My system is a combination of several different things.
I was tired of hearing everyone say they charge X dollars per hour because, that's what every one else is charging. I did not do very well in this business until I got a GOOD grip on the numbers side of things and that took about 5 years of night school to get that AA in Business Administration. Things started coming together after that.
In 2001, I was determined to come up with a solid, scripited operations system for landscape business's. I read a short piece in a trade magazine about a guy who had developed an operations system and was bringing it to the landscape market. I called him and over the next few months we spent a lot of time on the phone and he invited me to come look at his business. So I made a cross country trip, went to a presentation, saw this guys business and he invited me to join the operation as a trainer / consultant.
I brought my financial expertise and melded it with his operational excellence, and together with a couple other individuals, we developed and perfected his system that has helped hundreds of contractors around the country. Some of the major premisis that this system uses are:
1. Every hour you purchase from an employee MUST be resold to clients.
2. Efficencies MUST be monitored and controlled on a daily basis.
3. Effective Human Resources program and employee training are a MUST for this or any system to work.
4. Overtime is a profit killer with out exception and easily proveable.
5. Return on labor is all we have to make profit on in this business. If you make money on labor, charge some level of markup on materials, (but not counting on it for revenue stream), and effectively control labor and you will make money.
6. Set one overall labor rate for your company, incoporate equipment and other costs into overhead, and use a basic cost averaging type of price level setting.
7. Knowing your EXACT direct and overhead costs per hour allows you to add profit as you see fit, (no less than 8% for sustainability in the business), and makes you discipline yourslef to not EVER work for less than your set net profit and to protect it at all costs.
6. Set a target amount of hours you need to sell, and sell to that and no more, unless you have it carefully planned and budgeted for.
on and on and on... there are many guidelines. There are many companys out there that have benifited from this, some in the millions of dollars that we turned around in 18 months. This system has worked for me and others, but the main thing I stress is that you need a SYSTEM, whether it is one like this or some other one.
Structure is very important to a functioning business, and the tendency of the left brain artist, creator person in this business is to hope that the numbers follow the creativity. It very seldom happens.
I deviated from some of my own operations procedures this year and it impacted my business in a negative way. I got away from my human resources program, and this effected every other part of the system. What you will find in ANY system, is that it is very interdependent upon other parts of the system, and the failure of one part, can generally be over come, but failure of one, not dealt with, leads to another failure and another, and pretty soon you have a major problem.
The employee problem hurt efficency and support operations, other employee's saw the problems and created their own. I became too focused on the employee problem and allowed the efficency monitoring and job control, sales and estimaiting to suffer and as a result we hit a pretty big wall real
hard in mid August.
We are on our way out of the hole, but it certainley is going to set us back at least a year or more. I am returning to the field on a part time basis, I have my operations manual out and going into a TOTAL REVIEW of the operations and getting us back on track.
Planning is very important and planning carefully got us to where we were in the first part of the season. I have carefully planned out our nursery operations, which is following close to plan at this time, and I am pleased at this point with that. I fully expect to sell or liquidate the landscape business in 3 to 5 years and go strictly nursery. That is what we will plan for , and what I expect to see.
By the way, this employee problem was also a family member, so my judgement was clouded by that and kept me from dealing with the problem as fast as I should. NEVER, NEVER, NEVER, hire family and expect suitable performance, or a level of honesy.
