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Business planning is strong medicine

July 1, 2002 -  By

It may be just what the doctor ordered for the health of your business, and it doesn’t taste all that bad.

“Without a budget, you can’t grow your company. And if you don’t plan it correctly, you don’t know if you are making or losing money, and what’s the point of that?” asks Glenn Jacobsen, president and founder of Jacobsen Landscape Design & Construction, Midland Park, NJ.”It” is budget and business planning, the classic management tool that gets glowing reviews from landscapers.

“Our tendency to have profitable years clearly did increase after we began running our business this way,” says John Wheeler, president of Wheeler Landscaping in Chagrin Falls, OH.

“We’ve been doing it for at least 15 years, and we wouldn’t dream of operating without it,” says Tom Davis, president, Bozzuto Landscaping Company in Laurel, MD. “To us, it’s not optional. It’s mandatory. You can only shoot from the hip for so many years. You can only get lucky so many times, when you don’t know where the dollars are going because you waited until the end of the year to see how much you had left over.”

Take your medicine

If budget and business planning are so wonderful, why is it that so few small to mid-sized Green Industry companies use the techniques? Our three contractors agreed that a big part of the problem is ignorance. If people in the industry knew the advantages they could gain from doing a budget and a business plan every year, more of them would “take their medicine.”

And there is always the question of time pressures – how do you learn a new business skill while you have a company to run? “Many of us landscape contractors have the feeling, ‘I’ve got so much on my plate now, how am I going to do that also?'” says Davis.

There was also a consensus among the three landscapers that budgeting and business planning are business skills that many entrepreneurs in our industry do not bring to the table, at least initially.

Call in help

Davis is an example. About 15 years ago, his company and his business experience had matured to the point where he wanted to be profitable every year. “You get tired of a hit-and-miss approach. You want to be consistently successful.”

So Davis brought in a consultant – initially Frank Ross of Ross-Payne & Associates, Barrington, IL. Ross taught Bozzuto’s management team how to improve its budget process and its business plan writing skills. Later, another consultant, Jim Huston of Smith Huston, Englewood, CO, sharpened their skills in analyzing and using the budget and business plan they had created.

For example, Davis’ 25-year-old company, which grosses $8 million in annual revenues and has 135 employees in peak season, once had 70 percent of its business in installations. After comparing their performance to their budget and business plan, Davis and his team ascertained that their grounds maintenance business was more profitable than installation work, and so over the years they gradually transitioned to the point where grounds maintenance is now 70 percent of their business.

“We have been consistently profitable, we’ve had steady growth, we’ve had measured growth – we’ve had a game plan,” Davis says about the results of the consulting. “Every year, we develop a game plan, we follow it and we measure how we do against it. We absolutely attribute a great part of our success over the last 15 years to the budget and business planning activity.”

“If you don’t have a budget and a business plan, you’re going to miss out on opportunities like that to improve and grow your company,” Davis says.

Also, Bozzuto’s recent (and profitable) decision to acquire a commercial pressure washing company was made possible by the detailed information on the company’s financial health yielded from the budget/ business planning process.

Growing? Get sophisticated

Jacobsen has a similar tale to tell. His company, which does about $4.5 million in annual revenue with 70 employees in peak season, got into the budget and business planning process when their company reached about $1 million in revenue (and about a dozen employees) roughly 10 years into its 24-year history. At that stage, Jacobsen noticed that his company was large and complex enough to need more sophisticated management techniques. His wife, Melissa, the company’s chief financial officer who has an MBA, was available to help with the nuts and bolts.

“When you’re smaller, you may feel that you can keep an eye on everything by operating on instinct and practical knowledge,” Jacobsen says. “But everybody wants their business to grow and be profitable, and if you reach a certain size, more sophisticated business techniques are called for.”

Time to make moneyThe results of adopting a budget and business planning cycle have been positive. Jacobsen feels that he has good management controls in place today – in part shared with his four department managers, who are kept closely involved in the budget and business planning process – and that he has gained a lot from the practices over the years. Profit analyses are prepared on all jobs, and monthly income statements are closely monitored against budgets. By constantly following the systems set in place, problem areas can be corrected and adjusted before profits are jeopardized.

Wheeler Landscaping has been in business since 1976 and grosses $4 million in revenue with 70 employees. In the early 1980s, John Wheeler hired consultant Warren F. Purdy, Palm Coast, FL. “Mostly because I was tired of not making money,” he says. Later he also sought help from Frank Ross, the same consultant who helped Tom Davis at Bozzuto. With the consultants’ help, Wheeler created an operating budget and a pricing system that allows him to know his company’s precise costs.

“You may be able to get your company off the ground knowing nothing more than landscaping, but if you want to get to the next level, those budget and business planning skills are necessary,” Wheeler says.

Landscapers who wish to begin creating a yearly budget and business plan, and who need to learn how, can acquire the skills in many ways. One way is to bring in a consultant. “A lot of people are reluctant to lay out a few thousand dollars for consulting help in these areas,” says one landscaper. “But that expense is something you basically incur once, whereas the benefits of having a budget and a business plan are ongoing year after year.”

The Associated Landscape Contractors of America┬áplaces emphasis on budget and business planning skill development for industry businesses. ALCA offers seminars and promotes networking on the subject. The association also offers the “Trailblazers Program,” in which seasoned and successful industry veterans visit your company and share their skills. To learn more about the Trailblazers Program, contact ALCA’s Judy McCloud at 800/395-2522.

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