Travels with Jim follows Jim Huston around the country as he visits with landscapers and helps them understand their numbers to make smarter decisions.
Ike was an entrepreneur and in his eighth or ninth year as a landscape contractor. I met and worked with him on a recent trip to the Northwestern U.S. His story is typical: He was making money and thought that he was doing OK. However, he didn’t understand the numbers and the financial side of his business.
He knew that he needed help and a fellow landscape contractor turned him on to me. Ike and I talked on the phone about what he needed and what I might do for him. He decided to have me consult with him for a day in order to benchmark his business.
Upon arriving at his office, Ike and I tore into his financials and created a budget for 2017. It was during this budgeting process that I benchmarked his operation. However, before I could do so, I had to adjust his expenses and reformat his financials. This allowed me to move around some expenses (office remodeling, bonuses, cash paid for equipment, etc.) and adjust his net profit.
Ike’s crews were extremely productive, producing more than $1 million in sales. He was billing more than $200,000 per full-time landscape crew member – well above the industry average benchmark of $125,000. Material costs were in line at 27 percent of sales, as was direct field labor at 20 percent. His field crew average wage was $20 without overtime and $23 with overtime. Labor burden for field labor was about 20 percent of labor costs or 3.6 percent of sales.
Field equipment and truck costs were within acceptable parameters at 10.5 percent of sales. (This figure includes all costs for the same to include fuel, straight-line depreciation, repairs, insurances, mechanics, etc.) Add them all together and Ike’s direct costs were right at 60 percent of sales, which meant that his gross profit margin was nearly 40 percent.
Once you throw in some revenue from some lawn care work that his crews did and take out general and administrative overhead (near 18 percent of sales), Ike’s net profit hovered around 25 percent. Not bad for a young man who does not know much about finance and numbers. But that’s not the end of the story.
family before school.
Once we finished the budgeting and benchmarking process, Ike told me more about his story. His parents pulled him out of fourth grade to help save the family ranch. Fortunately, the family was able to do so.
Unfortunately, Ike never returned to school to finish his education. In lieu of a formal education, Ike developed an amazing work ethic and gained street smarts. He went on to build a very successful landscape business, a great family and a very bright future for all concerned.
Ike was an extremely hard worker who had a very successful landscape company. He was also smart enough to know what he didn’t know, and to invest some money to learn more about his company’s financials, benchmarks and critical numbers. He may not have had book smarts but he had plenty of street smarts – and the bottom line to prove it.
I believe in education and have a bachelors’ degree in psychology, an MBA in finance and a master’s degree in Christian apologetics. You might say that I’m educated beyond my intelligence. However, it’s not formal education that you need to be successful as a green industry contractor. Like Ike, it’s street smarts, hard work and a teachable attitude that leads to business success. His formal education was beneath his intelligence. Lots of very successful people have little or no formal education.
I meet lots of young (and old) green industry contractors who have lots of book smarts but whose attitude is, “You can’t teach me anything.” And they’re absolutely right. I can’t! You may be well educated but if you don’t have a teachable attitude and a good work ethic, your education may far exceed your success.