We recently caught up withLandscape Management Network(LMN) founder, Mark Bradley, to discuss the challenges many landscape business owners face when trying to budget and track the success of their companies. Although we can take the pulse of a lot of numbers, Bradley focused on two of the most important pulse points to measure:
Whether you’re on track to hit your end-of-year sales goal
Whether field productivity is improving, holding steady, or falling off.
Tracking Sales Goals
One of the most important, and simplest, numbers to watch is your sales goal. With a few years of sales history, you can build a benchmarking spreadsheet that will help you know if you’re on track. Here’s a simple, yet effective method:
Create aspreadsheetusing your accounting software to pull a sales history by month for last year, two years ago and three years ago. Next, enter your cumulative sales by month in the cells. By cumulative, we mean each month should equal its sales, plus the total of all months prior. For example, if your January sales were $50K, February sales were $60K and March sales were $100K, your spreadsheet should show $50K in January, $110K in February and $210K in March.
Next, copy that table, but instead of sales by month use a formula to calculate each month’s (cumulative) sales divided by the total sales for that year. This will show you, historically, what percentage of your total sales you have earned by the end of each calendar year. For example, January 5%, February 11%, March 21%, etc. If you’ve done it right, each year will hit 100 percent (your total sales) by the end of December.
Take an average of the last three years and you will know that, over history, you should have reached X % of your sales goal by the end of January, Y % by the end of February, Z % by the end of March, etc.
Once you have created this tracking tool, the benefit becomes very clear! For instance, if you know your business averages 35% of revenue by the end of April, then at the end of this April, you will want to ensure you have met 35% of your sales goal for the year.
Monitoring Field Productivity
Nothing will make (or hurt) profit quite like field productivity, so it’s a critical number to watch. You can ‘guess’ at staff productivity by seeing how fast they get out of the yard, or seeing jobs being completed on time, but the numbers can tell you a more accurate story without any guessing. Bradley advocates the importance of separating your field labor payroll from your overhead payroll expenses into different accounts. This allows you to quickly identify how much wages you’ve paid your crews, and it makes the following kind of management much faster and easier. Here’s how you can monitor the pulse of your productivity:
Using the format of your sales goal tracking spreadsheet, enter your total field wages (no overhead staff), cumulatively by month. You’re doing exactly what you did for sales, but this time you’re entering wages for your field staff. By the time you hit December, that number should equal your total field payroll for that year.
Copy this table again, but this time, use a formula to divide last January’s field payroll by last January’s sales. This way, you will see what percent of January sales were spent on field staff payroll. Same for February, except February is going to show you the cumulative total of January and February payroll, divided by the total of January and February sales. Repeat this for all 12 months for the past three years. Unlike the cumulative sales table, these percentages won’t (and shouldn’t) add up to 100 percent by December.
Now simply average each month over your last three years to see the average amount of sales you spend on wages by the end of each month.
This shows you something you already know… but with hard numbers. Here’s a common scenario: In January, you likely have more unbillable time, giving the crews some hours around the shop to give them some income. Therefore, you spend a higher percentage of your sales on wages. By April, that percentage has dropped dramatically, as you’ve now invoiced a bunch of work on jobs you haven’t spent a lot of hours on yet. That percentage climbs back up in May when crews are pulling a lot of hours getting out of the gates, then it starts to normalize again as the year continues.
This exercise will help you spot any issues with productivity and begin fixing those inefficiencies now, before it is too late. To learn more about LMN, visithttps://golmn.com/. And to learn more about the Cat® equipment that can bring value to your landscape business, visitCat.comor contact yourlocal Cat dealer.
We’d like to hear about your landscaping business and the challenges and/or solutions you have discovered with tracking progress.
How do you currently track your sales and productivity? Have you found your methods to be effective and/or useful?
What worked well for your business in 2017? Are there things you plan to change about your business in 2018 to improve efficiencies and drive profit?
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