Coaching a $1.2M Landscape Business Owner

Hey, everyone. My name is Mike Andes. I'm the founder of Augusta Lawn Care. We have over 150 locations around the world. And today is actually going to be a coaching call that I had with a landscaper doing about $1.2 million in annual revenue. His highest performing employees are leaving because he can't pay them enough. Right now, he ranges between about $15 per hour and $19 per hour for his employees.

I am losing the best of my employees, all of them. Like, I don't want to pay them. 35.

Someone that's making $15 an hour versus someone who's making $19 an hour. The guy making $19 an hour might actually be making twice as much profit for the business, but he's only making $4 more per hour. And so in this case, this is when pay for performance is super important. That's where we pay the employee based upon how much revenue they bring in for the business. So today is actually a coaching call, about 30 or 40 minutes. And you can actually get one of these coaching calls yourself. And if you just go to p4psoftware.com, you can book a call with our sales team, and someone from the sales team will be able to speak to you about whether or not pay for.

Performance is right for your business.

Without any further delay, let's talk to John from Vine Landscaping. Building a big business and making sure you can actually switch over to P4P.

Instead of hourly wages.

Mike Andes is on the call. Hey, John.

How's it going, dude?

My wife was like, yo, you're gonna have a call with Mike, Andy. I was like, no, honey, I'm gonna have a call with his team.

Well, Lael's knew the team, and. And so she's gonna be, like, long, kind of for the ride, for support. But I'll. I'll do the whole call with you, so anything I can help with? Let's jump into it.

Dude, I am so blessed to get you. I know I got 15 minutes of your time, and I'm obviously gonna use it wisely. My whole business model is based off of yours, by the way. The entire thing, from up, left to right, front to backslid. Um, so here we're at P4P and I am losing the best of my employees, all of them. And it is crushing me. But I. I don't know what.

Mathematically and for the books, what this is going to do. Like, I can't give 33%. Just can't do it. You know, for landscaping, I can probably get 18, nine for mowing. I can probably do 25, but I need to know like what that's going to look like on my books. And that's really the only question I really have. I once demoed this last year. I did bonus up last year a lot. I, I think I demoed this very briefly. But I, I just need to know like what this is going to do to the books and how to roll this out.

Like I, I think it just comes down to the math. Yep. Is this go right.

What was your revenue like last year for example, John?

819. Yeah, 819 for last year.

Okay. And then do you happen to have your P L in front of you or not?

Sure, I can share my screen.

Or even if, if I could just know how much your total wages were and if you know direct versus indirect, that'd be great. But even just total wages would be fine.

By indirect you mean. So the cost of goods, sold, everything, materials, subs, minus wages.

So if, if you even just know total wages, that'd be a helpful number for me right now.

Yep. So I got total wages minus taxes, total wages at.

153,940.998.

And then.

All right, disregard, disregard. Okay, that is for this year. Let me get the 2013 numbers. I'm sorry, 2023. Jam one.

Because I was going to say that was pretty phenomenal.

Now total tech wages is 236, 748, 52.

And then what was your material cost? Do you know? Have that itemized out.

Just like total materials, we're at 49,000 for landscaping.

Customer damages, repairs, chemicals. So we're about 4. We're about to.

8,076. So we're about 57,140 for just materials for both lawn care and landscaping.

Got it. Okay, cool. So on, on the 236,000 in wages, does that include office or admin or any sort of other overhead expense or just all direct? So you're the only overhead in the business, I'm assuming negative.

It's me, my production manager, my admin last year.

Got it. And you're not including those wages in the 236. Got it. So just to be clear, right now you're paying 29% of revenue to direct wages. Now when we say 33%, for example, on P4P that is a labor revenue only, which means you got to cut out all materials. You got to cut out all. Any sort of estimate. Fees, dump fees, equipment fees, anything like that. And so I would actually venture to believe you're paying about 35 to 40% of labor revenue to employees right now. Sure. So that would be my first thing is like.

I actually think you're going to fit inside the system fine from a numbers perspective. It's just scary to think that, oh, I'm going to give 33% away because 33% of 819 is an extra 30, 40 grand compared to last year. But it's only of labor revenue. You don't give them 33% of revenue. Right. So I would just. I would just kind of put that as an asterisk next to it. So we don't have that limiting belief that like we can't afford it because like the percentage actually works decently right now.

Sure.

Okay, so in terms of.

The goal.

Being really keeping the guys, that's kind of like the main objective here. What's the current base pay for say the entry level guys?

Right now, all around my landscaping and mowing, the base Pay is around 17. Base pay for like some guy we bring off the street that doesn't know what he's doing is about 15 an hour. But collectively the average is 17 an hour.

Got it. And let's say like a project manager or someone like higher up, are they making more like 20, 25?

Our lead techs make about 19.

Okay, so it's pretty close. It's right around that 17 marker. Okay, cool. And then what's kind of your target hourly rate per hour? I know it's probably vary across services, but.

Yep. So I wanna. So we have. It varies. Right. So we, we're changing job cost analysis stuff right now I want to do a hundred dollars a man hour for landscaping and around 80 for mowing.

Yeah.

And then as like a very broad stroke. I know right now you kind of want the. The employees to be able to make more money. The ones that are higher performers, etc, the business, is it profitable enough or is it struggling from a financial perspective?

So.

Not for where I want it to be like on our current profit and loss, it says like a net. Net 10, net 11. I want it to be like a net 20. Net 25. I know that that's possible. I know it's possible. But you also know P. Ls they have the hidden costs, they have the recurring monthly revenue. Like so right now, like it'll say net 10, but actually if you do all the. The monthly cost, we're almost like we were broken even for the entire year. Everything else thereafter is now profit.

Got it.

So it's net 10 but there's always those taxes and hidden fees.

Got it. And then this year, 2024, what are you kind of projecting for revenue?

We would like to hit 1.2.

Christmas lights, which, by the way, great job. Nailed it. I was wondering if you're going to do that. That just kind of brings up the rear for us and really helps us out getting to the winter.

So 1.2.

Yeah, we're kind of. It would be like the Hail Mary to get there, but I think, I think we'll get there.

Cool. All right. Basically, you're going to grow 50% year over year. So having a basically break even is not unheard of. When you're growing revenue by $400,000 in a year, $400,000 will typically take almost 80, like between 50 and a hundred thousand dollars of just capex to facilitate that growth. So I'm not concerned about like right now having a zero. When I look at $17 per hour base and I look at 80 to a hundred dollars as what you're charging the customer, you, you're blowing the doors off. The 25% rule to be able to make P4P like actually work. And so what that basically means is I want to be able to pay on base pay less than 25% of what I'm charging the customer. So for example, if you were charging $80 per hour, I don't want to be my base pay to be any greater than $20 per hour to the crew. So you're already beating that, like, massively.

So have you, what have you done in terms like trying P4P? Because, like, I think that, like the business from a numbers perspective, it would work just fine. What, what parts are you kind of question marks around that?

To be honest with you, my only question is in moving forward, I'm just scared to see what it's actually going to do to the books. Like, I, I, I mean, we're, I have a coach bta, and they're like, yo, you can't even roll out people P4P right now. And I'm like, that's the number one thing in my business. Even though there's all systems. And like, the most scareful thing for me is like, if I roll this out, what's going to happen week over week, good, bad or indifferent, that's the only, that's the only worry or concern that I have. And now, like, what's their reason?

What's their reason, John? Did they give a reason? Is it a matter of, like, you can't afford it?

That's what they say. But if you look at my books, I mean we can pull it up. Like, if you look at my books and it's like we're at a net 10, going to a net 11, bumping up into net 12. Like it, it, it's there. So I'm kind of like, why? But I think it's because the system's not really in place in terms of like, it's not very strategic. You know, this is written down, which we can have that written down. I have your document, from one to two page document that you. I got that. Like it's already written. They've already signed it off before. We've rolled it out, rolled it back. We did bonus up last year. I'm sure you're familiar with that software. It just the concept of like your hour plus a little bit of like, hey, you made $7 a day. Like they don't, that doesn't do anything for them, you know. And you know, again, I got guys right now, the hurricane came in and they're like, yo, I need to get hours or I'm walking. And so I truly have really great people that want to see the vision that we have for this local area and blow it up. But I can't do that at just doing maintenance at $17 an hour.

Right? Yeah. Like, so the bottom line is, especially with maintenance, you have a huge amount of incremental savings of labor as soon as you institute P4P. Because every time they get in and out of the truck is most of where the savings are at. So any sort of maintenance where they have multiple stops in a day, that's when P4P really impacts it the most. When projects are involved, there's a little bit less of a savings because there's not in and out of the truck, they're not on and off their phones all day long. That being said, they get much more creative with projects when all of a sudden they are getting paid based on the job getting done instead of clocking hours against the job. And so when you rolled out in the past or attempted, what was the struggle? Why didn't that work?

They weren't just motivated. I, I don't know. Like, if it wasn't, hey, showing them the numbers every day and maybe it wasn't having.

The reminder constantly when you're reminding a technician, hey, guess what, you could do this every day. But it's like the desire to want to go do that, but it wasn't in their face. This could be possible.

I think that's Kind of the problem is that it was kind of like out of sight, out of mind, like you could. But it was, it wasn't like in their face every day about making the money. It was just, I'm just going to be here as a technician to get the job done and collect the paycheck.

Did they ever get on P4P, the app or not?

I think we got it before the app was like fully.

So there was no leaderboard and stuff.

No, got it.

Okay.

But we did like the leaderboard with bonus up. And there was no, like, it's not. When you walk in, it's glaring. It's in your face. You know what was.

What was kind of like the highest performers bonus ups on say a given pay period? Like 100 bucks?

Not even.

Okay, yeah. So basically I've just seen unless they're making over 200 to 300 per paycheck, it just does not impact their behavior because someone's not going to bust hail all day long for an entire paycheck over an extra couple bucks an hour. They're just not like, if given the choice, like, I'd rather just stay in the truck and have AC now the difference. So for example, at my shop, the first one, our base pays 20 bucks an hour. Um, you know, guys are making between 25 and $35 an hour. Like they know when they get to to work, there is so much urgency to get outside that door and get start working. Like no one's lolly gagging or talking. And if they do, they're going to get kicked to the curb. No one wants to work with them because they're going to take them from a 30, 35 all the way down to 15 or like a base payer 25 bucks an hour. And no one wants that. And so the bottom line is like, as you know, there are people in your organization that are going to pay 19 that make twice as much profit for the person that's making 17. And so the. You will lose one or two of your guys if you institute pay for performance correctly. The bottom line is the highest performers will absorb all of that work just fine. And now they'll be able to make 26 to 30 bucks an hour.

Go ahead.

That's just my concern. You know, we have a budget set now in LMN where they're only supposed to make a certain amount of revenue to clear like 1.2 based off of our last seven months going into the eighth month they have, we're projecting like this much revenue. So my, my concern is that they'll just blow that off the doors and we can't recoup overhead because it. They're just.

Yeah, but it doesn't, it doesn't matter because if you're. If right now we're paying someone 35% of our revenue is going to direct wages. Whether they make 30 bucks an hour because they get the job done in half the amount of time, or they make $15 an hour cause they hit budgeted hours. I don't care. The job got done. They just done it. Did it way faster. So, yeah, it'll. It'll throw production rates through like all over the place. Right. But I'm thrilled. Cause they're getting more money and they're getting the jobs done faster. And instead of working 45 hours, now they're working 35 but making the same amount.

Gotcha.

And they hate overtime because when they go into overtime, they're not making any extra when they're on P4P.

Got it.

And so I would really, really challenge the idea that going to P4Pmakes you pay them any more money. You're already paying them 35%.

But that's my point. I don't want to, like, I don't want to pay them 35. Like right now, our, our labor is a little bit less this year than it is last year. That's because our prices increased. But I'm not trying to pay them 33%.

So this is what I would do, John. I would probably.

Run like one crew inside the software, inside of a free, free trial.

Run them at 30% or even 28%. I know your, your prices will warrant this. Like, your pricing is differentiated enough between your $17 per hour base and $100 per hour for landscaping. Like you can. So like my, my shop, for example, I only pay them 25%. But I've raised prices high enough to where now at 20. The base, I'm. I'm at a hundred dollars per hour to the customer. Right. So you can absolutely do it that way. Just change the percentage. But I would just do it on the back end and just track it. Just see what they'd be making. And, and what I would challenge is the idea that switching to P4P is going to cost you anymore. It won't. Because you know what the. It's a fixed percentage. So like, sure, sure. If they, if they crush it and you're like, man, I don't know if I can pay them 30 bucks an hour. You can. If they get the job done in half the Amount of time.

Yeah.

Right, yeah.

So I want to respect your time. I know part time's up, but I, my, my last question is.

Let'S say that, God, I just had it like you give them all of say 25. Like, it's just more of like a commission structure because I know you. Okay, that's what I thought. Any, like, last words on like salespeople.

In terms of. So like how, how to bonus them or making sure that they're accurate on.

Their estimates to bonus them, I would.

Do more profit sharing instead of, you know, P4P around budgeted hours.

So doing it based upon profit, you could also do it based on revenue. So we usually do like a defensive and an offensive measure. So like offense being revenue, defense being profit margin. So basically if they grow revenue a ton but we have no profit, they'll make a bonus.

Got it.

This is, this is more important if you're not there. If you're there, you can kind of monitor them a lot better. But when you want to get out of the business and have like a general manager, for example, that's when you want to have like a very balanced, you know, profit sharing, revenue growth, and some sort of, you know, balance between the two.

But the thing is, what's nice about P4P is when they start using budget. Like do you guys use budget hours on projects right now?

Correct.

Yeah. So like when, when, when they start using budget hours, the crew will keep your, your estimators honest because if, if they try to cut way back and they go, oh man, we're just gonna like try to get this job. Great. Well, if they cut budgeted hours, the crew will revolt against them. Sure. And so there's this always this nice tension between sales and ops and the guys doing the work. And that is sales wants to get the price as low as possible, get the deal, but not so low. Do they cut budget hours to the point that the crew gets mad at them.

Got it.

And so right now no one cares because they just want to clock as many hours in the job.

And so I would really, really challenge based upon your numbers, I know you can afford to switch to PvP. And if that means doing 25 or 30% instead of 30%, that's fine. Your. Your numbers warrant that. And I really believe if you ran the numbers in the background, some of these, some of these guys are make, could be making 24 or 25 and others are probably at 12 bucks an hour in terms of what they'd be earning on P4P.

So what about the like, for example, we just had a $6,000 landscape job that they finished in roughly a day. So same, same percentage, same everything. 25.

So out of the 6,000. Right. How much of that was actually labor revenue?

I, I don't have to go back.

That's, that's. So like when you look at investment, right, you obviously have your materials, which you usually mark up. Then you have your equipment, you might mark that estimate fees, dump fees, et cetera. I'm only looking at budget hours multiplied by the rate I'm charging the customer. So if you're charging a hundred dollars per hour to on landscaping, do you know how many budget hours were on that job?

34. Let's just say 50. 50 is a close. Yeah.

So 50, that means $5,000. Let's just do the math. So $5,000 of labor revenue. How many crews, how many guys were on the job? 5. So there's five guys on the job.

And how long do they work for that day? Like a 10 hour day? 12 hour day.

An hour day.

10 hours. Great. So they hit, they hit budget hours exactly on the head. 10 guys or 10 hours multiplied by five guys, that's 50 budgeted hours. Right. So then it's just a matter of. Okay, well, at $100. Sorry, $5,000 in labor, let's assume we give them 20%. We're going to do 20% on P4P. That means $1,000 is going to go to wages divided by five, that's $200 per person. Right. So in this case, they would make $20 an hour, quote, unquote, on P4P. I would challenge the fact that we can actually afford 25%. And now all of a sudden, instead of $1,000 of labor revenue, there's 1,250. And they're making $250 per person. And now they're making $25 an hour, which they deserve because to your point, they knocked this out in one day.

Yeah, it was good.

And so I would bet that they would. This is the thing. They got done in 10 hours. I bet they get done in eight or nine if they are in P4P valid. And so when they know that they're getting $250 for this job, no matter what, things change.

But explaining that to me is important. Like if you're like, oh, you guys did a percentage and especially if you've been back and forth, you did the bonus thing and no one really bit at it, explaining to this crew in a very succinct way is important. It's this. It's simply this, hey, guys, some of you work like crazy hard, and other people, you know, you work with, they're not really pushing it. And you guys are all working together. And so everyone can, like, people can kind of fall through the cracks. I want to be able to pay our highest performers way more money. I don't think it's fair that someone gets paid 17 bucks an hour and someone else gets paid 19 bucks an hour. And 19 bucks an hour guy generates twice as much profit for the business. I don't think that's fair. They all, in their mind, think they're high performers and they're going to identify with this guy. And so you say, look, we're going to do is we're going to just give a percentage of labor revenue that you earn for the business. You get. Not revenue, labor revenue. And so now it's going to force you to be able to say, hey, we charge $100 per hour. So when you see 50, 50 budget hours, we're charging the customer $5,000 for that labor. You're going to get 25% of that.

So I think what was really difficult and bonus up is actually inputting budgeted hours, cogs, let's just call it cogs for my knowledge. And then, you know, your labor hours, labor revenue is that is. I haven't seen the software. I mean, it's probably in a year or two years from now or ago. Is that, Is that clearly.

Yeah, I'll show you here real quick. Okay, so don't worry about time. We don't have a call after this, so I don't mind taking some time. I gotta get you convinced, bro. All right, let's see here, let's see here. 30.

I mean, listen, I was talking to my, my people. I'm like, if there's one person that can do this.

You, Mike, I. I been following you since I started, man.

I appreciate it. All right, so this is inside the software. So if you're doing a, say, a project, Right. So we'll do projects first. So all you're going to do is create a project. You're like, okay, this is Bill Smith, or now it's nil. Okay, Bill Smith, we're doing a rock install. There are 50 budgeted hours and we're charging a hundred dollars. Yep. For rate. There's your $5,000. I'm going to go ahead and submit that it becomes an active project. But then on their time cards, I just assign them to this job for the Day.

Now, I'm assuming there's no. The only place that you really integrate with this software, I mean, just correct me, is. Is Copilot. Is that correct?

It is. And mostly. Mostly the advantage for the integration there is really on the recurring side, because then the crew can see how much money they're supposed to be making based upon what's on their schedule for the day. And then as they finish the jobs, it kind of like shows them how much they're making, which is a huge incentive on maintenance for projects. It's. There's not a whole lot there. But yeah, Copilot's the only way to integrate with. But literally, it will take you a minute a day to make time cards. So, for example, like, if you're in time cards here, even if you did this completely manually and the guys didn't clock in on the app, it literally still. It's like we've kind of done like over the course of a few years. At first, everything was manual. Like, literally we would take punch in and outs from server autopilot and then we'd go into here and just make the time card. Right. So if we go back. Let me just make a fake one. No, it can't do that.

That was the other miserable piece. Is trying to like, do all of this by hand and bonus up. It was miserable.

Yeah. So what you can do, though, is if they have the app, like, if you start. Okay, we're going to do. If you eventually get to where you have the confidence in P4P and they clock in and out on the app, then the time card gets made automatically. So then you just be. At the end of the day, all you really need to put is this information at the bottom. The hourly rate, how many budget hours they completed, the number of the crew, and then it'll figure out the labor revenue automatically. And then like, that's it. That's all you have to do each day. Now, if they were on a project. Let me see if I can find someone on a project.

No one was on a project. All right, let's go back to a different day.

So if someone's assigned to a project, you don't even have to put in all that information because you've already done that in the project side. You literally just assign them to this. Again, that project we, we created in the other tab.

So you create your big.

Go ahead.

Can you separate the percentages from projects from maintenance?

Correct. Yes. So you have additional rates. So basically you add here you can say, I want to add an additional rate. So if you said, okay, I'm going to be giving 30 on maintenance, 20 on projects, you can just add it in from here.

Yeah.

So like, really, really, the, the thing a lot of times is with the software side, people get confused with. It's like, oh man. Like, it's a lot. It's like, look, every day you're simply going to take their time card and if they're on a, on a maintenance route, you're going to put in their, their rate, their budget hours and how many people in the crew. That's it. If they're on a project, you're going to create the project at the beginning and then you're going to assign them to that project on each time card for each day they're there. That's it. At the end of the pay period, we're simply just calculating, okay, what's their base.