Landscape Management, October 2012

THEBENCHMARK FRANK ROSS The author is owner manager of 3PG Consulting Reach him at frank@ 3pgconsulting com Before you fire a customer A s you think about renewing maintenance agreements for next year do you identify jobs that are underperformers and develop strategies to deal with them For many of us the thought process is I dont really know how the job performed and dont much care Just let me renew it OK I get it None of us wants to see revenue go away But if a job is not contributing to the overall goals of the company you might have to fre the client I challenge you to face the cruel reality that not every job is a winner Where to start The frst thing I would do is run a revenue perhour report see sample report below Revenue per hour is calculated by taking the contract amount and subtracting from it all the non labor costs plus their individual markups To fnd those markups go to your estimating system There you will fnd your typical markups for the recovery of overhead and proft Once you subtract the non labor costs plus their markups from the contract amount what you have left is what you earned with your labor or labor revenue Divide this amount by labor hours and you have what you earned per labor hour on the job Pay particular attention to the gross margin percentages and the revenue per hour A high margin job does not necessarily mean a high proft job LANDSCAPEMANAGEMENT NET OCTOBER 2012 12 Analyzing anything using margin percentages can be risky and lead you to the wrong conclusions Lets take the frst job in our sample report contract value of 40500 revenue per hour of 1796 Theres every reason to believe this job is a stinker Our break even point for performing maintenance work is 23 This job at 1796 is 26 percent below our break even point Before we fre this client or any client here are 10 things to consider 1 Is the information correct 2 Is the job part of a larger portfolio Analyze the entire portfolio to see if this job is the runt 3 Is there add on work 4 Can the job be value engineered to make more sense Consider its position in the route the equipment used mow patterns etc 5 Does the job fll out a route 6 Did I intentionally low ball this job to create new opportunities If so does it still make sense to keep this underperformer 7 Is this a marquee job 8 Is this a loss leader job to stimulate future opportunities 9 Are we attempting to keep a predator away from a valued customer 10 Can we raise the price of the job If all justifcations are exhausted raise the price of key underperformers and if you lose them so what SAMPLE REVENUE PER HOUR REPORT Contract Labor amount hours Labor cost Material cost Sub cost Other cost Total job cost Gross margin Gross margin Revenue per hour 40500 1750 21000 4650 1000 750 27400 13100 3235 1796 23300 850 10200 1750 0 260 12210 11090 4760 2396 12680 245 2940 300 5200 0 8440 4240 3344 2445 7180 200 2400 950 0 0 3350 3830 5334 2878 19325 650 7800 0 0 0 7800 11525 5964 2973 53500 1120 13440 5270 5000 1500 25210 28290 5288 3375 28570 650 7800 1675 0 0 9475 19095 6684 4009