#1 – Know Your Numbers
Growing up I was a decent math student. I wasn’t going to give a calculus lecture at any point, but I could hold my own. Besides, I knew what I was going to do in life all along so I figured as long as I owned a calculator I would be fine.
I learned pretty quickly that business math and grocery store math are not nearly the same things. When I started my business I was not really focused on those “pesky numbers”. I was determined to focus on the things I thought were important – things like equipment, and getting more customers, and making people’s lawn and landscapes look beautiful.
Things like estimating and accounting were a nuisance at best. I looked at these things as a necessary evil, but I certainly never learned the true ins and outs of making my numbers work. When I decided I should take a more active role in this aspect of my business, I was confused to put it mildly.
I had no idea what I was spending other than when I looked at my checking account balance at the end of the month. I was like so many other people in this business when it came to money and numbers – was there anything in the check book for me?
As embarrassed as I still am to admit this, a lot of the math I did was based purely on instinct and guessing. I guessed on everything.
Can I afford this?
How much should I charge for this?
Will I have enough to pay my bills?
How can I make more money?
All guesses. I flew by each and every single day by the seat of my pants. But when things started getting difficult to “guess” and there was less and less money each month in the old checking account, I started getting nervous.
So I decided enough was enough and I was going to sit down and figure out “my numbers” if it was the last thing I did.
Heading into the winter months one year, with very little money to spare, and me praying to mother nature that it would snow so I could make some money to keep the business afloat, I decided to devote every waking moment to breaking things down and really looking at my business with a microscope when it came to money and numbers.
If you want to talk about an epiphany, this was one of those times. I think I must have called myself an “idiot” at least 250 times that winter, each day looking closer and closer at everything that went on in my business.
When I say I “broke things down”, I really mean it. I looked at every day, every receipt, every check, every bill, and every penny that came into the business. I was in shock. I think for about 2 days I just tried to figure out how I let things get so out of control.
After the shock wore off I knew what I had to do. I had to learn how to estimate properly for profit, I had to overhaul the systems of my business, and I had to create an actual budget that would serve as a forecast and as a blueprint for how this business was going to either succeed or fail miserably.
The first thing I did was look at all of the money that was spent. What was necessary and what was a complete waste? This was an eye-opener in itself. I wasted a lot of money just by not shopping around for the best deal – vehicles, equipment, insurance, fertilizer, mulch, parts – you name it, and I always purchased things based on convenience instead of common sense and budget.
I remember realizing that I probably could have saved about 20% minimum on these things if I would have been a little better prepared and if I would have taken the time to look, compare, and then buy. This is a very important lesson unto itself. I am not saying you should sacrifice quality, but if you look a little harder, the savings will certainly add up. To put it into real numbers, if you realized that you spent $20,000 last year on things you should have spent $16,000 on, how much better would you feel right now with an extra $4,000 to work with, play with, reinvest back into the business, or simply put in your own pocket?
Then I knew I had to tackle the task of figuring out if I was even charging enough money for all the work my company was doing. To some degree, I admit, I always kind of put this off. I always figured that every situation was different when it came to estimating and in order to secure the work, you had to roll with the situation. Boy was I an idiot….
So I sat there and I looked at the work we did. I looked at who did the work, how long it took, how much money was charged, and how much money we actually made based on the time spent.
After spending countless hours looking at schedules and tallies of work done and the money made I determined that I probably lost money on over 15% of the work we did and barely broke even on another 30%. That means that on 55% of the time any work was done, money was made. How the hell was I still even in business????
I realized something very simple, but very important – and remember this, because it will have an impact on your business – I was selling time, not a service. There is only so much time in a day, a week, a month, a year. The sun is only shining so many hours in a day. I had to determine how much time I had, and how much that time should be worth, and then, and only then would I truly recognize what I had to charge for any work that I did.
My very first concern was that by doing this, my service would become too expensive for people to afford and I would price myself right out of business. However, I also realized that this was where efficiency, planning, and budgeting truly came into play.
Here is what I am talking about so you know what I mean (this is just an example to paint a picture….). I will use a mowing example to make it simple.
Two guys are handed a route schedule for the day. They are required to mow 20 lawns with the average price being $35 per lawn. Those two guys are being paid $10 per hour each. Doing the math, 20 lawns at $35 each would generate $700 in gross revenue. Now keep in mind, I am not even including taxes, insurance, withholding responsibilities, etc… just simple math.
Those same two guys are supposed to start a 7 am. They both arrive “around” 7, drink their coffee, putz around for a few minutes and they are out the door at 7:20 am. The first thing they do is go to the store to gas up the truck and equipment. They take their good old time and buy themselves some cigarettes and a donut and wait in line to pay for their gas. They leave the gas station at 7:40. They arrive at the first lawn at 7:50. They get out of the truck, argue over who has to trim and who gets to ride the zero turn, then they get started at 7:55. It takes them 20 minutes to cut the lawn, even though it should have taken 15 minutes, but the guy trimming forgot to gas his line trimmer and he walked back to the truck to take care of that.
This kind of time wasting goes on all day long. Finally, at 5:30 they arrive back at the garage with 16 of the 20 lawns finished proclaiming that they could not get the rest done and would “arrive early and bust them out tomorrow”.
So….you are paying $20 per hour 10 hours (assuming they take 30 minutes for lunch and you are not paying them for that). That means just on the surface you are paying out $200 in labor. This does not account for taxes, insurance, gas, and all of the other expenses you have, etc… They brought in $560 when they should have brought in $700. This one crew with all their inefficiencies is probably costing you somewhere around $25,000 a year. Remember, this is just one crew. If you have 3 crews making the same mistakes it could cost you as much as $75,000 a year. And don’t think for a second that this doesn’t work for you if you are a solo operator too, just like it works for those who have 20 employees.
Inefficiency means you have to charge higher prices to make the money you want to make. If you charge too high of a price, then yes, you will price yourself right out of business. I realized that the more organized the business was, the more money would be made.
If you follow the section on estimating in the guide I offer you will know your numbers. You will know what you spend; you will know what you have to charge. But this trickles down – you will also know what you can afford to pay people, you will know what you can spend on products and supplies, and you will know what you can spend to market your business….
Speaking of marketing….
#2 – Advertise, Advertise, Advertise
When I started my business I had the same impression many people in this industry have. I will get some customers, make some money, get some more customers and everything will be a piece of cake. Of course I did not know exactly how this was going to happen, but I had seen so many other people in business, and I figured if they could do it, so could I.
Before I could buy any equipment or hire anyone I figured I need to do some advertising. Since I did not have any money to spend, I had to find the cheapest way possible. The first thing I did, which most new business owners do, is I told family and friends. I figured they would hire me, right? Some of them did, but the problem was, they were family and friends, and as you probably know, everyone is looking for a break on price.
So I quickly figured out that I had to go outside my circle of family and friends and get some “real customers”.
I did what many people do in this industry. I waited. I figured no one was thinking about lawn care and landscaping in January so I had to time my approach just right.
I printed up some inexpensive flyers and picked all the places I was going to pass them out. I created an ad that would go in our local newspaper listing all the services I offered and how wise it would be to hire me. I was especially excited about the newspaper ad because from what I could see, no one advertised these kinds of services – I would be the only choice.
So March rolls around and I am ready. I am going to pass out 3,000 flyers and run that ad so my phone rings off the hook. I called and placed the ad first. I was excited for the ad to run in the paper (it was a once a week local small paper) and when the paper arrived, I quickly turned to the back page where everyone advertised.
My mouth hit the floor…
My ad was in there – the only problem was my ad was one of 7 ads for people offering lawn care and landscaping. I was not too happy but I figured I would pass out 3,000 flyers and I would get my customers that way.
The next day I head out ready to canvas my neighborhoods of choice – I was going to place them in doors, in newspaper boxes, and anywhere else I could stick them.
As you can probably guess, all the neighborhoods I wanted were pretty nice and seemed like the kinds of places that would need my service. The only problem was everywhere I went to stick a flyer and there was already 2 or 3 flyers there for other lawn care and landscaping services.
I was really upset now. I was just one of many. Why would they choose me over someone else? I learned pretty quickly that when these people did call me, they were calling me to see if I could beat the price of the other 10 guys they had give them an estimate.
If you want to talk about discouraging, this was it.
I kept on and kept advertising. I ran the ad, I passed out flyers, I spread the word every way I could. I got some customers here and there, but not nearly as many as I thought.
That is when it hit me. I was chasing after the same people everyone else was chasing. To make matters worse, I was chasing them the exact same time all these other companies were chasing them.
I had to do something to make me and my company seem different.
That was when I noticed something very interesting.
Once late May rolled around, there were not as many ads in the paper for lawn care and landscaping. I decided to continue running my ad hoping someone would call so I could get some work.
That was when it hit me. My phone rang a little bit more. More people called me. People were calling me because suddenly I was the only ad in the paper. I was the only choice.
That was a very important turning point in my business, and luckily for me it happened early on in my business. I vowed from that day on that I was going to advertise all the time. I was going to advertise where other people were not advertising. I was not going to just advertise my business; I was going to create a brand. I was going to make everyone know the name of my company and make it so that when someone needed a service I offered, I was automatically who they thought of.
In the guide I mentioned earlier I go in to great detail about all of the different ways I promoted and advertised my business, often inexpensively and always very effectively. In reality, I became more of an advertising expert than a lawn and landscape expert.
The first thing I did was create a marketing calendar. I chose different times of the year to advertise specific messages I wanted the public and my existing customers to be aware of – spring clean-up, fall clean-up, snow removal, mulching, irrigation service, grub control, etc… And then everywhere in between I constantly promoted my business.
It worked – the branding approach started to pay off. I learned quickly that from day one you must advertise. You must not only do it certain times of the year. You must be consistent with your message and get that message in front of as many people as possible. You have to budget money towards advertising and promotion. It is not just merely an “expense” – it is something very necessary for your business to grow and succeed.
When people ask me how to get more customers, this is the short answer – advertise, advertise, advertise!
And if you do not have money to advertise, you have to get money to advertise. In order to do this you may have to take on some of that evil word so many business owners are afraid of….
#3 – Debt
I am probably like you in a lot of ways. I do not like owing anyone money – not a person, not a bank, not a credit card company, etc… It just makes you feel like you are not in control and that is never a good feeling when you own your own business.
Early on in my business, I was determined not to make the mistake I had witnessed so many other business owners make. I was not going to go out and buy an expensive new truck and expensive new equipment. I wanted to go on the “cheap” as much as possible because at the end of the day I would know that no one “owns me”.
OK, here is what I want to say about debt. You may agree, you may not agree. Everyone is different and I can respect that.
If you want to grow your business and constantly grow your business, you must take on debt. It is just the way it works. Every business in the world – heck even governments – take on debt to accomplish the things they want and need to accomplish.
But understand this; there is a definite difference between good debt and bad debt.
I did not want any debt. My philosophy was if I could not write a check for it or pay for it with the cash in my pocket, then I didn’t need it.
So with this philosophy, the first few years of my business was very slow moving and slow growing. I struggled in many ways, but at least I did not owe anything.
Until one day I met a local entrepreneur who everyone knew was the richest guy in town. He owned several businesses, a bunch of real estate, and anything else you could imagine. He was well-liked in the area and because of that I figured why not see if I could talk to him and pick his brain. After all, he was where I wanted to be.
I called his office, asked if I could see him (his assistant asked why of course), and explained that I wanted to talk to him about business. Being that my request was probably out of the ordinary, and curiosity got the best of him, he agreed to meet me. I told him who I was and what I was doing. I told him I was not trying to hit him up for money or business; I just simply wanted to know how he did what he did.
Of course he was flattered and he said something to me I will never forget.
“You have to use other people’s money to get more money for yourself…”
In a nutshell, he explained that in order for him to grow his businesses and his real estate portfolio he had to go out and get people to give him money. This eliminated some of his risk and made him work harder to pay the money back. The more he borrowed and then paid back, the more people would give him to accomplish his next mission or project.
Of course he told me a lot of other things too, but in the case of understanding the necessity of debt, this is what I am telling you….
Make a plan. Know what you want. If what you want requires more money than you have, then go out and get that money. It might mean a small loan from a friend, it might mean a loan from a bank, it might mean using your own credit card, or might even mean convincing vendors to give you a line of credit.
When I started to “take on debt”, everything changed and quickly. My business grew like mad. I could afford the things, products, and people I needed to do bigger projects, advertise more, and ultimately land more work than I could ever handle.
But you must realize that any money borrowed is money that must be paid back. That is why it is crucial to understand the difference between good debt and bad debt. If you borrow money to buy equipment or trucks, then you must make sure it is for a reason. Those new purchases must make you money and make you money directly and right away.
The revenue from the work you do should be used for operational needs – labor, gas, supplies, etc… In order to justify debt, you must be able to clearly look at the purchases you are going to make with that debt and recognize down to the penny how that debt is going to make you more money, allow you to pay the debt back, and generate a PROFIT for you in the process.
Borrowing money or taking on debt just to pay the bills or keep your head above water is never something I suggest. It can get you caught in a dangerous cycle of borrowing from Peter to give to Paul.
In other words, the debt has to make sense.
One thing I had no problem taking on debt for was equipment improvements and upgrades and advertising.
I knew that if I spent $10,000 on advertising from borrowed money that $10,000 was going to generate 10 to 15 times what I spent. By doing so, it pays the bills, pays the money back, and generates a heck of a PROFIT.
But debt, like anything else, requires patience and planning. You cannot read this and then waltz into the bank and give them a grocery list of all kinds of things you want to spend their money on.
You have to start small and work your way forward.
The first OPM (Other People’s Money) I took advantage of was $500 from a friend’s dad. I used the $500 for a new line trimmer and backpack blower. This was the beginning. I agreed to pay him back $100 a month for 6 months – meaning $600 on a $500 loan (not a great rate but I needed the money).
From that point on, I understood what to do.
I am telling you that if you are disciplined enough to really determine what you need and how much you need to do it, and then also disciplined enough to map out a plan on how to accomplish what you want to accomplish, then borrowing money and taking on debt will work.
If you use the money as merely a cushion or use the money to buy all kinds of “cool things” and have no plan on how to use those cool things to make you more money, pay back the debt, and make a PROFIT, then borrowing money is not something you should consider.
Some of the wealthiest and most successful people I know and have read about and studied owe more money than you would think possible. To them, as long as they are capable of paying the money back and they are worth more than they owe, debt is something they have no problem with and often they look for more.
Think, plan, be realistic, be honest with yourself, and know how to pay the money back, and make that debt work for you and this will be a very liberating thing for both you and your lawn and landscape business.