Landscape Management, May 2018

business insider lets grow Year round spring cleaning by Kevin Kehoe The author owner manager of 3PG Consulting is a 25 year industry veteran Reach him at kevinkehoe@ me com I ts the end of renewal season and spring work is about to commence While sitting at your desk late in the day you receive an email The message is from a customer It essentially says Thanks for your service but youre fired After considering some options like begging or getting a drink you might want to consider Is this good or bad news Certainly in the short term it feels like bad news But is it Spring cleaning is a euphemism for clearing out the old to make room for the new Its a fresh start a better and more profitable direction In my last column I discussed pricing your work to address overhead recovery and market conditions LandscapeManagement net resolve to raise prices In this column Ill discuss a method for customer spring cleaning year round Back to that email Lets start with a simple question Was the lost relationship a profitable one Lets define profitable A profitable customer is loyal 100 percent retention delivers a targeted profit margin for the services provided gross profit percentage and purchases additional work upsell percentage Was this customer relationship profitable If it was then losing it is bad If it wasnt then its not so bad If you dont know then you have a bigger problem And if you dont know for this one customer you have to wonder how many other customers might leave you one day or how many are merely revenue providers costing you more than they contribute Here are three steps you might practice yearround to ensure your relationships are good ones Keep score Before renewing any relationship understand customer profitability To do this you need the information below at a minimum In the example below the customer relationship appears to be profitable It meets the three requirements retention margins and purchases Keep in mind that you should not only address low profit relationships you should also address high profit relationships Relationships where you are making far above a target margin are also at risk from a lower bid competitor review monthly The account manager is responsible for the relationship To manage it he or she must be on top of it To ensure this is the case you should monitor the activities that drive relationship profitability renewals site inspections and upselling A simple report will provide the snapshot you need to work with your account manager For example it could list the number of site inspections planned and completed by month along with actual and target dollar amounts for work proposed and sold Do spring cleaning The final step is spring cleaning Using data you can now take the necessary actions to manage relationship profitability I will discuss these specific steps in my next column Spring cleaning is essential to managing your net profits Unprofitable relationships bleed your margins in many ways As for the results of cleaning house if it comes to firing a customer instead of them firing you I can say your people will thank you for losing that kind of customer and your cash flow will thank you as you open up the potential for selling more profitable work My philosophy has always been Work with people who appreciate your work and respect your need to make a profit The best and most honest relationships in life and business are profitable for both parties Year Contract actual actual actual target revenue Increase gross ProfIt gross ProfIt 25000 5 48 45 26000 4 46 45 27000 4 48 45 2015 2016 2017 48 LANDSCAPEMANAGEMENT NET May 2018 Upsell actual target actual actual target sell rate sell rate revenue gross ProfIt gross ProfIt 23 25 6250 48 50 28 25 6500 48 50 25 25 6750 47 50 Example