How to set your landscape business on a path to growth

The Herring Group recently completed its market research of landscape companies with fewer than 500 employees. The numbers tell a story. As you review the figures in the table below, ponder two questions:

Why are there so many small companies and so few large companies?
What is required to grow and continue growing?

(Photo: ImagePixel/iStock / Getty Images/Getty Images Plus)

One of the great characteristics of the landscape industry is that it displays the principles of capitalism well. The numbers in the table illustrate this truth — more than half of the companies have an annual revenue of less than $300,000. The barriers to entry are low, enabling competent, ambitious people to start and grow a business quickly and simply. The industry is lightly regulated, which means competence and diligence, rather than connections, are rewarded by the market.

Customers’ cost to “switch” landscape maintenance companies is low — usually, it is their time.

In our work at The Herring Group, we find many business owners who are stuck. These owners have built great companies, but they have been frustrated with their companies’ lack of growth. Many of these owners are also tired — their companies require more time and energy than they want to give.

Here’s an unfortunate truth in growing a business: What got you here won’t get you there. It is not that the owner needs to commit more time and energy; the owner’s role must change.

Graphic: Greg Herring

Path to growth

If an owner starts with a truck and a mower, the focus is on growing and serving customers — just getting the work done. The owner does it all. As the company grows, the owner adds employees to do the work, and the owner becomes a manager. First, the owner manages one crew and then moves to multiple crews. The focus is no longer doing but managing.

A competent owner or manager can achieve revenue of $1 million.

Growing above $1 million requires another change. The owner will need to hire a manager to oversee the production activities so the owner can focus on sales and developing leadership skills. The owner needs a manager who can be led, not managed.

By the time a company gets to $3 million, the owner will need to lead a small team of effective managers.

Difference between leading and managing

Management is directing others to do specific tasks. Leadership is hiring managers, communicating values and creating a culture that empowers managers to make good decisions without the owner’s direct involvement. Establishing such a culture in a landscape company requires access to reports that inform decisions and key performance indicators that measure success and create accountability.

Just as growth requires a transition related to people, it also requires a transition in systems and processes. We observe a transition from paper-based systems to Excel-based systems to specific software solutions (e.g., time tracking, estimating) to comprehensive landscape business management software.

In conversations with owners, I find there are typically two types. One type focuses on the value that software delivers. The other focuses on the cost. Great software is expensive. It should be. It produces tremendous value by making your employees much more efficient and effective. Still focused on cost? Here is a simple question: Would you rather recruit and hire more people or buy software?

Some owners have made the changes required for their companies to grow. Some small businesses are small because the owners want to stay small. These owners know that bigger is not always better. Some small businesses are small because the owners think small. As a small business owner, I use that truth to challenge me to think bigger.

I’ll leave you with some final questions to ponder: As your company has grown, how have you purposely changed your role? Are you hiring doers who can become managers and managers who can become leaders? How have you embraced more and better software to make your employees more efficient and effective in their work?

Greg Herring has served as a CFO of both public and private companies. Herring is the CEO of The Herring Group, an operational and strategic finance consultancy. Using its proprietary Path to 12%, The Herring Group serves landscape business owners challenged by growth by installing financial dashboards and systems that provide more margin for their businesses and their lives. Reach him at greg.herring@herring-group.com.