Episode Transcript
[00:00:00] Speaker A: Welcome to the Grow Show Powered by Steel. The Grow show is brought to you by Marty Grunder's Grow Group where we specialize in teaching landscaping companies how to clarify their platform, grow their people, build their processes and realize profits. Everything we teach is grounded in real experience. Our team is actively involved in the day to day operations of Southwest Ohio's Grunder Landscaping Company. New episodes of the Grow show are released weekly on Wednesdays. Remember to subscribe so you never miss an episode.
Filling in today from Marty Grunder is Grow Group Vice President Vince Torchia.
[00:00:30] Speaker B: Hi everybody, Vince Torchia here from the Grow Group. Here for another exciting episode of the Grow Show Powered by Steel. In this week's short episode, I want to talk to you about financial transparency and financial literacy. It's something that I've seen firsthand at Grunder Landscaping Co. And the hundreds of ace peer group companies that are involved in our peer group. And it's been an absolute game changer in terms of education turned into action by discussing more things about financials. Long story short, as you all know, listening to this, you're never going to go wrong talking more about, number one, how we make money, and number two, where the money that we spend in the organization goes. You can allow people to connect the dots better. They can better understand the decisions that we're making as leaders or owners in the organization. And finally, it helps them round out the skills that they want to have. And as team members, what would we rather have? The team member who doesn't understand numbers or financials, or the one who can better connect dots because they have more information and more of an option to understand financials. So there are a few ways to do that. So number one, I'm going to talk to you about the tools that we use at Grundier Landscaping Co. And our effective ways of doing that. That's going to be the penny exercise we'll talk about later. But I want to talk about first. Number one, the the idea of just being financially transparent. The easiest way to do that, the way that we do that at Grunder Landscaping Company is through dashboards or scoreboards. So I'll ask you, what are your dashboards or scoreboards? Let me talk to you about ours. If you've been to Grindr Landscaping Company, you will have known that we have the central hub in our production room, right in our warehouse. We have six monitors up on a wall that are controlled by two keyboards. We have six monitors. Two monitors showcase our maintenance teams, two monitors showcase our construction teams, and then two monitors showcase the Total company performance.
Think of those two separate monitors, right? The two monitors on maintenance, the two monitors on construction. Think about those blended into more team focused metrics.
So what's on those? Number one, we have metrics for all of the data that is going on on jobs, right? So the maintenance team has access to all the on site job information that they need in their department.
Whether that's hours, whether that's material, whether we're ahead for the day, behind for the day, how our routes are performing, all of those numbers and metrics are made available to the maintenance team. And conversely, all those numbers and metrics are made available to the construction team.
Okay, so they've got all their data, all their sales, all their revenue, all their hours. How the schedule looks, Are we green, meaning we're ahead on hours? Are we read? Are we behind on hours? How are we performing on individual jobs and individual routes? We've got all that information.
And then again, blend that across with that other monitor that shows more team performance with all of the combined revenues, combined hours, combined reds, combined greens, all the information that again, blends those two together. This has been a staple for us really since 2020. It's just been an amazing way for us to communicate with our teams without having to say anything. The scoreboard is just out there. The teams can see the numbers, they can interact with them, they can go deep in them, and anything job site related or job performance related, they can go in and look at it, right? Whether they know English, whether they know Spanish, whether they don't know English, whether they didn't graduate high school or they have a PhD.
They can look at numbers and tie dots together freely as part of our organization. That was a big move for us. We were nervous about doing it, but we ultimately decided, hey, if we're worried about not having good data, we have to take that as an ownership opportunity to put better data in the system so we get better data out. Us being afraid of the data going in is not a reason not to do this. So number one, for everybody, the easiest, quickest way to start getting some financial transparency and some financial literacy is to go public with your dashboards. Again, these public dashboards are available every day. As soon as time is approved, the numbers move, the data grows, and we can begin to track performance day to day, week to week, month to month. Okay? So that's number one, get your scoreboards out there, get them public, give them all the job site information within their department so they can tie dots together themselves.
Number two, you've heard me Talk about this before, but it's the other version of communication, the meeting communication, the team communication that happens at our GROW meeting. The grow meeting at Grunder Landscaping Company. Think of it as our monthly State of the Union. We update the organization in totality, everybody in the organization, all at the same time with the same information about the company's performance, where we're headed, what we're doing, are we ahead on goals? Are we behind on goals? If we're ahead, how do we stay ahead? If we're behind, how do we catch up? Okay, we talk about those gray areas, we talk about the future, and then we talk about. Right where we are headed as an organization. So again, think about it. You're on the ground, your landscaping team, you're on a maintenance team.
Every day, all day, whenever you want. You can see all the performance metrics you need for your team. You can also see the performance metrics of the construction teams. Right? You may have some ideas about how the construction team works. You may have ideas about what else goes on at the company, but we like to clear that up at our GROW meeting. So now we've got everybody all in the same room at the same time, looking towards the future of where our numbers are going. And again, we try to make that an open, honest, and transparent conversation about company information.
So the teams can get their questions asked, we can interact with the team, we can help them connect dots. That meeting is in English and it's in Spanish. Again, the whole company's in attendance for it, and everyone gets to hear the message. Everyone gets to get those gray areas cleaned up as part of numbers, as part of metrics, as part of reporting. And again, it's exciting because we talk about the future. So again, if you're thinking about ways to get your team involved, this monthly State of the Union is a great way to. To do it. Okay? So we've got our scoreboards, we've got our monthly communication. We've got our ability to have more of a dialogue around this.
What about the P and L? What about other expenses? What about other things going on in the company that's not necessarily to the job performance? Well, that gets me to number three, the penny exercise.
So the penny exercise actually was something that I got to see for the first time ever when I was 20 years old at Mariani Landscape in Chicago. Right. This was 13, 14 years ago. I happened to be there on a site visit with Marty, and they were going through the penny exercise with their team. And I got to have a great education at that point on the Mariani team and how they do that. So again, I got lucky. I got exposed to this in a cool way at a young age to see how a much larger company than us at the time was handling financial education and transparency. And that penny exercise is a great way to showcase it. So I'll talk to you about how we've done it at the Grunder Landscaping Company.
We've got a great idea blog post on this. So if there's more information you want on exactly how to do the penny exercise, we can link that here. But the idea is that we want to bring our team together and we want to talk to them transparently about where dollars, or in this case, pennies, flow through our organization as costs and expenses.
So the very short, quick way to do this is you make up a fake client. Okay, the client is Jim Jones.
We're going to sell a $1 job. Why are we going to sell a dollar job? Because then we use a hundred pennies and now we have percentages. And you can see where I'm going here. Okay, so we sold 100. We sold a 100 penny job, a $1 job.
Okay, now we're going to pull some historicals. We're going to see historically based on the work that we've done, the revenue that we've earned, how much of that was directly related to the job that we just sold, the direct costs.
Okay, so direct costs, as many of you know, are going to be direct labor, direct materials, and then you might have some sub or rental expense associated with that revenue that you've earned, but number one is going to be direct labor. Okay, so we sold a $1 job, we got 100 pennies for it. We're going to now perform that job.
How many pennies are we taking off the table right away just to cover the expenses of that job specifically?
Again, let's use easy numbers. Let's Say Grinder Landscaping Company, for example.
It costs us 50 cents for every dollar that we sell.
So for the accounting and finance people that are following along with me, that's what, a 50% margin. We sold a job for $1.
It costs us 50 pennies to do it. We have 50 pennies remaining.
Again, those 50 pennies are going to the direct labor on the job, the direct materials on the job, maybe some subs that we had on the job or maybe some rental that we had on the job. Let's just use those categories for now. There's a lot of other conversations about want to be included in that. But I Want to keep it simple for today.
So we've got our 50 cents that are now off the table. So we sold a $1 job, we had 100 pennies.
We just wiped off 50 pennies off the table just to actually do that job.
Well, we have more expenses at the company than just the direct labor, just the materials, just the subcontractor, just the rentals, right?
So we have what, overhead or expenses? Okay, so those expenses that we have at the organization are going to be there whether we sell a job or not, Whether it snows or doesn't snow, whether it rains or doesn't rains, whether we work a Saturday or we don't work a Saturday, there's still other expenses, right? We still have a rent payment, we still have insurance payment. We still have salaries to pay. We have marketing that we invested in. We have legal fees, we have accounting fees, we have coaching fees, we have software fees. We have all those whether we sell a job or not. Now I get what you're going to say. We can adjust all those if we don't sell any work. Yes, you're right. But let's not talk about that now. Let's talk about how we're going to talk about this from an accounting standpoint. So let me go back to the top. We sold our job for $1, right? 100 pennies. Right away, 50 pennies get taken off the table just for us to do that job.
So now based on averages, let's say that our organization, on average our overhead expenses are about 40%.
So that will mean in this case we're going to take off another what, 40 cents? 40% of the dollar that we've sold.
So let's do the math really quick. We sold a $1 job was 100 pennies. We took 50 pennies right off the table for our direct labor, direct material, subcontractors and rentals. Our direct expense.
We had a 50% or 50 cent cost of goods sold. That leaves us with a 50% gross margin or 50 cents left.
But based on what I just told you, on average it costs us 40 cents from an overhead perspective for every dollar that we sell. So now we're going to take off another what, 40 cents, leaving us with what, 10% or 10 pennies or in a non technical term, 10% profit.
Okay, great. We made 10 pennies, we sold a $1 job, we're keeping 10 pennies. That's great. But we all know it doesn't really end there, does it?
What if we want to reinvest for more equipment or more team members or more vehicles for next year, we probably are going to have to pay taxes, right? So we don't just put the 10 cents in our pocket and go home.
What if we have some other debt that we want to pay down? Or what if we want to take a distribution as an owner? Right? All of those don't necessarily reflect in that 10%, right. Because those are not P and L decisions. Those are investment or balance sheet decisions for the most part. So at the end of the day, we have our 10 cents left, but that 10 cents has to go to certain things, right? Maybe you want to earmark half of that for reinvestment and debt service. Maybe you want to earmark a quarter of that for taxes. Maybe you want to earmark another quarter of that for owner distributions. You can see very quickly how those pennies can be reduced based on what's going on in the organization. And so this is a great education point to start talking about with your team to say, hey, these are averages.
On average, it costs us 50 cents to do a job, and on average it costs us 40 cents just to keep the lights on.
So what happens if all of a sudden it takes us 52 cents to do a job?
Oh, now our margins got squeezed from 10 to 8 pennies at the end of the day, and now we have a little bit less for reinvestment, a little bit less for debt service, a little bit less to get us through the winter. Probably don't have much left for owner distributions.
Or what if we get doubly squeezed? What if it's on average now taking us 52 pennies instead of 50?
But what if we invested in overhead? We didn't really get the revenue, and now we're at 42 cents.
Now we squeezed on both sides, right? So the idea would be that we can start to use these to educate our team to see how, number one, we can maybe reduce the cost of goods sold that we have on jobs, or over time, we can reduce the overhead we have as a percentage of revenue, maybe by growing revenue. Maybe it's as simple as that by using the things that we've already invested in. But it's just a great starting point as a conversation with the team, because ideally, what we'd want to be doing is maybe costing us 49 or 48 cents to do a job. And because we're so efficient and because we're growing our revenue so much, now we're only spending 39 or 38 cents as an expensive overhead, maybe we've negotiated Better terms on our insurance. Maybe we found a better way to market. Maybe we have again through efficiencies, just been able to do more revenue with the same amount of overhead. Now we're in the right spot. But again, this is an education point for your team. I want to shout out Ross Moore, Red river down in Paris, Texas. Ross has done an awesome job with the penny exercise and his team. He took a big six foot fold up table, he put a nice big piece of rollout paper on it, he charted it out, he made nice grid lines and he showed all of those general ledger expense that make up those big general ledger expenses that I'm talking about. So today I wanted just to give you the high level of the painting exercise. Obviously you can go into every general ledger code, you can go into every direct cost, you can go into direct labor and then warranty labor and then indirect labor, and you can go into marketing, and then you can go into web marketing and you can go into SEO and, and you can go to social media. You can do all those things using the penny still. But it's great place to start from a high level.
So I would encourage you just to have that open, honest, transparent conversation with your team. Whether you're keeping 12 pennies, whether you're keeping six pennies. At the end of the day, it's just about education for the team. And as I learned from Jim Calai in a grow session myself probably seven years ago, at this point, these are not financial conversations, these are cultural conversations. So if you're keeping 12 pennies and you're doing great, and you're worried that your team's going to think that we're all fat and sassy, we don't have a finance problem, we have a culture problem.
Vice versa. If you're only keeping two pennies a year and you're worried about sharing with the team that, hey, we haven't been performing as good as we should have, we're only keeping two pennies at the end of the day. Again, don't be afraid of that for financial reasons. Be afraid of that for cultural reasons. We want to have an honest, open, transparent culture where if we're only making two pennies or we're making 12, the whole team can rally around how we either keep making 12 or how we go from 2 to 4 to 6 to 8, right over the next four years. So again, the penny exercise is a great way to get financial literacy and transparency with your team. Again, we've got a more detailed, great idea blog post that you could read about that. But again, I would encourage everybody this season, as we're moving more than halfway through the year, starting to take a peek into next year to do that with their team. So for this week on financial transparency and literacy, get your scoreboards out, get them open, get them on monitors, let the team dig into the job site information they need.
Take time every month at a State of the Union to talk about those numbers, to clear up those gray areas and talk about the future.
And number three, take time to do the penny exercise with your team. Show them where those dollars come in, where those dollars go out, and have an open, honest, transparent conversation about how we as a team can make more pennies together. That's it for this week on the Grow Show, Powered by Steel. We'll talk to you next week.
[00:16:50] Speaker A: Thanks for listening to this episode of the Grow Show. A special thanks to the folks at Steel whose support makes this podcast possible and whose outdoor power equipment makes our jobs easier every day. Did you know that you can tour Marty's Landscaping Company? We're hosting four Grunder Landscaping Company field trips in in 2025 where landscape pros can come see our operation for themselves in a small group setting. Meet the GLC leadership team, ask Marty your questions in person and connect with other landscape pros. Space is Limited. Visit growgroupinc.com today to sign.
