This is the first in a multi-part series about the importance of business calculations and reporting in the green/snow industries.
“Do the math!”
This was my mantra for 23 years of consulting for clients. What I meant was any business plan should be based on information that is mathematically sound and identifies the key activities required to achieve success – be it in sales, margins, hours or profits. And whether you’re planting shrubs or pushing snow, doing the math behind the work is how you stay in business.
For example, in creating a sales plan for a salesperson, do the math. Start with the goal: let’s say it’s to sell $1,000,000 in new contracts. Consider the likely close rate – maybe 20%. That will require that you bid $5,000,000 in prospect volume.
Now, start asking questions.
“How big is the target prospect job size?” This is a very good question. “Whom should the salesperson pursue?” Let’s say the target size is a $25,000 annual contract (which, in my experience, seems to be the national average for many contractors).
Now we know that we need to bid 200 landscaping/snow management job sites. But how many prospects must be contacted to get the 200 opportunities to bid? Let’s say that 50% of the time, a salesperson calls a prospect who is open to a bid (This raises another good question – what is a qualified bid? But more on that later.) Now we have a number we can use: the salesperson needs to have a list of at least 400 prospect job sites that average $25,000 annually in land/snow contract value.
Math > Goals
Does the salesperson have this list? If not, how in heaven’s name can he/she sell $1,000,000 in new business? The simple answer is, it’s probably not going to happen. This is not a bad plan, it’s worse – it’s no plan. In doing the math, we realize that the key to success is not setting the goal. The key is determining what matters in the sales process and where to start. That is why we do the math!
Let’s add one more calculation: Let’s assume it takes eight calls to get a chance to bid. Now we know another important number: that 3,200 touches will be required to meet the goal. Divide that by 250 working days and we get 12 touches every day. Now we have marching orders: The salesperson will have to reach out an average of 12 times to prospects every single day.
Is this too detailed? Not really – but it is essential. Can the salesperson hit that goal? Absolutely – I’ve done it!
Math + Accountability = Reporting
Now that we have a plan of action, we need a reporting structure to monitor and hold the salesperson accountable. Our reports will likely include the following (from big picture to small – with an emphasis on managing the small picture):
- Sales dollars closed
- Bid dollars proposed
- Bid number proposed
- Average job size proposed
- Number of prospects contacted
- Number of touches (email, call, task, appointment)
These reports could be reviewed every day, week or month. Why would anybody want to do that? Of course, for accountability, but mostly to re-assess activity and coach for the right tactics. This is something every sales manager must do, no matter the industry. Reporting provides the information essential to achieving success.
Do YOUR Math
So it must be for running your entire business. What is the math essential for your company’s success? At the big-picture level, it will be measured (per my prior posts) in terms of growth and profits. How many properties are you caring for? How much are they paying you to do it?
And just like the salesperson, you need to do the math and create a reporting structure from big picture to small. The big picture provides the vision. The small picture provides the traction.
Here’s the reporting structure for running a green/snow/contracting business – from the BIG to SMALL picture (more on this in future posts):
- Rolling Budget
- Business KPI’s (Key Productivity Indicators)
- Functional Reports (Sales, Client, Production, Finances)
- Work - Process Management Dashboards
In these next blog posts, I will do the math starting with the Rolling Budget and drill all the way down to Work Process Management Dashboards. I call this process of creating a reporting structure “cascading.” We start high atop the waterfall and cascade it down to the river below where the actual flow of work happens.
Next: Tune in for Part 2 of Reporting: Doing the Math.