This $1.2M Landscape Company Has $11K in the Bank

My name is Mike Andes. I'm the founder of Augusta Lawn Care, where we have over 150 locations around the world. But we travel around the country turning around small businesses just like this one.

Today we're in Arizona to turn around.

This 1.2 million dollar landscaping business. The last thing you want a salesperson to be hearing is negativity.

They've had as little as $11,000 in the bank.

There's always a couple of pretty large.

Invoices outstanding with over $170,000 in accounts receivable. They have 22 employees, and the business owner is working seven days a week.

And what happened to that one? Somebody fall? I can do what happened to that one?

Let's see if we can turn this thing around.

Hey.

Morning, Paul, how are you? Good to meet you.

How you been?

I've been pretty good. We've been coming to this place for years, and we love this place. And this is the place we eventually wanted to go. So we had a five year plan to come here. And when Covid hit my job as a outside sales guy, kind of, you know, didn't dry up, but it just became real boring. And so we kind of accelerated our plan to be here. And when I got here, Dave Gronin, who had the business before me, was selling it and we talked and I ended up buying it. Over the past couple years, my Google rating has gone from 1.8 to 4.5.

I heard. Because you acquired it originally and it was kind of a mess.

Yeah, it kind of was a mess.

What year was that?

2020.

Oh, wow.

Oh, so it's been like less than five years?

Yeah, less than five years. The guy who owned it before had owned it since 79. He started the company in 79, so he had it for a long time. And this place wasn't near as big as it was. So he had good word of mouth and everything. I mean, you know, this is a small town place and everything like that. But his focus was on construction. He really liked doing the construction stuff, and he's very, very good at it. I needed cash flow when I first took over the business, you know, and I needed to build up the maintenance side to have that monthly income coming in. I mean, that's just what had to happen. And not to badmouth him or anything like that, but I mean, he just had a different sort of focus on it and everything, so.

Well, he's been with his, what, 30, almost 40 years?

42 years.

I want to keep increasing our maintenance type of thing. I mean, We've been steadily growing. The maintenance thing, like I said, from that 35,000amonth to now 75,000amonth and everything like that. I would like to keep going and get that up to $100,000 a month. The only way I'm going to do that is hoa. You know, if I tried to do that residentially, man, I couldn't fill. You know, we're filled in the parking lot as it is right now. I wouldn't have enough space to put the people. You know, my goal has always been to add two HOAs a year, and that's usually adding a truck. We went and bought crew cabs last year or whatever. So we could. Instead of adding trucks, because that used to be the thing, too, I would add a truck, and then everything would kind of fall apart. So instead of adding the truck, now I just, you know, try to stuff more people in the truck. We do a clown car kind of thing. If I could get three decent commercial jobs a year, that would really be what I am. And my goal from the very beginning was that the maintenance side was going to be the foundation of the company. They were going to pay the bills, they were going to pay the overhead, they were going to pay the salaries and everything like that, and that the profit was going to come from the construction side. Like I said to me at the time, the maintenance that he was doing was more like, you know, like the people that build pools, they always provide a maintenance package after. Right. And it's more. They don't really like doing it. They hate doing it, probably, but they feel like they have to do it so they keep their customers. And that was kind of the way I saw it, what was going on here. Dave would do a construction project like the Verizon or something like that, and then he'd get the maintenance for it when the construction project was done. And we've done that, too, but I was in need of cash.

So say we get a couple more commercial projects, we get more maintenance. Is that going to increase the headcount, or do you think you're going to be raising prices to achieve that? Because, like, I'm concerned that we have 22 people already.

Yeah.

And let's say we're trying to get to 1.6, 1.7, which I see a lot of times like a wilderness of profitability between 800,001.5 in terms of just. You usually need that second overhead person, an operations manager or a salesperson. And so to get there, are we gonna have to hire more People or raise prices. Because my concern is you're still juggling all the balls. And we have 30 people in the crew, and now it becomes unsustainable.

So you're good. What's up? Is the battery dead?

You don't know. You haven't seen any jumper cables around, have you? Let me see if I can find some. That's a lot.

Like, I didn't know even at 15, like, most of my general managers will start to break down.

There's my grease gun.

In general. Just like the amount of volume of just every day is just stuff happening.

Yeah. Well, it keeps you up during the day, keeps you awake, and it keeps you up at night.

Yeah.

You know, if I could concentrate on the sales part of the thing and on the company promotion and the sales and everything like that, I really feel that's where, you know, I'm best suited. That's where my background has been in before and everything like that. And what happened to that one?

Somebody fall. Somebody fall? Because I know, hey, Jordan. I just can't. It's hard to do both, you know, so. And it's hard to find somebody. I'm not sure that just somebody who's a crew leader fits into that role.

Yeah. Because I rebuilt three of them this weekend.

My feeling is this 1.2. We're right at that absorption level.

Right.

And we're. So we're absorbing our cost well. And we're doing okay. If we can just get past. That's when the profit starts coming in and we can start doing a little bit more with what we do. I think the construction side may be a little over right now, to be honest. We had the three projects we were running at the same time, so I went ahead and got the extra people that I need, and they're good people. I don't want to let them go. I'm afraid if I let them go, I won't be able to find them if I need them again type of thing.

Right.

So the business is struggling to make profit because the project income is up and down and extremely unreliable. Now, I understand Paul's inclination to not want to let go of any of his team, the crews that are working on the construction side of the business. But I do believe there's an emotional connection that is starting to form between Paul and the construction side of the business. And I'm all for enjoying the services that we perform for our customers and loving the work that we do and loving the people that installs those projects. But ultimately, if the business isn't Going to be successful. And if it doesn't make money, we've got to make these hard decisions. Now, on the other hand, when I look at the maintenance side of the business, it's been growing very quickly, and customers are accepting these bids like crazy. So why not focus more of our attention on that side of the company?

What's usually your close ratio like, if you, as general average, are you closing pretty much most that comes in?

On the maintenance side, we close everything that comes in pretty much. And. But on the construction side.

I would say we're about 60% close. You know, there are some that we lose. And then, you know, we also. Because, I mean, I actually got this place. I was kind of lucky. The timing was right. Right. Because this place exploded during and after Covid, everybody was coming here because, I mean, Arizona's kind of lax on the face masking and everything like that to begin with. And then. So you had people from California and stuff like that moving here, but you also had a lot of people from. From Phoenix and stuff moving up here, too. This place just blew. Yeah, I think, you know, the. The people up here are starting to get a little.

Under pressure because of the. The population growth. Home prices haven't dipped here at all. And we have a couple rental properties. And if we've gone two weeks, you know, once somebody decides to leave or go somewhere else or something like that. I mean, if we spent, what, two weeks reed between, you know, we'll have a list of seven. Seven other people that want to move in. So. And I've hired people that were literally living in tents out in the desert because they couldn't find a place to live. And that continues still. So there's. You'll drive around, you'll see lots of construction, housing construction and stuff like that go on. But as far as the commercial stuff, I mean, we just got the Burger King in town. We're doing a blue ocean thing up in Flagstaff. We're pretty much at capacity. Right.

We are. Need two more people because all the.

Accounts, Home depots kick back in and things like that.

I need to meet you.

Come on. What was your name? Re. Good to meet you. You handle all the admin side then, like phone calls and as well as all the maintenance. Is that right?

Okay.

We talked about it, that I. I realized that we had people coming and going and everything like that. I really wanted to keep them. Man, you're gonna have to offer 18, 19, $20 an hour to do that. And that was higher than what a lot of people were offering out there. And so we raised rates up to the 4th because we were at 35 when I first started. Now we're up at 45 and we're.

Still closing 100% almost to maintenance.

Yeah, in this area, definitely.

Now Paul keeps mentioning hiring more people and extending the amount of work that the company can do for customers. But ultimately, when their prices are this low, they need to raise prices and make profit. And I know without even looking deep into the numbers that there's a huge amount of profit that could be had by just raising the price. If you look at all your potential customers, they're going to have different levels of perceived value with your services. Some are going to think it's basically worthless and others are going to think it's worth a lot. Now, when you set your price, anyone that doesn't have the perceived value high enough, you will not get them to accept the job. Now everyone above that line will accept the job because value is higher than price. Now when I raise prices, yes, I will lose some customers because they do not perceive the value to be higher than the new price. But also I will gain all the extra profit that is associated with everyone else. That, that a huge amount of value discrepancy between what I was charging. So in essence, you're gonna do less work and make more money. Sounds like a good deal to me.

If 90% of clothes, 90% of people are accepting, like, we can move that price. And that's like an instant fix for the business. Cause like if we raise prices on $70,000 and we raise it by 10%, that's $7,000. There's your operations manager. Right. And that's what I'm looking at as like the unlock to the next stage of growth is you focusing on sales. Having an operations person that 8, 10 fires that happen throughout the day goes to them, the angry customers go to them. Because the last thing you want a salesperson to be hearing is negativity.

We have to grow a little bit more, I think. You know, I want to be a company. I don't want to be a family owned business type of thing. You know, I want to be a company and it's a point of pride to be able to succeed at something like that. And I feel like we're at that thing that if we could just get past the hump, you know, this one little hump or whatever, that this thing would, you know, would be exactly what I thought it could be like.

I know the amount of work that goes in this location because the exact Same size as mine was before I implemented paper performance.

Okay.

And I know, like, the amount of, like, work and effort and all the fires every morning, like, it kills me to see that much at the bottom line and the amount of effort that goes into it.

You know, we didn't come out here from New York working 15 hour days, seven days a week, come here and work 14 hour days a week.

The margins are super, super tight on just about everything. And what you're seeing too, on the maintenance side, like I said, we do pretty well. The construction side tends to take away from it over the year because of the way the pay thing works. Right. I mean, you know that I can't invoice until this period. And, you know, I would spend a lot of money on the materials and everything like that up ahead of time.

There are a couple of like very large invoices outstanding.

Oh, yeah, yeah, yeah. There's always a couple of pretty large invoices outstanding. The whole Chipotle project was outstanding. We finished Chipotle in September or whatever, and so they just finally paid off. And that was 60 grand right there. So again, that's why we. I pushed really, really hard to increase the maintenance side.

I mean, I think the maintenance part this year, the maintenance side has really take. Taken us to the next level. I mean, this is. I mean, we've done really well, employee wise, account wise. We've put on a bunch of accounts this year, HOAs and stuff.

You don't have outstanding massive bills because people pay every month.

Yeah, correct.

Do you think moving more towards maintenance and like letting go of the projects?

That's what he's been told. We've been really discussing that. Right. Because right now, if you looked at P and L, the maintenance side would show that we're profiting 200 grand a year. Right. And it's the other side that's taking it down. We've probably lost 80, so why don't we cut it?

I love my people and I'd have to let some of them go if we did that. Right. And, you know, Bobby's been here five, six years, you know, Junior and them. I love working with those guys. I do like the project stuff. I like being able to go and see what it looked like before and after and everything like that. I understand, though. Yeah. I mean, and we've been talking about it for the last couple years. That man, you know, can we be just a maintenance company?

We've got a really, really good crew, you know, and we consider these people part of our family. And Everything. And we just want to be able to provide, you know, like anybody does. You know, you want to be able to provide for your family, you want to be able to give them a better life than you had, type of thing. Right. So that's what we're. That's what we're about now. We just want to grow the business so we can all make, you know, more money and be comfortable in what we do. You know, everybody knows that landscape cyclical, you know, it can go up and down and everything like that, but these people really committed to it. And, you know, we want to pay back that commitment by being able to, you know, make their lives more comfortable if we can.

What if you brought your team together and said, hey, like, just being honest, they know how hard you work. Like, they do understand that. And I think you actually get a lot of respect from them by saying, it's not sustainable for me to do this anymore. And, like, the business doesn't make a lot of money in the project side. But I am going to. I want to keep you all busy, and I'm not going to cut the business. I'm not going to, like, all right, tomorrow, no projects. Yeah, but we are going to start moving the focus of the business towards maintenance to ensure that if there are times when there's not projects, I have work for you.

Yes.

And then, then it's a matter of, like, we don't go chasing big projects. We have a little higher prices to make sure we actually make some money on them, which means we'll have less of them closed. But then that will give you more time to focus on the maintenance side. My concern is that the recipe to growth is four or five more big projects. And that to me is like, more accounts receivable. It is more of your time on the project side. It's our lower margin service. If all of that time and energy was just focused on, okay, can we reach out to property management companies locally?

Can we.

Can we reach out to do these more recurring stuff? Like, I think we. I think even upselling our residential customers, like, can we sell them a different service that isn't hourly? That is something else. Projects, we are getting massive accounts receivable. It's causing cash swings.

Yeah.

It's taking all of our time. We aren't making money on it. Maintenance, we have increased by 50% or no, we've more than doubled the maintenance over the past few years. We're profitable on it, even at what I consider a very low cost price. But somehow that's the profitable side of the business and it doesn't require, but probably what, 20% of your time?

Yeah, yeah. I mean, that's probably true.

I think it's becoming clear that the business needs to focus less on the project side of the business and more on the maintenance side of the company that actually produces the profits. And I understand Paul doesn't want to let go the crew members that have been with him for a long time on the construction side, but it's not making money. And this side is the maintenance side. And it's not easy switching from one time jobs to recurring revenue. One time jobs, I might get 10, 15, $20,000 on one job, whereas for maintenance I might make 100 or $200. But over here, the recurring revenue is much more stable. It's not as up and down. And better yet, we don't have $170,000 of overdue invoices from these massive projects.

There would be six people right now that I would be like, man, what do I do with them?

But what if we raise the prices on our projects? And then we basically told them this is what's happening, we're going to be increasing the maintenance side because if we need two people come March, I feel like that's a perfect time to start making the transition. Knowing that if we don't get the project sold at the higher rate, we now can move a couple people over to the maintenance because we need them in March.

Switching from this revenue model, it gets a bunch of revenue up front to more of a recurring business model is difficult, but it can be done over the course of time without tearing the band aid off immediately.

I think being honest with the crew, no one's losing their job. I will do whatever it takes if I have to go do pavers at my house. No one's losing their job. But we need to move the business in this direction because it's more sustainable and everything can't depend on me being here 12 hours a day, seven days a week.

Yep.

The construction business has been here for 40 something years. You know, I think that that's his baby. Even though, you know, psychologically he sees the right way to go and we've talked about it to the maintenance. I think that that's his, that's his part of the company. That's. Is it a failure by letting it go? I mean this, I'm an outsider, let's say, looking in right now, you know, that this company's been here for so long, the construction. I think he also does like that. I think he Likes the big projects. Not so much the backyard, but definitely the big projects. But I think, you know, he's a very logical, sensible person when it comes to the business that sees that, you know, and he's been talking about it probably the last. Probably within what, two years. At least two years, that this is really the way to go.

I think we just take away the projects that are causing pain in the head right now on the project side, which sounds like to me, backyards no one likes. So why don't we nix that and instead say we do commercial maintenance and we crush Brightview. And on that brochure, it's like, Brightview versus us. Here's what they do and here's what we do.

Bingo. That's what I would love to have. I mean, like. And I told Zach, I mean, that was the first thing I think I told him that was number one on the list.

There's like three major keys. It's like, kill Brightview. Okay, great. Two, take care of the people. And three, like, you're extremely involved in the community and that's what you love.

Yeah. Because I, you know, I just think that the place, this area is very unique. Right. You can't grow the stuff in Phoenix. You know, everything. It's unique. And so having somebody, a national company come in, I don't think they serve the people right again. And I think also that if somebody's unhappy with the service with Brightview, who are they calling? They're calling some guy in Phoenix or they're calling, you know, whatever they may be or, you know, if they're calling anybody at all. But if they're unhappy with us here, I mean, how many times have we gone out on a Sunday morning or something like that because, you know, somebody squawked about an irrigation issue maybe going on or something like that. We're here 24 7. We're here. And to me, if these guys know that, you know, especially the resorts or anything like that, something happens on a Sunday morning, I can be there.

You know, the thing about concentrating on the maintenance, you know, concentrating on providing a service that we do very, very well and that people recognize us for and concentrating on that, you know, to me, that's the main thing that he brings us. And the one thing that we're probably going to take for this and go. And, you know, we had considered that. We thought about it because the construction part is hard, man. It's up and down and everything like that. And.

You know, we saw it. It's just hard to, you know, you don't know if you're going to make a mistake by doing it. It helps big time to have somebody who's done it before come in and tell you, yeah, you're probably, you know, that's the way to go.

So, you know, see if you can convince him to let some of the.

Project stuff go there.

I mean, he's been talking about that.

Yeah.

Like I said. And more so recently.

Yeah.

You know, he's always wanted to go to the maintenance side. Like I said, I think it's more. It's been here for so long.

Yeah.

You know, I think it's more of a pride thing too. I could be wrong.

Yeah.

Yeah.

But you know, you know, and he's good. I mean, the big projects are great. Backyard project.

Yeah. Well, even over the past like five years, really fix the, the company culture internally and like the company brand. If the next five years let me actually fix the service, mix the financials, like that aspect in five years of a business that is a. You could pass on and sell if needs be.

Right.

And that's what I'm concerned. Not concerned, but like thinking about too is like, okay, like there is a time where it's like you won't want to work 12 hours a day, seven days a week. Yeah.

Six weeks after we went and visited Paul from Green Earth Landscaping, we called him up to see if he'd made the changes in the business and if he was able to turn things around. But before we catch up with Paul, let me tell you about two resources you can use to turn around your business. If you're struggling right now and you want me to come fly out to. To your business for 100% $0 free, go to mikeandys.com turnaround now. If you need help today, the second resource I want to give you is mikeandys.com course. It's an online course that's completely free that will walk you through the 13 principles you need to take your struggling business and make it profitable. Go to mikeandys.com course and check it out today. Now let's check in with Paul and see if he was able to turn around the business.

Yeah. So we just got these in the other day and, and these are brochures specifically dedicated to doing contract commercial maintenance and everything like that. So they didn't cost a lot of money. It was like 85 bucks for 50 of them or something like that. So we're going to start doing that next week to give us a start of the year boost for the commercial maintenance business, which I guess, you know, is where we want to concentrate our efforts and where Mike said we should concentrate our efforts. I also think since, since you guys were here, we signed up three new contracts and then today we got a call from Sunridge Hotel Group that we do the Marriotts for. They just got past the 60 day maintenance period on their new Hampton Inn in town, and so they've given us that account too. Yeah. So, you know, just in the past two weeks, we've signed up four accounts and it's December. The person I consider to be my project manager or whatever, we've had a couple bad projects that just are not ending well at all. And so I've kind of remained, removed her from that position or whatever, but also told her when I was doing it that we think that this project thing that we've been basing that a lot of her time was spent on is going away anyway. Well, we want to hope to stay in touch. And like I said, it's just been a great experience and we really appreciate it.