There are two rules for managing in a tough economy: Control the things you can control, and minimize the risks of things you cannot. You must do both.
For example, you can control (increase or decrease) your costs. Your decisions drive this number. But you can only minimize the risks of revenue disruptions and/or revenue creation because your customers ultimately control these factors. Your actions only influence this number.
- Start with cost control. Eighty percent of your costs are related to staffing, equipment, insurance and rent. You have some leverage in controlling insurance and rent, but you have a lot more clout with staffing and equipment expenses. In a down market, you must downsize these costs and stretch these resources more thinly than you might like. If revenues do not materialize — or if they’re taken away by competitors — you will wish later that you had made some tough cost-reduction decisions upfront. Tighten your belt now for 2009.
- Minimize the risks to your revenue streams. The chief risks are low pricing, declining customer budgets, insufficient new sales activity, and slow and late renewals. Your customers will be looking for lower pricing and/or more value in 2009. They will want you to save them money. If you do not find them a path to savings, they will find someone who will. After you make your 2009 budget, refine your pricing model. Reducing costs will help with pricing by lowering your burden and recovery markup rates.
You must be proactive in meeting with your customers to restructure your service deliverables and to better help them meet their budgets. Develop several service and pricing options for their consideration. This may mean delivering less-than-perfect landscapes to some of your customers. But it is better than losing the revenue.
- Stay in front of your customers. Get out of the office and talk to them often. Start your renewal process earlier in the year, especially with your biggest customers. Talk with them frequently enough to address their changing economic situations. Customers appreciate flexibility and ingenuity even more in a tough market. Relationships still matter, but they are based more on mutual economic realities.
2009 is going to be the toughest year yet in grounds maintenance. My clients are experiencing this already with falloffs in enhancement sales and with price negotiations on renewals. Construction has had its two worst years in a long time, and the pain is about to spread to our industry. Don’t get caught. Act early. It’s too late to close the door when the cost and revenue horses already have galloped out of the barn.
— The author is the owner-manager of Kehoe & Co. Contact him at kkehoe@earthlink.net.
