When CEOs tell me they’re drowning in data, they’re not wrong. With increasingly more intelligent technology, it’s getting easier to access information and harder to find the wisdom to understand it. But because we need data to make decisions, we dive in, unsure how to discern or extract the nugget that will change our business for the better.

If you are swimming through a sea of data, two foundational approaches to a data strategy can form a life raft, helping you know what to do and where to head next: dashboarding and benchmarking. Dashboarding is like the raft’s base, consolidating the nuts and bolts of your business, providing key financial and production data that drives performance and gives a concise overview of overall health in critical areas. It provides insights that drive key decisions surrounding growth, pricing and profitability.

Benchmarking is a big-picture approach, the raft’s rudder, measuring your historical performance against itself, competition and the industry. It powers your ability to grow in your market by showing you opportunities for improvement, or where you have a competitive edge. When paired together as the foundation of your business strategy, the value is immeasurable.

Financial Dashboard Value

Good financial management occurs by actively controlling what is in front of you, not passively observing what is already behind you. Determining specific data needed and sources to supply it, along with a way to consolidate it, is at the very heart of a successful financial dashboard. Long gone are the days when simply reviewing an income statement and balance sheet after the month closes results in good decision-making. Today’s fast-paced environment of almost instant information demands timely, accurate data with which to make fully informed decisions.

Data-Driven Decision Making

Data volume does not equate to data value or even data validity. Conclusions based on timely, supporting data help take the guesswork out of evaluating performance and making strategic decisions, though only if that data is accurate and reliable. Good data is rooted in timely, scalable and consistent processes. For example, an electronic time system that is correctly used by field crews can accurately track time worked for payroll and time on each job, producing accurate labor cost data, which makes bidding and management decisions surrounding pricing timelier and more accurate. The better and timelier a company’s access to reliable data, the bigger their competitive advantage in the market.

Finding and Correcting Weakness

Customers expect to pay a fair price for the services you provide. Too often, they end up paying for inefficiencies, sometimes ultimately resulting in the loss of a good client. The industry generally benefited from generous price increases over the last few years as wages and other costs of production soared. Today, though, the market is in flux, and those increases won’t be as easy to get. Dashboard analysis provides context for operational and administrative costs and gives the insight needed to improve margins and the bottom line. For example, knowing the benchmark gross margin for companies with a similar service mix to our own allows us to determine if we are producing work as efficiently as we should be. If not, we can begin to drill down into additional data, such as actual vs. budgeted job hours, to help determine where we may be falling short, then put an action plan in place to improve.

Dashboarding and benchmarking are two key components of understanding how your business is performing, how you can improve and how you can bid and win more business using data as your competitive advantage.

Reprinted with permission. GIE Media. Lawn & Landscape May 2023 (c)

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Yogi Berra, World Series champion and Hall of Fame catcher for the New York Yankees, was known as much for his humorous sayings as he was for his talent. My favorite? “If you don’t know where you’re going, you’ll end up someplace else.” No truer words were ever spoken. Navigating the unknown is much easier when the foundational pieces are in place and there’s a plan for the way forward.

Here are five key actions every business can take to ensure stability, continuous improvement and operational excellence, regardless of which way the market winds blow.

Stay nimble

Develop an operating model that allows you to easily pivot when economic or market trends change. Concentrate on growing your recurring revenue services, with labor and equipment inputs adaptable across multiple business segments to provide a competitive and financial advantage. If your capital is tied up in specialized labor, equipment and material, it may reduce your company’s ability to turn on a dime, leaving it vulnerable during times of change, both financially and operationally. Subcontracting services, cross-training employees and renting, rather than purchasing, specialized equipment can help your business improve its agility and make full use of its assets in any situation.

Develop a strategic plan

Make your strategic plan a living document, one that can be tweaked and refined to accommodate the dynamics of growth. It should include several elements — clearly defined goals and objectives for the current year, as well as a longer-term outlook of 3-5 years, plus stretch goals that can be implemented over time. It should include a SWOT analysis — an evaluation of the company’s strengths, weaknesses, opportunities and threats — in conjunction with the stated goals and objectives. The plan should contain an operating budget for the current year, and an estimated budget for several years into the future. Finally, an action plan should be developed detailing the steps necessary to achieve the established goals and objectives, who is responsible for completing them and the timeline for completion.

Know your numbers

Gone are the days when simply looking at an income statement three weeks after the last period closed results in consistent success. Good financial management occurs by actively controlling what is in front of you, not passively observing what is in the rear-view mirror. Work with CFO or a financial advisor to develop a financial dashboard that tracks Key Financial Indicators (KFI), ratios and objectives in a clear and timely format. Regularly review this data and use it to help actively manage sales, financial and operations activity. Lastly, consider the operating budget a dynamic document that you update regularly to reflect changing economic and market conditions.

Actively manage accounts receivable

All too often, receivables management is viewed as an administrative function, receiving scrutiny only when cash flow is suffering. On the contrary, it should be managed weekly as a combined administrative and operations responsibility. For accounts between 30-45 days delinquent, operations’ staff are generally in the best position to collect as payment is often withheld due to a service concern. After 45 days, collection communications, responsibilities and service disruptions may require a coordinated response between operations and administration.

Review, consolidate and integrate operating systems

It is difficult to know what systems are being used, especially with so many apps available at the touch of a button. It is a good bet that your employees have created workarounds and short-cuts to help them do their jobs — an efficiency step that works for them but which may be a cog in the greater wheel of operational performance. Take an inventory of all systems, both formal and informal, determine what is working and what is not, where informational and operational gaps exist, then determine what stays, what goes and what’s needed. Assign and empower employees to step up to lead in their understanding and use of various systems and encourage them to share newly acquired expertise to mentor and train others. Finally, invest in building a systems performance engine by creating a network of integrated systems that work together to maximize effort, reduce redundancies and provide advanced reporting capabilities that assist in timely decision making.

Reprinted with permission. GIE Media. Lawn & Landscape March 2023 (c)

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Leaders are in the “people business.” All of their other responsibilities notwithstanding, their team and its care and development are among the most critical responsibilities any leader has. Ensuring that the team is functioning at its best requires that leaders regularly spend quality time with their direct reports to help them develop and mature into the best possible version of themselves, prepared to accept even bigger challenges and make greater impacts as time goes on.

Effective leadership of the team is rooted in meaningful engagement between the leader and direct reports, not solely in the measurement of the time they spend together. Most would agree that leaders should be fair in their expectations, interactions and dealing with others, but the word ‘fair’ also holds the key to four critical actions leaders must take regularly when it comes to developing their subordinates.

Feedback

Consistent feedback is critical to a well-functioning team, whether a member’s performance is exemplary or needs improvement. People want to know how they are performing, and the impact they are having on the organization. A few words of affirmation spoken regularly will let the individual or team know that they are valued and not taken for granted. But be careful – feedback that is not sincere or sounds contrived will have just the opposite effect.

More difficult interactions when a team member is not performing up to standard are equally critical. If a leader has noticed substandard performance from someone, it is almost guaranteed that the team noticed it long before the leader did. A quick, timely conversation in private that starts with concern about the individual, includes a specific description of the area of deficiency, and ends with an offer of assistance to help them get back on track will generally correct the problem. This will not only improve the person’s performance, but also possibly that of the entire team.

Accountability

Giving subordinates concrete goals and visibility to the progress made towards achieving them is key to an accountability structure. Goals remove the ambiguity that can sometimes surround job performance and allow everyone to have the same understanding of job performance. Accountability structures also make feedback much more timely and concrete.

A good general rule of goal setting is that they be SMART: Specific, Measurable, Achievable, Realistic and Time-Bound. In other words, set goals that are easily understood, can be measured easily, are within the person’s sphere of control, and must be completed in a specific amount of time.

Innovation

Progressive organizations know they must embrace innovation in order to evolve and continue to compete. For every Netflix there are many more Blockbusters, companies that got comfortable with the status quo and were left behind by competitors that successfully adapted to a rapidly changing market.

When a leader challenges subordinates to ask why—rather than rely on the way things have always been done—each team member can bring different experiences, views and perspectives to problem solving. When paired with similar types of input from their peers, this type of problem-solving uncovers opportunities to create never before thought of solutions and processes, which result in greater efficiency.

Respect

This may be the most important action of the four. Leaders and managers that do not show respect for their team members and subordinates (or always place their own needs first) will struggle to be successful managers. It is true that respect has to be earned, not given simply based on a title.

While it may be an oversimplification, one of the best ways to earn the respect of others is to walk a mile in their shoes. That doesn’t mean doing their job, but it does mean spending time with them to get an understanding of their job—its challenges and requirements—and then considering the impact that decisions may have on the team. It also means showing a genuine interest in their feedback and considering it in the final outcome.

Management is a difficult responsibility when done correctly. It may seem overwhelming at times, especially for a new manager. Remembering this simple acrostic can help the focus to remain on the most important cultural aspects of successful leadership.

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The Bottom Line: Regularly producing job costing reports showing revenue and expenses at the individual customer (and/or job) level provides a multitude of benefits, including visibility to the efficiency of your own internal and field operations and the future viability of the customer relationship.

For more, read on.

First, the good news: Even if you are not currently producing job-costing reports regularly, chances are you have the information necessary, at least at a high level, to get an idea of whether customers are profitable or not. Job costing can be done in two ways which I will label as macro and micro job costing. Macro job costing looks only at the individual customers to determine profitability. All revenue and expenses, regardless of business segment, are combined to determine the customer’s overall profitability. Micro job costing takes this one step further and looks at each individual job or service provided to the customer. Sources of data are billings for services, invoices for materials, equipment, subcontractors and any other miscellaneous job costs, records of time worked to calculate labor costs, and the target gross margin for all combined field operations (or that particular business segment if doing a micro job costing analysis). Subtracting the costs from the revenue will yield the gross margin dollars that are left. If they are equal to or greater than the target gross margin, the customer (or job) is profitable.

Now, the bad news: It may be very difficult and time-consuming to gather all the information necessary and then compile it into a report for one customer, let alone all customers. It becomes almost impossible if there are not already good processes in place to track time at individual customer sites and expenses at the customer or job level. Without job costing reports, though, whether an individual customer is profitable or not is simply an educated guess. At the micro, or individual job level, not being able to measure profitability can lead to performance issues within the company going unnoticed, result in the potential for improper allocation of resources, bids that are insufficient to meet target margins, and overall lower company profits. It may also unknowingly keep you in a relationship with an unprofitable customer.

What to do? The first thing to do is determine whether current processes allow access to get the information needed for job costing. Is there a way to tie purchases directly back to a customer and/or job? Does the time-keeping system show how much time was spent servicing each customer or job? If not, those processes must be put in place first. Once the data can be accessed, a work flow needs to be created that details the system reports needed and how to put the data together, preferably in an electronic format, that allows largescale analysis of the revenues and costs associated with each customer. If you are not certain where to start or how to get the needed information, get some help; the worst thing to do is to ignore it! There are many industry software programs that allow job costing reports to be run with ease and will also positively impact other operations of the organization. And if it is not yet time to make that investment, finding a resource partner that can help leverage existing systems to get the required information needed to make good, solid decisions based on the numbers is the next best thing to do.

Steve Steele
Financial Services Practice Leader

P: 303-870-8160
E: steve.steele@brucewilsoncompany.com
W: www.brucewilsoncompany.com
Bio: https://brucewilsoncompany.humblehunger.com/about/our-team/steven-steele/

The post Do You Know If Your Customers Are Profitable? appeared first on Bruce Wilson & Company.

Inflation is the highest it has been since 1982. Most of you were not in business then, but I was. What left an impression on me was how difficult it was to maintain profit.

A turbulent market is a new challenge for today’s business owners. They’re rightfully concerned about the trajectory of the economy, though many are unprepared for the impact interest rate hikes and inflation will have on their organizations, customers and employees. Overcorrection may exacerbate the impacts of a challenging economy but small corrections, with an eye on the horizon, can help you ride it out.

Here are five steps you can take to stay on course:

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As we move into late fall, companies are setting their renewal and pricing strategies for 2022. Failure to raise prices could severely hamper the ability of companies to maintain service levels and effectively compete in an already tight labor market. While the general belief is that prices will begin stabilizing in 2022, direct costs like fuel and material will likely not retreat to their pre-COVID levels quickly, if at all. Meanwhile, higher wages are here to stay.

Here are six steps to help ensure outstanding service while maintaining profitability in 2022, even in the face of uncertainty.

1. Raise prices. This may seem like a no-brainer, though many companies worry higher prices could lead to client turnover. While a valid concern, not raising prices virtually guarantees reduced service levels, higher customer frustration and lower profitability. Price changes require thought leadership and analysis from your operations and financial staff to answer the who, what and how much questions related to customers and services impacted. Do this analysis before sending renewals out. It is impossible to recoup the increased costs for improperly priced contracts that have already been signed.

2. Talk honestly with your customers. They are usually willing to pay more for services if they understand the benefits to them. Don’t apologize or blame the economy; instead, explain service, support, or quality improvements they can expect because of increased investments in training or technology. When possible, meet in person and go prepared; this is an opportunity to show them they matter. Relationships are strengthened through difficult conversations. Finally, be creative if a blanket price hike isn’t in the cards. Offer discounts for payment in advance or longer-term contracts.

3. Determine what impact rising costs for direct inputs such as wages, materials and fuel are likely to have. Don’t forget to factor in headcount changes. Planning now for the increased cost of direct inputs is a critical first step in proper pricing decisions for renewals and service pricing for next year. Gross margin analysis may provide high-level impacts.

Don’t apologize or blame the economy for raising prices; instead, explain service, support or quality improvements they can expect with an increased price.

4. Verify current contract pricing matches required performance. Crews often spend more hours servicing properties than required. Determine if hour overruns are the result of “scope creep” versus requirements specified in the original agreement, incorrect bidding or performance issues. Then, adjust pricing and performance expectations accordingly.

5. Evaluate your customer portfolio to eliminate unprofitable accounts or adjust pricing. Just like shrubs need annual pruning, customer lists are no exception. Jobs that made sense in the past based on route density or portfolio considerations may need to be re-evaluated to verify pricing, contract scope and overall fit. Evaluate customers based on total value to your organization — maintenance, enhancements, snow, etc., not just one service line. Cutting unprofitable work frees up resources for more fruitful endeavors.

6. Use available data in your accounting and job costing systems to drive analysis of customer and service line profitability. Data is one of the most powerful and effective tools available to help ensure companies make the right decisions regarding hiring, asset purchase and allocation, routing, and a whole host of other factors that influence and drive what customers are charged.

These are critical steps, but they are not simple. Get help and advice, if necessary, about how to best use available resources to make good decisions now. Focus on a plan to improve current systems and people for even better results in the future.

Reprinted with permission. GIE Media. Lawn & Landscape November 2021 (c)

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The question is not if we need someone to handle tech; it is determining how technology fits into and drives our operational infrastructure. We must verify who’s on point for tech governance, strategy and the smooth running of our organization’s digitally driven engine.

Here are five ways digitally fluent organization answer these questions.

1. What tech specialists are needed? Options must be consistent with budget and strategy. A C-Suite professional for tech operations may be cost-prohibitive, but a budget-friendly tech generalist and/or third-party resource may result in coverage gaps. The answer is likely a combination of resources.

A Chief Information Officer (CIO) or similar could handle everything from strategic advice to end-user support, though many companies may not have the complex technical needs to both pay for, and warrant, this addition to the C-Suite. Therefore, an external vendor is a cost-effective option for cyber-security, network maintenance and end-user support activities.

A tech committee composed of managers and end-users from each functional business area, augmented with a consultant or trusted advisor to provide them with technical knowledge and counsel, can consider tech needs and options.

Have somebody leading the charge, whether it’s one person or a team. Having a tech specialist ensures it will be used strategically.

The consultant may also provide fractional CIO duties, filling the gap at a fraction of the cost of a C-Suite addition.

Any resources employed must effectively present advice from a neutral viewpoint and not one motivated by vendor relationships, individual profit or other factors which may result in strategic decisions inconsistent with what is ultimately best for customers and employees.

2. What responsibilities do specialists fulfill? Tech specialists translate business needs into an actionable plan.

Whether it is finding and implementing tech that provides efficiency gains, or working with the C-Suite to determine how tech drives revenue, performance or competitive advantage, they are tasked with several critical responsibilities, including:

• Ensuring system security
• Determining what tech gaps exist
• Evaluating the long-term scalability of tech solutions
• Determining compatibility and overlaps with existing systems
• Effectively implementing solutions
• Providing on-going training and support to users

3. How can systems be optimized? Documenting a specific evaluation process helps provide logical and consistent criteria to evaluate the value of your investment in new technologies. It should also ferret out areas where there are unintended impacts on other areas of the organization.

Evaluate proposed tech’s organizational impact by asking your team: what gaps does this solution fill? How will customer service and/or internal workflow improve? How will technology reduce costs?

4. What is my desired outcome? Knowing the outcomes that drive strategic business decisions is critical. Focus on defining deliverables like “provide gross margin by service at the customer level.” This specificity allows the proper questions to be asked of the vendor before a commitment is made and clarifies in advance the specific uses the tech is being employed for and how it will function optimally.

5. How do I know if tech is providing value? The right technology allows you to establish and measure key performance indicators (KPIs) and management dashboards that show real-time progress toward objectives. Focus groups of users and customers can help provide critical data on the user experience, identifying training gaps and needed improvements.

Discovering through hindsight that different decisions in the past would lead to a better outcome today is not a sustainable business model. Properly supported, technology gives us a crystal ball to make pricing, service level and scheduling decisions in the present, and allows us to keep, or even increase, our competitive advantage while positively impacting gross margin and retention operations.

Reprinted with permission. GIE Media. Lawn & Landscape May 2021 (c)

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No one came out of the pandemic craving more Zoom. Everyone has told me as our industry emerges from a different kind of tech bubble. After a year working in the cloud, technology fatigue has never been higher, even as it allowed us to thrive during an unprecedented worldwide event.If a jumble of apps and data sets has your employees feeling hijacked by systems they don’t understand, you are not alone. Technology is one of the highest-ranking stressors in the workplace. As a tool, it is equally important as trucks, mowers and other equipment in ensuring consistent employee productivity and optimal customer satisfaction.

But, unlike how fixing an equipment problem results in a higher-performing tool, fixing a tech problem by upgrading the tech often upgrades the problem without any meaningful gains in customer satisfaction or employee productivity.

Here are 5 strategies to reduce technology overwhelm and regain control:

Too much tech can be overwhelming, so make sure what you’re using is effective enough that it solves problems without creating new ones.

1. Determine who owns the tech. This may be one of the most overlooked pieces in many organizations. Just as your operations divisions have people responsible for ensuring they function correctly, your technology solutions should also have an owner to provide oversight, training, evaluation, implementation and integration. The real value of tech lives in how it integrates throughout your business, providing critical, accurate, actionable and timely data across all levels of the organization in a seamless, accessible manner.

2. Evaluate the capabilities of current tech. Technology is sometimes employed because it easily addresses a specific need. When lesser-known or unique uses of the program are overlooked, critical functionality is not employed, resulting in additional technology being implemented down the road that should have been handled by existing tech. This can lead to unnecessary expense, compatibility issues and increased workload where the same data must be entered into multiple systems. Being creative with tech implementation and use can often provide needed results even if the software was not specifically designed to function a specific way. This eliminates the need for multiple solutions.

3. Implement the right tech for the right data. Technology implementation should be done with a specific purpose in mind. Employing technology simply because of the cool things it can do is pointless if it does not ultimately increase the ability to better service your customer base or improve employee productivity. For tech that you choose to employ, verify the information it provides is timely, accurate and useful. Don’t confuse data volume with usefulness. Useful data should provide you and your employees with critical, actionable data that benefits your customer, streamlines employees’ workloads, or does both at the same time.

4. Eliminate “app for that” thinking. You’d be surprised at how many workaround tools your staff may be using, especially those that are free, easy to download or promote a quick fix. Solving a tech issue with a quick trip to the app store compounds your tech silos and fails to solve the problem. Be proactive. Make a list of all the apps your teams are using, authorized or DIY, then find out where the system limitations are and fix them. It could be as easy as more training.

5. Address the learning curve. Workarounds, like all shortcuts, fill a perceived need. Mostly, they’re employed to overcome learning gaps with existing systems or humor a “because this is the way we’ve always done it this way” mentality that is resistant to change. The result is separate processes, outside tracking spreadsheets and individual-use apps, all of which create compatibility and reporting inconsistencies with existing systems while limiting access to critical information and requiring more effort to obtain it. Find out what employees don’t know, what will help them become more fluent, and make learning a major part of any new technology initiative.

These actions will increase the visibility of usable data, help streamline critical processes, and ensure a better and more consistent service experience for your customers.

Reprinted with permission. GIE Media. Lawn & Landscape May 2021 (c)

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