Leadership Advantage: How offseason planning leads to success

Photo: alexsl / iStock / Getty Images / Getty Images Plus

Let’s face it, for most commercial landscape maintenance businesses around the country, performance during the growing season can make or break your financial year. Even in heavy snow markets, it’s important to hit your green season margins to mitigate down snow years.

A lot of green season success comes from smart offseason planning and execution.

As the green season winds down, savvy leaders begin planning for next year. Through budgeting and strategic planning, business leaders zero in on a few key metrics to ensure that next year’s growing season will be successful. Below are a few areas to focus on.

Contract review/scrub/renew

Customer contracts can be made up of a combination of service lines. Each contract should be assessed annually, utilizing filters such as profitability, size and strategic value. Then rank contracts in terms of best to worst and in terms of largest to smallest. Based on ranking, determine whether you’d like to renew the contract, increase the price or take another action.

Some nonconforming contracts may need to be scrubbed or dropped. There are few reasons to retain losing or nonconforming accounts in today’s labor market. It’s important to understand your client’s budgeting cycle so that you can discuss increases. Most property management firms start the budgeting process by August and are complete by October. Don’t miss the timeline to adjust pricing as necessary.

Service line review

Landscape companies offer their clients a variety of in-season options or service lines. It’s important to understand the gross profitability (GP) of each service line. Review GP in terms of budget versus actual. Service line profitability is simply the combined profitability of all jobs within a service line.

Revenue service lines

• Contract maintenance
• Mulching
• Seasonal color
• Irrigation
• Fertilizer and pest control
• Enhancements
• Construction
• Subcontracting

In too many cases, companies are leaving profit on the table by not seeing the performance of the individual service lines. While you may know the profitability of all service lines combined, it’s important to be able to analyze profitability for each separately. Often, there are profit laggards.

When you identify GP laggards, determine the root cause. Drill into each job to identify profit robbers. Services like seasonal color and fertilizer and pest control tend to get buried in the base contract price. Develop GP through your company’s annual budgeting process. Generate actual GP results through your work ticket management or job cost system.

Labor review and forecasting

Through the contract review exercise, give special attention to evaluating your labor efficiency (LE) and total labor expense. Labor efficiency is a metric derived by dividing your budgeted hours by your actual hours over the year for your base maintenance services.

LE of 100 percent or better means you performed the work within the hours bid. Performance under 100 percent begins to erode margins. Reset the hours based on where you need to be to hit 100 percent LE or better. If you find that you’re working off fat labor budgets, reduce the future hours to reflect the actual performance. In addition to LE, review the labor dollars budgeted to actual.

This exercise may yield two outcomes. First, you may need to develop a more efficient workflow plan. Second, you may need to increase the contract amount or a combination of both.

After completing an effective labor hour assessment and associated reset, you are ready to forecast head count and payroll for the upcoming year. These forecasts form the basis for all staffing and overtime decisions in the future.

Estimating costs and production rates

As you analyze your job cost performance and identify any negative variances or anomalies, you may discover estimating issues.

In 2021, we’ve seen substantial increases in many operational expenses, including labor, materials, fuel and more. Those increases need to be factored into your estimating system so you’re on track with new opportunities. If you find that your LE percentage is falling significantly under target, take some time to challenge your labor production rates.

Planning for next year’s success starts right now. Pull the data, build a plan and execute over the offseason to ensure a more profitable 2022!