How Much Should You Pay Lawn Care Employees? (P4P for Small-Sized Biz)

Hey everyone, it's Mike Andy's Landscape business course and I wanted to address a question that came in on the Facebook group. And if you're not a part of the Facebook group, you should become part of the Facebook group. Landscape business course. Just search it on Facebook and become part of the group. And completely free. We share lots of ideas in there. Questions. I try to get on there as much as I can. If I can't get to them on there, I try to answer them here on the podcast. So just walking through the trees and wanted to make this video.

And there was a question on there this week about pay for performance. P for P. So we call it. We played around a lot with the idea of what we were going to call the system, like last year when we started developing it, and it was like, are we going to call it piecework? Are we going to call it, you know, we ran through a whole bunch of ideas and eventually like, you know what, let's just call it P for P. And so that's our short term for it because pay for performance is a bit of a tongue twister. Say it 10 times. Pay for performance. Pay for performance. Pay for performance. It's a lot of P's and F's and so P for P. Well, the question was, is how can you make P for P and can you do P for P for a smaller lawn care and landscaping business? The reason the question was formed was because their observation was that people like myself or other people talking about pay for performance are generally larger businesses, 10, 15 employees out in the field, they have operational and office workers, they have an estimator, things like that. And so I wanted to talk about that because I really don't want smaller businesses to think, oh, like that's something for the bigger companies. I can't do that. And if you were at Landscape Summit in January, you heard me talk about the reason why I did not implement P4P for years and why I've been developing it for so long, trying to figure out how it can work. And one of the biggest reasons why I thought it would not work or the reasons why, I guess I would say I delayed implementing it, was the fact that I did not want the system to take longer to calculate than the savings in time. What I mean by that is I did not want to save, you know, five man hours a day from my employees, let's say three hours per day from my employees, but then have to take 5 hours per day just to calculate P4P and figure out the calculations of how much revenue they made and you know, the different deductions and additions and all the things that we do for P4P. And so my thing was like, hey, I'm not going to create a system that takes so long to calculate that it actually is financially detrimental to the business simply due to the fact that it takes so long to calculate every single day. And so that was a big part of it. Now for smaller businesses that are trying to implement P4P, and if you don't know what P4P is, it's pay for performance. Basically, it's not paying your employees by the hour. And that's why right now everyone clicked on this video. They're like, I wanted to know how much I'm supposed to pay my people by the hour. Guess what the answer is. You should not be paying people by the hour. In my opinion. My opinion.

I truly believe that we have to make this change in this industry. And it's the reason why I'm making this video right now is to really share that, like, P4P will change your life and how your life interacts with your business. As a business owner, it will change the way your employees think about your business. And there's so many positives. You don't have to watch over their shoulder, you don't have to track them. You don't have to be distrusting of their effort. You don't have to worry about them being on their phones all day. You don't have to worry about them stopping at gas stations. And if they do, that's up to them. They make less money.

But for small businesses, it's a really interesting question. It's like, how can I do that? And the reason that most of the time bigger businesses get into P4P easier is because economies of scale, if you have 20 employees and they all save two hours a day.

Using P4P.

You'Ve saved 40 man hours of efficiency by implementing P4P. Huge 40 hours, that might be, that might be equivalent of five or 600 extra dollars in your pocket in a day. Trust me, most of us would make any change we could in our business to make an extra 5 or $600 net profit in our in our pocket take home.

Per day. Now if you have two employees, you say four hours in that day. Now it becomes a question of like, is it really worth saving $4 or 44 hours? That might be, you know, 50 or $60 in your pocket. Is it really worth all the trouble, all the hassle, all the calculations, all the systems, all the Differences in your business, that $50 or $60 per day in your pocket, some people would say no. I would say absolutely, positively yes. If you want to scale the business, if you want to grow it to the point where you don't have to be in the business, if you're just trying to continually work in the business and you don't mind doing the work all the time, you don't want to scale it up to anything of any size, trust me, it's going to be easier for you just to pay hourly. If you just want to stay at one employee part timer and you go through employees a lot because you don't have steady work, it's gonna be easier for you to stick with hourly earnings. It's easier to attract hires because it's easy for them to comprehend. So if that's your style, if that's your goal, that your ambition is just have one and two employees, part timers, seasonal students, things like that, cool. But if you have three or four employees, that's when I feel like the tipping point becomes, you must know P4P. And if you don't have three or employees, maybe you only have one or two, but you have the ambition to grow, you need to implement P4P as soon as possible. Because the sooner you can do it, the better your culture is going to be and the sooner you can actually begin to scale because you'll have the profitability and you'll have the consistency of profit. I've said this before. I'd much rather have a 15% net profit margin business that does 15% every single month than a business that does 20% net profit for the whole year. But one month it's 10, one month, it's 15. One month, it's 5. One month, it's 28, one month, it's 38, one month, it's negative 6. I'd much rather have that consistency of profitability than I would a higher profitability margin. Because when you had that consistency of cash flow and of net profit, you don't have to. Your cash flow is much better. You don't have to as much money in the bank. You can invest the money at a faster rate because you don't need as much cash on hand when you have that consistent profit margin. And so that's what P4P does for you. It allows you to have consistent profit margins due to the fact that you've taken your biggest variable expense, which is your labor in this industry, labor is your biggest variable expense, which means the more work you sell a Variable expense goes up. Alright, a fixed expense is gonna be something like a car payment or maybe your insurance, which your insurance goes up a little bit too. But fixed expense might be your rent, utilities, if you have an office or something like that, those are fixed, aren't going to change same amount your licensing fees, fixed expenses. But this industry is mostly most of our expenses around a variable expense of labor, which means the more work you sell, the more wages and employee salaries you're paying. And so that's why P4P is so important, is because it creates a consistent percentage that you give to your employees instead of a variable rate. Depending on how fast they work, you might pay them $20 an hour. If they work really, really fast, you make a bunch of money because they got the work done faster. If they do it really really slow though, you lose money or you don't make as much money and your variability of that expense is going up and down. Whereas with P4P, it's consistent. Maybe you don't make as much sometimes, but you make a whole lot more, like less less and less more. So if that makes sense, basically you're taking out those big highs and the low lows of your profitability. Now, for small businesses, the reason I would highly suggest that you implement P4P now is a few different reasons. Number one, you're going to attract much better talent and it's a better way to get a talent when you're small by implementing P4P. Because if there's an A player that's with a B team in your local market, competitor, locally, other lawn care, landscaping business that might have a really amazing employee and they're tired of working with sub performers and people that don't care about their work ethic, they aren't professional, they aren't clean, they swear, they just not good to the customers, not good to the company, have no work ethic, don't care about, have no pride of their work, etc. That person, if they're a really good worker, is going to be annoyed by that and they're going to want to come work for a company that they get incentivized to work harder, they get incentivized to produce more, they get incentivized to be efficient, they get incentivized and furthermore, they're working with a team of people that are thinking the same way.

They love working with other people. Grade A A players. And so when you're just starting out, you have one or two employees, you can make that first employee, that second employee. You can get greater talent due to the fact that you can attract the best workers from your competition. The people that are tired of working with a bunch of slobs, tired of working for a bunch of lazy other laborers that they're annoyed by. And they want to work with really hard working people and they enjoy that. And they're going to be able to get paid more using the P4P system because they're actually producing so much revenue for you and you're giving them a percentage of revenue and they're going to be able to be incentivized to work harder and they're going to feel good by the fact that they're able to make more money because they work hard.

And so number one, you're going to attract greater talent even if you have one or two employees. And sometimes the hardest employees to get is your first and second employees in your small business. If you have P4P, you'll be able to afford more because.

It'S P4P. You'll be able to afford more if they're really, really good. And so you want to have a consistent base rate for your P4P. But then you want to have, you know, basically this was said by one of our franchisees. Jeff over in Sandwich, Massachusetts is one of our franchisees, Augusta Long here. He said this last week. I really liked it. And he said base rate with P4P is like lowering the floor a little bit, but removing the ceiling. What he meant by that is like your, your base rate might be a little bit lower than they're making right now. In other words, they can't, that's the floor. They can't go lower than your base rate, but you're removing the ceiling. In other words, you're giving them uncapped unlimited potential to grow and expand and make more money. That's a great way of putting it. P4P lowers the floor a little bit, but removes the ceiling. And so, number one thing, for a small business, you might have one or two employees. Why you should still implement P4P. If it's implemented correctly, it should only take 30 seconds after a long time, maybe 2 minutes or 3 minutes at first to calculate P4P. Alright? And what I mean by that is you're going to be looking at what was the revenue produced by that employee that day. You're going to be, you know, having certain systems and procedures of like, okay, I'm getting the percentage of revenue, but then you're going to have quality, you know, different ways of adding more money. They can make more money, they get customers. If they upsell somebody, you have certain deductions like damage cases or callbacks. This is all part of pay for performance. And I've talked about a lot of this before. And so, number one reason for a small business, I know I'm kind of all over the place, but the number one reason for small businesses, like I'm talking one or two employees in the lawn care and landscaping industry that want to grow, that want to expand, want to get more employees, number one reason why they should have P4P and implement it now is because they're going to attract greater talent. The second reason is financial. And that is because you're going to have a more consistent profit margin and it's going to give you more confidence to grow and expand because you aren't going to have these really, really good months and then these really, really bad months. It's going to make a more consistent profit margin and it's going to make a more consistent cash flow, which is going to give you confidence to spend the money when you have it. Because you're not going to be wondering if you need to hold on to big cash reserves in case a big job goes bad. Or if you have a bad month and it rains a bunch, guess what? If it rains a bunch and it takes the guys a lot longer, if you're on P4P and they're getting a percentage of revenue, doesn't change. If it's sunny and they get done fast, great, they're going to make more. If it's rainy, they're going to make less. Cause per hour they're gonna make the same amount of money. It's just gonna take them longer. So, number one, you're gonna attract greater talent. Number two, you're going to have financial consistency in your profitability, which is going to give you the confidence. That's number three, the confidence to grow and expand due to the fact that you're financially secure and more predictable. And so I really, really encourage small businesses, even if they have one or two employees, to implement P4P. And I believe in this so much. And there's a reason why, like for our franchisees, I'm developing version two of P4P. It's actually rolling out this month. We're in May 2020, we're rolling it out to them, which is going to calculate P4P in less than 30 seconds per day per employee. We're actually shooting for less than 20 seconds. It's also going to send them a text message every single day. The next morning what they made the day before. Because we want to get the incentive as close to the performance as possible. That's the best way to increase someone's performance is to have the incentive or the carrot as close to the horse as possible. And so the text message goes out the next day, tells them either A, if they're on a mowing route, tells them exactly how much money they made the day before they're doing maintenance. If they're on a project, it's going to tell them where they're at in the project. If it's a multi day job, like how many where they're at on actual hours versus budgeted hours, like what's your progress in the job? Giving them a gauge like am I behind schedule or ahead of schedule? And so we're developing that. We're paying out, spending a lot of money on that. Because I believe in this so much. It's got it. This is where this industry has to go. We have a labor shortage. It's going to be very difficult. And right now there's a lot of unemployment. It's easier right now to get employees. But trust me, you need to expand and grow, especially when you're small. This is a bigger issue for smaller companies to attract great talent. It's hard. I'm finding this out with our Mount Vernon location. I'm finding this out with our franchisees that are just starting out and brand new. The hardest thing is to get great people for your first few employees. And so I'm not going to talk about all the specifics of P4B. It takes a long time to kind of explain a lot of it because a lot of people will implement P4P or they'll try to change from hour to P4P and it'll actually wreck their business because they don't have a lot of the fundamentals that are important to actually implement P4P. Trust with your employees, open book management, these things are paramount. And you will ruin your business if you try to switch to P4P without showing your employees numbers, without being open and honest and being open to criticism and being having trust and accountability with your employees. It's not gonna work. And so.

Last year or in January, I should say, at Landscape Summit at the conference, we spent three days and we went through the entire system of P4P. How to set it up, how to sell it to your employees, the process by which you need to test P4P to see what your numbers, your base rate should be, what the percentage of revenue should be. Going to deploys. We talked about all of that, walked you through how to do that. Now the big announcement for the day and the reason I'm actually saving this at the end of the video because all of you that have watched the past 16 and a half minutes are dedicated to P4P. You're dedicated to making this change and you want to improve your business. So this is an announcement. I would do it at the beginning if I was trying to sell more of these, but I actually wanted to give it to the people that are actually listening to this content, actually going to implement P4P. Tired of selling stuff to people and giving advice and they don't do it. They don't see the change, they just they think that somehow paying money is going to fix things anyways. So for those of you that stayed on for the last 17 minutes and listen to this.

On landscapebusinesscourse.com currently all the members have access to three days of landscape Summit that we had in January. I think it's like 20 plus hours of video content walks through the entire process of P4P. There's some other things we talked about during that time, like Liz talked, Lee talked, but really I wanted to give that, all that content to you because it gives you actually whole scope of P4P. Because they talk about in their speeches, we talk about it when we talk about culture, the amount of how much it changes your relationship with your employees is incredible. So all of that's on there. And once you become a member at Landscape Business course, it is free, it's on there, you can scroll the very bottom of the modules page and literally I would buy that content or become a member of the course just for Landscape Summit 2020 with P4P information hands down.

But this is the announcement and that is that once version 2 of P4P is released for the franchisees this month, I'm going to be making version one available to everyone on the course. Alright? So when you watch the P4P.

Education and all the keynotes that we talk about at Landscape Summit, keep in mind you're going to be able to have access to that software in about a month. Alright? So I really recommend, if you haven't already become a member of the course, it's 247 bucks, buy it and literally buy it just for P4P. Now the other stuff in there is a lot about when I started, it's how to grow your business when you're just getting started, your first couple years in business, all that, it doesn't really matter if you're established and you're kind of past that. You know, definitely good nuggets throughout there, but get it for just a three day conference recording and get it for the fact that when this all when we launched version two for the franchisees, which is a very sophisticated piece of software we paid tens of thousands of dollars for, and I'm not releasing that publicly, it's what does the text messaging and all that. But version one is a very simple tool that we've created online. It's called p4psystem.com and I'm going to give you access and a username and password to that in about a month for everyone. That's a part of the course. So I recommend is throughout May, go watch the videos, you're going to learn how to implement P4P, how to set your base rate, how to figure out how you should test and roll out P4P and switch from hourly over to P4P. Very important. Whether it be the test, the vote that you need to have with your employees to get buy in, all of that goes to the whole process. Learn that and then in about a month you're going to get access to the version one of P4P. And the reason I'm telling you this 20 minutes in, like I said, is because when I actually release version one of P4P software, I'm going to up the price for the course. I don't know how much, I'm not making any declarations here, but it's going to go up because of the amount of money we have to put into that software and all the money that we're making from that. I'm using for the further development of version 2 for the employee for the franchisees, version 2.1, which is adding some other features and software that we want to do with P4P. And so that's why I'm doing this, so I'm on this video, is to get you to go get the course, listen to the videos, create your system for P4P.

Know how to implement it, and then when I release it in about a month, version one of P4P, you will have access to it and you'll actually be able to run it on your payroll. You'll be able to switch over and you'll know how to use the concepts and then you'll have the actual software to make those calculations. So go to landscapebusinesscourse.com, sign up as a member and again you're signing up. There's a whole bunch of content, a bunch of templates, a bunch of contract stuff, cool stuff, lots of really good information. But promise me, especially if you're an established business already, you want to buy it just for Landscape Summit, the recording, learn it, listen to it, and then in about a month you're going to get access to version 1 of P4P, and that's the software we use in those keynotes. So in those keynotes you'll be able to watch them, see how the software works, learn how Lonnie is calculating that on a daily basis with the routes, with the projects, and be able to implement that as we go into summer. So check it out. Landscapebusinesscourse.com Sign up today. The price will be going up as soon as I actually make it public and really begin to launch to everyone once version one is available for the public, or should I say to the students of Landscape Business Corp. That's going to be available, the price is going to go up. So that's going to be about a month, probably two months. And so check it out today and all that money is going to be going to creating a better version 2 product for our franchisees. So thank you so much everyone. I hope you have a fantastic day. If you have questions about P4P, you don't even need to ask me, just go to just go to landscapebusinesscourse.com Sign up for Become a Member, get three days of the conference where we explain in detail all about how to implement it and the benefits of it. I promise you it'll change your business, change your life and how it interacts with the business and really change the life of your employees. And so check it out. Thanks so much everyone. Mike Andes, landscapebusinesscourse.com We'll see you next time.