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Sometimes the most profitable move in your business is walking away. And it's not because you failed or you couldn't make it work. It's because holding on is quietly costing you more than you realize. And in business, just like in warfare, not every piece of territory is meant to be defended forever. Today we're going to be talking about strategic withdrawal. We're going to be talking about clean slates and why letting go of the wrong service area dramatically improve your profitability.
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Today's episode is brought to you by Yardbook, the all in one CRM for your lawn care business. And as an exclusive partner of this podcast, you can get started today and begin simplifying your business and maximizing your profits. Sign up now@yardbook.com the link is in. The show notes Time now for Profits with Paycheck, an essential podcast for you in the green industry who are looking to unlock the full potential of your business. Hosted by by John Pajac, your certified financial coach, the show features in depth discussions with successful entrepreneurs, thought leaders and industry experts, providing practical advice and proven strategies on financial planning, operations, marketing and sales. Profits with Paycheck has valuable insights and action steps that you can implement today for creating long term success. Now here's John Pajek.
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Welcome to Profits of Paycheck, the podcast where you talk about business strategies and financial insights for the green industry. I'm your host, John Pajak and today we're going to be. I'm going to be sharing an idea that came from a conversation that I had with my good friend Joe DePace up in Michigan. He's got a lawn care business, a fertilization, weed control business and we share a lot of common commonalities and today we're, you know, we were earlier we were talking about business decisions and he used a military analogy that really stuck with me. It was brilliant. I was like, oh, I'm gonna, can I use that? I'm gonna use. Turn that into an episode. And he's like, oh yeah, yeah, that's fine. But you know, he was saying like, you know, like a military general, he might secure a piece of land because at one time it was really critical to the mission and resources were poured into it and it was defended heavily. But, you know, the mission changed and that, you know, that land no longer serves the strategic stronghold that it once did and continuing to defend it becomes a liability. And that struck home with me because that is something in my business that I lived. And I, you know, I was trying to pour those lessons back into my friend Joe because we were discussing some of the areas that he services right now are just not really making a lot of sense. People are kicking back with price increases. You know, there's a lot of drive time involved. So I mean, I've lived that. You know, I, when we first started this business, we used to service like seven different towns and we were spread pretty thin. You know, it wasn't the nice super tight routes that we currently have. It wasn't, you know, we currently only service two towns and we have a huge density of clientele that we take care of. And again, you know, I, I was, you know, sharing that with, with Joe and you know, he remembers that because we've been friends for a long time and we were kind of talking about it. But you know, to get you guys up to date, you know, years ago, I serviced a specific town and you know, for a little while it made sense. You know, we had clients there, the routes were starting to form and it started to feel like growth. You know, we were get, we were, I was building the business, I was getting things established and you know, making it pay for itself and then, you know, really working on trying to replace my income that I had previously when I was working construction and I was making really good money in construction. But over, it was, it was over time, but it wasn't like a really long period of time. It was actually kind of a short amount of time. I, the market stopped supporting the profitability of our business and I, I realized it wouldn't help us grow and it wouldn't even really sustain our business model. And it's not because they're bad people or anything like that, but it just, they were not our, our, our desired client. Avatar. Okay, make it sound fancy pay Jack. Oh yeah. These people just didn't have live a lifestyle that we wanted to support. You know, we, we were in a couple other towns that were, you know, we, we could, I could go in there and I knew that I could upsell products. I could, you know, if they needed something done in their property and I suggested it, they would take me up on it. The people that we are currently serving in this one town, they were literally like the bargain basement people. They were, they really wanted to do bi weekly cuts which are pain in the butt if you know that cool season grass tends to grow crazy in the spring and it kind of phases out a little bit in the summertime. If you don't water it and take care of it the way you should, then it grows again like crazy bed in the fall and These people, they expected to just. They weren't looking for immaculate lawns. They were just like. They just didn't want to get a ticket from the town. Okay, I understand that, but the way I was building the business, we did not want to be just the. You don't get a ticket from the town from when you use us. You know, we were looking to. I was looking to make my brand a, you know, top of the line lawn care. You know, if you needed some service, we would perform that service and it would look great. And there was no issues, no pushback. We just. You just pay the money, we do a wonderful job, and you'd be happy. Okay? But again, like, this wasn't the right fit. And at the time, I was still kind of ignorant that I thought I could make it work. And let's go back. You know, I was just looking this up. I. When I. After I got done talking with Joe, it's like in 2016, so we're talking 10 years ago, our average mowing price was $30 per cut. And at one point, we had 12 properties in that town. So let's just look at the simple math. Okay, I'm going to. We had 12 properties. We're charging $30 a cut, and just for simplicity, we'll just say we had 30 weeks in the season. Now, in northwest Indiana, we don't get that. We get maybe 26, you know, 26, 28 cuts. You know, 30 is a stretch, but let's just say 30. It makes the math easier for me in my head. Okay, so 12 times 12 properties times $30 a week, 30 weeks in the season, that's 10,800 in gross revenue. Sounds good, right? On paper, it looks fine. Like, yeah, that's cool. But paper doesn't show a lot of the other things that happen. Paper doesn't show the drive time or the spacing between properties or the inefficiencies that are caused by this. The thing that I didn't mention was that just to get to that town, it was roughly 25 minutes one way from our. Our. The town that we were already in, which was a nice dense route. And that was 50 minutes round trip every time we had to go out there. And that does not include when we would get caught by a train. Because this town, literally, it's where all the trains would go through. So there was really no easy way of getting there unless we wanted to fight all this traffic to go around and catch the bridges and get past all it was. It's. It's not an easy place to get to when there's trains. Okay. If you try to go around, you're going to be fighting traffic like crazy. You know, it's intense. I was always trying to take surface roads to just get back into this little town. But anyway, you know, if we didn't, if we didn't catch any trains, you know, on average we're losing about an hour and a half every time just because, you know, 50 minutes, just a round trip, you know. And then, because these were not tight areas, they were not. Oh, we dropped the trailer gate once. And then we do three accounts and then pack up. No, this is like we do one account, pack up, it's five to seven minutes between to the next one. You know, honestly, it was kind of like a, you know, for the crew leader, it was a little bit stressful. You know, I was the crew lead. It's just getting to and from it. But the guy that was working with me, he loved it because he would just get a lot of windshield time. And when you start looking at that, that's where the real labor cost starts to come in. Because back then, you know, it was a two man crew. I was paying back in 2016, I was paying myself 17 bucks an hour as the crew lead. So if I were to replace myself, I would pay the guy 17 bucks an hour. The technician that was with me, the guy that was, you know, trimming and edging and blowing, I was paying him 15 an hour. Okay, let's go back in time. 2016 in northwest Indiana, 15 bucks an hour. That wasn't a bad job. Okay. Everybody else was paying like 12 bucks an hour. I was paying more than what most of the other companies are paying. So our base wage total was like 32 bucks an hour. But then, you know, you got to add your. All your labor burden in on that. So your fica, your futa, your suta, your workman's comp. And that does not include any. You know, back then, I didn't offer paid time off or any kind of vacation or any health or dental or anything like that. So we're just talking about basic labor burden. And, you know, all in our fully loaded crew cost about 38. You know, we'll. I think it was like 38 and change per hour back then. And if we take that into consideration. Let me look that up real quick. Hang on. We're gonna pause for the cause for just a second. Back when I was getting my lawn care business off the ground, I was juggling routes, invoices, and customer Notes with paper and prayers. It was chaos until I found Yardbook. Yardbook gave me the structure. It helped me track chemicals, route efficiently, invoice faster, and most importantly, it helped me grow a profitable business. If you're tired of duct taping your systems Together, go to yardbook.com and sign up for free. And if you're ready to go premium, use promo code paycheck to get your first 30 days on me. All right, welcome back. I, during the break I went ahead and took a look at. It was $38.16 per hour back in 2016 for a fully loaded crew cost. Wow, I'm glad I kept on those records. Going to change your whole Life by that 16 cents. Right? So anyway, when we lost the, you know, like one and a half hours every time we went out there, you know, here's what it actually costs. You know, that one and a half hours times 3816, that was $57.24 just for driving out there and getting in between the jobs. And you look at over a 30 week season, that's that you take that 5,724 times 30, okay, that's 17, $1,717 in pure labor inefficiency. That's just the labor that's not even including any overhead costs or anything like that. You know, we're not talking about, you know, fuel or overhead or anything like that. We're just talking about in a season 17, 17, okay. And then if you add like your opportunity cost in that same one and a half hours, we could have serviced three tight properties in our already dense location. So if I could have got at one of our stops in our, in our, the town that we already had a tighter route, if I could reach out and get three more that are neighbors and it doesn't have to be all in one spot. But you know, if we, if we could just, we could add three more properties at $30 back then again 2016 pricing people don't yell at me, but that was $90 per week. So if you look at it from this perspective, $90 times 30 weeks, that's 2700 in missed revenue. That's, you know, it's, it's starting to add up. So when you look at the real picture that, you know, we, we determined that those 12 accounts that was contributing about $10,800 for that service area, but it didn't behave like an additional $10,800. You know, we subtract the 17, 17, the $1,717 in labor inefficiency. And you look at it at the $2,700 in missed opportunities, that's a $4,417 swing. And that means that that territory, that service area affected, you know, instead of it being $10,800, it was closer to like 6,400. 6,000. We'll do the math. $6,383 before overhead hits you. And again, like I said, so with the missed opportunity costs, the missed labor, if the labor inefficiencies, we're at 6,383. That does not include the fuel it took to get there. And that's a variable that could cost. You know, one day it could be $3. The next day could be 5. The next day it could be a $50. I don't. You know, you can't always plan on it. It doesn't include the wear and tear on the vehicle. It doesn't include the insurance. It doesn't include the contractor's license. It doesn't include the maintenance, the admin overhead, or your owner's salary. Now, again, you're like, well, you paid yourself 17 bucks an hour. I'm like, yeah, but that was because I wanted growth. If I was going to get myself out of that truck, I'd have to replace it. I also needed to take care of my personal life. So I take owner's distributions to kind of pad that make the difference. So anyway, and this is where, you know, you as a lawn care owner, you could get fooled because, you know, if you're looking at the gross revenue, it could lie to you. But if you're looking at your margins, your actual after everything is paid out and everything is said and done, that those are the numbers that tell you the truth. So, you know, of course, I'm sitting there going, well, I'm not really making money here. What should I do? So back in 2016, I realized, okay, this is not as profitable as we think it is. So, you know what? Naturally, what did I do? I tried raising prices. I took those $30 cuts and moved them a bit higher. It wasn't much, but, you know, it was enough to say, okay, I could justify this now. But what happened? We lost most of those clients. Only a few stayed. And instead of 12 properties after I started raising prices, now we only had about five. And it wasn't even like a lot of money. I mean, some people we went from 30 to 32, which wasn't even a 10% increase. Some of them went to 35. And you know, when we propose that, they're like, oh, this is five bucks a month. Five bucks a week is going to kill us. You know, the extra 15 or, you know, excuse me, the extra $20 a month. We just can't afford that. Okay. I didn't at that time, I was not going to, you know, go back on my word. I told these people I would service them and they accepted a higher price. So I suffered for the rest of the season. And the reason, and the thing is, even at that higher pricing, those properties became even more spread out. You know, it's not like I was able to pick up any more clients in that area to try to make it more efficient. The drive time didn't change the fact that we got caught by trains, didn't change that inefficiency between them. Instead of it being a five to seven minute drive, sometimes it was like, you know, eight or nine minutes because we didn't have. We would lose houses in between. And at that point, the problem wasn't pricing. The problem was route density. And when I look back at this, it makes it, you know, I know what happened and I, I could be confident what my decisions were. But at the time, you know, I was, I was really trying to get myself out of this mess that I had put myself into. The, the back then, I know the right move wasn't adjusting prices. The right move back then was to make a clean break. And at the time, I know I was scared. I was scared to do it. And I, I'm sure that there's, you know, you're, maybe you're in this position now and you're, you know, saying the same thing, like, well, you know, there's, it's only a few lawns or, you know, they've been with us for a long time and you know, Ms. Smith is really nice and sweet, but you know, maybe, maybe because, you know, we're already out there, it's okay to do these extra ones. You know, we're not that far from it. You know, we're at the very edge of the town and it's only another five minutes to get over there. Got to just cross the train tracks and, you know, but the problem is, it's like those five scattered properties aren't five properties. What I started to realize those properties were anchors. They were holding my business back. And the crazy thing is, you know, if you're looking at, beyond the actual work, you starting to look at the ad, you know, the admin side of, of business, you know, you're. If your Production target. If your target production rate is $150 per man hour, and that route drags you down to like 110. If you could even achieve that with, you know, you can't do it with $30. If it takes you a half hour to do a $30 property, $35 property, which was what it was happening back then, you're, you're, you're, you know, you're under $100. And that in a finish, that inefficiency, it's going to compound every single week. It's going to take the, you know, the ones that you are profitable on, and then it's going to be disguised, you know, those, those lawns that you're really not making profit on even with an increased price, all that time suck and everything that strips away all the profits, it's going to kind of be hidden and you're going to be busy instead of profitable, which is not the best thing to be. And the crazy thing is the longer you hold on, the more expensive that pride that you have becomes. So if you're in this position right now, there's three questions I want you to ask yourself. If you were starting today, would you even enter that market? Because a lot of us have been in these areas for a long time when you're just like, yeah, it's just part of our routine. If you were to start from scratch today, would that be part of your marketing campaign? And you know, the second one, second question if is this service area serving my mission or is it just serving my pride? Because like I said before, you know, there's people that I've, I've talked to at the equipment shops and everything. They have literally bragged that they cover, like all points from northwest Indiana, the Illinois border. They go into Illinois, they go all the way out to like Michigan City, which is like, if you're looking at a map of, you know, of the states and you see Lake Michigan I'm talking about, they're trying to serve that entire area. Like the finger tip of Lake Michigan, they're trying to serve all of that. And a lot of these are solo operators. And they take a lot of pride in the fact that they travel, you know, 80 miles just to go cut one lawn. It's a big lawn. It's an acre. I get $120 an acre. That's what the guy told me back when it was 20. Actually, no, he didn't even tell me. I told him that I was charging $180 and he was like, I charge like $90 an acre. I'm going to beat you out. I'm like, yeah, go ahead, but that sounds like the best way to lose. But anyway, the last question I want you to ask yourself is, what opportunities are you missing by holding on? Because again, that one could be the most glaring. It's like if you're spending a whole day and you're only generating a couple hundred bucks, what if you went into one of your really dense areas or an area where you could really do some good work and get compensated properly for that? What opportunity are you missing? So I just want to say not every piece of territory deserves permanent defenses. Not every decision deserves lifelong loyalty. Because I'll tell you, as a mature business owner, knowing when to hold the line and when to step back with clarity. That is, I'm telling you, that brings you so much peace. And I know in the moment it is very difficult to do. It's hard. But I. I've lived it. I've experienced this. I've been broken and bruised over it, but, you know, I survived. And I'm telling you this not to tell. Just do what I say. You know, I don't have. You know, I want you to succeed and I want you to avoid some of the failures that I've experienced. I want you to. All that blood, sweat, tears, and years that you put into everything, I want it to be as productive as possible for you. I don't want to see you fail. So, you know, I just want to say, you know, this, this discussion is really mainly about you don't have to hold the line all the time. If it's not working out for you and your business, sometimes the best thing to do is just say, tell your. Notify your clients that you're not going to be serving that area anymore. You can make a recommendation if you wish. If not, you don't have to. You're not obligated it. You know, I ran my entire season to, and I limped through that season just to make sure I kept my promises. But at the end of that season, I notified all those clients, the five remaining clients that we had in that town said in the next season, 2020, or excuse me, 2017, we are not going to be serving this area anymore. So anyway, I think that was one of the best moves that I made early on in my business was just making a clean break from the properties that were just not working for us. So I hope this helps you out. And as always, keep pushing through. God bless and we'll catch you on the next one. Thank you once again for listening. If you've enjoyed the show, please leave a review and share it with fellow business owners. Your support means the world to me and helps keep the show going strong. I want to give a special shout out to our friends at Yardbook. Their continued support has been instrumental in bringing this podcast to you week after week. If you haven't checked them out yet, visit yardbook.com and see how they can give you the tools to streamline and manage your lawn care business. Also, don't forget to explore the resources and upcoming events that I've collected just for you in the show Notes. These are curated to help you stay ahead in your business with the latest tips, tools and networking opportunities. Whether it's a new tool, an insightful article or an event you don't want to miss, I've got you covered. Until next time, Keep pushing through and God bless. Sam.