Something as critical to business profitability as "contract renewals" should not sneak into the tail end of our to-do list, but most of us have days it feels that way. Right about when the long summer sun puts the "Spring Sprint" behind us, Fall bursts through the door. Seasonal landscape tasks, continuous maintenance, and construction collide – for some, on top of snow season sales and preparations!
…Oh – “and” contract renewals.
Despite the temptations of the "urgent" and the "due now" to dominate our calendars, the reality is few things impact our total-year success or failure as greatly as renewals season. A well-performed renewals season reaffirms your vision, unifies your team, and maximizes your balance of growth and profitability. That is quite a “return on investment” for your time! …but it still involves investment. Lets discuss investing your time wisely with a simplified, streamlined renewals process.
Gather Your Data - The #1 reason most teams do not experience a confident and successful renewals season is simple: they were too busy, or it would take too long, to get “real numbers”. (Sometimes, if we are honest, we know the picture will be ugly and would rather not face it.) Resist allowing short-term to trump long-term! One of the best ways to empower accurate leadership decision-making is to give leaders accurate data. Whether you have crusty work orders, Excel sheets, software, or something in-between, take what you have and establish a centralized "master" report of your total hours and materials – per service, per property.
Operations Feedback – Invite in your operations management team - only after step 1 is completely done - to audit the data for clarifications and corrections. Do any budgets need investigating? Did some jobs get tanked by a known bad team? Did any properties scale services down (ex. for renovation) or up (ex. adding a building)? Could we get more aggressive with new equipment or technology? Depend on these leaders not just to "get the job done" but to now tell you about it. Even if their ideas are only used in part, empowering them to shape next year speaks respect and trust – and should improve your accuracy.
Finance Projections - Having refined our numbers to believable and proven levels, refresh your unit costing. How do we foresee the cost of goods sold (COGS) changing next year? Will a continued lack (or renewed availability) of H-2B labor in our market change our average labor wage? Can we bulk purchase materials next year for a better discounted rate? Look for both the positives and negatives that would change your unit costing, and ergo your job costing, for the future.
Defining Reality – Now knowing what every job is projected to cost to perform next season, add current pricing and calculate per job the projected gross margin ((Price – Cost) / Price). Rank jobs from best margin to worst, grouped into categories such as, "must increase", "below target ", "acceptable", and "outstanding". (Some competitive markets add a top outliers group called “at risk of underbid” – an intriguing consideration.)
Renewals Strategy - Everything up until this point has been defining our current state. Now we pursue the goal: pulling off the best renewals season we can. Bringing in your sales and account management staff should add an important human wisdom layer atop the analytics. Which client is so happy our value could tolerate a price increase?, is a bad fit?, owns a block of properties?, buys a ton of (or none of) your upsells?, is a happy sales referral?, etc. Layer your relationships into your data. From here we can design an effective strategy that, with believable probability, maximizes our chance to renew as much work as possible at healthy-to-outstanding levels, while also (as the old Kenny Rogers song goes) "knowing when to fold 'em" and walk away from bad work.
Rapid Client Issue with Target Dates - Yes, get your bids out the door - in mass - now - before your competitors get there! – but also graciously set an ideal timeline for your customers of by when you would like to hear back. Why? Your happiest clients will quickly reveal themselves, and your most at-risk clients likely will as well, focusing account management efforts. In tandem, before the season gets too late and opportunities fade, sales can sign additional work into expected attrition gaps, and account and branch management can safely let a bad job go knowing another excited customer-to-be is ready to be seated at your table. Finally, ownership benefits by seeing fiscal projections come into focus since a significant percentage of “in or out” gets settled punctually. The result? Not only are you set up to thrive next year, but the operating budget shows it.
David Rempfer is a veteran leader of multimillion landscape and snow operations and one of less than 300 professionals in North America to be both ASCA Certified and SIMA Executive CSP certified. He now consults landscape and snow industry executives in their pursuits of business improvement and quality-of-life.