“The Dud”: Avoiding Bad Jobs In Peak Signing
As much as the flurry of opportunity and growth happening in pockets of the industry is exciting, we carry a responsibility as owners and sales teams to make sure we only choose good work out of the pool. “A dollar is a dollar” is nowhere near true in landscape sales! Time crunches can tempt us to make the mistake of blindly copying the price and scope of a former vendor, determined to “figure it out as we go”, but just a few bad contracts can tank an entire division.
Take for instance Excellent Maintenance LLC, described below. Owner Tom Excellent is hopeful to cross a big milestone and break $2 million in signed maintenance contract revenue this year and bids in the 45-55% gross margin range so as to exceed his division “break-even” goal of 40%. Coming into the spring they’re just short of the goal, but because jobs have been priced carefully up until this point the overall forecast looks healthy.
|JOB RATING||GROSS MARGIN %||FEBRUARY|
|TOTAL REV $||$1,900,000|
|$ GM ACHIEVED||$855,000|
Unfortunately, Tom gets one of those “love-hate” calls. A long-time client has decided to step into retirement and is selling their portfolio, and despite putting in a glowing referral advocating for Tom the new management company already has a preferred provider. A massive $200,000 of contracts lost. They weren’t priced the best in the first place, so Tom is hopeful the loss from the “Fair” budget can be overcome elsewhere in his pipeline, but it’s a big hit.
A few days later a bid Tom long since stopped chasing calls back. Their vendor fell through. Mowing starts Monday, billing starts Monday, and it’s $300,000 – they can send a copy of the scope of work and pricing for Tom to copy – can he take it?
We all know the lesson: failure to work good estimating means risk to work bad jobs. But, time is of the essence, and it hits the revenue goal. Surely the former vendor wouldn’t have worked for a negative contract… right?…
Tom’s story goes how too many have gone. What he missed by skipping estimating is that while the “top-line” job from the portfolio runs at “Good” margin the rest is an absolute dud.
|JOB RATING||GROSS MARGIN %||FEBRUARY||MARCH||NET CHANGE|
|TOTAL REV $||$1,900,000||$2,000,000||$100,000|
|$ GM ACHIEVED||$855,000||$820,000||($35,000)|
Even though Tom’s revenue actually climbed $100K — $300K from the time of loss — having just 10% of his jobs be complete duds is enough to tank his entire division. Bad jobs literally mean doing more work to make less money. “A dollar is a dollar?” Sure doesn’t look that way.
With software such as BOSS LM, which centralizes all your material pricing, vendors, labor costing, and production rates into one place, every estimator on every job works from the latest job costing – every time. Jobs which went well can be converted into templates so you easily reproduce the estimating success in the future. Live-to-the-minute budget-vs-actual visibility exists on every single job in your system. And renewals? There’s a whole module for that, automatically prompting your team at a preset number of days out to remind you, and offering one-click reporting of gross margins achieved live-to-the-minute. Even “rush jobs” don’t take long to bid the right way.
Teams who run every job through a system like this have a significantly higher chance of only signing good work, systematically weeding out bad work, and ultimately improving both the gross margin of their divisions, the net profit of their company, and the business valuation owners desire. Allow yourself and your team the emotion and excitement of a rush of opportunity. But… Continue to be the calm voice of reason in the room that demands a proper estimate of every job – preferably before the bid ever goes out the door, but at a minimum before you as the executive leader sign on the bottom line.
David Rempfer shares from 13 years of profit and non-profit team leadership, is a veteran leader of multimillion landscape and snow operations, and is one of less than 300 professionals in North America to be SIMA Executive CSP certified. He now consults industry executives and leadership teams in their pursuits of business improvement and quality-of-life.