Jim Huston Certified Professional Landscape Estimator, J.R. Huston Enterprises, Inc.

Common Business Mistake #3: Too Much Caffeine

A few years back, a hardcharging contractor in the Southwest was feeling pretty good. He’d just had a year with over $750,000 in gross sales and a net profit of well over 15 percent. He decided to “put the pedal to the metal,” so to speak, and grow even more.

He had office help, but decided he needed a fulltime estimator. So he hired one—who had very little experience.

Over the next 12 months, his sales increased to $ 1.1 million. Unfortunately, his bottom line went from a 15 percent net profit for the year to a 10 percent loss, even with the increased sales.

What went wrong? I boiled it down to three main items.

• Bids weren’t reviewed. The new (and unproven) estimator was allowed to bid work without the owner or someone else reviewing his work. This cost the company about $ 70,000.
• Field communication and audit trails were not in place. People in the field made decisions and changed the product without proper approval or documentation from inspectors or the owner. One job had to be redone, which cost the contractor over $50,000. Other similar mistakes cost another $40-50,000.
• Proven systems and office staff weren’t in place prior to growth. This company could just about handle the pace of $750,000 in gross annual sales. There were problems (the flow of paperwork would become congested, job costing would be late or not done at all, change orders wouldn’t be adequately documented, etc.), but these problems were not insurmountable.

Unfortunately, the owner didn’t try to resolve these problems in his systems before he decided to increase sales. Management was soon overwhelmed. Lack of documentation, litigation and disorganization cost another $150,000-200,000. The owner (and the company) never did recover.

Simply put, the owner managed neither himself nor his company. He thought he could run his company on adrenaline (of which, by the way, he had plenty).

The moral of the story is: “You take care of the systems, and the systems will take care of you.” Or “You take care of the business, and the business will take care of you.” If you don’t, it won’t.

This excerpt is adapted from the book “How to Price Landscape & Irrigation Projects” by Jim Huston.

Jim Huston is president of J.R. Huston Enterprises, Inc., which specializes in construction and services management consulting to the Green Industry. He holds the distinction of being one of only two Certified Professional Landscape Estimators in the world.