Steve Hoogenakker "Audaces Fortuna Juvat"

"FORTUNE FAVORS THE BRAVE!"

Browsing Posts published by Steve Hoogenakker

I can help, I’ve done acquisitions for lawn care/landscaping. If you want a BUSINESS VALUATION, below is a very real formula. If you want a REAL LIFE VALUATION, a lot of times it’s two guys over coffee, going over customers and employees, then they agree on a percentage of revenue (20-100%) plus maybe buying out some equipment. [B]Short Answer:[/B][B]I’d start out with a number of mows per client, so I’d offer to pay the previous owner the payments received for the first 2-3 mows. You can do it the week after you mow them, or if you wanna be a nice guy, you could pay them for 2-3 mows once they sign your contract. [/B]If that isn’t good enough, below is very valuable information on larger business acquisitions:[B]Answer that imparts wisdom for this and future transactions:[/B]A REAL VALUATION, which you should run at least once per year so you know what your business is worth goes like this:Technically, it’s based on EBITDA, which is Earnings Before Interest, Taxes, Depreciation and Amortization. If you would like to know more about that, just reply and I’ll give you a better explanation that should be useful. It’s basically a “cash flow” formlula. You take your profits, depreciation, interest expense, and any of your pay that is “excessive” to what you do. So, if you’re running a crew and making $80,000, you could put $40,000 back towards cash flow because a new owner would have to hire on a new foreman to run that crew:Formula works like thisProfit $20,000Depreciation $30,000 Interest Expense $8,000Excessive Owners Income $40,000 Total: $98,000. Then you use a multiplier on this EBIT or EBITDA formula. Something like 2.5 to 3.5, so the business would be valued at $250,000 to $350,000. In this sort of equation, the value of the equipment is negotiated. IT can be rolled into the price, or the net value can be added, or the buyer may ask that the equipment be paid off from the $350,000 and be free and clear. The way to keep this clear is to think from the buyers view is:I’m going to buy a business for $300,000. I expect to earn $98,000 per year or get 33% for my money which is a lot better than Wall Street!Other factors, it’s based on:1. Size of company. I would rather buy companies over $750,000 because there has to be some management or systems in place, but a business broker friend of mine says he finds many many more buyers of businesses of around $200,000-$400,000. We think it’s because it’s easier for another contractor to add that much service to his present line. 2. Type of billing. Since we’re in the Lawn Maintenance forum, I’ll assume that we’re talking about mowing. “recurring billing” is what brings in a bigger amount. When you have solid monthly billing, this is something that buyers can count on more than one time landscape sales. Commercial usually worth more than Single Family Residential. 3. Spread out customer base. A Customer base that doesn’t consist of 3 clients that make up half of the billing is going to scare some people away. A base with 50 clients with no one client making up more than 25% is pretty solid. This is also something that banks financing your company, or financing a sale4. Growth. Most buyers prefer some decent, but not excessive growth. A 10 year company growing 15% every year sounds pretty solid to me with probably a solid customer base. 5. Gross Profit margins. Anyway, if you have other questions, let me know, Best of Luck!

Steve Hoogenakker, Concierge Landscape, Delano Minnesota, CIC, MHA, CAI-MN, MNLA, Gerrit Hoogenakker is awesome, Kirsten Hoogenakker is great, Paul Hoogenakker is Super, Teri Hoogenakker is a saint, LINKEDIN

A Free System to cut your work time in half and make clients happier!

By Steve Hoogenakker

As I was cleaning out emails from 2009, I noticed I had about 100 emails from 1 medium size CIC from this summers’ service. Wow, I thought, I didn’t realize we had that much back and forth communication, besides, this didn’t count the 40-50 phone calls over the 7 month period or my attendance at a few board meetings.  In addition, when I looked through a few of the emails, it wasn’t uncommon to find that 3-5 people had been in the loop on each email!

An example might be a request to repair a piece of downspout that had been run over by a mower. The process started with a homeowner, to the president, to the property manager, to me, I would write up our work order, it came back completed, then I’d email back to the property manager again, he’d contact the homeowner or the board. The inefficiency of this madness is amazing once you think about it, but what can we do?

If it were possible to cut out 1/4 of the emails and time from beginning to end, it would be a fantastic creation, but I’ve found a way to cut out over half, and it’s free (for now).

To do this, we’d have to have a single place where the information resides. A single place accessible by the property manager, the contractor and (optionally) the board.  The association website software seemed the most natural place, but until Mark Johnson from Arcstone can build one, we found a method that works today and it’s free!

  1. A spreadsheet is created for an association. The spreadsheet would have 6-7 COLUMNS listed across the top 1. ASSOCIATION NAME 2. WORK ORDER #,3. DATE, 4.SERVICE REQUEST DESCRIPTION, 5.WORK ORDER RECEIVED (by contractor) 6.WORK ORDER COMPLETED, and 7.COMPLETION NOTES.
  2. The file is uploaded into Google Docs (free). You can then share it with whomever you wish.  It’s easily done by inviting people to join using email addresses. Maybe the head of the grounds maintenance committee, president, property manager and contractor. If you want it available to the whole board, you can easily set permissions that allow the primary people to edit and update it, but allow the board and/or homeowners to view it.  Allowing all homeowners to view it in effect publishes it to the web so everyone can see it. That doesn’t sound like a good idea to me.
  3. You can set up notifications so that anytime a change is made you can be notified once a day or immediately.
  4. The property manager enters in the work order request, notification automatically goes to contractor.
  5. Worst case, our office prints up the work order, marks the spreadsheet so everyone else knows that the work order was received with the date and sends it out to the field the next day. When completed, the office can enter it in as complete the following day, automatically updating everyone, or the same day if the crew calls it in. Best case scenario is if my operation manager or foreman has a mini-laptop in his truck, he can enter in the completion the minute it’s done! We can immediately markup the spreadsheet, along with any notes. Instead of the homeowner calling the pres to the property manager, prop mgr to me, they can view it on the web, and it’s not 9 to 5. It’s 24/7.
  6. Everyone can view that the work order was sent, received, date done (or not) and any information. No phone calls were made, no emails were sent.  A complete record of all work orders can be kept all year long, although that would be a pretty long spreadsheet.   

We saved all of the emails and phone calls. If I have mobile computing, I probably got the work order out into the field and the completion back 1-4 days sooner, and again it’s your favorite price, it’s FREE!

This system would make a managers life a lot better in the winter where speed is 10 times more important.

Google Docs is just releasing a method to upload all kinds of documents. Instead of a spreadsheet, if the property manager has an electronic work order, maybe it can be uploaded, shared and updated by me, the contractor the same way.  As property managers start to customize this idea, it’d be wonderful to share it with CAI membership so we can create the best documentation available in the country.

Value of a Landscape or Lawn business

HOW TO BUILD, BUY OR SELL a LANDSCAPE MGMT COMPANY:
In the past 6 months, I’ve had a number of people ask me to advise them in valuing their business, or evaluate a business they’re considering purchasing. There’s a lot of interest and a lot of activity this year.
So, what’s a business worth?
To help you find out, you should follow three general rules.
1. Start planning TODAY! You never know when an opportunity presents itself, or when disaster strikes. Ideally, you’ll want at least 2-3 years planning before selling a business.
2. Hire a professional or ask an industry expert to help you
3. Maximize the guidelines listed below to bring the highest price.
The first place to look is your own business. This is a complex process, but here are the basics.
As a business owner, you should always be thinking of your company’s intrinsic value, and how you’ve achieved it. Most contractors look at the income statement (if they have one) at the end of the year and say “I made $100,000 net!” But, using the same financials, you might have actually increased the value of your company by $350,000, or reduced the value by $50,000. So, having the right information might mean a $400,000 swing in real value instead of $100,000 profit! Do you see how your daily decisions will be profoundly affected by this new knowledge?
You have assets that you can sell, but I’m here to tell you that you aren’t selling or buying “hard assets”. Heck, you can buy equipment anywhere, anytime. You’re really selling or buying “soft assets”; your ability to build a team, sell, market, satisfy, create relationships, forge loyalties, make a profit and grow the business.
In the Minnesota market, I would say that most businesses I’ve seen for sale are overpriced because somewhere, someone is saying “my company is worth one year’s gross sales” Some of this is encouraged by business brokers who don’t understand the green industry. They make a percentage off of the price of the sale, therefore, they encourage high pricing. If you’re going to use outside help, stay away from the brokers, at least at first.
Gross sales have little to do with the value, therefore, if your goal for 2008 is to grow the biz by 40%, then you could still decrease the value of the business, or even reduce it’s profits. Most companies who make the Inc. 500 fastest growing companies lose money! In the two years my companies would have made the Inc 500 list, we lost money.
Realize that businesses generally sell on multiples of earnings, which is much more complex than just profit!
Steve Hoogenakker
Concierge Landscape
Steve Hoogenakker has 20 years in the landscaping and leadership field. He can be reached by email at Steve@Landscape.Pro. Steve Hoogenakker, MHA, CAI, CIC Midwest, MNLA, PLANET, MTFG, Concierge Landscape, Gerrit Hoogenakker, Kirsten Hoogenakker, Paul Hoogenakker

LEADERSHIP and THE BOARD: A Story for board members and company owners:

By Steve Hoogenakker

There comes a point in time in every leaders time when he or she is tired of

spearheading every initiative and dragging and cajoling the other members to help.

At that point, they look to take their board or company to another level, either to create more energy, creativity or create more balance in their life, or possibly all of the above. When they find themselves in this situation, they must become a leader working “on” the business of managing a board instead of “in” it.

The first rule of a great board leader is that the team can never be completely dependent upon any one individual.

One of the more common mistakes made is that the president of the board fails to let go of certain activities and therefore stunts the growth of the team as a whole.

The next important point to remember is that as a leader, part of their job is to build a team of decision

makers. This can only be done by observing, directing and training them to be inter-dependent with each other. There are 3 stages of dependency;

1. Dependent: Unable to make decisions or to sustain a high level of accomplishments without prodding or constant oversight. It takes at least one additional competent individual to monitor this person. Using fuzzy math this equation would look like (1+1)= 1

2.Independent: Able to successfully perform complete projects required by the board in their entirety without oversight. Independents will often take over the entire task even if it was handed out to a subcommittee of 4 people. Independents like to think of themselves as the highest order of individual as I used to believe. Independents don’t require someone to watch over them, but they don’t add people to the process either. Fuzzy math might be 1=1 or a really good independent might be able to perform the work of 3 people or 1=3

3. Inter-dependent: This individual can complete the project on their own, but seek out ideas and input from others. They have good communication skills and are somewhat empathetic, (not sympathetic)!

When a project is given to an interdependent person, they PULL people into the project, creating synergy and energy. Because their very nature is to look at each issue as it affects all members, the fuzzy math might look like 1+4=30, with 1 being the interdependent person, 4 being the input and ideas brought in by other people and 30 being the number of residents who are on board because the group nailed the mission and tapped into the energy of the association.

In the Garth Brooks song, Standing Outside the Fire, people want to be “cool” and “strong” and face the problems alone, but the real answer is to be strong, but just “weak” enough to let others in and help create the future.

We call them cool
Those hearts that have no scars to show
The ones that never do let go
And risk it the tables being turned

We call them strong
Those who can face this world alone
Who seem to get by on their own
Those who will never take the fall

We call them weak
Who are unable to resist
The slightest chance (that) might exist
And for that forsake it all

They’re so hell bent on giving, walking a wire
Convinced it’s not living if you stand outside the fire

So what’s the plan?

As a leader you are responsible for the focus of your board and the needs of all residents. The clearer the vision of the leader, the more people will follow. When building your team, as the chief, you must lead by example.

Each board must have a Visionary and a Manager. A single person should not hold these positions. In many cases, one person tries to fill both roles. This is the classic case of a workaholic. This is the type of person who puts in 60 or 70 hours a week and has no balance in their life. You must let go of this attitude if you wish to achieve success in building a strong team and surround yourself with supporters. Surround yourself with people whom you can trust, and whom you know will get the job done. You must engage yourself with people who will follow your lead.

You are the quarterback of your team, and as such, you must have people around you (like Michael Oher in “The Blind Side”) who will protect you and block for you. Make sure that your association’s environment is enjoyable and satisfying. If this is not a satisfying, gratifying and enjoyable place, how can you expect your board to flourish?

With this in mind, make sure you avoid the temptation of micromanaging. While delegating is a critical part of your role as the Manager or Visionary, keeping too close an eye on your board makes them feel untrusted and hesitant. Let them know you expect them to make some mistakes, but that you trust them to excel at their work without you hounding them or watching their every move. You’ll be grateful for a board member who isn’t afraid to use their own initiative, and get some balance back in life while accomplishing more than ever before

<p>Da Garden” If you have a personal garden, ‘tis the season to till it up. Consider doing a soil test yourself for best results. Here’s a little secret: Why does Miracle Grow grow 700 pound pumpkins? I know you don’t actually want a 700 pound pumpkin this fall, but if you want to give your garden every chance of providing pleasure or juicy tomatoes, then the secret is this: Most fertilizers carry 3 ingredients. Even if you ask the U of M, they’ll say. “Buy a 10-10-10”! This is the standard response for anyone in the industry, and it usually works Ok.  BUT, there are 16 minerals needed for every plant to survive. Miracle Grow provides all 16! They might not be needed, but if just 1 or 2 are missing or weak  your plants will suffer. “Da Trees” Make sure that the tree wrap is removed from trees, look for split trunks or damage that might’ve happened from the early snow storm or from wind damage. If you know you have Ash Trees, which almost everyone has, there is a terrible menace out there this year. The Emerald Ash Borer. Once it’s on a property, can kill all the ash trees on a property in 1-3 years. There are links on <a href=”http://www.townhome.pro/”>www.Townhome.Pro</a>. “Da Water” Irrigation system startups need to include replacing broken heads, and resetting the direction of heads so they cover the lawn, making sure they don’t blow over the freshly washed car and into the bedroom window. If you don’t have a system, I would be happy to recommend a professional, or design one myself..Finally, work with your contractor. It’s in his/her best interest to have a wonderful, living landscape too. If your association does a lot of work itself, or if you’re just curious, call or write a Master Gardener volunteer. It’s free, and the link is on your website that is just being created; <a href=”http://www.townhome.pro/”>www.Townhome.Pro</a>. This article written by Steve Hoogenakker of Concierge Landscape.He has 20 years experience in landscaping.</p><p>This article may be reprinted as long as the author’s information is left in the new article</p>

The Case of the Missing Contract

By Steve Hoogenakker

It was a hot Monday afternoon in July and the humidity made it feel like an Indian sweat lodge.  The air conditioner was refusing to work through another day, much like the temp that was hired here last week.  My desk, looking like it belonged to Andy Rooney was strewn with paperwork facing every direction.

 Emails had come in over the weekend about sprinkler heads shooting fountains 15 feet in the air, and I’d received 2 calls from the Vice President of the board asking when the pruning was going to be done.  I even got an email asking about the sidewalk edging.  Sidewalk edging? Who asks about sidewalk edging?

I scrambled through the papers looking for the maintenance specs, then through my files. I called my assistant and asked her for the contract, but nobody had found it yet.

The contractor finally called me back at 3:00 PM. He didn’t think the pruning had been due yet.The edging might have been kind of done using a weed whip, he didn’t know. As for the sprinklers, how was he supposed to know? He said “I’ll get my irrigation subcontractor out there in the next week”. A week? Oh no.

At 5:45 PM, I left the office, never finding the specifications. I emailed the Vice President before I left and told her I was working on it, but didn’t feel like I had made a lot of headway.

Tuesday morning. Another email about wasting precious water due to the fountain sprinkler heads asking if I cared about the environment and if I was going to pay the water bill next month. I get a phone message from an angry resident about one of their bird baths being damaged by the mowers last week. With the edging and pruning questions still fresh on my mind, we did a full press search for the specifications. Voila, my assistant has saved us!

Well, saved might be a strong word. I start to read through it. Hmmm, I’ve never seen specs like these before, they’re only a couple of pages long, should be a piece of cake.

Let’s see here, mowing; “Contractor not responsible for damage to personal items left in common areas”. I don’t remember seeing that. I hope the birdbath was inside the sidewalk, but it’s not likely. I’m not looking forward to that visit and phone call. Ah, here’s edging. “Edging shall be completed once annually”. Well, no end date, so I guess they have until Halloween to finish. I’m sure they won’t wait that long, but when?

Then I found pruning. Pruning shall be completed twice annually, but after shrubs have flowered. What does that mean I wondered? Surely some shrubs have finished flowering, it’s July for Pete’s sake. Have they done any of it?  OK, one more question, irrigation, let’s see if that’s any better. Irrigation: “Lawn Sprinklers will be started up in the spring and blown out in the fall. If adjustments or repairs are necessary, it is the responsibility of client to notify contractor.”

So, I feel good that I found the contract and specs, but I still don’t have a single answer to give to the association.

This story happens hundreds if not thousands of times in Minnesota each year in one form or another.  The problem arises because there is no standardized specifications for grounds maintenance. The specs could’ve come from a book, or more likely, they’re using a contractors specifications.  I’ve run the largest landscape maintenance business here through the 1990’s and I can tell you that 20% of the language in contracts being passed around is language I wrote in 1999, and I am not an attorney!

In the past the board probably took 3 bids with 3 sets of specifications and accepted one. If they were one of the lucky ones, they kept using the same specs even after the contract ran out. If not, when the bid was up again, they asked for 3 more bids and got 3 different sets of specs to try to compare and had a new board to re-learn everything all over again.

So, what’s the solution? Whether you’re non-managed, a managed association, or a management company, you need to come up with your own set of specs and standardize as much of it as possible. To me, NOT having grounds maintenance specs for one of the biggest budget items and complaint items is just like trying to run an association without having MCIOA as a backstop!

There are only a couple of large management companies that have their own specs and they have a big competitive advantage over all the others. Their property managers already know what’s required at each site, why and when. They have deadlines for pruning and edging and they’re the same date, so on July 15th, sidewalk edging had better be done at every site. 80% of the thinking and brain damage of the board and property managers has already been eliminated. Just mark it in your Outlook calendar in February: First edging to be completed July 15th. You’ll see July 15th coming up so you can contact the vendor 2 weeks in advance with a reminder if you wish. The standardized specification makes less work for the manager, and in turn makes the manager and the board more efficient, and that translates into a happier association.

So, how do you go about making standardized specs? Since 90% of the horticultural items apply to all sites, standardize as many dates and descriptions as possible. For those few items that have to be customized, put them on as an addendum WITH DATES.

Grab 2-4 of your current landscape contracts and setup a meeting with 1-2 landscape contractors (with their current contracts), 1-2 of your property managers and optionally 1-2 respected board members. Send the documents out ahead of time and ask all to comment. Then, buy them lunch to come up with best parts of all contracts. Have them combine the specs into two sets. One for very small associations and one for larger associations. Run these by your accounting and legal departments and start using the “ABC Grounds Maintenance Specifications” as your own competitive advantage. Once done, 90% will always be done. You can tweak it over the years, but as the great philosopher Susan Powter says, “Stop the Insanity”!

Steve Hoogenakker

Concierge Landscape Environments

Steve@Landscape.Pro

763-213-2410