Here at Modern Design Aquascaping, we have won many awards and have been recognized as one of the best pond builders in the country. I don’t say this to toot my own horn; I say it because I am proof that you can be the best at what you do and still fail at the “business” end of business. I am a guy who had a business plan for 20 years that looked something like this: Work your hind end off. Work harder than everyone else. Hope for the best.
That plan kept us poor. That plan kept us running in the rat wheel. That plan took our family and our business down a path to financial ruin.
Hope is Not a Strategy!
That “plan” was in place until three years ago, when one of those great moments in my life happened. A friend of mine, Dave, introduced me to Steve, a man who had helped him change his business (and his life). Steve introduced me to the Contractor Sales Academy, and he began to help guide our business (and family) toward a future full of hope. He asked us hard questions for me to think about. How much money do you bring home each year? How many hours do you really work? How much money does it cost you to send your crew out each day?
The question that really got me was the most basic one: “How much does it cost you to clean a water feature?” I couldn’t answer this basic question because I didn’t know my numbers. Something I have continued to embrace to this day is that I don’t know what I don’t know. There is always more to learn, and there is always room to improve!
The next step was to define how many days we produce our widget each year. For us, it’s around 180 workdays. My overhead number, then, divided by 180 workdays, equals how much revenue I have to generate each day just to keep the lights on (with no profit for business). I was blown away. The number was $1,000 per day, and it did not include any production at all. In other words, if our truck sat in the driveway during one of these 180 days, it cost me $1,000. It also meant that if our team went out and cleaned three ponds, bringing in $1,000 in revenue for the day, that was a breakeven situation for our business. The numbers depressed me, to be honest.
So, what did I learn? If the team can clean three ponds in a day, the overhead cost of the day is $1,000. The cost of the laborers for the day is $1,100. So, the cost for our company to produce those three clean ponds is $2,100. Therefore, it costs us $700 to clean each pond. There comes a point when the numbers are depressing because you have been blissfully hiding in ignorance. But this also gave me power. I knew how to tweak the numbers now. We could work more than 180 days. We could figure out how to clean an extra pond each day by increasing productivity. We could shave some off the overhead number by reducing expenses. We had options! It is amazing how the brain begins to find solutions to problems once you acknowledge the problems exist.
Freedom Through Calculation
So, once you have a clear view of what your overhead expenses are, you become an open door for great decision making! You can develop a real business plan based on real numbers. It gives you power in estimating as well. I can now look at a job and make a quick estimate based on real costs. The truth is, if you don’t know, you are only guessing. Trust me on this one.
Studying the previous year’s numbers and figuring out our overhead naturally led us to create a budget. Using the same numbers and some logic, we are now able to compare actual monthly expenses to projected expenses to be sure we are on track. This allows us to correct course throughout the year, and it helps us to avoid financial surprises. For a lot of you, you are probably thinking the same thing I was thinking. “I got this. I don’t need to do all that stuff. My system has been working just fine for me!” This number stuff can scary —but so is bankruptcy.
No matter where you are in business, there is somewhere better you can go with it. There is someone out there who is awesome at whatever you are bad at. Don’t try to do it alone. Join a group like the Contractor Sales Academy, where you can interact with other people who want to grow and learn. Hang out with all the smart kids and learn something new; it might just change your life. Ask yourself the hard questions. How much money do you have to give? How much do you have to retire on? How about the people who work for you and with you — are they happy? And do you have a plan in place to keep them that way? Grow and learn. Share and inspire. Make a difference!