A majority of our industry is walking through budgeting and strategic planning for next year, and between the hazards behind us and the uncertainty ahead many of BOSS LM's client partners are asking fantastic strategic questions. To help, we decided to bring in one of the industry's premier consultants, The Harvest Group's Ed LaFlamme, for Q&A and to share some of his wisdom. Below are a few highlights from our hour together; enjoy.
BOSS LM: I’ve heard you talk about how before annual budgeting or strategic planning it begins with great vision. Walk me through how you help someone figure out their "what's next".
ED: It all starts with the owner. 98% of teams don't have a vision statement written down - and if it's just in your mind, it's just a dream! Where are you taking your company? What do you want to do? Everything changes when you write it down; it becomes clearer.
Vision is powerful; it's what everyone else in your team grabs onto. When Disney World was built, Walt Disney's brother, Roy, was actually the mastermind because Walt had died. At the dedication ceremony, one celebrity said, "It's too bad Walt wasn't here to see this." Roy Disney smiled and said, "He already saw it." Wow.
Great vision empowers great culture by giving your team purpose. And great vision can be concise yet huge. I once sat down with Burt Sperber - it was just after he celebrated his fiftieth year building ValleyCrest - and I asked, "What was your vision when you started?" He replied, "Simple: to be the premier landscape company in the United States." It was a huge vision, but it was concise and clear… and, in his day, he accomplished it.
BOSS: So say we solidify the vision, the “where we want to go”. Now we talk about how to get there with "Strategic Planning". For people who have never been a part of this process: What do you lead people through, or see healthy teams assess?
ED: It's important to be slightly aggressive in your goals. The Harvest Group has an outline that we use - Bill and I developed it years ago. We look at a lot of things: People, Marketing, Sales, Competition, your standard S.W.O.T. Analysis, Disruptors… It takes two full days to truly do it justice - and that's with getting some homework done beforehand.
By far the most important piece in strategic planning is your people. We lay out an organization chart of what your company looks like today and rate how your team is performing at their current job roles - A, B, C, or D. Separately we rate that same team for their future potential. Owners should upgrade this quarterly. If your strategic planning involves growth, we then make what the org chart will be a few years ahead. This gives you time to see the needs coming and either build someone up internally or go out and find talent in the market. Too often companies just promote a top-performer beyond their potential and they fail out, leaving you with less talent and more gaps to fill.
BOSS: That makes for a great framework - goals, timeline, size, profit, people - and from there you can get into the gritty details of annual budgeting and the action items that make it happen. What are some of the key systems and metrics you focus on most?
ED: The most important part, for the Harvesters, is gross margin. The true profit of a job tells you about three key things: it measures your estimating ability, if you're pricing effectively, and your efficiency. If you have the symptom of, "I'm not making the money I should, and I don't know why," that's where gross margin helps. Most of the time companies can't give gross margin because they aren't measuring it - often because they don't have the systems to.
One of the earliest things I had to do with my own company when a consultant once coached me, and that I now help my clients do, is break your accounting system into profit centers. Until things are separated, you can't really know which departments are or aren't making money.
When we ask people about systems and software, a lot just say they use QuickBooks and Excel. Honestly, I tell people to wait - stay with that until you are big enough, then make one move onto a more comprehensive software like BOSS LM. If you invest the time and energy into lesser software - which will help you but is not complete - you're going to regret it; so much time and effort is required to learn and implement smaller software that when you've outgrown it you're not going to want to switch because of what it took to get it working. Wait and do it right.
BOSS: We see that all the time as well. Every product on the market has either a floor or a ceiling. Once you get past the marketing, you either have a low price that's great for startups but a limited featureset due to limited development budget, or you truly have the full featureset that has no ceiling and you can rattle off the customers on the LM150 using the platform. If anything claims to be in that space in the middle, look for the ceiling. Usually the two pointed questions where other products are Purchase Orders (and inventory) and Payroll. If they can't provably demo a two-way sync in those two with your accounting system, you'll never get true job costing - just average costing - which means your gross margin data is all wrong.
ED: That's exactly right. This business is all about people, and it's all about measuring, so we tell clients to measure everything that makes sense to measure. With the right systems and software in place you should be able to grow with fewer hires than your competitors.
Another common focus is growing the company more in maintenance than construction for valuation purposes. There's nothing wrong with construction, but an 80% construction company isn't going to have anywhere near the same value as an 80% maintenance company of the same revenue.
One more focus I strongly recommend - that sneaks up on most owners - is HR Liability. We worked recently with an east coast company who got hit with $52,000 of fines for incorrectly filled out I9's - not illegal at all, just incorrectly filed or missing. Another one had an employee handbook that wasn't proofread by a qualified legal representative, and it had one line that said a standard paid work day started at 7:00am cost; the audit said regardless of true crew start times he owed pay starting at 7:00am, and the audit cost him $58,000 in back-payroll. Too many people under-value and self-perform this stuff and don't catch it until something ugly happens.
BOSS LM: Just as a closing thought, what do you personally see in the market as you look ahead at 2021 and at the three-year horizon ahead? Maybe some key risks, market shifts, untapped opportunities, or new technology that excites you?
ED: One cool opportunity I'll mention, something that I hardly see any landscape companies doing… One of our customers who does outdoor spaces has opened up a completely new profit center for audio. It pairs so perfectly with low-voltage lighting and construction that their landscape designer now automatically puts in low-voltage lighting and audio in every proposal so he can demo it live and go for the upsell. I've been impressed with the product quality of a manufacturer called Coastal Source out of Florida.
…On a more serious note: I'm hoping that, one year from today, we'll have a vaccine in place and most people will have had it, but even with that done I think the economy could actually be worse in a year than it is now. Some economists say the only way the government can reclaim the trillions of dollars it just printed will be raised taxes, which tends to slow economic recovery.
Simultaneously: In the commercial sector many buildings are empty, with remote employees moving to rural areas, but what The Harvest Group is hearing throughout the country is that many commercial buildings will stay empty. Many employees will stay remote after the pandemic is over. Some companies are even paying to hardwire their private network to employees' homes; that's not something you do for a short-term fix. Landscapers maintaining these need to watch out; the budget slash is coming. It may be smart to have a market mix, picking up some high-end residential or medical facilities, which will both be huge in the years ahead. Hospitals are prime targets now, as far as I'm concerned; fight for them hard.
I also just don't see the field labor market getting better short-term, since neither party seems eager to restore bringing in foreigners to work. Companies can still grow right now, but you'll need a really sophisticated, well-thought-out recruiting program.
The good news is the management talent you need is out there. Many professionals are coming out of other industries and joining landscapers - teachers, property managers - to become salespeople and account managers. My plan with all of my clients is to entice them strategically with solid culture, pay, unique benefits, career opportunity, and a great vision worth joining.