Why did you get into this business? That’s a question I often ask attendees at my seminars and workshops. Here are a few of the most common responses I receive.
- I mowed lawns as a kid in my neighborhood and I liked it.
- I like designing and creating beautiful landscapes.
- During college I worked for a landscape or irrigation company. I stayed there (or started my own business) after college because it seemed like a good opportunity.
You may have heard about the general contractor who, many years ago, hired a man for $5 per hour to dig a ditch. He then told him he’d be back in a couple of hours to check up on him. Two hours later the contractor returned to find his new hire sitting under a tree and a stranger digging the ditch. He asked the new hire, “What are you doing?” The new hire responded, “I hired me a laborer.”
Impressed that the new hire might be management material, the contractor then asked him, “How much are you paying him?”
The new hire said, “$5 per hour.”
The contractor retorted, “But you’re not making any money.”
“I know,” said the new hire, “but I’m the boss.”
How many of you feel that way? You’re not making any money but you’re the boss.
Treat it like a business.
The reason so many green industry companies fail, make minimal profits or do not grow is quite often found in the reasoning process (or lack thereof) motivating owners to get into the business in the first place. You’ll notice the answers above are all intuitive. They’re based on emotions and feelings. While not a scientific poll, I’d say about 90 percent of the contractors that I talk with respond with some form of subjective rationalization when queried as to why they chose the green industry for a career.
Green industry contractors need to realize when they enter this industry that their business is a business and they need to treat it that way. The purpose of such an entity is to have more income than you have expenses. To ensure that you have a profit, you have to measure things. This means that you have to quantify your business processes, measure what is and is not happening, create budgets, identify and utilize benchmarks and format data properly.
A three-point plan.
In order to be profitable, you have to accomplish three things in your business.
- You have to price your services and projects accurately.
- You have to produce your services and projects as you price them or you have to price them as you produce them.
- You have to have enough volume (revenue) to cover your costs.
If you do these three things, you will make money. If you aren’t making enough money, you can trace the problem to one of these three things.
You probably didn’t get into this business because you wanted to format data. However, to be successful you have to understand three important reports, know how to format them and know how to use them. They are:
- The bid recap report
- The job cost report
- The profit and loss report
You have to format the data in your business in order to identify and measure its margin – the difference between its costs and its revenue. Successful entrepreneurs constantly conduct a mental “cost-benefit-analysis.” They do so throughout all aspects of their businesses in order to identify how much a particular product or service costs compared to the revenue generated by the same. This is called “working on the margin.”
The skill set you need to operate a green industry business is often counter intuitive. By this I mean that the skills needed to be a successful business person don’t come naturally to most of us. Some people just “get it.” However, most of us don’t.
If you don’t correct this shortcoming in your business acumen, you won’t optimize your businesses potential. The good news is you can learn how to become a successful entrepreneur, if you pay attention to the data within your business and learn how to format it properly using three very important reports.
While the seeds of a business’s’ destruction are sewn from within, more importantly, the seeds of a business’s success are also sewn from within. It’s up to you to decide which seeds prevail.