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Rising to the economic wake-up call

Maintaining profitability by working harder, maximizing deliveries, re-evaluating every little cost and going after better work.

By Tom Hatlen

Rivers West Landscaping's sales are down about by 35% from where they were 2 years ago. Total profit dollars, however, are not down. Yes, Rivers West is making about the same amount of total profit on 35% less sales.

"It's amazing what happens when you really tighten the reins in. We've pretty much had the good times since we started 14 years ago. If only we had been more frugal, tighter with our money during the good days - my wife and I talk about this all the time," reflects company president Mike Czeschin.

Achieving that level of profit has not been painless or easy. With 35% less sales, Mike's now running with about 35% less people. He's had to let several field workers go in addition to his estimator/project manager. That cut his office staff to just him and his designer /office manager now doing the work of 3. He says he's working as hard as he did when he was first getting his company off the ground.

Mike has to work that much harder to secure the sales he does get. People are getting 4 or 5 bids where they used to get maybe a second bid. They're taking much longer to decide and require additional follow-ups. Then when they do move forward, they're scaling back from the $10,000 landscape they requested to a $5,000 or $7,000 job.

Profile

Rivers West Landscaping
Michael Czeschin, President
Troy, Missouri

Market served
Middle- to high-end residential
Small commercial development
Home builders

Customer base
80% Residential
20% Commercial

Average job size
$25,000

Largest job size
$770,000

2009 sales
$1.2 million

2010 projected sales
$1.3 million

Services provided
50% Hardscape
10% Water feature
25% Greenscape
5% Maintenance
5% Snow removal
2.5% Landscape lighting
2.5% Design

Number of employees
9

In addition to his putting in more hours, Mike says they owe their profitability to several factors:

Maximizing deliveries and production time,
Re-evaluating every little cost, and
Going after better work.

Maximizing deliveries and production time
Mike determined that in-house hauling of materials was his crews' single greatest time/money waster, costing him an extra $100 to $150 a day. His goal now is to keep his 3 dump trucks parked and to have vendors deliver materials as much as possible.

"You pay a little bit for delivery, but when you have 1 or 2 guys going to pick materials up, there's the fuel cost, the travel time, them stopping to get a soda or to use the restroom. It's just like Vander Kooi says: the next thing you know a 30 minute trip takes an hour and a half. I want my people on the job site where they're making you money from the minute they get there."

"We're starting a 5,000 sq. ft. driveway tomorrow. The pavers, sand, edging, Sandlock, everything is there and ready to go. Tomorrow the crew will show up with the Bobcat and unload. They'll take 4 guys in an extended cab pickup there every morning. The pickup has a fuel tank on it for the Bobcat. They've got full gas cans for smaller equipment like the saws and compactor."

On a large landscape job, Rivers West will have trees and plants delivered, and they will set up a mini-nursery right on the job site for watering and irrigation. Mike says this saves him maybe 10 expensive trips hauling the plants with his 2-ton trucks.

Mike schedules deliveries to occur the day before a job starts so that any holdups can be overcome. Recently they couldn't do that because the job was in an upscale neighborhood without room to stage everything in the drive. The sand was scheduled to arrive early the morning of the job. Sure enough, the truck broke down and the paver crew sat for 3 hours.

"That cost me 15 man-hours. Things like that can't happen in this economy. There was a Hardscape magazine article along that line: In the good times, you could have a job go bad and make it up on the next one. Well, now you can't have jobs go bad. The next one's just as tight as this one. That's very true, and we've talked about how to prevent things like this from happening."

Re-evaluating every little cost
In the down economy Mike says they've had to be that much smarter with their money and realize that all the little things add up.

After 10 years of going along with the same insurance company, Mike says they shopped their rates last year. "We were paying almost $40,000 for all our different insurances for vehicles and workers' comp and everything. And we got quotes in the upper $20,000 range. For the exact same coverage we saved over $12,000 a year."
Rivers West now prices out at least 2 suppliers when they're bidding a project. Mike says they can no longer afford to "just go with the same people they always have."
They reduced the number of employee cell phones and changed the calling plans on others saving maybe $300 a month.
- With fewer trucks going out, fewer employees need cell phones.
- On Mike's and the office manager's phones they found it was cheaper to switch to an unlimited plan where they weren't charged by the minute.
- They put all 5 crew phones into a single plan with shared minutes. Then Mike talked to his people about limiting personal phone use, and will talk to them again if people go over their minutes.
Rivers West has gone to a 4-day work week to eliminate overtime. This has reduced their payroll by about $500 a month (not including fuel savings). At the same time it helps stretch their more limited number of jobs out longer. The 4-day week also helps with scheduling. If they have a rain day, they can still make it up that same week on what would have been their day off.
With less work they need less equipment so they've sold off 2 trucks and 2 Bobcats saving several thousand dollars in monthly payments.

Going after better work - Large-scale custom homes
Sales would be worse if Rivers West had not begun moving more heavily into custom residential work (including some very large projects) about 6 years ago at the suggestion of Charles Vander Kooi. "Chuck looked thru our financials and saw where we were making money. He told us we needed to get rid of the little $1,000 packages we were doing for homebuilders, and that we needed to be doing the custom work that we could do more profitably.

"And thank God we did that. We had been really big in subdivision work, and that's pretty much come to a screeching halt the last 2 years. We're seeing that pick back up a little now so that's encouraging."

Mike wants to keep the larger homebuilder projects as part of his business mix, and is working to solidify relationships with the surviving builders. "If they've made it this far I believe they'll be there as things pick up over the next 4 or 5 years."

The size of the custom home jobs they do has grown immensely as they've done 8 jobs over $250,000 each in the last 5 years. Right now they are on a $500,000 project with 22,000 sq. ft. of pavers, water features, several thousand feet of boulder walls and extensive landscaping.

Mike says the bigger the jobs get the more important it becomes to prove your abilities in total project management. "I will offer to serve as the superintendent managing the entire outside. That has really helped us land some of these jobs.

"We can do just about everything. But we also have very competent subs. 'Call me and I'll take care of all these little things so you're not making all these calls.' I'll call the irrigation guy to see when he's coming. Get the pet fence guy in before the sod guy. We've coordinated and run jobs with extravagant playground systems, asphalt trails and pool construction. You run around a lot and have a lot of meetings. It's more communication than anything. It's mainly my time that is tied up."

Mike thrives on the project management part of these jobs and one day several years down the road would like to retire from his landscaping company and just manage large projects for a fee. But presently he's looking for a bright future with Rivers West.

"We're hoping for a slow rebound next year. If we can keep things lean and mean, then as the economy turns around and we can grow again and become more and more profitable."