Earlier this year, we did an exercise with the entire Grunder Landscaping Team to talk about profitability and explain where all the money goes in our operation. To simplify the conversation and put it into terms that are easy to understand, we used the $1.00 method. Here’s how it works.

You start out with $1.00, and with the percentages you know on costs for your business, you then determine exactly where each $1 that comes into our business goes. These aren’t our real numbers, but here’s an example based on industry standards:

For every $1 in revenue, we have:

$0.46 Cost of Goods Sold

$0.47 Expenses (Overhead)

If we subtract our costs and our overhead; we are left with $0.07 in Profit. Which is great, but it doesn’t end there. What about taxes and depreciation? 

$0.03 Company Taxes

$0.02 Depreciation

What’s left: $0.02 in profit.

And here’s the thing. That $0.02 doesn’t just get deposited into the owner’s bank account. It’s the cash we have available to:

• Hire new team members who may not immediately produce revenue
• Buy trucks and equipment we’ll need next year
• Make improvements to our existing facilities
• Purchase new property or facilities for expansion
• Cover property or equipment damage

We’re transparent with our team and believe in open book management, and sharing the numbers this way puts it into terms that everyone on our team can understand. The collective feedback we received: “Wow, I didn’t realize our profit margins were that tight.”

And when we explain what the profits go for, there’s a clear cause and effect relationship that highlights how each team member impacts the company’s success or failure in a year. If we have:

• Equipment or property damages
• Jobs finishing above bid hours
• Less sales and revenue than we budgeted for
• Clients who don’t pay their bills

It means we may not have the funds to do things that we all want to do as a company, and we may have to say “not this year” to things like:

• Replacing some of our older trucks and equipment
• Adding new team members
• Renovating parts of our facility
• Additional bonuses or raises

This exercise is a great way to help your team understand what’s on the line year after year, and get them bought in and taking ownership of their role and the impact it has on the team as a whole. Try it with your own team this summer, I think you’ll be pleasantly surprised by their reactions.

Vince Torchia
Vice President & Director of Strategy
The Grow Group & Grunder Landscaping Co.

P.S. Come see Grunder Landscaping Co. for yourself this fall during our GLC Field Trips. We have just 2 date options left this year, and our October event is close to selling out. Mark your calendar and claim your spot now!