“How come my operation isn’t more profitable?” is usually the first question I hear from a new consulting client. Upon reviewing many operations, I am amazed that a majority of my new clients do not have an annual budget. Landscape professionals enjoy working outside and their least favorite thing to do is to spend time on the business side of their operation. Many work hard and hope things work out. Excuses abound: too busy, not good with numbers, fear of the unknown, etc.
Reflecting on my experience with my own company, I KNOW that my success and eventual profitable sale of my business was strongly based on the fact that I had a detailed budget and business plan. A business plan built by and communicated to key members of my management team. And budgeting is the keystone to a business plan. Here is why.
Why Budgeting Annually Is Important
Profit is a necessity, not an option. Profit isn’t going to just happen. You must have a detailed plan to get there. You can have an awesome marketing plan with a strong brand, and you can do the highest quality work with exceptional customer service, but if you are not profitable, then you are out of business. Annual budgeting is key. Many factors change year over year, from the economic outlook; cost of fuel, wages, and insurance; customer retention; and the prices we can charge to name a few. Without a budget, business owners don’t know where they are, what adjustments to make, or how to guide their operations to profitability.
Financial roadmap to success. Your budget will be your company’s guide to decision making during the busy landscape season. It will help take emotions out of the decision-making process and will allow you to make decisions quicker and with more certainty. When you build and share components of your budget with your team, it communicates and sets goals for them to focus on during the season. Your leadership, in creating and sharing a detailed and measurable plan for your company, will empower your staff.
Know your business. Budgeting will help you evaluate all facets of your operation. You’ll see how you compare to industry averages and how to bolster areas of you operation that aren’t as profitable as they should be. A key component of your budgeting process is making sure that your pricing structure will get you to your revenue projections in your budget.
Thinking of selling your business in the future? Consistent strong profits along with a strong business plan and a talented and tenured staff are the key points in getting the top dollar for your company when the opportunity arises. Your annual budgets and actual performance relative to these budgets are very significant in valuing your company.
Whether this is your first or fifteenth budget, it’s never going to be perfect. Yet every year you refine your process, do a better job, and tighten up your financial plan.
Detailed analysis – Do a detailed analysis of each item on your chart of accounts. Compare it to your past few years’ performance and to established industry averages.
Involve your staff – I recommend that your office manager or in-house bookkeeper be involved during the entire budgeting process. They are the gatekeepers of your finances and can have great insight regarding your revenues and expenses. Also, bring in everyone: managers, sale staff, and mechanic, to review areas of the budget that involve them. By getting their input and then explaining how you came up with the final numbers, they will be more invested in achieving your budgeted goals.
Outside help – If you need it, ask for it. Accountants, consultants, bookkeepers, etc. are available to help guide you through the process or review your completed budget. Their professional advice can pay you back tenfold based on my personal experience.
Financial software – Input your final budget into your software package. Spread each account over a 12-month period. Fixed revenues and costs should be spread evenly, while variable ones should be spread based on historical peaks and valleys. Monitor your actual financial performance against your budget at least on a monthly basis.
“If not now, when?”
‘Tis the season to set aside dates in the upcoming slow months to build your budget for 2015. When your team works together and is focused with realistic and measurable goals, your chances of a successful and profitable 2015 are greatly enhanced. Reduce your stress by having a financial roadmap and controlling your destiny in 2015. Just do it!
About the Author
Laurence Coronis is a business consultant and leadership coach focusing on profitability and bringing sustainability and organic practices into the Green Industry. With a B.S. in Plant Science from U.N.H., he founded Coronis Landscaping Inc., and in the 30 years of operation won numerous state and national awards, including a “Grand Prize for Landscape Excellence” from A.L.C.A. (now PLANET). Coronis Landscaping was named one of the top 100 landscape companies in the U.S. in 1999 by Landscape Management Magazine. After selling Coronis Landscaping to a national landscape company, Laurence stayed on as the Branch Manager. During the years of his leadership, his branch was consistently a top performer in customer retention and profitability. He has served on the Board of Directors and as President of N.H. Landscape Association and presently is on the Advisory Board for NOFA-OLC. He can contacted at firstname.lastname@example.org or visit his website at www.coronisconsulting.com.