Adventures with lyrical - buying a business

Shonuff · Jun 2, 2011

Cathan said:
Reading through the thread here you said you do high end landscaping which sounds like a 1 time deal to me but you make good cash on it.

Later on in the thread you talk about partnering up with other businesses for referrals and various other methods of advertising. At another point you mention how some of your competitors mow lawns but don"t have the heavy equipment you do for the landscaping, how your guys don"t cut lawns...

Somehow I doubt this has escaped you but why not have either a separate business that cuts lawns or roll it into this business? Seems like you could use the lawn cutting business to bring in more clients for your landscaping business just by offerring more services and direct word of mouth referrals from one business to the other...

Damn forum ate my 1000 word response.

In a nutshell, an acquaintance of mine in another city told me that his largest competitor in the niche does zero advertising in the niche. While he might be on a few lawns a day, the other guy is on 1,000 lawns a day, mowing lawns. The mowers get paid commission and are trained to look for work while they go from house to house. So you have one guy specializing in the niche and relying on word of mouth and alot of advertising, while the other guy does the full gamut of lawn services, while being able to grab extra work as he goes along.

Its something I"ve thought of lately alot. The only way I could pull it off would be if the mowers were paid a seperate rate than my guys. My guys in the niche are highly trained, and they can command $15+ an hour at my competitors. You can"t pay a guy $17 an hour to mow lawns and make a profit doing so.

Maybe one day I"ll branch out to other services. But on the high end jobs (just ran an estimate on Tues for a trucking company that was $32k) we have more credibility, as I have a long list of difficult jobs that we"ve completed. Alot of firms that do multiple services around here get the rep of "jack of all trades, master of none."

Cathan_foh · Jun 3, 2011

Lyrical said:
The problem is that the bigger clients have built their businesses by having their vendors finance them, and that isn"t going to change. My biggest client is notorious for this, so much that I"d say the name if they wouldn"t kick my ass, and you"d know why they pay slow. They pay so slow that they held 10% of the jobs of the previous owner of the business for two years, and didn"t pay any interest on it.

Its like a problem that one of the highest rated business professors in my MBA program presented to us. Hypothetically speaking, a farmer is approached by Wal Mart, and offered a deal that would bring in millions of sales, and increase the farmer"s net worth by twenty-fold. The catch is, Wal Mart won"t pay him for 90 days after he delivers the goods, and he needs to incur a ton of expenses out of pocket that he can"t afford.

Instead of the farmer bitching about how Wal Mart is screwing the little guy, and complain about how he needs the 200-300k in working capital that he doesn"t have, he"d be better off going to the bank and borrowing it.

My uncle set mobile homes for several local dealers and did secondary calls from home owners also. 1 dealer was a notorious asshole that screwed everyone over that ever worked for him. Guy was so greedy that when he got robbed he went after the guys for his wallet and they ran his stupid ass over (spent a long time in the hospital recovering from it). Anyway, that dealer had a shitload of business in the area, more than most dealers so he just cycled through contractors fucking them over 1 at a time. That dealer stayed 1 complete job"s payment behind for years with my uncle until he finally got out of the mobile home business. In the end he never did pay for the last deal, he just strung my uncle along for years paying for the last job when my uncle did the next. I hated that asshole because my uncle made it a point to do good, honest business with everyone. My uncle went the extra mile to please every customer no matter how much bullshit/money he had to go through to make sure they wouldn"t bad mouth him.

One thing I learned from my uncle"s mobile home setup business is working for cheap, broke ass clients pinching every penny is NOT the type of business/clients you want to deal with. The less money people have, the MORE they want for it and generally they will be the bigger assholes. My uncle also had another theory, the more "christian" a person was the more likely they were to try and fuck him over (he had over 30 years experience in the business to back that statement up).

At the end of the day, this is a major corporate client (think Fortune 10 company), and they"ll pay me whenever the hell they please, its how they ran the business from day one of incorporation. They"ve never bounced a check yet, but they sure will sit on their checks for awhile.

I hope you build late payment fees into the future estimates of companies/people that do that shit to you. I think if I were you I would track that and run a quick calc on how much interest you lost on previous jobs waiting for payment and put that into future bids if you thought you could squeeze it in without losing the job.

Cathan_foh · Jun 3, 2011

Lyrical said:
Damn forum ate my 1000 word response.

In a nutshell, an acquaintance of mine in another city told me that his largest competitor in the niche does zero advertising in the niche. While he might be on a few lawns a day, the other guy is on 1,000 lawns a day, mowing lawns. The mowers get paid commission and are trained to look for work while they go from house to house. So you have one guy specializing in the niche and relying on word of mouth and alot of advertising, while the other guy does the full gamut of lawn services, while being able to grab extra work as he goes along.

Its something I"ve thought of lately alot. The only way I could pull it off would be if the mowers were paid a seperate rate than my guys. My guys in the niche are highly trained, and they can command $15+ an hour at my competitors. You can"t pay a guy $17 an hour to mow lawns and make a profit doing so.

Maybe one day I"ll branch out to other services. But on the high end jobs (just ran an estimate on Tues for a trucking company that was $32k) we have more credibility, as I have a long list of difficult jobs that we"ve completed. Alot of firms that do multiple services around here get the rep of "jack of all trades, master of none."

That"s what I was thinking when I suggested a separate company I suppose. Obviously you"d have to have lower wages for lawn services and a separate company could shield one company from the other if you wanted that. I guess you"d have to weigh it out to see if it"s worth having a less profitable company mowing lawns that helps you build business vs advertising costs and which is more effective at selling your primary business. Another benefit of a lawn service would be to find good employees. If they work out well mowing lawns, seem knowledgable etc you could move them to the landscaping business.

One thing the Marine Corps and some large construction companies taught me is that safety is a culture. I don"t know what your worker"s comp rates are or how much they would increase if someone got hurt on the job but safety is one thing I would constantly preach ot my guys, specifically that safety is a culture. If you do everything safe and keep safety in mind without taking unecessary chances you"re much less likely to be injured. For large construction companies 1 fatality or serious injury can cost so much money they have learned preaching safety is a major cost saving measure.

This has been one of the most interesting threads I"ve found on this board. I made note of the books you suggested and plan to pick them up when I finish what I"m reading now. I"ve even given thought to taking some classes toward an MBA since work will pay for school.

opiate82_foh · Jun 3, 2011

Cathan said:
I hope you build late payment fees into the future estimates of companies/people that do that shit to you. I think if I were you I would track that and run a quick calc on how much interest you lost on previous jobs waiting for payment and put that into future bids if you thought you could squeeze it in without losing the job.

If a company wants to pay you whenever the fuck they want, and your competitor will let them pay whenever the fuck they want, you can"t start trying to charge late fees. Lost interest ? lost accounts.

Shonuff · Jun 3, 2011

Cathan said:
This has been one of the most interesting threads I"ve found on this board. I made note of the books you suggested and plan to pick them up when I finish what I"m reading now. I"ve even given thought to taking some classes toward an MBA since work will pay for school.

Thanks. I can say that I think the MBA gave me good tools for being self-employed, but that"s because it was a great program. Some of these hole in the wall schools are so bad, if you were talking about going to them, you"d be better off self-educating. Although, being an ex-marine might help you get into some of the better schools.

Cathan_foh · Jun 3, 2011

My grad school gpa is 3.67 right now for engineering. I don"t know how much being a former Marine would help but I"m sure I"d list it. (slight distinction: ex Marine means you got kicked out, former means you got out honorably, some guy explained it to me my last year, no big deal...)

I"ve heard of the importance of "where" you get your MBA so if I went for it I"d try and get into one of the better schools or what"s the point? From what I hear it"s a big dick waving thing to state where you got your MBA from...

Shonuff · Jun 3, 2011

Cathan said:
My grad school gpa is 3.67 right now for engineering. I don"t know how much being a former Marine would help but I"m sure I"d list it. (slight distinction: ex Marine means you got kicked out, former means you got out honorably, some guy explained it to me my last year, no big deal...)

I"ve heard of the importance of "where" you get your MBA so if I went for it I"d try and get into one of the better schools or what"s the point? From what I hear it"s a big dick waving thing to state where you got your MBA from...

I went to a top 20 school, and alot of the recruiters only recruit at top 20 schools. Also, there is a huge difference in pay between my school at #17, and my cousin"s school who was out of the top 50. The difference in pay was even larger in Austin, UT was like 110k, while the run of the mill MBA had a starting pay of 50K (in the same town). Furthermore, your quality of instructor is alot better, for instance, my Investments class was run by a guy who managed a $100 mil + fund, in other schools, it might be taught by a guy with a Phd that has no actual experience in investing. We"d have Management classes taught to us by member and Chairman of different boards. Again, in lower ranked schools, you"d be more apt to have a management class taught by a Phd professor who never managed a person in his life, and so on and so on. Marketing was taught by an actual Brand Manager for a major company, vs. the guy reading from the script.

Alot of the lower ranked schools have profs that can only teach from the textbook, and not real life.

Cutlery · Jun 3, 2011

Lyrical said:
Maybe one day I"ll branch out to other services. But on the high end jobs (just ran an estimate on Tues for a trucking company that was $32k) we have more credibility, as I have a long list of difficult jobs that we"ve completed. Alot of firms that do multiple services around here get the rep of "jack of all trades, master of none."

I"m so far outta my league on this, I gotta ask.

What exactly does a 32k landscaping job get you? Do you guys just lay sod or what? I have a hard time envisioning a 32k job that doesn"t include a koi pond or a banzai garden or something ridiculous. Why would you have that much lawn on your company to begin with?

Shonuff · Jun 3, 2011

TheCutlery said:
I"m so far outta my league on this, I gotta ask.

What exactly does a 32k landscaping job get you? Do you guys just lay sod or what? I have a hard time envisioning a 32k job that doesn"t include a koi pond or a banzai garden or something ridiculous. Why would you have that much lawn on your company to begin with?

It wasn"t anything special. Its a trucking company with a huge regional HQ, and it was like a mile and a half stretch they want worked on. Felt like the whole property was like 50 acres (I walked the whole stretch as we bid it). In this particular case, it was tree work, while replacing a fence, and adding in sheet rock etc.

Think of it this way, large commercial entities want work done the same as a small homeowner, they just have a ton more land. Like at the museum we"ll be most likely working at this Summer, they want to carve out a trail for people to walk, and then add some things. Last job they did like this was 90k.

With a 20k job being worked on, and a 32k and 100k job looming all in the next three months, I did borrow a little bit from my bank today to get me over the hump. I"m sick of worrying about having to turn down any resedential or commericial jobs because of the payment lag.

bofa_sl · Jun 3, 2011

there"s a lot more to landscaping than just "mowing the lawn". drainage system installation (curtain drains, french drains), irrigation services (sprinkler systems, backflow testing and certs), property enhancements (koi ponds, retention walls, erosion control), winter maintenance (plowing, salting etc)

bofa_sl · Jun 3, 2011

lyrical, what software do ya use to keep track of / schedule your jobs. also, say your crew wraps up job one and heads over to job two, then three. how do you account for the hours / expenses on each job? do you even break them down on a job by job basis or track P/L quarterly?

Shonuff · Jun 4, 2011

bofa said:
lyrical, what software do ya use to keep track of / schedule your jobs. also, say your crew wraps up job one and heads over to job two, then three. how do you account for the hours / expenses on each job? do you even break them down on a job by job basis or track P/L quarterly?

Without being too specific, what we do can be tracked on a daily basis. Right now, we are expecting each guy to do $80 an hour (in crews of three, so $240 per crew), and we measure it. Average customer job is $700. We give them feedback on how they are doing every morning. With gas prices being so high, there"s no room for error, unless they have a real good reason (job was bid too low, customer was a pain in the ass). As far as expenses go, I spend enough time in quickbooks to know when they are getting high.

Blazin · Jun 4, 2011

Lyrical said:
It wasn"t anything special. Its a trucking company with a huge regional HQ, and it was like a mile and a half stretch they want worked on. Felt like the whole property was like 50 acres (I walked the whole stretch as we bid it). In this particular case, it was tree work, while replacing a fence, and adding in sheet rock etc.

Think of it this way, large commercial entities want work done the same as a small homeowner, they just have a ton more land. Like at the museum we"ll be most likely working at this Summer, they want to carve out a trail for people to walk, and then add some things. Last job they did like this was 90k.

Large commercial or industrial clients in almost any business beats residential ones. I run my own business and all I have are large industrial clients, and I use to be in high end residential housing and there is no comparison. Jobs not only tend to be much larger but often easier to work with and much easier to maximize profit. If I do a job for Pepsi there is nobody bitching if I make lots of $$ in a short time frame, with a home owner if you bid a job as a week and bust your ass and finish early they"ll turn around and bitch they paid too much for the time invested.

Cutlery · Jun 4, 2011

Blazin said:
with a home owner if you bid a job as a week and bust your ass and finish early they"ll turn around and bitch they paid too much for the time invested.

Really? I"m a homeowner and I want anyone doing work here in and out as fast as fucking possible. Get it done in 1/3 of the time you quoted me and get the fuck out, as far as I"m concerned. I"d even pay extra for you to do so.

Blazin · Jun 4, 2011

TheCutlery said:
Really? I"m a homeowner and I want anyone doing work here in and out as fast as fucking possible. Get it done in 1/3 of the time you quoted me and get the fuck out, as far as I"m concerned. I"d even pay extra for you to do so.

That"s because you are being logical. I only heard people bitch when they start kicking the math around in their head. $20,000+ for four days work?! etc.

The homeowner is obviously a lot more stingy because it"s their money. When I do work for a large company the person I"m dealing with doesn"t really care as much because it"s not money out of their pocket. I think my pricing is fair but I"m amazed at what they"ll pay.

Whenever I have work done on my home, most recently a new furnace/ac system, and a new driveway, I"m actually amazed at the amount of men and equipment that are applied for so little money compared to what I do in industrial. One week projects are often $100,000+ and nobody bats and eye

Shonuff · Jun 4, 2011

Blazin said:
Large commercial or industrial clients in almost any business beats residential ones. I run my own business and all I have are large industrial clients, and I use to be in high end residential housing and there is no comparison. Jobs not only tend to be much larger but often easier to work with and much easier to maximize profit. If I do a job for Pepsi there is nobody bitching if I make lots of $$ in a short time frame, with a home owner if you bid a job as a week and bust your ass and finish early they"ll turn around and bitch they paid too much for the time invested.

Especially in these times, if I do a job for a large corporation, I can guarantee the workers will get their 50-60 hours for a month or two at a time. Its no fun sitting around looking at each other and having workers struggle to eat. Right now, I have one crew on resedential jobs and one on commercial jobs. Life is pretty easy like this, it takes alot of resedential jobs to keep the schedule full for seven guys. Problem is, even though I"ve gone off on a hiring binge, we still can"t keep up. I"m going to have a "come to Jesus meeting" with them on Monday, because they are being pretty sloppy. They know it can be feast or famine in this business, when its time to feast, we can"t lay off, we need to press, to make sure we have $ in the Winter.

I"d love to do just commercial jobs, but we used to do alot of work for the state, and since tax receipts are lower, we"d go broke waiting on new projects. We had a state park we"ve done huge contracts for all of the sudden lose funding from the state, and had lots of projects get stopped midway through them.

We usually run 25% commercial 75% resedential, but this Summer its been 50/50.

Shonuff · Jun 8, 2011

Just got my 60 second radio spot back, after several edits of the script. Sounds pro, wanted to make it build trust, the guy sounds like my Grand Dad, but rugged. They asked if I wanted any changes, I told them they knocked it out of the ballpark.

I"m trying to decide how many times per day to run it. One spot per day is going to be $800 per month, two will be $1600.

Blazin · Jun 8, 2011

how are the crews handling this heat? Had crew start at 5am this morning and still had to have them knock off early from it being to freaking hot.

Shonuff · Jun 8, 2011

Blazin said:
how are the crews handling this heat? Had crew start at 5am this morning and still had to have them knock off early from it being to freaking hot.

Crews are trying to deal with it. We"ve had to hire a bunch of guys to keep up with the work, and they haven"t been employed in months, so its even worse for them. All I can do is tell them to keep taking breaks with this 110 degree heat index. But they know that this is the busy time, and they know I give them checks in the Winter, but I tell them I need to earn money now to give it back later. We"ve worked a full day everyday this Summer, and with our backlog, customers are upset.

Some might think I"m nuts for advertising like this, but with as many guys I have, they can knock through alot of work fast. At 5-6k a day, you could look up in a week and be out of work, its happened before.

Blazin · Jun 9, 2011

Lyrical said:
Some might think I"m nuts for advertising like this, but with as many guys I have, they can knock through alot of work fast. At 5-6k a day, you could look up in a week and be out of work, its happened before.

Not sure how your business is affected by the economy but since I deal with large public corporations it can have a big impact when they put on the financial breaks. We are working a lot right now because I keep saying the same thing as you, that it could dry up at any time.

I don"t recall if its been discussed in this thread, but I"d be curious what your stance is on taxes. Is your company a LLC taxed as a partnership? Even with the relative anonymity of a forum some aren"t willing to say whether they skirt on taxes, if so PM me.

Adventures with lyrical - buying a business

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