goals.”
“And exactly how many more people did you plan on hiring?” asked Bill.
“At least two more labourers; I think our skilled positions are set. I also thought that by hiring a true field supervisor, I could spend less time managing the work and more time improving customer relationships and selling jobs. I know I can manage the business better if some of the day-to-day problems were taken off my plate.”
“And how much will these people cost you, relative to your projected increase in sales?” asked Bill.
“I figure the new wages will cost the company an additional $120,000 per year.”
“But you forecast a $190,000 increase in sales. What makes you so certain this is going to make you more profitable?” asked Bill.
Dan paused for a second to think. He was caught a little off guard by Bill’s questions.
Need real numbers
“I think we’ll improve our efficiency because the supervision and planning will be better,” he said.Bill continued, “And which costs will drop, and by how much exactly?”
“I couldn’t tell you off the top of my head,” scrambled Dan, “but I’d guess…”
“That’s not good enough,” said Bill. “You need real numbers to back up such important decisions. The problem is your business plan doesn’t include any meaningful numbers. There are goals here, but there are no plans to meet them. How are you going to lead your business if you don’t know exactly where it’s going? How am I going to help you by debating your opinions and beliefs?”
Bill continued, “Our first project will be to build you a proper operating budget. An operating budget will quantify your opinions with numbers, and it’s going to inject logic and thought into your business plans.”
Dan felt a little uneasy about Bill’s plan. Dan had built budgets before, but he never actually used them.
“I’ve never seen the point of a budget,” said Dan. “I’ve tried them before, but my projections never seem to work out. Really, what good are they if they’re not in sync with reality by the end of the week?”
Budget doesn’t predict future
“It’s not the fault of the budget,” said Bill. “Your operating budget is not meant to predict the future. The purpose of an operating budget is to provide information you need to make good business decisions to reach your business goals. When you use your budget as a planning tool, rather than a forecast that hangs on a wall, you’ll make your projections become reality. An operating budget is non-negotiable; if you want my help, Dan, this must be your first step to fix Danscaping.”Reassured by the certainty in Bill’s tone, Dan committed to try again.
“So, a budget is really that important? No problem, then. Listen, whatever you say is best, I’ll do. Where do I start?” asked Dan, eager to get his company back on track.
“You already have.” said Bill. “But let’s first clarify your company’s goals, because the future you see is the future you get. Vague, non-specific goals lead to random, ineffective execution. The first step for you is to clarify your goals.”
Wish you knew a Bill to help steer your company in the right direction? Join LMN and Landscape Ontario for the Seize Control at your Operating Budget workshop series. Bring your company’s numbers, and leave with an operating budget and pricing system built specifically for your company. At only $100 for three full days of education, guidance, and advice, there has never been a better opportunity to improve your business. For more information, go to www.horttrades.com, or www.landscapemanagementnetwork.com, email at workshop@landscapemanagementnetwork.com, or call 1-888-347-9864.
Mark Bradley is the president of The Beach Gardener and the Landscape Management Network.