Is it time to invest?

February 10, 2017 -  By

The November election changes everything, as every election does. The question is, “Is there more upside than downside for your business?” Over the past few years, we’ve framed our discussions about growth in terms of sales. Now, we need to think about growth in terms of investment. If you believe there’s more upside, then you need to think about where to invest to position your business to take advantage of the coming growth “rally.”

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screenshot: LM

There are good reasons to expect a friendlier investment environment—one that benefits management in terms of ROI and people in terms of jobs. So, the next question is, “Do you put on your rally cap?” And if you do, where do you invest? Trucks? Equipment? People? Yes, of course, but these required investments are always necessary to operate a landscape business.

Trucks/equipment are required. They’re a depreciating investment with short life spans, high maintenance costs and, ultimately, you have to retire them and repurchase them.

People are an expense. As a rule, they don’t appreciate in value, they have relatively short life spans (they can come and go easily), they are expensive to maintain and you will always need more of them. What they need from you is a tool to help them manage, not just operate, at the next level.

Therefore, your most important investment will be in technology—specifically enterprise resource planning (ERP) software. ERP is the integrated management of business processes, often in real-time, using software and technology. These processes include marketing, sales, estimating, scheduling, purchasing, time, payroll, invoicing, job costing and accounting in a seamless flow rather than operating them independently with many spreadsheets and redundant data entry.

(Full disclosure: I am managing partner of Aspire, a landscape ERP software company started after my 23 years of consulting in the industry.)

ERP provides what the industry most desperately needs: management. ERP is a management investment, not an operational one. It’s the tool that drives a management system—one that can create and sustain growth. ERP as an investment appreciates in value, has a long life, has low maintenance costs and, if you choose the right ERP partner, eliminates retirement and future repurchase.

The software industry is quietly undergoing a technology revolution. Over the last few years newer technologies have made the cloud and mobility useable for green industry companies, while getting less expensive. This opens the door to using a powerful management tool that delivers information in real time, embeds best practices right into the product and puts it all on a device like a smartphone so anyone from the owner to the crew leader can use it from anywhere. The result is greater personal productivity and better customer service, while reducing your cost of doing business.

How do these investments compare? Table 1 outlines the “costs” of each investment using approximate profit and loss statement dollars and the return on the revenue dollar supported or enabled by that investment. Since we’re investing for the purpose of revenue growth, the comparison of revenue dollars divided by cost (also known as turnover adjusted for useful life) provides a fair representation of the tangible financial return.

In reality, the true and intangible return is far greater because an ERP leverages both equipment and people investments. Just ask those who have made the ERP investment how much more productive people and equipment become when they can be managed—not just operated—more efficiently.

The landscape industry is entering a new era where management is the real game changer and differentiator enabling you to compete with the national big boys and the local little guys. Time to put on the rally cap.

This article is tagged with , , and posted in 0217

About the Author:

Kevin Kehoe, a longtime landscape industry consultant, is managing partner at Aspire Software.

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