Ideally, your company has been budgeting from day one, but many landscape companies have been guilty of not truly budgeting in earnest for years.
The good news is your business can benefit from adding a budgeting process no matter how long you’ve been operating or how big you’ve become.
When to Budget
If you’ve decided to commit to the process of budgeting, you might not know if there’s a right time to craft next year’s budget. For most landscape companies, it will vary based on their seasons and services.
Brian Mark, partner and president of Chris Mark and Sons, Inc., based in Pocasset, Massachusetts, says they add data from their open-book management throughout the year and then buckle down in October with a goal of completion by the end of November.
David Koehn, president of Koehn Outdoor, based in Jacksonville, Florida, says they start working on their budget in the middle of September. By mid-November, Koehn has finalized their budget. He says sometimes it does come down to the wire and they’ll finish by the first week in December.
While it is a time-consuming process, it helps you examine your numbers and forecast for future growth.
Who to Involve
If you want to create effective, realistic budgets, you need to involve the right members of your team.
Koehn says they’ll have internal meetings with division leaders to understand their wants and needs, how they’ve performed this year with the current budget, and what they are forecasting going forward. Their division leaders share what capacity they have with their current equipment and manpower.
“We always start with a forecast of sales of each department,” Koehn says. “That way we can try to forecast growth. We can factor in how many trucks are we going to need for your division if we’re going to grow by X amount in horticulture revenue, and we only have three spray trucks.”
While some things won’t change that much year-to-year, if you’re a $5 million company and you want to get to $6 or $7 million, you have to think through what additional leadership and staff you’ll need as well as the new sales you need to generate to support these new positions.
Koehn says they will also conduct a SWOT analysis and talk to their team to hear the voice of the field before they create their budgets.
Mark says aside from his co-owner brother, they include their general manager, construction manager, turf and plant care manager, maintenance manager, two account managers and their office manager in the budgeting process.
“We have multiple summits to review where we are and then bless a final budget when we are all satisfied with the plan,” Mark says.
Monitoring and Adjusting Your Budget
Once you’ve set your budget, it’s important to monitor how your company is performing against it regularly. Mark says once they lock in their budget, they do not change it.
“It is an integral part of open-book management,” Mark says. “The game is played live. We monitor our direct costs/budget impacts weekly at our open book forecast meeting. My office manager and I monitor and asses overhead budget issues monthly.”
Koehn notes that in the years when they’ve been behind budget, it can be a morale killer for the team. He says your staff can feel like they’re in trouble at school if you’re constantly reminding them about being behind budget.
“A lot of times, we’ll have a good, better, best scenario,” Koehn says. “We try not to overthink it and get to where we’re actually going in the budget and changing actual numbers. We’ll look at it from a standpoint of ‘What are we going to realistically sell, and where are we going to adjust?’”
Koehn Outdoor has an ops meeting every Friday where they discuss any adjustments they need to make if they’re not going to make their goal.
“I think it’s really easy to lose sight of budgeting expenses and then just going out and selling work,” Koehn says. “If you don’t really know how that work is performing, then how do you know you’ve got enough net profit to cover your repairs, your growth, your trucks, your new hires, your training and all of those key things that you need to continue growing. If you don’t really know if you have enough margin to cover that, then essentially, you’re going to run out of steam at some point.”
Advice for Others
Koehn says when you’re building your budgets, don’t forget the cost of important initiatives like employee training.
“Even though training is the right thing to do, you’re still slowly eroding your net profit and your margin, just because you weren’t really aware of what that was truly costing the company to have that indirect time spent,” Koehn says.
Koehn adds that every additional year you do your budget, your team should get a little bit more in tune.
“Even four and five years later, we still are learning every single year how to massage certain things and what months we’re going to need more,” Koehn says
Mark encourages other business owners to simply start budgeting.
“Ask for help; don’t reinvent the wheel,” Mark says. “Network to understand how colleagues go about budgeting and if it is ‘in the budget’ consider a consult or coach to help with the process.”
