Episode Transcript
[00:00:01] Speaker A: Welcome to the Grow show, brought to you by Mardi Grunder's Grow Group, where we specialize in helping landscaping companies clarify their platform, grow their people, build their processes and realize profits. Everything we teach is grounded in real experience. Our team's actively involved in the day to day operations of Southwest Ohio's Grunder Landscaping Company. New episodes are released weekly on Wednesdays and are made possible by the support of Aspire, Bob Yard and Exmark. Remember to subscribe so you never miss an episode. Filling in today for Marty Grunder is Grow Group Vice President Vince Torchia.
[00:00:32] Speaker B: Hi, everybody. Vince Tortilla from the Grow Group here for another exciting episode of the Grow Show. This October, we wanted to give you a peek into some planning for 2027 and how you can start to get a great plan together for 2027 now. So I'm happy to kick off that series with a conversation around financial planning. So today this is an episode heavy on numbers, heavy on planning, heavy, heavy on financials. So see the show notes, go through it twice. I'm just going to give you a whole list of things that should be on your mind as you plan for 2027. So in the world according to Vince, a great plan for 2027 starts with a revenue plan. What can we sell and produce in 2027? Now, for companies that are on this journey of planning, typically you should plan for a 10% growth. 10% growth happens to any company through taking care of your team, taking care of your customers, natural price increases that happen. But 10% should be the bar for any planning going into next year.
Once you get to 20%, 30%, 40% growth, that's aggressive, that's planned growth. We are supercharging a service we're doing. Maybe we're entering a new market, maybe we are going through an acquisition, maybe we've gotten a huge contract and this is going to take us from where we are now to where we want to go.
All those are good. We've gone through every version of that at Grunder Landscaping Co. But at a minimum, we should be planning for 10%.
So how do we dial that even in further? We use historicals. What did we do in 2025? What have we done in 2026?
Based on 2025, based on 2026, based on our market, based on where we feel things are headed. What is our natural growth for next year going to be? So that's our first step in planning for next year is agreeing on a revenue number that we can use as a target for our team. Based on historicals. Okay? So we're going to have that revenue number. Once we have that revenue number, we have to talk about the mix of that revenue.
Construction, maintenance, lawn care, snow or other seasonal services and enhancements on that maintenance.
If we're looking at our revenue plan, we have to have a pie chart of what makes up that revenue.
Why do we have to do that?
Because how we sell it and how we produce all those services are different. Right. As we all know in the industry, doing a million dollars of commercial maintenance is different than doing a million dollars of residential maintenance. Doing a million dollars of bid build construction is different than doing a million dollars of a residential design build project.
Right. For those of us in the industry, we know that to be true, which is why it has to be part of our plan. Neither of those are right or wrong or good or bad. We just have to have a plan that we know we can execute. So we get our revenue target, we get the mix of that target, and then we need to talk about the capacity that we have to do that. And there's two things. I mean, when I say capacity to do that, number one again in the world, according to events, everything starts with sales. Do we have a sales team that can sell this new target that we're putting out for next year? And what is the compelling reason as to why we can sell that? Based on our brand, based on our team, based on our systems, our process, our training, our sales team members that are, you know, better now than they were a year ago.
Is there a compelling reason that our sales team can hit this number? Right. That should be like an easy yes. Yes. We can do 10% more or 20% more. And here's why we can do that. Great.
How about on the production side? Can we produce that work?
Do we have the trucks, the people, the equipment, the processes operationally to do that?
And again, what is our compelling why?
How do we know that?
That has to be a part of the planning conversation for 2027. So we're going to get our revenue target and our revenue growth goal. That growth goal is going to be broken down into a business mix.
And then we have to have a compelling reason to share with our team about why and how we have the capacity to sell and produce that.
So that's our first step in financial planning. Is this revenue conversation the makeup of it and a capacity to do it.
And I'd ask you, if you're thinking about that, think about the structure you have. Right. So what is the structure of the sales team?
The Account managers to designers, who's estimating, right? Who's actually talking to customers? Who's designing? What is our structure?
Do we have systems to support that structure? And do we have people who can be successful in those systems that are a part of that structure? That's how I'd ask you to think about it. What we're seeing more often from a sales team perspective is the specialization of salespeople. I think it's a good thing. It used to be that we might have a residential design build person who could sell the job, who could estimate it, who could design it, and who could project manage.
That's great. Those people feel like unicorns now, don't they?
That's not necessarily what we're seeing in most companies. Most companies are now specializing those skills as they grow and as they can afford to do it.
So you might have someone who sells and designs, you might have somebody else who estimates. And then you might have a project manager who's actually part of the operations team, for example, not even a part of the sales team.
And then we have the natural sales or production handoff that has to occur.
Conversation for another day on that. But from a planning perspective, let's start with revenue.
We're going to use historicals. We're going to get our mix right, and we are going to ensure that our capacity, what we can do and what we have talent for on sales and ops can accomplish what our goal is set out to be. The goal should be realistic. It should be the plan.
It should not be what we hope to do, what we could do if everything goes perfectly.
We've done all those things, we've tried all of that.
Hope is not a strategy. As somebody famously once said, it really is about what can we execute, what can we go do?
We can run that plan. If we're going to beat it, great, even better.
But let's plan to run the plan. That should be everybody's goal from a revenue perspective.
So what else makes up that revenue is the sales process of coming up with pricing and margins and overhead allocation that will be different at every organization. But again, we have to have a compelling reason as to why we are charging what we are charging and ensure that we have the margins that we can run a profitable company on.
Okay, so again, for those in the industry probably know this intuitively, construction margins, 50% industry average, right? 50% on construction, closer to 40% on maintenance or recurring services.
Recurring services are like the gift to the industry, right? The mailbox money that we get. How do we increase Our margin on maintenance services, recurring services, we sell enhancements, right? Which brings up our overall maintenance enhancement margin closer to what it could be in construction.
But if you're planning and looking at margin, 50% of construction, 40% in maintenance, and then we can get the bump on maintenance with enhancements. Right. There's a huge part of that coming.
[00:07:40] Speaker A: Okay, okay. You listened to the Grow show, so you already know that my team and I have information that can help take your business to the next level. The next step. Join us at GROW 2027 in Savannah, Georgia in February. Tickets are on sale now, but the price goes up by $200 per per person on November 1st. So save your seat and save yourself some money by visiting growgroupinc.com I'll see you there.
[00:08:05] Speaker B: So that's our revenue planning step one, historicals. What have we done in the past? How does that inform what we can do in the future?
Do we have the right mix? Do we have the right structure to support that?
And we have the capacity from a sales and ops standpoint to, to hit those revenue targets. That's number one. We've talked about margin. We also have this big financial expense called overhead, right? So overhead is what we have to do to keep the lights on. That's everything. Quote below the line that we have to pay for whether we sell work or not still to pay the electric bill. We still have software that we pay for, insurance that we pay for. We still have marketing that we pay for.
We still have our facility. We still have salaried team members, Right, who are not revenue generating. Right. They are support team. We've got to pay for that.
So again, use historicals. What was our overhead spend last year and as a percentage, what was that of our revenue? What is our overhead spend been this year? What is that as a percentage of our revenue that we've earned this year based on our new target of revenue? Add our new mix, add our margins.
What overhead do we need to recover? What does it cost every month to run this company whether we hit our revenue targets or not?
Again, there is no right answer. There is no wrong answer. It's having a plan for it. At Grunder Landscaping Co. We've been on the investment side of our business lately. I mean, investing heavily in people. And so we've brought on people maybe sooner than we've needed them, which has increased our overhead in the short term. But our revenue, on a math equation, at least on a spreadsheet, should increase while keeping our overhead spend consistent, meaning our overhead as a spend of revenue goes down over time, right? There are fat years, there are lean years based on people. But it's really more about having a plan.
Again, great operators. 30%, right? That's the average that we see across our ACE peer group members who are operating well that we run in partnership with McFarland Stanford out of Dallas, Texas. 30%.
Great overhead number as a percent of revenue to manage, that number will be higher. That number will sometimes be lower. But if you're looking for somewhere to start, do we have a path to get to 30%? What would that look like?
So that works as a financial plan to understand what have we sold at what margins and what are we recovering from an overhead standpoint. Very simple, right? And what I've just walked you through are the basics of a profit and loss statement, right? That's really what we're, what we're showing and what we're forecasting for next year is what can we produce, right? Sell and earn.
What will it cost us to do that? Direct cost, right? Giving us our gross margin targets based on that, what overhead do we have to support that? Whatever's left becomes profit.
That is the basics of a financial plan, starting with revenue, the mix of that revenue, the support of that revenue, the direct costs associated with producing that revenue, and then the overhead to recover it.
So we'll start there.
Whenever we do this at Grundy Landscaping company, whenever I'm working with an ACE member and looking at financials, I always zoom all the way out, right? And just really look at those four categories.
What have we sold and produced? What did it cost us? That leaves us our gross margin.
What is our overhead that we have to hit every month? What does that leave us in profit? That's the basics of a financial plan for next year. There's a lot of components, there's a lot of line items between there, but that's where we need to start.
So what are some more helpful things along the way that you can do? As you plan for that revenue and financial piece for next year, think about the key milestones for your business and your market based on the seasons that you go through. When are renewals right? When is renewal season for you?
Do you have a habit based on historicals of getting any mid season contracts or does your cake get baked on January 1st? And come hell or high water, you're not going to add any new contracts for recurring services if you don't get them in January.
Again, good to know that, right? So when are your renewals for us, we're in the middle of it right now, right? In the fall for a grinder landscaping company looking into next year. But when is your renewal process?
What ability do you have to add mid season contracts? Or do we need to be all in on getting our renewals plus new contracts by X date by November 1st? Right. What is our dead line date for renewals?
When do we sell work and then when do we produce it?
Do we sell a lot of our work in Q2? Do we sell a lot of our work in Q3? If we were going to look at percentages of revenue, right? Or I'm sorry, sales over the course of a year, when do we sell the most work?
We just have to have that open, honest, transparent conversation with our sales team and remind them. Historically, we've sold the most amount of work at our organization in the second quarter of the year, right? So we've now have a broken down goal that we know we need to hit in the second quarter based on historicals of the revenue that we sell for the year.
When do we produce the most amount of work? If we sell the most work in Q2, maybe we have a 6 to 8 to 10 week backlog, right? Between the time we sell it and the time we do it. Which means maybe we produce most of our work in the third quarter.
Do we have the capacity to do that? Do we have the operational planning to do that in the third quarter? But it's something that Seth Flum goes over with our leadership team at Grunder Landscaping company was really helpful for us is understanding when do we actually sell work throughout the year and when do we produce. It really helps from a capacity planning standpoint. It also helps us understand where our cash needs are.
Check Jennifer Murray from our partners at McFarland Stanford taught this to me and a larger group years ago. But understanding cash flow on a monthly basis and lumping every month into one of two months, either a burn month or a build month. And what Jennifer means when she says that is, are we burning cash this month? Are we losing cash at the end of the day? Or are we building cash in this month and looking at each month as a silo with the right accounting, right? In terms of matching revenue and expenses, are we burning cash or are we building cash that better informs our sales and our production and better informs planning as an organization and understanding what cat, what months are heavy in cash from an investment standpoint, what months are we building cash, right, that we can use for rainy days, investment trucks and equipment, all those pieces.
So I'd ask you as Part of your financial planning for next year, other than revenue planning, then margin planning, other than overhead planning, what is our cash planning? And what months historically have we earned cash at the end of the day, what months have we spent cash? And can we put a plan together to smooth out the year from a cash perspective?
Because if you're a company that's growing, you've probably taken on some debt, right? So you probably have some debt payments you have to have. There's investments in growing the organization, there's investments in people, there's investments in equipment, there's investments in even a facility, right? So those are cash investments that we're putting out there. We still have to pay taxes as a business that earns revenue. We have owner distributions, we have team bonuses to pay out. What months can we plan for those? Right? So what is our cash plan for next year?
And again, focus on Jennifer's teachings. What months are burn months? What months are build months? So what I've just walked through are the components of a financial plan for 2027. We start with revenue.
We look at the margin in the mix of that revenue, we look at the overhead to recover that, and that leaves us profit. And there's a lot of line items between there. There's a lot more detail that goes into it. But as a starting point, this is where we all need to start as an organization.
Once we have that plan, we can then look at the key dates and times that affect those numbers throughout the year. When do we sell? When do we earn? When are our renewals? When do we need to be on top of client communication? How do we manage right through the seasonal aspect of our business?
And how do we plan for cash? What are our build months? What are our burn months?
And if we start these conversations now, we will have a chance of success for 2027 because the plan will be thought out, it will be shared, and the team can rally behind it.
So again, I want to leave you with a final comment about your financial plan for next year. Make it a plan based on historicals.
Every number that you present with your team or that you go over with your team have a compelling reason as to why we can accomplish this.
Don't make it a hope, don't make it a dream. Make it a compelling reason as to why we can do it.
So thanks for listening to this bonus episode of the Grow show talking about financial planning for 2027. I look forward to seeing you all soon at our upcoming Ace Discovery meeting with there's opportunities for owners to get involved in our ACE peer groups and certainly would love to see you at GROW 2027 in Savannah. You'll be two months into your plan by then and would love to hear how it's going to thanks for listening. Take care and talk soon.
[00:17:23] Speaker A: Thanks for listening to the Grow show and a special thanks to Aspire, Bobyard and Exmark for making this episode possible. We'll talk to you next week.
