6 rules for achieving 20% net profit

profit (Illustration: iStock.com/champc)
Illustration: iStock.com/champc
profit (Illustration: iStock.com/champc)
Illustration: iStock.com/champc

Too many companies in the landscape industry aim too low. They mistakenly believe the market will only accept low margins due to the proliferation of low-ball competitors. They are overly focused on competing on price and end up being afraid of their own shadows.

This phenomenon is made worse in the design/build niche, where the risks (weather, misestimating, skill deficiency, economy, etc.) are numerous. Therefore, I’ll focus on design/build as I lay out the following strategies, which are applicable to all landscape niches.

If you continue down the road of aiming too low, you will:

  • Have trouble scaling your business;
  • Lack money to reinvest in better people and technology;
  • Burn out, without seeing a return on your energies and money;
  • Lose good people who don’t like to lose;
  • Have trouble paying bills and taking advantage of discounts; and
  • Suffer the stress of all the above.

If you’re willing to change how you run your business, you will enjoy more fruits of your labor now, which is mandatory in design/build since these businesses can be difficult to sell.

Here are my six rules for achieving a 20 percent net profit:

1. Lead with high confidence and self-worth.

The first sale is to yourself. If you don’t buy it, neither will anyone else. Equally, you need confidence that your marketplace can handle a high-value, higher-priced provider. Self-image is everything! Do you believe?

2. Become king of the mountain.

The key to earning higher rates is to eliminate the competition. Besides buying them up, this can be done by refining your niche, so you’re the No. 1 or No. 2 provider in your niche. Define your limited mountain (niche) so you can claim the top market share and become unique in your niche.

3. Define your service as a product.

For most design/build firms, I recommend considering a “mass customization” approach to what you provide. This means limiting your material palette, developing predesigned packages and setting clear product standards. (By the way, this is a proven approach to high profit in irrigation service and property maintenance.)

4. Sell only to Green Light Customers.

Green Light Customers are clients who believe what you believe and want what you sell. By contrast, Red Light Customers do not believe in you and want to shop or change what you sell so they can save money. The key is to protect your salespeople’s time and psyche by spending their time mostly with Green Light Customers.

5. Price your work to win big.

To end up with 20 percent net profit, you need to price many jobs higher than 20 percent. The smaller the job, the higher the profit applied to it. Small jobs are easier to sell and produce quickly. If you have fears around this approach, see rules 1 and 6 to build confidence.

6. Gamify your business.

Everyone loves to play games (more than they love to work!). That’s why you want to turn your daily operational goals into a simple game with simple rules and a way to keep score every day and reward the winners. By clarifying and simplifying, you can make winning fun!

The added synergy behind the six rules also will boost revenues. When you doubt yourself on any one of these six rules, you can gain strength by understanding how well you do on the other five rules and setting a course of action. You have so much to gain by implementing all six.

Jeffrey Scott

Jeffrey Scott

Jeffrey Scott, MBA, author, specializes in growth and profit maximization in the Green Industry. His expertise is rooted in personal success, growing his own company into a $10 million enterprise. Now, he facilitates the Leader’s Edge peer group for landscape business owners. To learn more visit GetTheLeadersEdge.com

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