Uncertain Times

How to Lead Your Business Through Uncertain Times

We don’t know all the surprises 2009 has in store for us, but we are certain there are several smart business practices you should adopt to protect your business this year. At the top of our list:

Think twice before you hire too many people
Don’t commit to buying too much equipment
Don’t be too eager to sign up for a lot of projects based on last year’s business costs and expenses.

Here’s why.

There are many different scenarios confronting business in the landscape industry in 2009. Have you made sure that you have worked out a strong business plan? We think it will be very difficult, and likely impossible, to predict all that is coming in 2009. Does your plan account for all those uncertainties?

With a new administration promising ‘change,’ with currency values continuing to be unstable, with the prices of oil and other commodities likely to continue changing dramatically, how can you predict what the basic costs like transportation, water, utilities, fertilizers, fuel and insurance, etc. will be? We watched gas skyrocket to more than $4.00/gallon, then plunge to less than $1.75 in six months. Will this year be different? Gas prices might double again when we’re rolling our trucks, trailers and bobcats out to job sites.

Don’t expect the government to bail you out if you cost out installation projects at the wrong price and find yourself making little or no profits on those jobs. This year, things are different. You can’t predict job volumes and size like you could before. As we write this over the holidays, many contractors’ clients are already pulling back their projects to half the size, even on contracts signed before the bailouts started last fall. We’re hearing about $500,000 projects drop to only $250,000, and $60,000 projects falling to only $20,000. We’re seeing this across the board, on large projects and small ones. We hear of projects shelved or cancelled, even those with cancellation penalties. Take heed now!

Our Advice for 2009
Despite the fact that project prices are dropping, remember that half the revenues of a project are still half the revenues. So you need to look at your own operating costs. Are your overhead costs continuing to remain high? If so, you’ll have obvious serious problems being profitable in 2009.

For the past 15 to 20 years, the Green Industry has seen a constant increase in demand for our services. An abundance of leads wasn’t our problem; profitability and seasonal time constraints were. As consumers batten down the hatches, businesses like ours have to respond to an environment most of us have never had to face before. Many of you remember the effect of 9/11, with the fall of the stock market and that effect on the economy. It appears to be possibly even worse this time. Then, we only worried about sudden change, terrorism in the U.S., and the possibility of war. Now, every day we hear news that makes consumers and all of us wonder if our system of business will survive.

We believe that if you can nurture your company to prepare for flexibility, be resilient, and be aware of what’s happening around you, your changes are much higher to survive this crisis and even prosper. In a world full of uncertainty, we at the Kinman Institute believe there still should be much optimism in our profession. What can give you that optimism? You need to have a business process that is based on “certainty,” not just hope.

One big advantage of being a Design Build firm is that is we can be flexible. We just need to make sure that flexibility is in our favor, and not on the side of suppliers, sub-contractors, equipment dealers, bankers, or employees. This winter —now—before you send out your soldiers, is the time to start strategizing and positioning yourself to be protected for this year’s unpredictability.

7 Key Strategic Moves to Make
Eliminate as much risk as possible! Look at each of these areas and determine how you can eliminate your risk:

1. Suppliers – Negotiate a win-win deal with your most trusted suppliers that benefits you both. For example, if you know you will purchase a minimum of $100,000 in plant material, negotiate a 10% or 15% discount with the supplier you like and trust. They will be happy to hear that you are committed and will thank you.

2. Sub-contractors – Are you looking at the potential advantages of using sub-contractors on your projects?

3. Equipment dealers – Don’t get lured into purchasing new equipment by seductive offers! Remember that it is not just the price of the equipment that will be the overhead monster on your back this year. It is also the insurance, equipment maintenance, licensing, storage, etc. Combined, these expenses can really escalate!

4. Bankers – If you rely on the use of line of credit, expect to deal with more stringent regulations from your lenders this year. You may even be refused. What’s your plan for dealing with that?

5. Employees – Your employees are expecting steady work and a regular paycheck from you this year. What’s your plan for providing this? Maybe your first step is to decide if you need all those employees. What is the minimum number you can support? Do you have an administrative process and/or managers who aren’t actually producing revenues? Can you streamline your operations? This is the year to become lean in operations and rely more on help from outside contractors. Don’t put yourself in the position of keeping people busy.

6. This might be the year to consider helping your employees think more like owners by offering bonuses based on profit sharing. This way, you only pay when you’re profitable, and you foster entrepreneurial thinking in your employees.

7. Get the right clients! No matter what the economy is doing, there will always be people who are doing very well! For example, even when real estate prices plunge, fortunes are made by those who take advantage of the temporary artificially low prices.

Position yourself so that the people, equipment and resources you have are being used to the maximum and seek out alternatives to hiring and buying, in case your business does pick up. Don’t put yourself in a position where you have to be scrambling for business just to pay your employees. We have found it is easier to tell clients they are going to have to wait for our work rather than to run our company desperate to keep our employee ‘machine’ going.

When you streamline your company during economic uncertainties, it becomes more important than ever to be efficient with your resources. Our industry suggests a process that has you hire lots of sales people to chase after every lead, hoping it will turn into something — anything. Unfortunately, each sales person on an average can see 6 to 15 people a week, and still will get only one or two jobs. The question is: Were those jobs worth getting?

You obviously have limited time when you are seeing everybody (and are probably doing it without a clue if those meetings will turn into anything or if you are wasting many hours just chasing hope). What if you had a process that made it certain that every client you met with would turn into not only a landscape contract, but a significant landscape contract? Kinman Associates has created and tested just that process, the Kinman Process. We have been training it for over ten years now. Hundreds of companies have adopted the process and are using it consistently and successfully.

To find out more about how you can learn the Kinman Process in our seminars, click here.