CLIP's Tips

I have been informed by a few readers that they have been unable to download the excel spreadsheet for determining $ per hour pricing.  I have attached the file below along with copy for users of Excel 97-2003.

Spreadsheet Excel 2007 (.xlsm)

Spreadsheet Excel 97-2003 (.xls)

If you have any more trouble, please let me know by email or comment on this page.

At CLIP Lawn Care, the first step in our year-end projects is to make sure that we have an accurate idea of what we need to charge in the following year.

Business is simple:  “you need to make more than you spend.” This simple, often quoted formula for running a profitable business comes from one of our CLIP customers.  The saying is somewhat ironic because everyone knows this—the problem is; many companies don’t know how this translates down into the every day realities in their business.  How do I ensure that I will make more than I spend?  That will be the subject of this post.

I am going to assume that the primary product that you are selling is time.  This is the case with any service company (as opposed to a retail store for example).  In exchange for their money, customers are hiring you to spend time at their property to perform a service.  Therefore, in order to be profitable, you need to know how much to sell your time for.

How Do You Know What to Charge?

Sadly, many companies in our industry have only a foggy idea of what they should be charging.  Usually, this idea comes from what they know that “the other guys” are charging rather than on their own business finances.  Many companies get away with this but I fear that the numerous businesses that close their doors every year, do so because of this mentality.

As I quickly demonstrated in a previous post, the basic formula to determine what you should be charging per hour is this:

Expenses (Overhead, Labor, Equipment Expense) + Profit / Production Hours

The equation says that in order to pay for all of my expenses and profit, I need to sell this many production hours at this rate.

This is certainly a simple formula—so why don’t more companies know this?  I believe the breakdown occurs because most people have not been taught how to work this formula out for their business.

Your Success is our Business

It is our goal to make your business succeed.  Therefore, in order to help you determine your expenses ahead of time and calculate what you should be charging, we have created a spreadsheet, which, when filled out correctly, should provide you with an accurate number for how much you need to charge.

This spreadsheet is what CLIP Lawn Care uses to calculate our dollar per hour goal.  Every year, we adjust this spreadsheet to account for any changes in labor, equipment, or overhead.  I just finished updating our spreadsheet for 2010.  We plan to add a new crew next year which will require a new truck and equipment.  We need to add that to our spreadsheet to make sure that our pricing is inline with our new set up.

This is a necessary first step in our end-of-the-year projects because we need to know if we need to adjust our prices at all for the renewal contracts.

Next week, I will be posting the spreadsheet along with step-by-step instructions for filling it out.

Application Action: Post a comment telling us if you use this method or not.  If you have another method you have been using to determine what you charge, let us know.

CLIP Lawn Care scenario last month:

Customer Email:

“I see that you charged me for Aeration and Overseeding this month.  I never authorized that.”

Our response:

“Dear Mr. X,

I am sorry for any confusion and I hope to clear this up for you.  According to our records you signed a contract for aeration and overseeding in April.  I have attached the scanned copy from our records.  Please let us know if you have any further questions.”

His response:  A check.

In my last post about EchoSign, I suggested that you attach signed estimates to the customer record in CLIP.  The above scenario is one of many examples in which having your customer documents stored in CLIP can be helpful.  In this post I will demonstrate how to attach this or any type of document to a customer record.

The benefit of storing documents in the customer record is that you will always have customer documents linked to their accounts for easy reference in the future—much easier than trying to find a contract from last year amidst your computer or paper folders.

This is a great way to store:

• Spreadsheets
• Quotes/Proposals
• Excel
• Letters from Customers
• Signed Estimates/Contracts
• Pictures (see below for tip on storing pictures)

The process:

1.  From the main customer screen click the “Correspondence” tab.

2.  Click the “Office” Tab.

3.  There are two options for adding a document:

• Add File/Scan – Create a new Excel or Word document to attach or use your scanner to add a scanned copy of any document.
• Add Existing File – Attach a document already on your computer or network.  

To attach a document with either option, simply click the button and follow the steps indicated on the screen.

After attaching documents, you can access them from the “Office” tab.

Tip on storing pictures: If you have a lot of pictures to store for a single customer, I recommend creating a Word document titled “John Doe Pictures.”  Paste all of your pictures for the customer into this Word document.  Attach it to the customer record in CLIP.  This will prevent you from having hundreds of files listed in the “Office” section and allow you to add pictures to this document as you collect them.

How do you use this feature?  Let me know in the comments.

Photo credit: schnaars

Effective management (of a business, life, or even a garden) is boring.  I say this for two reasons:

1.  Consistently doing the right things is a major factor in accomplishing your goals.

2.  Most people consider that doing the same things, the same way, day after day is boring.

While I sincerely believe that our work can and should be meaningful, fulfilling, and fun, I have also learned that “boring” routines are imperative for productivity in work and life.  Without routines, important responsibilities are left undone, commitments are broken and stress-free control over our lives is sacrificed.

Routines can take many forms.  You probably already have many routines established in your life.  Think about what you do after you wake up every day.  Most of us have some kind of pattern that we follow everyday after we wake (i.e. stumble into the shower, put on a pot of coffee, feed the dog, etc.).  These kinds of routines often fall into place without much effort on our part because of the external pressure to get them done.  For example, your brain doesn’t function until you get your coffee, or the dog is whines your ears off until you feed her.

Take more effort to think about and establish routines for responsibilities that are easily forgotten or ignored if a reminder is not set in place.  Here is an example of my morning routine at work:

Trying to remember to do all of these items everyday without a written routine, would be impossible.

Having this list in place benefits me in several ways:

• By reviewing all of my inboxes daily, I am able to make better decisions about my priorities. If I did not review them, there might be something sitting there that I didn’t know about that would be important for today.
• By reviewing my Calendar (usually about a week out) I am reminded of any appointments I have for that day and/or of things that I need to prepare for appointments on upcoming days.
• By reviewing my entire action lists (to-do lists) I am able to pick out the things that are most important rather than just “flying by the seat of my pants.”
• I am reminded to do things that are important but may not be staring me in the face (i.e. think about business growth goal and how I can move toward it today)

While they may sometimes be boring, I am sure that if you apply this principle, your life and work will be better off for it.

Application Action: Create a daily routine.

Suggestions for creation:

• Brainstorm ALL of the responsibilities that you need to perform daily.
• Write it down.  Don’t trust your brain to remember the routine.
• Test it for a week, see how it goes and change it at the end of the week if necessary.
• Stick with it.  This is the important part and sometimes, the boring part.  Oftentimes, when you least feel like doing it is when you most should do it.
• Add or remove items as necessary.
• Create routines for wherever you have things you would like to get done consistently(exercise, end of day, school, etc.).

Let me know how this works for you in the comments.

Companies who learn to hire well succeed. ”When asked what their biggest source of frustration in building their business business owners in the green industry most often answer “Finding good workers.” Have you struggled to find quality workers in your business?   If you can’t relate to this at all, get back to work.  But if you can, here are 5 lessons I have learned about recruitment.

1. Have an “always hiring good people” mentality.

I first heard of this method while listening to Good to Great.  The author talked about the difference between two major competitors in the electronics industry.  From what I recall, he reminisces about driving around town during a particularly crucial time for both of these businesses.  On one building was the sign “SALE!!!”,  on the other, “Always hiring good people.”  Guess who succeeded?  Do you have this mentality?  Always be on the lookout for people that you would like to work with you, even when you don’t need them at the moment.  Keep a running file of people you have been in contact with that might make great employees.

2.  Think creatively to solve your labor needs.  Here are some ideas:

• Utilize part-timers:  Don’t think thatyou need to hire someone (or anybody) full time.  Many people right now just want to work, any hours.  Be up front with them and ask them if they can be flexible.
• Find a pinch hitter:  Currently, we have a young guy who works part-time for our company that has most of the skills to fit in on any crew.  Some days he can join a mowing crew to help them catch up, or join a cleanup crew to help them get a big job done, or I can send him alone to finish a job that was left undone by another crew.  This works out extremely well.
• Create your own temp agency:  Rather than paying for the profits of a temp agency, create your own list of temp workers.  Every 2-3 months, put an ad on the advertising site craigslist.com for $25 (something like this).  Set up group interviews with 5-10 people, pick out the top performers and put them onto an “on-call” list.

3.  Apply the 80/20 Rule to recruitment.

• Who is your most productive team member?  Ask him if he knows anyone looking for work.
• Where do you tend to get the best team members from?  Group of friends?  Church members?  Friends of employees?  Newspaper ads?  Think about how you could get more from this source.

4.  Design your interviews well:

• For labor type jobs, I prefer group interviews.  Schedule 5-10 people at a time.  This wastes less time (especially because of no-shows).  It also allows you to see how the applicants interact with each other.  If you need to talk about any sensitive information (i.e. pay) just take 5 minutes for each applicant at the end.
• For more “knowledge work” type of positions, consider this article.
• Do a work test. What are the applicants applying for?  Mowing?  Put them on a mower.  Chemical Apps?  Let them spray water on your yard.  I have found this really weeds out those who talk the talk and those who walk the walk.

5.  Hire slowly, fire quickly.

This is a painful lesson I am just starting to learn.  The time, money and emotional energy trying to make a team member “better” is not worth it.  It is not beneficial to anyone involved to let an underperforming employee continue.  The better thing to do is to let them go but to be very clear on the reasons why so that they can learn and improve in the future.

Do you have any tips about recruitment?  Please share in the comments.

Photo:  madebytess

I am in the final chapters of The Five Dysfunctions of a Team by Patrick Lencioni.  If you are not familiar with Lencioni, he is most famous for his business books written in the form of fables.  They are in fact quite entertaining while at the same time teaching invaluable business lessons.

The Five Dysfunctions follows the journey of a highly talented team at a tech company in Silicon Valley.  The team is sorely underperforming considering their talent, capital, and market position.  Kathryn, the new CEO joins the venture and begins to teach her executives what it takes to make a great team.  Through as series of off-sites, she teaches them about the following dysfunctions of a team:

1.  Absence of Trust – Members are unwilling or unable to believe that other members are out for the good of the rest of the team.

2.  Fear of Conflict – Team members cannot endure mature “arguing” in order to arrive at the best decision for the company.

3.  Lack of Commitment – Once a decision is reached, those who disagreed continue their disagreement rather than “buying in” for the sake of unity.

4.  Avoidance of Accountability – Holding each other accountable for required results is too hard or uncomfortable for the team.

5.  Inattention to Results – Focus get shifted away from results to feelings or egos.

As the team works through each of these issues in the context of the off-site meetings and real business scenarios, they are bonded in a way that positions them to be the leaders of their market for the long-term.

Building a good team is not easy.  Identifying where your team is weak is the first step to creating an all-star team that can excel even in a difficult economy or highly competitive market.

Application Action: Identify one of these areas where you think your team struggles the most.  Spend fifteen minutes with a pen and a paper brainstorming about how you could incorporate training in this area into your next team meeting.

To help you, I encourage you to buy a copy of the book or log on to Audible.com to download an audio copy.

Photo: spekulator

I recently received a question from one of our CLIP users regarding how to calculate what you should be charging per hour so I thought I’d share some quick steps to figuring this out.

The following calculation will provide you with a good foundation for understanding how much you need to charge.

Figure Out Your Charge per Hour

1. You will need the following information about your company:

a. Total Yearly Expenses (excluding material costs) – Example:  $300,000

This you can quickly find by looking at your Profit & Loss Sheet from last year.

b. Desired Profit- Example: 15% or $45,000

c. Total Production Man Hours in a Season – To calculate use the following formula:

# OF PRODUCTION EMPLOYEES x HRS/WEEK x WEEKS PER SEASON

Example: 5 production employees x 40 hrs wk x 30 wks/year = 6000

2. Next, use the following formula to calculate your hourly rate:

(Total Expenses + Desired Profit) / Production Man Hours per Season

Using the example numbers above, our formula would be:

$345,000 / 6000 = $57.50 per hour.

This is the method taught in our Revenue Tracking/30% Profit presentation which is available online here.

I have the tendency to let things go on cruise control. “No news is good news” is the attitude I take rather than being actively engaged. One area where I have realized that this “no news is good news” mentality can have a serious negative implication is with customer service.  Just letting your customers be—not actively engaging with them on a regular basis, allows for the competition to come in and win their business without you ever knowing why.

One of the most effective ways that we have found to engage with our customers and to gauge their satisfaction is through simple “Check-In Calls” two or three times per year.

These check-in calls consist of merely calling through your entire active customer list and asking them if they are pleased with the service this season.

Check In Calls

• What to Say:
  

  “Hi, this is Jon with CLIP Lawn Care. I am just calling as a courtesy check in to make sure that you are happy with our service. We really appreciate you as a customer and would love to know if there is anything we can improve for you. If you do have any questions, comments, or concerns, please feel free to call me back at 555-555-5555. Thanks again for being our customer!”

• Benefits:
  
  • Customer feels appreciated.
  • Customer provides candid feedback that might otherwise not call you that helps you to improve your services
  • You have the opportunity to get more work by offering other services.
  • Customer loyalty increases through contact with your company
  • Your confidence increases because you know your customers are satisfied.
• Tips:
  
  • Keep a running tally of customers who are Happy, Neutral, or Unhappy. Add these up at the end to see where you stand.
  • Make a note of every suggestion for improvement given. At the end, assess what you want to change and inform your crews or whoever needs to know.
  • Just DO IT! – The benefits are huge!

Application Action: Just as a test, call twenty random customers from your active customer list and see how it goes. This will take about an hour. Then, once you see the benefits, get the whole list and schedule the calls for yourself or delegate it to someone to do within the next week.

No, I am not talking about your family responsibilities—I am talking about your customers. Do you know who brings in the profits for your company?

Would you be surprised if I told you that a mere 20% of your customers are producing the vast majority of the profits in your company?

The 80/20 Rule

Wikipedia states the definition of the 80/20 rule as thus:

“for many events, roughly 80% of the effects come from 20% of the causes.”

The 80/20 rule was popularized through the influence of Vilfredo Pareto, the Italian economist who discovered that 80% of the land in Italy was owned by 20% of the population. As it turns out, this principle applies to much more than land ownership in the country that looks like a boot.

Pareto’s Principle Applied

	1. 20% of the world’s population makes 80% of the world’s income.
	2. By fixing 20% of the bugs in software, Microsoft discovered that they eliminated 80% of their errors and crashes.
	3. 20% of workers produce 80% of the results.
	4. And very important to this discussion: 20% of customers produce 80% of the profits.

Is this really true?

I just tested this for CLIP Lawn Care for the 2008 season and the principle holds true.

While not exactly 80/20, I found that the top 20% of my customers produced more than 70% of the profit.

This is HUGE in terms of how you run your business. Consider the following questions:

	1. Do you know who those customers are? Application Action: If you don’t know this, please subscribe to receive part two of this post later this week. I will be demonstrating how to determine this using CLIP and Microsoft Excel.
	2. Are there any services that these customers are not receiving that would be of value to them? Application Action: Take 5 minutes to look at the list of customers and determine what services you could offer these customers. Then take another 5 minutes to brainstorm how you could introduce this service to them?
	3. Do you know if these customers are completely satisfied? Application Action: Give these 20% a call soon to see if there is anything you can do for them to make them a happier customer.

Stay tuned for Part II…

Photo by cyclone bill

As I stated in my last post, systems are essential to growing a successful business whether your goal is beach management or company growth growth.  One type of system that we have implemented in both CLIP Software and CLIP Lawn Care is creating our own manuals for in-house procedures.  Some examples of manuals that we use are:

- How to add a new customer into CLIP and how to schedule their job.

- How to record work using CLIP2GO (in Spanish, for our crew members).

- How to do monthly billing.

- How to change the oil on each of our trucks.

These manuals enable anyone in our company to do these processes with minimal to zero training.

All you need to make a manual is Microsoft Word and possibly a digital camera.

 

Click Here to Open or Download the Instructions: How to create simple manual using Microsoft Word

Remember, it will be tempting just to go about the normal way of doing things and not create these manuals simply because they take some time initially.  For the sake of working on your business and not just in it, invest the time to create some good manuals that will be used over and over again.

Here are some samples:

How to Add Postage to CLIP Lawn Care Mail

Daily Procedure for Using CLIP2GO (Spanish)

How to Schedule a $35 Special

Application Action:  Within the next 24 hours after you read this, when someone asks you for instructions on how to do something that takes less than five minutes, do not show or tell them how to do it.  Take the time necessary to create a short manual for how to do this process.  Give it to them and say, “I’m trying something new.  Try following these directions and let me know how it turns out.  I appreciate it!”

Photo: svilen001