LJN Blog Posts

The Seven biggest mistakes I have made in business

1. Starting the business without enough investment capital – my wife and I started from our 600 square foot apartment downtown Toronto with a pick up and a wheelbarrow and absolutely no money. I will never forget the first winter in business when she took a six week horticulture course at Landscape Ontario, we had to roll our pennies to put fuel in her car to get there…..it paid off! Starting the company on a shoe string budget was a mistake, we came close to losing our newly purchased home that winter too. The first five years of business were much harder than I realized at the time….we had huge obstacles to overcome purchasing equipment and maintaining adequate cash flow to support our projects without enough working capital. Had we spent more time on business planning before starting we would have understood the actual capital needed in advance. I believe that landscape companies need 15-20% of annual revenue in liquid cash made up of its own cash and/or a line of credit. We found that the bank was not terribly helpful until we were in business for five years and showed three years of very positive financial statements. It’s no accident that “technicians” start landscape companies……anybody with a business background would run for the hills if faced with the variables in this business! Lesson learned – start with a budget, and then stick to it!

2. Growing the company before the systems were in place – we started our business without the business education or experience we needed to operate an efficient business. We simply wanted to be great landscapers….the problem is, you cannot become a great landscape contractor without great systems to allow your company to produce great results once you add a second crew. The transition from being a hands on owners building our award winning gardens like craftsmen into trying become business owners that hire people to design and create projects at the same quality while earning the same profit margin that we had made as owner – operators was more stressful than it needed to be for us. We simply could not find a solution or a product that had the systems in a “out of the box” format. Creating systems by trial and error while managing the day to day operation from inside the vortex of day to day problems that arise in running a landscape company was almost impossible. We should have built the systems first, then grown into them. Unfortunately we realized what systems were needed using a trial and error method – an expensive but foolproof way to learn…I think if we had more business education or more experience in the industry we would have understood this sooner….we found out the hard way that the secret to success in business is being prepared to do the work before you get the work! Lesson learned – become a planning organization.

3. Growing too fast - We started in a neighborhood that was under a great deal of renovation, and the real estate values were increasing quickly. We simply didn’t have the working capital to expand at 30-50% each year. Our growth curve continued at such a high pace for the first nine years in business that we continually struggled with cash flow despite earning double digit profits every year! We could have went out of business many times had our suppliers not been as understanding and supportive during times of cash flow shortage, the banks simply are not helpful unless you are financially stable, most start up small businesses do not fit the lending requirements of the bank unless the company has a great track record and the owner has really high personal net worth. Being forthright, and explaining our financial situation to suppliers made a difference – if you find yourself in a bind with vendor accounts, make sure you communicate the situation clearly, and never break a promise once you have made arrangements to pay your debt. The best solution to this problem is to ensure you don’t out grow your working capital – you need at least ten to fifteen percent of annual sales in cash to manage your day to day operating requirements or you will struggle and make bad decisions as a result of a cash flow shortage. Lesson learned – never outgrow your working capital.

4. Not identifying Superstars soon enough – one mistake that haunts me, and probably the most expensive in terms of lost opportunity would be this one. We have had a few outstanding people leave our company over the years simply because they didn’t see this industry or my company being able to support their future financially….we could have kept these people, and capitalized on their capabilities together if we had the right system in place. I have developed a way or keeping these Superstars – again, unfortunately by trial and error! By leveraging these people and providing a more entrepreneurial environment and pay structure we have been able to expand the company beyond my expectations while reducing my own personal workload. Lesson learned – create an entrepreneurial environment or forever be surrounded by employees that work for a paycheque…..


5. Trying to operate without the right equipment – in the first few years of business I was deathly afraid of monthly payments….when we really started to watch our spending on Labour and Equipment as a ratio to gross sales it was a scary state….we were spending 36% on Labour and 6% on equipment. Most of our equipment was old, we didn’t have a mechanic on staff to maintain the equipment so we had a lot of downtime, and often we were working harder longer hours than we should have, with more people than we needed to. I started turning out the older gear and leasing newer equipment, and more of the right equipment to ensure labour savings. We found we could do more work in less time with fewer people….we we on to the next project sooner…sales revenue increased, labour spending dropped to 22% of gross sales within 18 months, and equipment increased to 10% of gross sales. The result here was an increase of 10% in net profits….and better yet our revenue had increased by 82% with the same number of people!!! That meant we could pay better wages to staff, pay ourselves more, run a more professional company and attract larger more complex projects with this modern fleet of equipment! Lesson learned – being cheap is really expensive!

6. Doing complicated work without the right skilled trades – I can think of more than once when I decided to take on too much work at one time. As landscapers we have a short window to make hay. Customers are often buying with “instant gratification” in mind. We all have crews that are best suited for specific types of work….be realistic about this. I remember one Monday morning in my second year – we had two Supervisors, one was incredible, the other not so good! We had two complicated projects to work on at one time….I made the mistake of spending my day with the Superstar Supervisor setting up a new job – meanwhile at the other site the mediocre Supervisor was pouring a concrete pad for a flagstone patio 3” too high…..that was expensive! I have had more of these situations happen than I care to remember. Lesson learned – do not overbook your companies skills, and never take work that is outside of your skill set without considering a great subcontractor to manage the work that is outside of your expertise. Lesson learned – Understand how many hours of work you are selling – and don’t sell more than you have available, level the workload if you want to work efficiently.

7. Hiring the wrong subcontractors – before we started building our own gunite pools and spa’s we hired subcontractors. There was a serious building boom at the time. The reputable pool companies in the area were booked solid for the season. I had a great opportunity to build a landscape project, but it included a concrete spa. I decided to hire a “start up” pool company who had a price that was $5,000 less than the others and he could start right away….he was basically a man and a pick up, and I should have known better. He built a concrete shell, but in the process he must have either forgotten to install some plumbing lines, or he may have broken them while pouring the concrete. Either way, I had paid him 15k of 22k and he disappeared…..I had to jackhammer the spa out and start again. That’s how I started building pools and spa’s. Lesson learned – never hire subcontractors based on price….always work with reputable companies when collaborating even if there isn’t much room for mark up.