2016 is proving to be a strong year for the lawn and landscape industry, including the roster of companies we work with.
One thing seems to be clear: Finding and selling work is not an issue right now. However, the lack of production capability (i.e.- labor) to support the increase in sales is limiting the growth of many companies.
This single point has been communicated to me personally by our clients more than any other over the past six months. Does it ring true for your company?
Instead of complaining more about the lack of qualified labor – as is typical for our industry – let’s have a frank discussion about growth.
First, let me be clear: When I talk of growth, I’m speaking to employee head count, not total sales or revenue.
I’m all for growing the top line, but not so you can add employees (and lots of fancy equipment) and look bigger and badder than your competitors down the street. That might be great for your ego, but it won’t dump more dollars to your bottom line.
Let’s focus on growing that bottom line (You know, the money you should be taking home as the owner of the company).
Capacity vs. Opportunity
Consider this point: Capacity for production should not match your opportunity.
Said another way: Your capacity to produce and deliver your professional service does not need to keep up with the amount of opportunity in your marketplace.Trying to raise and match your capacity to the demand and opportunity in your marketplace is when you start chasing growth for growth’s sake.
As I said above, this is when you start adding head count and overhead to support your increase-sales-at-all-cost mentality.
Maintaining capacity below opportunity is a good thing! It puts you in a much better position to grow your bottom line (and do it in a sustainable way).
I respect being aggressive. But, I respect being aggressive and smart a whole lot more.
Below are my three recommendations for maintaining a healthy balance between capacity and opportunity and ultimately growing your bottom line.
Consider these three steps before adding more production capacity.
1. Dismiss clientsYou should let go of clients more often than you do. You know this. You just don’t do it.
If you have a production problem then start by dropping your problem clients. You know exactly who they are. You’re picturing one in your mind right now as you read this.
Some clients aren’t necessarily a “problem”, they are just no longer a good fit for your company. Again, you know who these are. Make the difficult decision to let them go.
2. Increase your prices
Instead of hiring more people, raise your damn prices!
If you’re fortunate to have a back-log of work, why continue selling future work for the same price? Raise your damn prices!
Are you scared to lose that big, six-figure project sitting on your drafting board? Hello! You already have a production problem! If you’re going to add this project to your production mess then at least be sure to get a more-than-healthy profit margin on it.
3. Re-focus your positioningIf you have a production problem, then you need to be smarter about what work you take on. Being well-positioned allows you to do this. It allows you to say “no thanks” to the work that is not a good fit for your unique company.
A common example in our industry is when a landscaping contractor commits to offering either residential (B2C) or commercial (B2B) services. This is a very basic approach to positioning but at least a good start.
Before pushing for more growth, consider how you can narrow your positioning instead.
For a B2B company that could mean focusing on a specific property type (hospitals and health care systems in a specific region, as an example).
There are many different ways to position your firm: by service, location, demographic, industry, etc. I haven’t written nearly enough about positioning so I will expand on this in the very-near future. (UPDATE: Read this article on positioning)
Capacity should not match opportunity.
Trying to raise and match your capacity to the demand and opportunity in your marketplace is when you start chasing growth for growth’s sake.
Focus on growing your bottom line before increasing your capacity for production. Do that by 1) dismissing your problem clients or those who are no longer a good fit, 2) raising your prices and, 3) re-focusing or narrowing your position.
Each of these three recommendations can be extremely difficult to execute on. As a business owner you understand this very well.
I believe many companies aggressively pursue growth for growth’s sake simply because it can be easier than making the difficult decisions that ultimately lead to a fatter bottom line.
To wring the greatest profits from your business requires the guts to make difficult decisions like those outlined above. Do you have the stomach for it?
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