There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.

Katie: Welcome to the Best Metrix podcast. Each episode, we meet with industry experts to discuss how they evaluate financial statements, what metrics they commonly use, and how their clients have improved. We'll also gather suggestions of how you can incorporate the same insights and processes into your own practice. Thanks for listening and enjoy this episode.

Glenn Dunlap: Well, hello everyone and welcome to the Best [00:00:30] Metrix podcast. We're diving into a topic that's critical for small and midsize businesses, especially in industries like lawn care and landscaping. And our guest today is Christine Ara, co-founder of the Green Profit Academy. And she's here to share her expertise on how these businesses can transform their financial health. Christine has an impressive track record of helping companies improve cash flow, drive profits and achieve sustainable growth. She's a certified profit first professional founder of Core Growth Strategies, Klocwork certified Pumpkin plan [00:01:00] strategist. Fix this next advisor in QuickBooks ProAdvisor, making her uniquely equipped to guide business owners towards success. Christine has developed strategies that enable have enabled businesses in the lawn care and landscaping industry to increase their profits significantly, with some clients achieving gross profits as high as 65%. So, Christine, I'm tired after reading that, just thinking about all of the things that you're doing. But thank you for joining us today. Gosh, yeah.

Christeen Era: Thank you for having me here. I love the topic of benchmarks and KPIs. [00:01:30] So yeah, it was a pleasure to hear, you know, that we are going to have this conversation today.

Glenn Dunlap: Yeah. Likewise. I'm excited to to to learn more. So first before we jump into some of the benchmarking, you know, tell us a little bit more about, you know, all these things that you have going on.

Christeen Era: Yeah. So uh, I think they've all kind of contributed and kind of shares like, you know, my journey right through business and my business growth. And, um, I started off with a passion just in business consulting. I really love [00:02:00] kind of like the operations side of things, and I fell into accounting at a young age of feeling very confident that, yeah, no problem, I can do it. Good thing I was naturally good at it, because it went hand in hand with the operations side of it. And I love bringing the numbers together, you know, with the operations side and to find, you know, inefficiencies and ways that we can do better or what are we tracking and how does that contribute to more profit in a business? So [00:02:30] in my journey, you know, working with small businesses, it wasn't just about the numbers and their financials. It was everything that contributed to them in the environment of the business. And, you know, so I like to learn I like to, you know, continue to serve the industry and find out, like, what can we do better? How can we get more insight. That led me to the profit first derivative that I wrote a couple of years ago and released for this industry, which is profit first for, [00:03:00] you know, lawn care landscape businesses. And there's a lot in there, too, about KPIs and benchmarks and what percentages you should be, you know, to have a healthy business with the scalable growth business model concept that I developed specifically for this industry.

Glenn Dunlap: Yeah. That's fantastic. So we have a lot in common in that. Well, you probably like the debits and credits more than I do. The mechanics of accounting I absolutely couldn't stand as I was going through all of the kind of, you [00:03:30] know, this wasn't for me. But when I started realizing that, it always boils down to the numbers. And what are these numbers telling us? That that was something that really, um, you know, got me interested in, in management accounting more than just the actual, you know, side of, you know, just the mechanics of doing the doing the work. You know, whenever you read the story, problems about, let's say you're in a payables clerk at Ford Motor Company and I'd be like, forget. No way I could No. Never do that job. But what do these numbers mean? That's. You know, I've spent the rest of [00:04:00] my my life doing that stuff. So that's. I think we've got that in common. So, uh, how did you get in the lawn care landscape? How did that come about? How did the specialty there?

Christeen Era: So I've always worked with some sort of, you know, contracting business, whether it was like engineers, architects, system automation, general contractors, you know, in that field, just working with them, helping them grow their business, understand their numbers, you know, get their life cleaned up, whatever [00:04:30] it was that they're having challenges with. And I, I ran into along, you know, and I had some lawn care and landscape clients for kind of mixed in with several of my trade industries for years. And I ran into who's now my business partner at Green Profit Academy, Steve Bousquet. He owns a very successful lawn care and landscape business in the northeast. And, you know, him and I were actually in a mastermind group together, and he kind of heard all the stuff [00:05:00] I was talking about, you know, with benchmarks and what healthy businesses, you know, where they should be at with their spend and their revenue and all that stuff. And he said, man, he goes, we really need to get this to everybody in this industry. And he said, and you need to write a book and you need to get out there. And you know, so he's telling me all the things that I need to do to help this, the industry. And he just started referring customers to us, you know, kind of left and right from [00:05:30] his groups because he mentors and helps other businesses as well, just out of the kindness of his heart. And so I just really, you know, started connecting with these great guys that have put so much work in their business.

Christeen Era: And there was just this gap. So that's, you know, that was I was kind of invited in. And then, you know, it fueled my passion of solving these problems that they kept presenting to myself. And I realized in working with them, you know, I'd been working with contractors for [00:06:00] years and, and contracting and cost accounting and all that stuff. It is challenging, right, for, for this industry to navigate. And the additional challenges that I realized that the green industry has was far above just what kind of general contracting has. And, you know, there's all these kind of anomalies and, and, you know, outside influence and how they measure things. And then they have just a stack of services that they can provide, [00:06:30] you know, based off of their business model. So I went, you know, this is really complex. These guys, when they need help and they need some simplicity, you know, in being able to understand their business model. And I went, how can I do that. So so that was kind of how I, I continued my journey into this industry Specifically and just started identifying like where should they be on their revenue tier? What should they spend? [00:07:00] What's good, what isn't? And what if they're not doing that? Like, what are the numbers telling us when it comes to their business model and their operations and getting insight around that?

Glenn Dunlap: Yeah. That's great. That's great. So let's um, I think I understand when we say lawn care and landscape what that runs the gamut of, but you've mentioned some different types of contractors in here. So let's as we're getting ready to dive into some of the metrics, let's define what's in this bucket of lawn care and landscape. Who all are you serving or what are you. What are we what are [00:07:30] we really talking about here?

Christeen Era: Yeah. So the lawn care industry or landscape, there's two terms professional terms or industry terms that they use. Right. So there's one it's called the one trick pony. So that could be like hey I'm just a lawn application company or I just do this one service or the other one is called the Three Ring Circus.

Glenn Dunlap: Okay, one trick pony. Your three ring circus. Got it. Yeah, right.

Christeen Era: Because that's what it's about, right? It's like when they have more than one [00:08:00] service that they offer. Like they could do a lawn care application. They can do maintenance, they can do irrigation, they can do snow removal. Then they have landscape design. They have landscape install, they have soft scape hardscape. So you just start, you know, adding all of these different levels, these different services in. And it is really like managing a three ring circus, which is why they call it that. So it's pretty much anything that a lawn care company or a landscape [00:08:30] company, you know, can, can provide. And they also do snow removal depending on where they're at in the US.

Glenn Dunlap: Okay. So this would be different. So landscape architects for instance would be over in a different NAICs code. That's going to be in a professional services firm. Right. That's going to be more of the architectural services. This is going to be. Yeah. In the in the personal services I think is what they call this category in the NAICs codes if I'm not mistaken. Personal support or something personal [00:09:00] administrative support or something like there's a big bucket there. But okay. So I just want to make sure as we were getting into it that we weren't, somebody was not thinking, hey, we're talking about landscape architects too, because that's probably a different, um, a different set of challenges than this group. Right.

Christeen Era: So yeah, they're not out in the field, you know, getting in the dirt, planting, you know, tearing up pavers, putting down pavers, you know, anything like that. So they're not routing their guys out there. So this is this is really [00:09:30] for the lawn care and landscape business owner that has a team that goes and delivers services to whether residential or commercial, you know, and maintaining or creating or design. You know, I don't want to say designing, but installing, uh, any sort of landscape Into a professional business landscape or somebody's home.

Glenn Dunlap: So thinking about your client base, how many of them are one trick ponies? How many of them are three ring circuses? [00:10:00]

Christeen Era: Um, I have very few that are one trick ponies. Yeah. There's. Yeah. And when they are, you know, it's like we've kind of gone through coaching and figured out, like, this is just really your niche. This is where, you know, you do really well considering your market and your business model. Um, and, and what your people are good at. Right. Like, instead of we've had companies that decided to just be one trick ponies because they were a lawn [00:10:30] application and then they're like, well, we'll switch in the winter time to do snow removal. They didn't make any money on snow removal. Yeah, right.

Glenn Dunlap: They'd be better off taking the winter off. Right?

Christeen Era: Right. So they're like, okay, we'll just get that out of here. So. So there's very few that are the one trick ponies. And most of them are the three ring circus and you know, so we're navigating, you know, all kinds of benchmarks in their company. And we're looking at profitability, you know, kind of per department and figuring out like where can we make improvements? [00:11:00]

Glenn Dunlap: Okay. And how do you have any that are single shingles or are they all started building teams and they're much it's a much larger than, you know. Yeah.

Christeen Era: Most of them have a team. So we don't have anybody where it's just the owner. Um, I think that, you know, and the revenue tiers like 0 to $250,000, that's usually like just the owner. Right? Okay. So it's just the owner out there. They're making a living, you know, they're trying to build a business, but what it really is, is a job. Yep. And then [00:11:30] after we start moving. Yeah. Over that 250,000, then we start thinking like, oh, I need help. What kind of help do I need? You know, am I profitable enough? How much help do I need? You know, what does this look like? So most of our people have, you know, at least I would say for employees. Um, and that's usually like three field crew and an office support person. Okay.

Glenn Dunlap: Okay. That's interesting, isn't it? I mean, it's a I would think the challenge is the [00:12:00] stair steps in this maybe, maybe of adding another person and that just adds that extra overhead. And then you just have to. Yeah. Figure out those. The path to when's the right time to hire that next person.

Christeen Era: Right. Yeah. And in the book I kind of outlined that with the scalable growth business model, I dive into it in more detail where I outline, okay, these are the revenue tiers. This is what you should spend. And based on your business model, these are the team members you should have. [00:12:30] So that way it gives them a guideline of you know because because we have some business owners where they're like, I don't want to do sales anymore. I don't want to do install. You know, there's maybe only like five of us. And it's like, well, I get that you don't want to do it, but you're not there yet.

Glenn Dunlap: Yeah, yeah. Yeah, yeah. That's interesting. One of the the the profit first um, teachings I think is that's that's an interesting one is that if you've got $1 million business and it generates $350,000 [00:13:00] of, of gross profit or, um, that you really have a $350,000 business that just moves around $650,000 for somebody else. And I think from a from an owner's perspective, it's an interesting thing to think think about that in a, in a different way. I think instead of it sort of sets up, um, your mentality of, of what's available in a completely different capacity. Right. So yeah.

Christeen Era: Yeah, yeah. And that's a lot with like subcontracting. Right. Because we're delegating the work to someone [00:13:30] else versus managing a team. And of course we want to have our production crew and our cost of goods sold. Right. We can understand, you know, what's the percentage there? Uh, are we pricing? Right. There are so many things that come up with that. So we really need to look at that. You know, if you have that million dollar business and like you were saying, I think you said like $600,000 or something in subcontracting, then, you know, this is really what's left. And yeah, [00:14:00] so if we're looking at subcontract work and we have seen business models that approached us and they're like, oh yeah, you know, I'm $1 million business. And we're like, yeah, but you sub out like $700,000. And so it's like, so really you're a $300,000 business. So let's talk about that right? Yeah.

Glenn Dunlap: It's a totally different mindset isn't it? I mean, it's just just in, in, uh, you know, what you can think about in terms of where are we going, what can we invest, what can we afford to do in different [00:14:30] things? If when you when you really break it down that way? Yeah. Yeah. Well so that's a good that's a good transition to financial statements. So you know I'm going to open with a question which is, you know as you're looking at financial statements, um, you know, in this space, what are the first things that your eyes are drawn to, whether it's the balance sheet or the PNL? What are you what are you first paying attention to when you see a new set of financials?

Christeen Era: So the first thing I want to see is, you know, before I get into the weeds of like, if their balance sheet is even correct, because most of the time it isn't right.

Glenn Dunlap: Okay. [00:15:00] We're going to assume it's correct right from the start or we're going to assume it's incorrect, but we're going to at least take a look at it. Right. So yeah.

Christeen Era: Right. Yeah. So so I don't even look at the balance sheet from the start. I you know I'm looking at the top line numbers. So I'm looking at well what's your revenue. I'm looking at okay. What's your labor costs. What are you spending on equipment. What does that look like and what's your material. So I want to see you know, what are the percentages that they're spending based off of their revenue. And if it's, it's [00:15:30] it typically doesn't start off correct. Like when I'm looking at it, there's never a, you know, like, oh, this is perfect. And there's some things that that can influence this, right. So if they have high labor costs, then their equipment percentage should be lower because it means that their team is doing the heavy lifting when it comes to generating the revenue. So that tells me that they're working on smaller job sites, that they don't have as much room for heavy equipment, [00:16:00] and it's the team that's getting in there and they're doing the work. So, you know, that would be a would not be a red flag for me if I saw that their labor costs were high and their equipment was low. But then I would look at, well, you know, how profitable is your labor costs. And then on the other hand, if we have high equipment costs and low labor, that's going to tell me the equipment's doing a lot of the heavy lifting in this business. Right. Uh, the [00:16:30] people, you know, they're coordinating things. They're not doing as much as the labor. They're working on larger job sites. You know, they have room to get in there and utilize heavy equipment for their business model, and so their labor costs would be lower with their production team, but their equipment would be quite high. So that would be on the higher end. But when I see that equipment and labor are both high, that is a huge red flag for me. And it tells me either your labor heavy, your equipment heavy, or you're not pricing, [00:17:00] right.

Glenn Dunlap: Okay, so so when you give me some examples on the labor side, I mean, are we like talking the size of the, the the mower deck. And so you're having to work more hours on those things. Is that what you mean by that.

Christeen Era: Yeah. So when you're not utilizing equipment to do the work that you're providing, you know, let's say that you're doing, um, a, you know, remodel in the backyard and they're saying, hey, you know, we want to have this beautiful [00:17:30] outdoor living space. We've got this beautiful ranch style home out here in Texas. We've got all this, you know, land and and that's let's say that's their ideal customer as someone like that. So they'll use this heavy equipment to come in, you know, they'll change the landscape a little bit. They'll do, you know, some install of like an outdoor kitchen, a swimming pool, you know, beautiful entertainment decks, some lighting, things like that. So a lot of heavy equipment is going to be involved in something like [00:18:00] that.

Glenn Dunlap: Okay. Okay. And so that. Yeah. So it's um, but if they have they're not either not utilizing it well or they've, like you said, not pricing it. Well, if they've got both high labor and high equipment and most of the equipment in this case, when you're thinking about it from a Cogs perspective, they're renting that equipment. Or how do you know that the labor costs are high? I mean, that the equipment costs are high.

Christeen Era: So you will see usually they'll have a rental equipment rental, you know, line item there where we can see how much they're renting. And [00:18:30] then, you know, we'll look at well what's your equipment spend. So those are kind of things that I'm looking at. And that's typically when I do find my way to the balance sheet. If there is a red flag, I go, hey, let me look a little bit more into this. And I actually created a workbook for these guys to where they can list their equipment and they can tie it back to not just the cost, but what are they pricing on it. Because that was kind of a challenge that they're having. And in this industry, I have to say they do love equipment. So that's [00:19:00] yeah, that's right. They're all fun. It's these big toys. So yeah they kind of collect it.

Glenn Dunlap: That's right. Yeah. And the most toys wins right. That's the isn't that the the rule. So yes they're either renting or purchasing this equipment. So that becomes a you're a measure for that. If you're so if you if you see low equipment on the expense chart, that doesn't necessarily mean they don't have high equipment purchases. So you've got to that's the check and balance that you've got to look for there.

Christeen Era: So right. Yeah. So that's when I dig a little bit deeper okay. [00:19:30]

Glenn Dunlap: You said labor equipment seemed like there was a third thing that you mentioned materials materials.

Christeen Era: Another one how much they're spending on materials. So so that's another challenging area because the markups and margins on their materials are rarely correct. Um, you know, so they'll do some rule of thumb or they'll go, oh, we'll just times it by two. Well, whatever the cost is, we'll multiply it by two and that's what we'll charge. And you know, the problem with that is they're not [00:20:00] you know, it's like some plants. It's like it's like $6 and versus other ones, you know, maybe some Chinese maple or something that's going to be hundreds of dollars. Right. So it's timesing it by two is not the correct approach. It's really having a pricing system built in where you're tying your costs, you know, back to making sure you have a profit. So you're being intentional about it.

Glenn Dunlap: Okay. So give me some examples of that then Christine. So tying them back to the cost, it's not just the cost of the of the [00:20:30] the material or the plant. In this case, it's everything else that goes into what the labor that goes into.

Christeen Era: Right. So they might have um, so they might have it to where they order and they get it delivered directly to the site. Right. So then they can go, okay, let's just figure out our markup on this and build it into our system. And then when they're building out a job and they're quoting a job, they'll know our markups are are good. You know we guarantee they're going to be profitable versus uh, [00:21:00] some places, locations. And, you know, my client, like he had, uh, my partner, he had this built in his business where the deliveries would go to his location, and then they would be preparing to install on the site. So then it took somebody they had to take care of the plants, you know, for several days. Right? So then they have somebody out there making sure, like they're watered, they're getting the right light, they're protected. [00:21:30] Like all of these things. There's loading, there's unloading. So there might be some additional things that go along with that to to where a business owner doesn't think about it and they go, well, I don't know why I'm not profitable. And it's like, well, tell me about your process.

Glenn Dunlap: Yeah.

Christeen Era: You know, and then we find out we have a week of labor of managing, you know, five different, you know, plants that are going into this install.

Glenn Dunlap: So and that's part of all the costs that you were talking about in terms of the, the markup for this. Or you're thinking that you try [00:22:00] to eliminate as much of that as you can and just have it, you know, go to the site.

Christeen Era: Well, it depends on their business model. Some it might like dropping it on a site may not work for them. It may not be coordinated with the vendor. It may not be coordinated. You know, it may not be doable. So it's like really, you know, depending on where you're located in the US, you know, what your market is, what your process can support. It just it's really going to depend on those things. But [00:22:30] we have to consider all those things. And there's kind of like this joke where, you know, entrepreneurs are like, but my business is special. And then, you know, there's this. Yeah, but it's not. That's right. And I go back to go, well, it is it is right. Because we all are in different markets. We have different business models. We have to think about the special areas in our business that can be bleeding profit.

Glenn Dunlap: Right. Okay. So so really what you're saying is that it's not just the two x if [00:23:00] I'm if I can simplify this for my for me, if it's not just the two x markup of the cost of this Japanese maple, but it's really it's everything else that goes into the transportation, the labor, the everything that we're having to deal with on this Japanese maple that we have to make sure that we've captured all of that cost. It's not just that it's a $200 tree, it's a $200 tree and all and $200 of other costs. And then we have a markup process that we use for the once we've captured all of those costs.

Christeen Era: Right.

Glenn Dunlap: Yeah. Okay. Because the two x [00:23:30] markup is is a markup process. It just does. It's a toy, but it doesn't. Maybe it doesn't capture all the other costs that are going into it, right?

Christeen Era: So. Right. Yeah. We want to make sure that that we don't have blind spots that we're not thinking of, you know, or we're just confused, going, well, I'm not making any money. And I've heard that so many times. I don't understand why I'm not making money on this service. Right. But then after we walk through the process and we identify all the costs associated with it, and then we look at the pricing, it's [00:24:00] very apparent why they're not making money on that.

Glenn Dunlap: Well, so it seems like you're going to solve a bunch of their problems just by focusing on focusing on these three things, right? If they get these three things right and the price they're pricing it right, then the everything else should fall fall through. Right. But what that's that's an oversimplification obviously. But what else what else are you looking at once you look beyond the labor equipment and materials?

Christeen Era: Well, one other thing I want to add to the equipment, which is a very common mistake in this industry, is they don't charge for the equipment. [00:24:30] So they don't charge, you know, looking at like on an annual basis, like what is the cost of, you know, one of the let's say it's a skid steer. What's the cost of this skid steer? And do I have enough jobs coming in to cover the cost of this skid steer? You know, am I pricing for it? And typically we find that they're not including a markup on their equipment, charging the customer for it, and they're [00:25:00] not considering a full annual use and cost of this to determine the price. So that's another huge bleed, you know, and this is just not one piece of equipment. You know, if you look at a, let's say, just a basic landscape company, they're going to have about at least five different pieces of equipment that can be impacting, you know, this, this pricing model, their, their profit with their margin. And they don't think about that, you know, or another thing [00:25:30] that I've heard them do is they do not mark up their subcontractors. They're like, oh, we just it's just a pass through expense, right?

Glenn Dunlap: Yeah. Except there's all the management of that, the collection of that billings. Yeah. The administrative element of that going into it too. Right. So there's yeah, there's all those hidden costs that you've got associated with that. Yeah. Yeah. That makes that makes sense. So on the equipment, how are you how do you have them charged for that. What's the process where they get to the the pricing of that [00:26:00] equipment, or are they taking it and dividing it by the number of hours that they're producing and coming up with a cost that they, they would use for that equipment or.

Christeen Era: Yeah, it's it's not a simple process, you know, which is why we try to support and coach them through it, especially, you know, in the industry, it's like they're they're not numbers people. They're more you know, I want to be outside and in nature. Right, right. Which is fine. Right. It's like that's what we're here for. But we're looking at like, you know, what is the cost of [00:26:30] this thing? And we want to look at not just what did you pay for this? What are you paying for this? What's the maintenance. Right. What's the insurance? Because those two factors come into play. Okay. How much is it being utilized? So a utilization rate right over the an annual year. So it's you know, from January to December how much is it being utilized. And then what are you charging for it. So we want to make sure that what they're charging is profitable. [00:27:00] So we come up with a percentage. If we say, well, let's say it's being used 80% of the time, which would be ideal, then our pricing to cover a full 100% in time would have to be X. So that's the simplicity of it okay.

Glenn Dunlap: That makes sense. That makes sense. I mean, I would assume that that there's another thing that just adds once you've once you help them look at that. And the cost of of of that going into [00:27:30] the changes their, their bottom line right away. If they're recouping that it does.

Christeen Era: Yeah.

Glenn Dunlap: Versus eating it. They would have eaten it before right. I mean yeah yeah.

Christeen Era: So when we sat down with a business owner and we start talking about their challenges, you know, in this industry, the first thing we dig into are these areas and we dig into them because it's going to give them, you know, an instant relief. Right. What's the one thing that we can change to [00:28:00] to get your business closer to your ideal vision right now? What's the one thing? And it's going to be the same thing that we can change to make sure that you're profitable from this point forward. And then typically what we do change based off what we find is it covers their coaching costs and working with us, you know, 3 to 5 times over in the first year. And fixes the problem, which is what we want. So we're like, you know, [00:28:30] now that we've put that on the shelf, let's talk about the rest of your business.

Glenn Dunlap: Right. Yeah. Right. So let's get into some of the metrics then. So you know what. What are you aiming for or what what should they be aiming for as they're as they're running these businesses.

Christeen Era: Yeah. So you know, one of the things that that we hear a lot about is I want to grow I want to grow, I want to grow. Right. So it's that's kind of the idea. And and the companies can grow. They can push the top line revenue all they want. But if we're not [00:29:00] safeguarding the profitability, there's no point because all we're doing is we're working harder for less. So with revenue growth, you know, we typically which is pretty standard. Like we want to look at a if they are going to grow, we want to look at a 10 to 15% annual growth. And we want to ensure that while they're growing that they're, you know, gross profit margins stay within that range of, you know, [00:29:30] the 45 to 55%. And I outlined these in my book with my scalable growth business model actually outlined like the lowest that you can go in, you know, as you scale and grow your company, which is a 42 to 43%. Right? Because as you're scaling your business, you are going to be investing in your business. So that gross profit margin is going to be a little bit lower as you're revving [00:30:00] up to grow that revenue.

Glenn Dunlap: Okay.

Christeen Era: So but when you kind of get into that sweet spot where you're like, you know, we're not growing, we're we're there, you know, we've got this nice little rhythm of adding new customers. We've, you know, streamlined our our routing, whatever that is. You can make that 55% or higher. Like we've had some clients even do 75%, you know, because they're they've got all their systems and processes [00:30:30] dialed in. They got their team working the right roles, and it's just very highly productive. So as that revenue of that 10 to 15% growth happens, we want to ensure that, you know, you don't go below that minimum of 43%. And then, you know, I kind of look at it like the sky's the limit after that. Like 55% is good, 75% is even better.

Glenn Dunlap: Right, right. Yeah. So we so we kind of alluded to this earlier. So when [00:31:00] the stair step of these things when you're buying the equipment as you're growing a business, you're going to buy another piece of equipment, but you're not going to have 100% utilization on that. So that's where you're going to start eating into some of those margins. As you're as you're growing the business, you're going to have another crew. You're not going to keep everybody occupied full time. So you're going to stair step, you're going to eat into your margins and some of that. So that's where you where you see the, the challenge is if you try to grow at 25 or 30%, is that you're going to end up with a lot of inefficiencies that are passed along in each of those [00:31:30] areas, right? I mean, that's the that's the challenge. Yeah. That makes that makes sense. Do most business owners do they start to understand that once they I mean, they've probably felt some of that pain as they've done some of the growth on their own. Right. I mean, that seems like that would maybe not knowing exactly what was causing it, but have felt the pain.

Christeen Era: Yeah. And we a great example is we had a client that within four years grew 800%.

Glenn Dunlap: Excuse me.

Christeen Era: Yeah I.

Glenn Dunlap: Know.

Christeen Era: Yeah. Which was just, you know, insane. Um, and he [00:32:00] grew 800%. And as he scaled his business, like, everything was great, you know, kind of like, at that 5 million mark. But then after he got over that 12 million mark, his company was structured still at that 5 million mark. So they started losing money Like they're like, oh yes, we're here at this really great revenue, you know, heading towards our goals, but we're not as profitable as we [00:32:30] were when we were half this size. And when we started looking at why, it was because the revenue happened, right? The delivery happened. But the business, the the operations, nobody looked at the operations to say, do we have the right systems and processes? Are they being followed? What do we need to put in place now that we're at this revenue level? So the lack of structure and strategic planning that happened through that growth, they ended [00:33:00] up sliding backwards on their profitability.

Glenn Dunlap: That makes sense.

Christeen Era: So now we're trying to right the ship and, you know, get that structure and that foundation in place with his team. Get the more of the leadership team developed, you know, and down the line in order for them to, you know, hold that revenue tier and then move above it.

Glenn Dunlap: Sure. Yeah. That's so hard. And you think we went from 5 to 12? It's got to be. If. If five is good, 12 has got to be better, right? [00:33:30] Yeah.

Christeen Era: And when they started working with us, I mean, they were under a million. So they were, you know. Yeah. They just they grew so fast and some of the stuff they were aware of, you know, we were talking about and then I was like, okay, I kind of like set them free. And then they came back and they said, oh no, we have a problem.

Glenn Dunlap: Yeah, yeah, yeah. Well, it can run away. It can run away quickly if you're not if you're not careful. So that makes makes sense. So we're [00:34:00] looking at margins as, as so you looked at growth and kind of measuring some of those things. What else are you looking at as you're looking at a set of financials for.

Christeen Era: So for their financials. Yeah it's you know of course it's like the net profit margin. Right. It's I kind of always say that if you're making, you know that under 10% in your company, you're just surviving. So we want to make sure that your you're thriving, [00:34:30] right. So we want to make sure that when all is said and done you have a higher net profit margin okay. You can then, you know, tuck that money away. And this is, I think, where business owners get a little confused too. And I'm sure you know, anybody in this industry that's an accountant that's listening to this, they're going to totally get it. Uh, at the end of the profit and loss statement, they go, where is that money? And we have to explain to them it's got a job to do over on the [00:35:00] balance sheet.

Glenn Dunlap: Right.

Christeen Era: So, you know, let's unpack that. So that's where we really need to ensure that there's this healthy net profit margin, you know, looking at the business and how it's operating. So it can go do the job on the balance sheet and the job on the balance sheet. It's not just paying the liabilities. Right. Paying for the assets. It's not just that it needs to go live in a savings account, you know, for that rainy day fund. So that's another job that [00:35:30] you know what's left on the profit and loss like has to do.

Glenn Dunlap: Right.

Christeen Era: So and that's where you know, the concepts of profit first are really great because then we're intentionally taking that money and we're saying you go do your job first because we might need you later. So it's the company's building its own capital.

Glenn Dunlap: Right, right. Well, it's the it's the owner's question that we've we hear a lot, which is this says that I'm making money, but I don't have any cash, like where's my cash? And that's the, that's [00:36:00] the a common question that you that you get a lot income statements can be deceiving. And especially when you're paying tax on, on net income that you also don't feel like you have the cash to cover those. Those are those are big challenges for business owners.

Christeen Era: Yeah. And the other job it has to do is to pay the business owner. Right? Because most of the time they're not on payroll. That's not showing up on the profit and loss. And, you know, they're over there taking a draw on the balance sheet, you know. So that's the other the [00:36:30] the other job it has to do. So yeah we want to look to you know, I would say don't be less than that 10% because you know, that's that's kind of like you're ready to hit the fire alarm. So ideally, you know, we want to be higher than that. We want to be 15, 20, even 25% is better. Yes. Okay.

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Glenn Dunlap: Other metrics that you use.

Christeen Era: Um, so some of the other stuff I'm always talking about [00:38:00] return on investment. If anybody has ever heard me talk, you know, before, it's I love the ROI conversation. It's one of the questions I typically ask my clients, you know, especially when they go, hey, so we want to buy a new truck and we want to put in a new route and we want this equipment. I'm like, that's great. So talk to me about the ROI.

Glenn Dunlap: Yeah. Fun killer right? I know.

Christeen Era: Sometimes they don't talk to me for like [00:38:30] a.

Glenn Dunlap: Week, right? That's right. Yeah. No, it really had my eye on this truck and this trailer and. Yeah. That's right. Yeah.

Christeen Era: So my rule of thumb with things like that is to have an ROI of at least 15%. Okay. So you know, when I'm talking to them I'm like, okay, well this is where we want you at. If you're going to do this, show me how it's going to happen. So and they might not know how it's going to happen. So you know, we'll try to walk them through how it's going to happen. Eventually they'll be able to do [00:39:00] it themselves, you know. But when we first start off with these types of things, we want to make sure that whatever it is that they're adding to their business, whether it's buying equipment, hiring an employee, you know, adding a new, a new crew that it has a return on investment.

Glenn Dunlap: What time frame do you use for that? Because, you know, first month they're not going to make money on something like that, right? I mean, it's going to be something where they're establishing that route there. So what kind of time frame do you give them to to hit that that ROI?

Christeen Era: Well, one of the things is [00:39:30] if it's going to be a longer road than we have them save up for it in advance. So we create an account that they start allocating funds to, you know, kind of like, oh, let's pretend that you're doing this now. How much is this going to cost? Let's start putting this money aside. And then we can really see without, you know, being married to the idea if it's going to work. Okay. And then they can also feel if there's pinch points. So it's like, [00:40:00] you know, so we typically want to do that for 90 days.

Glenn Dunlap: Okay.

Christeen Era: And then after that one they can roll it out. I would like to see it being productive and making money within 90 days of them actually rolling it out. It depends on the company and their training process. So some guys are like, hey, welcome handshake, go get in the truck. Right.

Glenn Dunlap: Yeah.

Christeen Era: And which isn't very successful. But then other companies that [00:40:30] we work with, they have a really great onboarding process. They train their team. You know, so typically it's within the first 30 days that the person is able to start going out by themselves. So then, you know, the next 30 days after that you'll start. It's not going to be efficient. Right. Because it's just starting. It's a new person. Um, so typically I would say give it 90 days. Look at it. If it's not ticking up, then we have a problem. What is that problem? But then we [00:41:00] have that savings of 90 days of them intentionally putting that money aside to lean back into it.

Glenn Dunlap: Sure. That makes perfect sense. Um, yeah. That's great. So after ROI, what you have the other items that you're using.

Christeen Era: As far as their financials? Um, I do like to look at their operations staff like how much are they spending on their labor when it comes to operations? And I [00:41:30] typically will see that they are admin heavy. And then I hear once I question the admin heavy I go, all right you know, tell me about more about that. And they're like well we're you know, we're gearing up to grow right. How long has this been happening. Because I see this on, you know, the financials for the last 12 months. So what's going to get you there? You know, so there's that scarcity mindset of it's been so hard to find the right person. Once they do find the right person [00:42:00] they don't want to lose them, but they're not tying the cost of their administrative team back to, you know, just like we do with their field labor. So we have some percentages based on revenue, revenue tier and who those people should be that I outline in the book that says, hey, you know, um, at this point you should have one admin. You know, at this point you should have 1.5 admin and you're going to be doing still doing as the business owner some of the sales. And, you know, the [00:42:30] management at this point you should have two admin. And then you can either hire a sales person or you can hire a manager. Um, so it gives them an option like where do you want to live? Or maybe you hire both. So you both do sales and you both do management. You know, it depends on you know, what their preference is. Right.

Glenn Dunlap: Right. That makes perfect sense. Yeah. Yeah. You mentioned some things that, you know, around the, um, you know, saving for things in terms of 90 days, I would imagine most [00:43:00] of these are, are seasonal businesses. They're probably a few locations that are year round. But, um, you know, when you're when you're thinking about this from a seasonality standpoint, how do how do you help them handle that? That's probably going to be one of the toughest things for them, right. Keeping their crew paying for this equipment. You know, in six months or nine months versus 12 and and then dealing with that downtime. What what do we do to prepare for that?

Christeen Era: I actually I love this topic. So I'm so glad that you asked about this because this it's I [00:43:30] get.

Glenn Dunlap: Lucky sometimes, you know.

Christeen Era: Yeah. And it's a great question right. It's it's looking into this type of seasonal business model. Like what are the challenges and pinch points. And you're absolutely right. You know seasonal to where it's like they function let's say ten months out of the year, nine months out of the year. Then there's those few months where they're they're not making any revenue. And this is typically one of the biggest pinch points for this industry. And I talk about creating a [00:44:00] down season account. Right. So it's like when you're not making money you're putting money away For the time that you're not making money, but the business model is not, you know, year round as far as producing revenue. But it's year round as far as spending money, right? So we have to make sure that the revenue that they're making, let's say from, you know, March to November, which is very typical in [00:44:30] the lawn care industry, that that revenue is going to cover December, January and February. So we have to figure out what are the operational costs for December, January and February that we need to cover, and what percentage do we need to slowly trickle away through the year through March to November to save and cover those expenses? And who are we going to keep employed because the company just [00:45:00] doesn't shut down 100%? There's things that happen, right? So we need to make sure that, you know, we're looking at their business model, we're looking at their schedule, and we're taking into consideration what are those things that happen. Who do you need to keep on your team. And it's usually, you know, the business owner.

Christeen Era: He continues you know, they continue to get pay. We always want the business owner to get paid. And you know, what are they producing? So their strategic planning that's happening during that time, they'll [00:45:30] also maybe do some renovations planned around that time. They'll keep an admin to work on internal projects to kind of move the business, work on the business. You know, that's a great time for that. And then they'll pick some key employees that they'll keep employed that they definitely don't want to lose. That will kind of do maintenance. They'll maybe revamp and freshen up the equipment, the trucks, you know, prepare for the season to launch. And then we've got the launch [00:46:00] where everybody comes back. Right. And that could be depending. I always suggest reboard your team, right? They need to know what's going on. They need to. I don't care if they've been there for ten years. Go over your, you know, core values. Go over the vision of the business. Share what their job descriptions are. You know, share the rules of the company. The policies, have them update their employment records. Things like that. Let's get back into training. [00:46:30] You know, let's practice some things and get those skills freshened up again because then we're setting them up for success. So there's a good couple weeks of of reboarding that happens where no revenue is happening. So we also have to consider that cost. And with that, we have to make sure that the pricing model for the business right from March to November supports all of that. Yeah. In the company.

Glenn Dunlap: Yeah. Yeah. That makes perfect sense. [00:47:00] And then if they're going to do seasonal things outside of that. Snow removal, Christmas lights, you know, whatever else that they're. They're thinking of doing in that time frame. I suppose that you can you can plan for some of those things, right? Snow removal might be a guess, but you might have a little more predictability with the, you know, seasonal decorations or that kind of thing.

Christeen Era: Yeah. So instead of calling that a down season, we call it a seasonal service shift. So they're shifting their service from one season to another. [00:47:30] And they're now you know, they're not doing an applicant application anymore. Now they're doing, you know, snow removal. Right. Which depends on their business model. Right. So it's like if you're doing snow removal for this many months, like do you have a plow? Do you shovel. Um, do you rig your trucks that you use in the summer for lawn and landscape services? Do you rig them up? So then you have, [00:48:00] you know, all the equipment on there. So they turn into plows, which is going to highly affect the life of those vehicles and the reliability. Because when you use those vehicles for snow removal, it puts a lot more wear and tear on them.

Glenn Dunlap: Yeah for sure. Yeah. And then you've got to figure if that's commercial or if that's residential or um, what those those could be different contracts in the way that you I mean yeah, it could be a ten minute visit. It could [00:48:30] be a two hour visit or something. I suppose there's a ton of things to consider in that.

Christeen Era: Yeah. And what if it doesn't snow?

Glenn Dunlap: What if it doesn't snow? Right.

Christeen Era: That's another challenge for these guys to where they might not have revenue, you know, because it doesn't snow and they have all this money invested in this equipment or rerigging their trucks, you know. So we advise on that, which is, you know, make sure that you have a snow contract that you get paid. Either way it covers their certain amount, which is your costs. And [00:49:00] then after that, you know, if it there's more snow than anticipated, it's X amount of dollars, you know, per inch or whatever that is. Mhm.

Glenn Dunlap: Okay. That's interesting. Which again if you, if you address some of those things with the business owners, I mean those, those are all things that would just help that fall to the bottom line for them. So that some things that they've likely hadn't considered going into into those businesses. So that makes [00:49:30] perfect sense.

Christeen Era: Yeah. This is why I say this industry is so more, you know, far complex than just, you know, like a general contractor that it's like, I'm going to go build a house. It's complicated. Right. Building a house is complicated, but.

Glenn Dunlap: Yeah. Yeah. So we didn't talk about the balance sheet a lot, but let me ask you a couple. Of balance sheet questions. So, um, a lot of these have most of these moved to, uh, subscription models or have they moved to because [00:50:00] what I'm thinking, that's obviously that's an income statement item. But I'm thinking if it reduces, ah, if it's if there's no ah to collect on some of those things, is that, do you see trends in that direction so that they're collecting cash on a more regular basis. Or are they having to invoice and wait on the collection of cash or what's what do you see happening there.

Christeen Era: Yeah, and that's another great insight is with this industry, we we see a lot of people doing kind of like the old school method of I'm going to bill you and then wait [00:50:30] for the money to come in. Right, right. We push them towards and this industry, some of them do what we call prepayments, which is a great concept. This is what gets them in trouble if they have a down season because they go, oh, we're going to do prepayments. We're going to get all these resigns right. For our lawn application service. They get all this money in in November and then they spend it. And then here comes March.

Glenn Dunlap: And [00:51:00] they're like, no.

Christeen Era: You don't have any money?

Glenn Dunlap: No, I can't imagine that. Okay.

Christeen Era: And so looking at their balance sheet, what you know, what's insightful is do they have a prepaid liability account.

Glenn Dunlap: Right.

Christeen Era: Okay. Right. To where they can collect that money, give it some place to live. Put it in a prepaid savings account and then, you know, trickle that money out as they launch their season. So we developed [00:51:30] a tool for them to understand. You don't take that money till you deliver. Right. So x amount goes where it's supposed to go. And then as you deliver we figure out how much you deliver. And then that's what you draw off of that prepaid account.

Glenn Dunlap: Yep.

Christeen Era: And otherwise it just goes all in one bank account and they're like, we've got all this money, let's do this, let's do that. And you know, it's all downhill from there. So we make sure that, [00:52:00] you know, working with them. Prepaids. Bill, your clients in November have, you know, collect the money, put it away. And then that way you don't have to deal with accounts receivable as you deliver through the season.

Glenn Dunlap: Okay, that makes perfect sense. Other balance sheet things that come to mind for me. We talked about equipment cost. Um, but are you looking at asset schedules, looking at the age of their equipment? I mean, chances are you said they love to buy new toys, so they're probably [00:52:30] not letting it get to incredibly old or. But do you see do you see things that are just so fully depreciated and and them not preparing to purchase new equipment? Is that something else that you work with them on?

Christeen Era: I do. Um, they like to buy new toys, but they don't like to get rid of their old ones. Yeah, right.

Glenn Dunlap: Yeah.

Christeen Era: So, yeah. So it's, you know, they're like. They're like equipment hoarders. Um, you never know when you're gonna.

Glenn Dunlap: Need that thing. You know.

Christeen Era: Oh yeah. They're like, well, you know, we can't get rid of that. We've had [00:53:00] that since the beginning. And I'm like, wasn't that like 30 years ago? You know, and it's still on the lot. And yeah. So that's one of the things that we try to raise their awareness around. Right is equipment. Like when do you let go of something and when do you fix it. So we try to explain to them, if you're going to spend more on fixing something than you would to replace it, like this percentage, it's time to let it go. You know, because we're sinking all this [00:53:30] money into it and you're never going to get it back. So we, you know, we try to to coach them around, letting go of the old equipment when it costs too much to repair or maintain it and getting something new. So we identified the life cycle. So in my workbook that I created for to help them visualize this, their internal content if they have one, use it as a tool. Um, you know, they're listing the equipment. [00:54:00] Then we're looking at the life expectancy of that equipment and they know, okay, so in five years I need to replace these three trucks so they can start planning for it. And they could even as part of their equipment costs, you know, not only pay for the equipment that they have, but slowly start saving for the equipment that they need to replace. So they're getting in front of it.

Glenn Dunlap: Yeah, that makes sense. I mean, it's just [00:54:30] a, um, moving target for them. I mean, it's kind of the age and and also things happen to that equipment that gets damaged or something happens to those things. I mean, you just never know. You think it's you can predict it, but it doesn't always work that as exactly as you would expect it to. So yeah.

Christeen Era: Well, and the equipment costs in this industry, even if you're, you know, simply just a lawn application company to build out these these, you know, rigs. It can cost easily $80,000 [00:55:00] to build one of these out. They just don't go get a truck. And it's like, oh, you know, it's a, you know, $40,000 Ford truck. It isn't. You know, it's like a Isuzu is one of the main retailers that really focus on, you know, special builds. Right. Customized builds for different industries. I have clients that use them that are in spray application. I have clients that use them that are in installation services. So depending on your [00:55:30] business, you need to get a vehicle to deliver your services customized for you to where you can say, we need this, we need this, you know? And then it gets painted, the color and logo and all that stuff. So it's not a cheap ticket item even if they have to replace one truck.

Glenn Dunlap: No. Can't be, can't be. You see you see those rolling down the road. And I think of those in dollar terms. When I see those, we see them pull up at a house or a business. You're like, ooh, [00:56:00] yeah, yeah, yeah. And it's not getting cheaper. It's not getting cheaper. Well, have we missed anything Christine? Have we covered the big the big rocks there?

Christeen Era: Yeah, I think so. I think the other things in this industry, um, you know, when I dive deeper beyond the financials for our clients is market saturation. Saturation. You know, so that's another, uh, I think, important KPI for this industry. And this is what I find, right? This is a profit [00:56:30] bleed. If we're not closing the gaps in the market we already occupy, we're leaving money on the table. Um, so, you know, making sure that you are maximizing, you know, that market share that you have with what you do have before really going off and just adding another route. So being very aware of Like, who are you serving? You know, what are those routes? What's the opportunity in that area? And making sure that [00:57:00] you take full opportunity before you go off and, you know, create a whole nother problem by creating a whole nother route and all these other costs.

Glenn Dunlap: Yeah. That's interesting. Yeah. That's good. I don't know that I think that a lot of CPAs are talking about market saturation with their clients. I think that's one that I don't know. It seems like it's a it would it's an off financial statement topic. Right. So it's not one that's an easy one to maybe wrap your wrap your arms around. [00:57:30] So that's yeah we.

Christeen Era: Talk about you know the financials are what happens from the operations of the company. So when I look at the financials or my team looks at the financials, we're thinking about okay what is affecting these right. What's impacting these. What are the opportunities beyond this sheet that where we can one give more value to our customers, our clients that we work with, with coaching, advisement, insight, [00:58:00] raising their awareness. You know, I've been working with business owners for over 30 years. And what I've realized is one, you know, it's it all boils down to mindset. You know, it's not about is your company profitable? Are you doing good any of that. It it comes back to mindset. It's kind of like the main problem. But we can't get there. We can't, you know, get to a better place unless we we understand what they don't know. And it's not just [00:58:30] the numbers that we're looking at with them on the financial sheets that they don't know. There's a lot about their operations that they don't know that affect and impact these numbers.

Glenn Dunlap: Right.

Christeen Era: So what can we ask? What questions can we ask them beyond the financials that will improve those financials. You know if you're interested in advisement, you know that's where we need to go.

Glenn Dunlap: Yeah. And it's not. It's it's not just improving it for improvements sake. One of the things I, as [00:59:00] you think about the where these owners go, I mean, you mentioned if it's under $250,000, they've bought themselves a job and you know, so they're they're doing that. But if they've if they've worked to build a, an entity that's larger than themselves, then at some point they're going to think about an exit. And at some point that exit, the numbers are going to mean something more than just what, you know. How well did I do? Year over year, this is going to be ultimately an asset that they're going to be able to transfer, right. So the things that you're [00:59:30] talking about in terms of building a profitable operation year over year, um, that is managed and maintained well, that becomes an asset that's much, much more valuable as they as they plan to exit. So have you have you worked with a lot of clients in that transition as they've they've gone from generation to generation or cell. So you know thoughts on that. That's a whole nother topic in and of itself I'm sure. But you know, this all of these things that you're talking about have to have had an impact on that.

Christeen Era: Oh it does. It's [01:00:00] um, we just recently had a client contact us and, uh, you know, he was like, hey, you know, I really want to get on a call with you guys, and and I have some news, and we got on a call, and he was like, I, I just have to thank you guys for, like, all the work that we've done on the reoccurring revenue, you know, looking at the business as an asset. Right. Like shifting it and, you know, looking at his market share, looking at his assets, you know, looking at his team and the leadership. [01:00:30] Um, he sold his company for twice as much as he ever expected to. And the company that bought him kept him employed with a higher paying salary, a retirement like all these things, and kept the entire team in place. And so now he's just kind of. Working there, you know, for another year or two, just reaping the benefits. And I mean, he's happy as a pig in mud at this point, you know, with the outcome. [01:01:00] And we have other clients that too are looking at exiting. And, you know, they even say, I, you know, I get text messages here and there from them and they say, I never thought I never thought that I would have this life. I never thought that I would be here, you know, and it's all because they are very intentional. They had these conversations, you know, with their accountant, which is us with their CPA, you know, the people. And we talk to to their CPAs as well. And, [01:01:30] you know, looking at the growth and looking at what do I need to change, what I really need to pay attention to, that's just not on this piece of paper, not on this financial statement. Yeah. And it changes lives. It changes generations. It's an amazing experience to be a part of.

Glenn Dunlap: Isn't that such a. I mean, that's such a great reward for the things that, you know, that what you're doing and having an impact on, on not just that owner, but their family, the their employees that, you know, everybody that's involved [01:02:00] in that that's a such a butterfly effect and the ripple effect you feel in that. So that's you know, that's fantastic. So yeah.

Christeen Era: So it's beyond the benchmarks.

Glenn Dunlap: Yes. Right. Yeah. They're part of it. But there's the impact of it. So Christine this has been great. I've really enjoyed this conversation. I hope you have as well. If somebody wants to get Ahold of you, um, you know, or reach out to you or learn more. You've, you've referenced, um, uh, your derivative book of the profit first system. So are [01:02:30] there things that how would how would you recommend that somebody either get in contact with you or find out more about some of the things you have available?

Christeen Era: Yeah. So if they're interested in the book to look at all the the details we talked about today and even some, you know, how do you do processes? That's on Amazon. It's on audible. I read the book to you. So, um, if you if you like audiobooks, I will be in your ear through the entire book. Uh, haven't had any complaints yet. And then if you want to reach out to us, you know, depending [01:03:00] on your needs, a green prophet academy.com. We do prophet consulting over there. Leadership consulting. Uh, you can reach us at simple. One is sales at Green Prophet Academy.com or just go to our website if you're interested more on the accounting side of things. That's core growth strategies, which you can find us by just googling core growth strategies. We are there as well.

Glenn Dunlap: Fantastic. Well, thanks everybody for joining us for [01:03:30] this episode of Best Metrics. And we'll we'll see you next time.