LM150 company profile: Schultz Industries

Eric Schultz

Eric Schultz, who mowed lawns in high school, naturally joined up with his brother’s residential lawn maintenance company after getting out of the Marine Corps in 1982. After five years, realizing he did not want to mow lawns for the rest of his life, Schultz broke off from his brother to found a commercial-focused company with his wife, Pam, in 1988. Thirty years later the Golden, Colo.-based landscape maintenance and installation firm still focuses on commercial properties and takes a no-nonsense approach to profits and growth.

Tell us about your company’s “top line is vanity” mentality.

About 10 years ago when things started to tank a little bit during the recession, we stepped back. The first 20 years of business, everybody’s mantra is grow, grow, grow, grow. We looked at that and said, “Is that really what it’s all about?”

At that point in time, we’d been steadily averaging around the $10 million a year mark. At the end of the year, you look at what you have left over after your salary, and you think, “Wow, was that even really worth the time?”

So, we started to refocus our business model. One of my senior managers came up with the mantra, “Top line is vanity, bottom line is sanity and cash is king.” We’ve been chasing that model for about the last 10 years, and we’ve seen margins skyrocket.

How do you apply this concept in your company?

A lot of times the landscape industry has a tendency to want to eat itself. Because if you need that job so badly that you’re not going to make any money on it, all you’re doing is dragging the industry down because you’re keeping prices low and nobody can make any money.

We have a standard goal for staff to hit 10 percent margins. We don’t want 4 percent or 2 percent
margins—then you’re struggling to replace equipment, and it’s just a downward cycle.

There are companies doing $50 million a year that are making 2 percent. They’re managing 500 employees and however many assets for a 2 percent return. You can get that in a CD.

During the recession we said, “We may not be able to hit the targeted revenue goals, so let’s focus on the internal operations, how we get leaner and how we drive more money to the bottom line.” It has worked really, really well for us over the last eight to 10 years.

Schultz’s work is about half design/build +installation and half maintenance, including snow and irrigation.

What changes did you make to get to this point?

We went to a profit-sharing program similar to an ESOP. We were averaging in the 4 to 6 percent range on margins. We told employees, “We’re going to cut you a deal. Hit 10 percent of $11 million, and we’ll give you 15 points back off that money.”

We went one step further and said, “Anything you make over that, we’ll split in half with you.” So, the first year they hit about 14 percent. Then last year, which was our second year, it just blew up. They hit close to 25 percent margins.

We take the kickback all the way down to the field, so it’s not just management that shares in it. We gave three quarters of a million dollars back (to the team) last year.

What has the impact been internally?

The people in the field are engaged much more. They’re engaged in production. We’ve completely flipped the culture that, “Hey, if you want to stop at 7-Eleven and spend 45 minutes in the morning buying cigarettes and Cokes for the day, that’s your money.”

We now have foremen saying “You’ve got to help find me somebody else because this guy’s not cutting it.” Whereas before, if they had a guy on a crew that wasn’t producing, it was just a guy on the crew who wasn’t producing.

The mentality is to focus on the bottom line and not be so focused on getting from $14 million a year to $20 million. When you’re driving that top line, I think you lose sight of the bottom line.

Is there anything else you attribute the successful shift to bottom-line thinking to?

We have a very, very good inclusive culture all the way down to the laborers. We have very little turnover as a result of it. So, that’s a good thing. Because we’re not looking towards growth, having that good core group of employees makes it easier for us to sell higher dollar work.

We did H-2B for a couple of years and then (the government) started messing with it, and I just walked away from it. When we did that, we again changed the culture to say we need to really make sure we’re taking care of our people, this is the place where they want to come to work every day, and where they enjoy working. We have a standing policy that if you leave for more money, don’t come back. You don’t get to work here, go make $5 an hour more for 90 days and then come back here and expect us to take care of you.

We offer health insurance. We do paid time off all the way down to the lowest paid laborer. We do longevity and milestone bonuses, so you get a check when you hit five, 10, 15, 20 years. We pay a hundred dollars per year.

What other advice do you have for landscape business owners trying to be more profitable?

I see the flyers that say, “We’ll beat any price by 10 percent.” How do you know you’ll beat any price by 10 percent? You’re not focused on what it costs you to do business.

I know there’s a point where you have to get enough work to feed three guys plus yourself, so you’re chasing work, but once you get to the point where you have consistent work, then step back and say, “Can I look at replacing some of what I have with something that’s better?”

The first 20 years we did work for just about anybody in the marketplace. We’ve gone to the model of picking and choosing our clients and working with clients that understand the value of a job well done as opposed to just buying the cheapest thing in the marketplace. That’s worked really well for us.

I think a lot of people lose sight of the fact that they’re chasing the work but they never step back and say is it the right work? Is there better work out there for me?

Photos: Schultz Industries