Spring brings the excitement of new tree projects and opportunities. But too many jobs can overwhelm you regardless of how well your tree service may run. While the good news is that you have business coming in, you and your team will suffer a lot of stress if you don’t properly manage these new jobs.
So how do you manage your tree care service when everything speeds up? You rely on numbers. If you don’t understand the following numbers or their impact on your business, you could be setting yourself up for early-season chaos while also missing out on new opportunities for growth.
Here are key numbers to carefully track to make it through this hectic spring and set your company up for a profitable 2018.
Track where prospects are finding you.
Now that clients are calling you, take a minute to see how they found out about you. Are they past clients or were they referred to you? Did they learn about you from radio advertising, yard signage, billboards or social media?
Whenever you get a call, always ask: “How did you hear about us?” This allows you to gauge your marketing efforts and see which medium gives you the biggest bang for your buck. The responses will also tell you where you can reduce your marketing dollars. You will not have to spray-and-pray when allocating your hard-earned dollars.
A common metric to keep in mind is that every dollar you invest in marketing should create at least five dollars in revenue. For example, if you invest $500 into marketing, your target revenue should be $2,500. If this is not the case, take a look at your past client demographics. Did you receive business mainly from residents, businesses, realtors, landscape referrals, municipalities, etc.? Once you know this, you can think about how you got this business, so you can target your marketing medium to that specific group.
Build your sales conversion percentage.
After determining how the prospect found out about your services, go out and close the sale. This is where you must track your closing percentage. For example, if you take a look at 25 jobs and close 12 of them, you have a 48 percent closing rate. This allows you to see how successful you are at selling your services. Is 48 percent good or bad? It’s relative. If you only closed 25 percent of jobs the previous month, then the 48 percent is a major improvement. If the previous month you closed 70 percent, then that would be a red flag.
Your sales conversion ratio can tell you a lot about your sales process. Once you know and understand this number, you can ask better questions, especially if your results are not favorable.
Did you overbid on these jobs? Does your company offer clients something that separates it from competitors, a unique value proposition (UVP) that they might find compelling? Don’t mistake offering a lower price as being your primary UVP. That’s rarely a good idea. Sometimes having too many jobs could mean that your bids are too low.
Work to boost your gross margin.
Don’t fall into the trap of thinking that more jobs equal more money or more sales equal more profit. If you don’t consistently track your numbers, you may lose sight of which tree jobs are profitable and which jobs are not.
Don’t wait to find this out on the backend once the final debris is removed from your client’s property. By understanding the importance of margins, you can do a better job at controlling the profitability of each property you service. Start by understanding the importance of gross profit margin.
You may already be aware of this simple formula: Sales minus Direct Cost = Gross Profit. Your direct cost is essentially the money you have to spend to get the job done. For example, this would make up your payments to haulers, climbers and ground personnel — the individuals in your employ providing the service. This formula helps you see the efficiency of your efforts and makes up the first part of your income statement, also known as a profit & loss statement.
First, set a gross profit percentage target. This depends on several factors: how you operate, your personnel setup, the amount of equipment utilized by your company and your profitability target.
Let’s say that you would like to have a gross profit margin of at least 50 percent. This means that your total direct costs should not exceed 50 percent. For instance, if you bid on a job for $2,000, then your costs should not be over $1,000. Your magic gross margin number may be 40 percent or 70 percent.
Just a word of caution, typically a gross margin should be at least 30 percent to ensure that the company has enough cash to cover the remaining fixed and variable expenses of the business, such as insurance, utilities, office administration, office supplies, etc.
Second, use a simple spreadsheet to track your daily gross profit per job. Start with the price of the job minus the direct hauling, climbing and ground costs. Instead of waiting until tax time to check your numbers, be mindful of your firm’s financial from week to week, if not on a per-job basis. Knowing the power of margin helps you make course corrections quicker along the way.
Have a way to efficiently track the progress of each job.
Use a simple calendar or scheduling system to keep track of all of your new projects. If you try to commit each and every new job to memory, you may find yourself confusing or missing starts. If you don’t use scheduling software, a simple excel spreadsheet or Google calendar can make a huge difference.
Successfully scheduling and fulfilling your commitments is like smart rigging. You have to be mindful of the working-load-limit of your equipment so that you don’t cause overdue stress. You can place too much stress on your tree care operations if you don’t plan well for the rush of new jobs.
Congratulations on getting more business. Now use these numbers and tips to help you operate smoothly.