Quick, what’s the key to profitability? How do you ensure all your work results in something left over to make it all worthwhile?
Is it growth? No. Windfall growth can result in short-term profitably if overheads don’t grow at the same speeds as the new revenue, but it’s hard to build a plan on continuous fast growth. Don’t get me wrong—growth matters. But growth doesn’t drive profits.
Is it good financial management? No. Counting the beans doesn’t make more of them. Good accounting “counts” what’s already happened and good forecasting predicts what’s going to happen, but neither drives profits.
Is it luck? It doesn’t hurt. And many businesses behave as if luck alone, rather than planning, ensures success. But, no, luck is no insurance of profits.
So, what’s the answer? It’s costs controls. There’s nothing really sexy or mysterious about it. In fact, it’s simple. It’s just not easy.
The next question is, if costs controls are key, what’s the single biggest expense in the business subject to your control?
Another simple answer: labor. Most of you already knew this. But if profitably can live or die on this one factor, why do so many companies under resource labor control?
Labor management is a three-step dance: 1). hour budgets, 2). field focus, and 3). reporting.
It starts with solid systems that that generate budgeted (or estimated) hours for every job. If your current estimating system doesn’t deliver hours for the job, revisit your process.
Next, complete the cycle with a tracking system that shows budget hours vs. actual hours for every job over time for any period. This reporting step needs integrity because you make decisions by it.
Finally, focus on the middle of the cycle, where the work actually gets done. With every type of work we do, there’s a certain amount of waste—time spent doing things that add no value. The only way to find the waste and correct the problem is to get out to the job and see what’s going on. In almost every circumstance where good leaders get into the field and look at the work being done, waste reveals itself and they they discover opportunities to increase productivity.
The root cause almost always lies with planning and training—almost never bad faith on the part of the crews. But until someone gets out there to take a look, nothing changes.
Plan for profits. Plan for great labor management systems. Dance the three step all the way to bank.
Don’t miss the Account Manager Master’s Series, being held by Envisor Consulting and Aspire Mobile Business Solutions in five cities across the country this winter. Landscape Management is the media sponsor of the seminars.