Landscape Management, March 2010

THEBENCHMARK The author is the owner manager of 3PG Consulting Contact him at kkehoe@ earthlink net Memo The rules have changed I like watching professional poker on TV It is especially interesting to me that the young guns consistently beat the experienced pros I think its because the younger guys are not playing the same game as the older guys and somehow the old pros missed the memo explaining the rules of the game had changed Something similar is happening in landscape contracting The rules of the game are changing Yet too many contractors insist on playing by the old rules The research on pricing is clear In almost every market prices have fallen by nearly 25 over the past fi ve years The forecast is for an additional 20 This one reality driven by declining commercial and residential spending and an increased supply of contractors will affect every contractors planning budgeting and management processes Everyone will need to relearn how to make money in this kind of business environment The old rules provide little guidance Heres my take on the new ones 1Volume is more important than gross profi t margin percentage Too many contractors fi xate on gross profi t percentage when bidding work when the game has shifted to gross profi t dollars The new game calls for Rebuilding your pricing model to work on lower margins on some services and higher margins on others Addressing your product and service deliverables by refi ning scope and frequencies and Investing more in marketing and sales 2 Reduced overhead staffi ng is required for new revenue volume In other words what once required three people two must now handle Too many contractors are locked into ineffi cient structures where people wear too many hats The new game calls for Reconfi guring your organization chart Creating more not less job specialization to establish clearer and greater accountability and Migrating to performance based pay schemes that hinge on closely tracked revenue and gross profi t dollar volume 3 There is simply too much paper and too little information in most contracting businesses The only way to reduce staffi ng requirements is to lighten the administrative workload of sales service and operations management people The new game calls for Identifying the Three Key Reports that enable managers to manage Upgrading software to SQL database systems that have superior integration of information and easy to manage real time reporting and Investing in a customer relationship management CRM system to aid the sales force in managing the sales cycle As much as we hanker for them we are not returning to the good old days this year or next We must all learn the new rules no matter how scary and different they might seem The alternative is to resist these changes and like the old poker pros consistently get beaten by the younger guns The good news though is that learning new tricks can be immensely rewarding even for old dogs KEVIN KEHOE The good news though is that learning new tricks can be immensely rewarding even for old dogs LANDSCAPEMANAGEMENT NET MARCH 2010 34