When you start a business, you have really big dreams and ambitions. Some of those dreams and ambitions are:
I want to grow my business and bring in a million dollars by year XXXX
I want to grow the business to 5 million dollars by year XXXX.
I want to get to 10 million dollars by XXXX.
Look, there’s nothing wrong with setting these kind of sales goals whatsoever — keep those goals and hold onto them! Just keep in mind that as income grows, so do expenses and you have to keep expenses in check proportionally in order to stay profitable. Otherwise, you’re just a 10 million dollar company with 10 million dollars in payables.
In order to focus on profitability, you have to look at more than the bottom line of the profit and loss statement. You have to look at the company as a whole and take everything into account. It’s admirable to grow to a multi-million dollar company, but at the same time, you have to keep in the back of your mind that you want to grow PROFITABILY.
That’s why it’s so important to understand that chasing top line sales growth is a mindset trap. You have to focus on profitability, because when you are profitable, growth will follow.
Did You Know: 83% of business owners are living paycheck to paycheck?
So often business owners are living pay check to pay check because they don’t have enough capital and they have way too many expenses, which means their cash flow can’t support their expenses. In order for this to change, they need sales, to get their expenses in check, to keep their profit in check, and to grow from there slowly versus always shooting for the stars.
“Watch your pennies and the dollars will follow.” -Sahra Linnemann.
It’s Like A Hamster Wheel
Chasing top line sales is like a hamster wheel. The hamster enters the wheel and it starts turning it. But even though it consistently turns, it’s not actually getting anywhere. Now look at that from a business perspective.
Oftentimes a landscape business owner, a solopreneur, and/or an entrepreneur will think, “Man we just didn’t make any money this year. Maybe if I just landed that big commercial contract. OR maybe if I had landed that huge snow removal contract – it would have all been different.”
I want to be a $500,000 company.
I want to be a million dollar company.
I want to be a 3 million dollar company.
So again, you tell yourself, “If I just landed those contracts I needed to make this happen, then I would have made money this year.”
Let’s face it, that’s not the reality and it’s not really going to produce the results. The question you need to ask yourself is – WHY? Why do you want to be a 3 million dollar company? If you do, then that’s great! Go for it! But it needs to be because you want to be more profitable. The focus for growth should always be profit. Focusing on top line sales will not make you more profitable.
What Can I Do To Start Improving Profitability?
First, you need to know what it would take to make you profitable. What do things cost you, AND are you charging enough to cover the expenses and make a profit? If you aren’t charging enough to pay for the expenses, then you aren’t going to make a profit. It’s why you MUST stay on top of what things cost per job.
Secondly – part of staying on top of costs is the price of goods. Prices are rapidly changing day-to-day in the lawn care and landscape industry. If you want to be profitable, you have to stay on top of what products are costing in your industry. It’s as simple as getting an updated price list from your vendor(s) along with an estimate. Doing so will help you stay ahead of the game.
Lastly, you need to know the price of doing business. Are you charging enough per job for each part of the process – labor, tools, equipment, etc.? Everything should be taken into consideration when pricing a job.
Pro Tip: Make sure you have a disclosure inside all your proposals that your estimate is only good for X amount of time or that it can change based off of the changes of pricing from your vendors.
Why You Should Consider NOT Accepting Work
When considering jobs, you should look closely at who they are coming from and what their margins are for the job. “Bob the Builders” and/or a lot of these commercial properties (aka. HOA’s) can look attractive to say “YES!” to, but the reality is that it could be too good to be true.
Getting asked to quote a job by a huge firm or HOA can be exciting. But when you get caught up in how attractive a job is, you can find yourself sacrificing profit just to be able to say, “Yes, I got that big job!”
Example: Several years ago, a contractor in Illinois asked Linnemann Lawn Care and Landscaping to bid on putting in new lawn installations. We gave him a price on doing so, and instantly he was like, “That’s crazy! I’ll give you the work, but you’re going to need to do 2 or 3 of these in a day for the price you’re quoting me for one.” We simply told him that we could not do that. So it’s something to think about… Yeah, there may be some great opportunities out there, but that is always going to be something you really need to analyze and decide by asking yourself, “Is this going to be worth my time and effort?”
“Don’t be so enchanted with how good the job sounds that you sacrifice who you are, what you normally do and your profitability in order to grow.” -Sahra Linnemann.
Overall you’re in business to make money and provide for yourself, your family, and everyone who works for you. You can’t do that if the business isn’t making money. So get better at looking at that bottom line and making sure that the whole reason you’re here is to accomplish your goals as a company and become PROFITABLE!