Know WHAT You’re Selling (2 of 2 for Owners)
August 2, 2022
This is the third post in a series we’re doing about business reporting for Landscaping and Tree Care companies. It’s the second of two posts written specifically for owners, CEOs, and presidents. In this post, we’ll talk about why you need to monitor what you’re selling at the service-line level.
Forecast Material Needs
Knowing what you’re selling helps save you money for the business. For example, if you see that you’re selling a ton of Lawn Care programs, you can order those products (fert, weed control, etc.) in bulk. If you have a good idea of year-over-year trends, you can take advantage of early order programs and stock up. You can often save over 10% on chemical purchases by ordering early.
The same goes for any materials you need – mulch, soil, chemicals, plants, all of it. Especially with today’s supply chain issues, you need to know sooner than ever before what your material needs will be.
Knowing how much material you need also allows you to maintain proper cash flow. You won’t feel backed into a corner with unexpected, big-ticket delivery fees for urgent orders.
Checking your top-line sales numbers won’t get you there. You need to pay attention to what you sell at the service level. This will better equip you to keep the material stocked that your team needs to generate revenue.
Correctly forecasting this is also crucial to delivering an excellent customer experience. No one wants to place an order and THEN find out that the materials are on an eight-week backorder. That’s a surefire way to get unhappy clients, nasty online reviews, and customer turnover.
Stay in front of all these issues by tracking your sales at the service level.
See Consumer Trends and Business Insights More Quickly
Monitoring your company’s sales at the service level has the added benefit of giving you insights into consumer behavior. This can be a competitive advantage in the marketplace. By identifying which services have become most popular, you’ll have a great idea of where to allocate your marketing efforts, allowing you to claim a more significant market share.
As for working on your business, you’ll be able to quickly see which services your Sales staff are most comfortable with selling and most effective at closing. That allows you to ask some more profound questions.
For example, let’s say you discover your Sales team is selling three times more Lawn Care than Landscape Maintenance when historically they’ve been pretty even. Why are they suddenly selling more Lawn Care than Maintenance work? Is that because it’s a quicker turnaround (getting them paid more quickly for the sale)? If so, maybe you need to work on your commission structure. Is it because they’re not comfortable selling Maintenance? If so, why – a lack of confidence in the service, or is there a gap in their training?
I once worked in a company where they shared the backlogs regularly. When the backlog on a particular service line got lengthy, the Sales staff could focus their attention on selling services with a shorter backlog. For example, if Design work was backed up by 16 weeks, they could quickly sell more Maintenance work where the backlog was only six weeks.
These insights keep your Sales staff more focused on services customers want, keep your Sales and Marketing efforts aligned, and allow you to dig deeper and address gaps and bottlenecks that you may have overlooked.
Tracking the Top-Line Doesn’t Tell the Whole Story
You might be profitable in one particular area of your business while lacking profit (or even losing money) in another place. You will likely miss this if you’re only looking at the top-line revenue. However, if you’re looking at your Sales at the service level, you’ll see which service lines are making the most money and which service lines need to be adjusted or dropped altogether.
This helps you in a couple of ways. As I said, it may be time to drop a particular service. If you’re not making money doing it, and you’re confident in your bidding process, perhaps it’s time you let other companies in your market handle it. Establish a referral relationship with another company that doesn’t offer something you do well. Everyone wins this way.
It also helps you forecast your profit margins more accurately. Let’s say you make a ton of margin on Irrigation work, but you’re not as profitable with Maintenance. But you have a year where you’re trending to sell more Maintenance work than Irrigation. That tells you that you’ll likely make less money this year, even if you sold as much or more on the top-line revenue.
A Quick, True Story
Let me tell a story.
I once worked for a family-owned company, a full-service landscaper that also offered PHC and professional pruning from ISA Certified Arborists. We had several profitable years until an invasive pest called the Spotted Lanternfly came along.
Crash-course: Spotted Lanternfly (or SLF) is a leaf-hopper native to China and other Southeast Asian countries. Using a needle-like mouthpart to suck sap, it secretes MASSIVE amounts of honeydew, causing sooty mold. I walked onto properties where the trees smelled like rotten apples; there was so much honeydew that the sugar from it started to ferment.
When it arrived in the US, SLF would only reproduce on ailanthus altissima (“Tree of Heaven”). That’s also an invasive species, so hooray, right?
SLF began to complete its life cycle on native plants. Hardwoods with high sugar content in their sap (maples) were vulnerable. Crops like grapes, fruit trees (agricultural and ornamental), and hops are also impacted.
We began to realize customers were asking questions about it as media coverage increased. We assembled a team and came up with a treatment plan.
In the Fall of that first year, we saw demand spike. We had hired a new Salesperson, and they spent two months that year doing nothing but giving proposals for Lawn Care and SLF programs. Seeing this increase in demand, we saved money by pre-ordering a good amount of the insecticides we used to treat for SLF and storing them on-site.
Also, we realized that while the company overall was profitable, this new service was particularly profitable. Some of our design/build jobs that year hadn’t been as profitable as we’d hoped. If we’d only looked at the overall company revenues and profitability, we’d have missed the fact that we needed to make adjustments to the design/build proposal process.
Why This Story is Relevant – Why It Worked
This worked because this company did all the things I just described.
They monitored the increase in tree applications. This told them to order more products (materials forecast) for the following year.
Because they were monitoring that service line, they knew there was increased demand for this service, and they could reallocate marketing dollars to it the following year. They also began conversing with the Sales staff and learned that this was a service many people asked about. They worked on the business by having extensive training sessions on SLF and taught the Sales team how to answer the most commonly asked questions.
This company realized they were having a great year but were able to catch issues with another service line by monitoring it at the service level. They made adjustments to make the design/build work more efficient and profitable.
As the owner, CEO, or President of a Lawn Care, Tree Care, or Landscaping company, you need to monitor your sales at the service level. Don’t micro-manage. Instead, use the insights you gain from this to equip your people with better training and materials they need and gain critical insights that give you an advantage over competitors in the markets you serve.
Go back and read Part 1 for Owners – Why Profit Matters
Keep reading with Part 1 for Office Managers – Receivables: What Are They and Why They Matter (publishing 8/9/22)