Canadians continue to feel the impact of rising prices in July as consumer inflation rose to 8.1% year over year. This was the largest yearly increase since January 1983 and up from a 7.7% gain in May. However, several input costs for contractors have increased much more than 8.1%. The July reading came as energy prices rose 34.8% and gasoline prices up 48.0% compared with a year ago.
The Bank of Canada has raised its key interest rate target three times so far this year to bring inflation under control. I recently heard that the Bank of Canada wants inflation to be at 2.0%. And that they will continue to raise interest rates.
Many experts are also suggesting that a Recession may be on the horizon. But we all know that in a recession, people do not stop buying, they just buy more carefully. When I look back over the past 40 years, Gelderman Landscape Services has always benefited from previous recessions (higher sales & increase ability to find talent). But many are wondering, what will happen in 2023?
I have always stated, “in the middle of every crisis lies an opportunity”. Will you be ready? Listed below are 4 Principles that will enable your business to thrive during uncertainty:
1. Process Improvements & Efficiencies = Become Lean
a. Document existing systems so that all employees can follow
b. Review each step & cut out the waste
c. Focus on improving your GP by 2-3%, don’t accept mediocracy today!
2. Pricing & Financials
a. Ensure you have a strong accounting team that can report monthly financial
statements and identify issues early on
b. Keep your clients very close to the market price. If pricing is below market rates the gap will increase as inflation continues.
c. Constantly keep charge out rates up to date (review labour rates, fuel costs, material costs). Make changes mid season. Don’t wait! Keep increasing your pricing!
d. Without changing your business model and increasing fixed costs, consider adding another service offering to generate more revenue for your existing clients
e. Identify and track leading Key Performance Indicators that will tell you what the market is doing.
3. People – Culture
a. Never, never stop focusing on culture and invest in your team.
b. Double down on training – especially sales training
c. Continue to build trust and empower your staff to think like an owner
d. Celebrate small wins and success along the way.
e. Communicate often and be positive with your staff. Continue to build confidence – as there are many opportunities in each of your businesses!
f. Be authentic as a leader
4. Plan – Strategy
a. Review your strategic plan and start setting 90 day goals
b. Be disciplined and follow your cash flow statement
c. Plan for equipment and vehicle purchases – but take on new debt sparingly
d. Strengthen your Balance Sheet
i. Lower your Debt to Equity buy paying down debt and leave cash in the company
ii. Ensure that your assets are generating profit (+20%)
iii. Improve your Asset Turnover (+3.5) by increasing the revenue with
your existing assets
e. Build strong alliances and partnerships with vendors, banks and lenders
In summary, understand your fixed costs vs variable costs; become a destination company; be a strong leader and trust your staff, create an action plan and be true to yourself. The Choice is yours, What will it be? If you have any questions, you can contact me.
