Landscape Management, October 2012

BUSINESSPLANNER2013 By Frank ross s consultants were constantly asked What are the reasons companies succeed or What do other companies do to make more money Recently I received an unusual question What are the top 10 reasons companies fail Typically consultants are optimists and think about why businesses succeed so felding this question is outside the normal response zone but here goes 1 Lack of cash Áow Poor cash fow is probably 90 percent of the reason companies fold Everything makes up the other 10 percent You can lose money every year youre in business but as long as you have positive cash fow and can pay the bills you can live to fght another day The frst day youre unable to pay your bills or meet a payroll vendors can shut you down and employees will leave There are an infnite number of reasons companies dont have adequate cash fow most of them created by management but theres one that resonates above all We dont do a sound job collecting the money were owed because we dont like asking for it Heres a tip make collections a responsibility of the sales process Customers are at the highest level of euphoria at the time of the sale Youve created a vision in their minds its a beautiful garden or a proposed low price Either way at that moment theyre as happy as theyll ever be This is when you set the terms about how youll bill the job and how you expect to be paid Dont expect customers to know how to pay you Get a commitment from them and follow that commitment through to the completion of the job LANDSCAPEMANAGEMENT NET OCTOBER 2012 100 2 Drive by estimating systems I constantly meet folks wholl price a job by driving by a site and rationalize doing so because the job is similar to other ones This method doesnt always work Theres a reason the Small Business Administration ranks construction as the second most risky business behind restaurants Every job must have a quantity takeoff and extension be marked up for overhead and marked up with a proft For every job know how much proft you have and how low you can go before you bid Its a time consuming process but one thats focused on eliminating losers 3 No job tracking Once you earn a job track your performance to ensure youre harvesting the margin overhead and proft you put on the job when you sold it If there was a way to verify this statistic wed discover fewer than 25 percent of contractors have job tracking systems that work If you dont know how a job is performing you have two problems One without a tracking system you cant spot problems in the job before they manifest Two you cant verify that your estimating standards to price work are correct 4 No Ànancial reporting by proÀt center Few of us perform only one type of work Were normally involved in installation maintenance enhancements and retail Every type of work you perform has different cost and overhead structures If you dont know performance by proft center how can you control Prevent business failure