Every Landscaper MUST Watch This Video! The Secret to High Profits and Fast Growth EXPLAINED!

Hey, everyone, it's Mike Andes and you're listening to the landscape business course. If you're listening to the podcast, definitely want to watch this one. Today I'm going to be doing an example that I literally thought about three minutes ago. I got to leave here in about 15 minutes, but I wanted to quickly shoot this video. I have not wrote these numbers or scenarios out, but I think it's going to work really well. And I want to show you why you should be focusing on efficiency or why you should be focusing on revenue. This is a big question for a lot of landscape business owners. Should I focus on growth or. Or should I take what I currently got and try to make it more profitable? That's what we're going to be talking about today. And I'm going to show you a scenario. And in order to show you this scenario, I have to do a lot of assumptions and some of you are going to discount some of them. But I got to show certain assumptions in order for you to see the point I'm trying to make. And that's why some people get confused. When I talk to some owners and I tell them, hey, you need to grow, you need to focus on growth, you need to spend money on marketing and other people, I tell them, hey, stop growing. We focus on efficiencies and create systems and all the rest of it. So before we get into this show, though, big thank you to everyone that has joined Lawn Care Web Design. It's where we build your website for you. And there's no upfront fee. Usually it takes us about six to eight weeks to build your website. That's eight weeks to be on the long end. But it's custom designed, built for you. Check out lawncarewebdesign.com and see some of our other sites that we built. There's no contract, so if you're like, hey, six months of it, you're like, hey, it's not ranking well on Google or it's not doing this, it's not looking as good. You're not doing what you can just cancel. There's no contract or any other fees or anything like that. So check it out. I promise you, you will not regret it. Lawncarewebdesign.com okay, so we are talking about growth.

Versus.

Efficiencies.

Let's do efficiencies. Now. We're going to take a business and what the decision this business has to make is, are they going to spend $5000 on growth or they're gonna send $5000 on efficiencies now that $5000 for growth is probably gonna come in the form of marketing. Let's just assume marketing for growth, that's where they would spend their money. If they're going to grow, they're gonna spend money on marketing or they have the alternative to spend that same $5,000 on creating some sort of efficiencies in the business. And that could come in the form of better equipment, truck, whatever it might be. So $5,000. And just for the sake of keeping numbers simple, we're gonna, we're gonna assume that this company does, let's say $500,000 in revenue. So we're going to write down here, $500,000 in revenue is gonna be our assumption, that's how much the business does. And we're going to assume again for the sake of assumptions that they do $100,000 in profit or 20% profit margin. Alright? So I'm just writing these assumptions down so I can put these in the bottom corner and we can assume these throughout this decision making process. Alright, so we got $500,000 in revenue, 20% profit. That's the assumption that this business currently does. And now the question is, are we going to spend $5,000 on growth? Are we going to spend $5,000 on creating more efficiencies and make it more profitable? Okay, so I'm just writing this down the board here. So in the terms of growth for the $5,000 in marketing, we're going to assume that over the next 12 months, the next 12 months that 5,000 do to get us, let's say.

Let'S do 10x. So usually at Augusta Lawn Care, we expect for our marketing dollars to get between 10 and 20x the investment in the next 12 months. Now the reason we make that distinction is it's gonna depend on what type of services you offer. It's also going to depend on if it's a recurring service. Because I'm willing to take a lot lower return in the next 12 months. If I know the next 12 months I'm gonna have the same customer base and I can keep growing and building my number of rec.

If you haven't watched it before, I made a video just on that one topic there. But just assume that over the next 12 months that the growth of this business, the $5,000 that is invested, is going to get a 10x multiple. So 10x multiple on that is going to lead to a.

$50,000 increase in revenue. So 50k revenue is going to be increased. Okay, that's the first step here of the growth equation. Now, over here on efficiencies, we're going to spend $5,000 on somehow making our business more efficient. This might be equipment improving something in the truck system of certain type of tool or machine, or perhaps building an office or doing whatever you need to do. Let's just assume we're going to spend $5,000 on this efficiency. Now, what we're going to assume on this is that this is going to lead to a 10% reduction in expenses. Okay?

Now we're just going to assume a 10% decrease in expenses in general. Now, you could say you could really get more granular and be like, it's going to be a percentage of labor is going to be reduced, because at the end of the day, you've got three expenses in your business. You got cost of labor, cost of goods sold, and you got your overhead. It's a basic, very simplified version of it. But we're just going to assume a 10% across the board decrease in expenses by having this $5,000 invested into efficiencies. Now, what that's going to mean. What that's going to mean is that, remember we had $500,000 in revenue, 20% profit. What that means is that $400,000 was the expenses. So if we take 10% of 400,000, that's going to result in a reduction of $40,000.

Of expenses.

All right? So if we assume everything remains constant the coming year. Let's go walk through this example. What's going to happen is what are the new numbers going to be for the following year? The following year. All right.

I gotta make a little extra little asterisk here because I gotta come back to something I just thought of. Now, what's gonna happen in the next 12 months this company is going to now do. They're gonna do $500,000 in revenue from last year, but they're gonna increase it by 50,000 because of their investment in marketing. So they're gonna do $550,000 in revenue, and we're going to assume they still do a 20% profit margin. So based upon that, they are going to do equals. Equals. So we got 5,000, $110,000, 110k in profit.

Okay, so they invested $5,000 into marketing. They have a 10x multiple on that in the next 12 months. So it increases their revenues by $50,000. They have a 20% margin. Let me just write this here. So we're assuming again, 20% margin on that 550,000 in revenue, they are going to get $110,000 in profit. Now, let's run the example over here. They are not growing, they're not investing in growth. They're going to spend that $5,000 on efficiencies. Equipment, tools, make them more efficient, less waste. Whether it be labor or wear and tear, or they save money in their insurance, they save money on fuel. Whatever it is, they save money 10%. That is going to reduce their expenses by 10%. Their expenses are $400,000. That reduces it by $40,000. So what's going to happen for this next 12 months is they're going to still do the same amount of revenue of 500,000 in revenue, 500k revenue, but because they reduced their expenses by $40,000 instead of $400,000 in expenses, they're gonna now have $360,000 in expenses leading to $140,000 of profit. So now the question is this.

Where should they spend money? Either in growth or should they spend in their efficiencies? Over the next 12 months, they are going to be better off in terms of profitability if they spend that money on efficiencies and not growth. Very important, very cool. They're gonna make $110,000 if they spend it on growth. They're gonna make 140,000 in profit if they spend it on efficiencies. Now, let's talk about a few things here that this story does not tell. There's a few ways that you can actually get change this up and get the good of both of these worlds. First things first, before we even talk about that, you gotta remember that this increase in revenue is doesn't go away. Which means next year.

If they spend another 5,000, they're gonna go to 600,000 in revenue. And it keeps compounding if you're doing recurring services. So if you're doing recurring services where I get 10 customers for mowing, and then the following year, at least eight or nine of them stay with me and I'm able to build another 10 on top of them. That number continually compounds and grows and grows and grows. So that's the beautiful thing about spending this $5,000. Yeah, I might get 10x in the next 12 months, but I might get 12x in the next 24 months. I might get 20x in the next five years based upon just that $5,000. Because remember, the customers that you get, and then they talk to people and that leads to more customers. So it's a continual growth and something that is compounding when you spend money in growth. So that's what's first off. A little bit deceptive is, yes, in the first year you might make less money and profit spending it on growth. However, over time, this is going to compound if you have recurring services that continually are growing on top of each other. And then one day you don't have to spend the $5,000 and you're making a whole lot more revenue and you can consistently stay at that profitable level. So in year two, this is going to look different because now this continues to grow. These folks are not growing in revenue. The next thing is this, and that is, I don't believe that. I believe that the best efficiencies don't cost money. Okay? I really believe that you can not spend this $5,000 and still get 10% decrease in expenses. How do you do that? By implementing systems that don't cost money. These are systems usually around labor. Labor is your biggest variable expense in most industries such as landscaping, lawn care, construction, any sort of plumbers, electricians, roofing, all of that. Labor is your biggest expense in most of the time in terms of variable expense on a job. And so the question is, can you create systems that don't cost money? Instead of spending $5,000 on a mower or some sort of like bagging system or a leaf vac or better, blowers that do create efficiencies, do create a reduction. Expenses can save time. Can you do that, though, without having to spend $5,000? And the answer to that is absolutely, absolutely, yes, positively 100% you can change the culture of your company that doesn't cost any money in terms of dollars and cents. Might take you time, might take you energy, might take a little bit of talking to people and having uncomfortable conversations, open and honest conversations, thinking about their future, all that. But creating a culture doesn't cost money. And so this is something I think about a lot is do I grow? Do I focus on efficiencies? And the bottom line is this. This is what you want want to focus on number one. The two biggest variables I want you to focus are these two things. I put asterisks next to number one. How can you make efficiencies without spending that $5,000? Because if you do, if you do and you create $40,000 extra profit by creating efficiencies, that $40,000 can then be rolled into growth and create a really, really growing business, very sustainably, very sustainable, good profit margins, very efficient. But then you take that extra $40,000 that you generated because of your reduction expenses, because of your efficiencies and labor, et cetera, and you roll that into growth. That's how you get the flywheel of a growing company. That's how you go very, very quickly, create efficiencies. With the extra profit you get from those efficiencies, you roll into growth. However, you did not spend money on making those efficiencies. And some people say, oh, I can't afford to have a pay for performance system. I can't afford to do profit sharing. I can't afford to have my base pay be 3 or $4 more than my competitors. No, no, no, you can't afford not to. Because by doing those things, you create efficiencies and that leads to greater profits, which then you're allowed to roll into growth. So this is the first thing you want to be thinking about. How can you create efficiencies without spending money? Number two, how do I increase this number right here? Because if I spend 5,000, let's change the numbers up here a bit. Let's do this all again so we can take this out. And let's say we are going to spend $5,000. Okay, that's all good. Let's remove this. Boom, boom, boom, boom, boom, boom, boom, boom. Okay.

So let's go ahead and take all this out. Very good. Okay, we're gonna spend $5,000 on growth, but we're focusing now on the multiple, in other words, the effectiveness of our marketing. Instead of spending a bunch of money on mowing advertising, mowing in the middle of summer, maybe you focus 80% of your money for mowing in the spring instead of just rolling over and dying in the winter and be like, oh, I don't do snow plowing. I don't do. I can't mow grass. No, get creative. Figure out winter services. We're gonna talk a lot about it at conference this year, so you should come. Landscape Summit this January. Landscapebusinesscourse.com conference. Best investment you'll ever make. Really looking forward to seeing you in person. We're gonna talk a lot about winter services because it's a great way to increase the revenue per customer that you have every year. Therefore, increasing the multiple right here. Okay. Because I can spend $5,000, get 10 customers, and they all spend $1,000. That basically meant I took $5,000 and generated 10,000 in revenue. Not really good, but just use it. For example, now what if I can make those same customers spend $2,000 per year? Great. I increase the amount of Upsells, I increase the add ons, I increase winter services, I increase mulch, I do weeding service, I do bush trimming, I upsell them on a lot of things. I increase this multiple by instead of two times, I go to four times. So what happens if I use one click estimate emails, If I stay do newsletters to my customers. If I do really effective marketing that doesn't cost a lot of money but again makes my multiple of growth on those revenue dollars much more effective. What if I take this to a 25x multiple? Now this is very, very good. Some of our best performing campaigns and best years have been we're at a 25x multiple on our marketing dollars. What that means is that $5,000 spent today results in $125,000 increase in revenue. $5,000 with a 25x multiple equates out to 125,000 increase in revenue in the next 12 months. Again, we're not taking into an account that's going to be grow the year after because we retain those customers and we keep compounding. We're not going to even take that into account. Now what happens assuming a 20% profit margin is that we got 125 on top of 500. So that's $625,000 is going to be in revenue for this next year. And then let's assume a 20% profit margin of that. It's going to be 100, divide that by five. That's $125,000. $125,000 in revenue. What we just did there is basically increase from 110 to 125. We increased by $15,000 in profit. Sorry I messed this up. Sorry. It's 125,000 revenue. This should be profit. Boom, boom, boom. This is profit. What we just did is we went from 110,000 in profit to 115,000 in profit. Okay. We increased by $15,000 in profit simply by changing the effectiveness of our marketing dollars. What that equates out to is going from 110 to 125. That is about a 12% increase in profitability simply due to making our marketing more effective. Okay. We didn't spend any more money. We simply made sure that the revenue that was brought in from our marketing dollars was higher by not spending more money, but timing it correctly, spending it, making our designs better on our flyers and on our door hangers and possibly doing an email newsletter where it doesn't cost you anything to get new leads. I know for a Fact that the marketing dollars at our first location has become more mature because almost all of their marketing dollars, or, sorry, all of their leads, are coming from recurring people who have already been our customers via email newsletters. Because I know that they're literally around a 75 to 100 right here. So the goal here and the reason I'm making this video is when you think about efficiencies and you think about growth, you gotta think about the two things that are gonna actually move the needle. Number one, how can I create efficiencies without spending more money? How can I create a system around P4P? Bonuses, culture, profit sharing, yellow slip system, all the things we talk about all the time. How can I do that without spending money? Create efficiencies around expenses, cut costs. Because at the end of the day, if I can cut $1 of costs, that's the equivalent of getting $5 in revenue. Remember that? So if I'm chasing revenue all day long, but I'm not cutting costs, we got a problem. So cutting costs, very important. That's done by efficiencies. And if you can do that via systems instead of paying a bunch of money for the brand new best equipment, because that's one way you can do efficiencies. Bigger equipment, nicer trucks, nicer trailers, that's one way to do it. But you're gonna pay out money and therefore you're gonna lead to a lower profit margin if you're always pumping money into that and getting the biggest and the best and all the rest of it. Now, if we can do that by creating efficiencies without spending money, and we can promote growth by taking our marketing dollars and making them more effective without spending more, that's what's gonna lead to a great business. It's gonna lead to a business that grows fast and efficiently at a high profit margin. And so I'd love to see you at Landscape Summit. Just go to landscapebusinesscourse.com conference. This is. There's a conference tab right on the homepage. I would love to see you there. We have limited spots because of just social distancing and things that we will have to do. If the current climate continues the way it is, there's not a vaccine. We will have to do certain things. So make sure you sign up for that. We're gonna have a lot more of this action going on. This year's gonna be different than the last couple years. The last two years we've figured things out, figure out what works, what doesn't. We're gonna make it a lot more professional, a little cleaner, have a lot more of our team there. So really looking forward to it. Make sure you sign up. I hope this helps you. Comment below what you're trying to do in your business to either drive revenue or increase your efficiencies. Comment below. Thank you so much for watching. I'm Mike Andes. On the Landscape Business course.