Consulting By Hart | Business Coaching

It’s March, and time for a ‘JPL’ Math Revival

February 23, 2023
It’s March, and time for a ‘JPL’ Math Revival

Many of my readers remember JPL. Jean Paul Lamarche. The North American Landscape Industry guru on overhead recovery. A brilliant math genius. A passionate landscape designer and contractor. One of our professions’ all-time top mentors on landscape business profitability, production rates, pricing and retail success. JPL passed away several years ago. He was my mentor, and my good friend. 


Every winter, I spend most of my time coaching business owners on improving profit. And, I deploy JPL’s formulae weekly if not daily – mentoring landscapers on simple math – and it’s actually not that painful. I realize that many if not most of you have settled on your 2023 pricing, hourly charge out rates, equipment day rates, wages and salaries to staff etc. Many have sent out contracts months or weeks ago. What I also know is that there’s going to be lots of new business come your way this year – new customers, new accounts, new referrals and new employees. My question to you is: Will you price your newly acquired work as the season wears on the same as the work you’ve already sold now?


There are many different ways to determine what to charge and what to pay staff. Some business owners use what I refer to as the ‘dartboard method’, which deploys a mixture of guess work, intuition and knowing how to stay below the competition on price. Others use budgeting software – which can be either a very valuable tool to support profitable pricing, or a weapon to destroy it if not properly used. ‘Pie in the sky’ budgeting can be more disastrous than no budget at all – because it gives a false sense of success that never materializes. Some business owners use spreadsheets which track recent and projected Sales / Costs Of Goods Sold / Overhead – line by line – to determine best predictions on profit margins.


It always amazes me at how much variation there is to the methodology, and related success. Unfortunately for many – figuring out how important both proper budgeting and overhead recovery methods are – comes too late, and the business closes down. And also, I am amazed every year at how hard working many business owners are – year after year, without decent profit or return on their investment. So, I thought I would share a few classic JPL ‘aha’ moments for you to consider going into this year’s pricing strategy on ‘markup’ and recovering overhead.


Starting with ‘mark up’ here’s an example. Let’s say you have materials and labour on a small project that in total cost you $1000. Labour, Labour Burden, Materials (Cost of Goods Sold or COGS) plus overhead recovery. And you want a 20% profit, so you’d likely ‘mark it up’ 20%.


If I handed you a calculator, and asked you to add 20% profit to those costs most typically take $1000 x 1.2 = $1200 as the price to the customer. Right? Does that give you a 20% profit? Nope. 


It gives you only 16.7% profit. ($1000/$1200 = .833 as the cost of the materials, which means .167 x 100 or 16.7% is profit) 

You just left 3.3% profit on the table. When most landscape companies average 2-3% profit (as reported by LMN), that’s a problem. The proper way to calculate ‘profit’ added to Costs of Goods Sold is this: 

$1000 / .8 = $1250 as the price to the customer. $1,000 / $1250 = 20%. Why divide by ‘.8’? Well, 100% minus the 20% desired profit = 80%. So if you divide by 80%, what’s left is the 20% you’re seeking. Look at the numbers here….. 1000 is 80% of 1250.


Right? Right!


So if you use a multiplier of 1.2 to get a ‘profit mark up’ of 20% on a $1000 COGS job – you left $50 on the table. If it’s a $10,000 COGS job – that’s $500 out of your pocket – if it’s a 100,000 job COGS , that’s $5000 profit you thought you’d priced in your ‘markup’ but didn’t by using a multiplier of ‘1.2’.


If you want 10% profit, divide your $1000 project costs (including overhead) by .90 = $1,111 price to the customer.


If you want 15% profit, divide your $1000 project costs (including overhead) by .85 = $1176 price to the customer.


If you want 25% profit, divide your $1000 project costs (including overhead) by .75 = $1333 price to the customer.


I think you get my drift here. While the difference seems small – think of a company with $500,000 in sales, with overhead properly recovered (see this column next month) and looking for a desired profit of 15%:

With the incorrect ‘profit markup’, $500,000 x 1.15 = $575,000. With correct profit margin calculated, $500,000 / .85 = $588,235. On $500,000 in sales, $13,235 is left hanging in the breeze, not in your bank account. That’s 2.65% more profit just by pricing correctly for the profit you thought you were going to get. That’s the hairy edge margin that many companies surf between break even and having enough money to get through the winter and keep going.


I hope that instead of managing disappointment at the end of this upcoming landscaping season, you’ll be happier with profit, by using the right math to calculate the profit you’re after.

Thank you for reading! Until next time.
Jacki Hart
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The Essence Of A Legacy

By Jacki Hart • December 6, 2023
It’s More About ‘Why’ Than ‘What’ you’ve done. Every now and then, I’ve thought about how many hours I’ve spent writing business columns and blogs since 2006. My guess is that I’ve written 200+ columns. Each column hovers around 1,000 words and takes a couple of hours to write, sometimes more. So, that’s like a 200,000 word essay – or a book (or two or three books worth – the average novel is about 70,000 words). And a lot of hours at the keyboard. But that’s WHAT I’ve done, not WHY. And since 2006, I’ve led and developed the Prosperity Partners Program for Landscape Ontario – two full day workshops about running a business - which I delivered to well over 800 business owners across the Province over about 8 years. That Program changed the trajectory for MANY small business owners. It also helped to provide a business blueprint for those aspiring to start a landscape business. But that’s WHAT I’ve done, not WHY. I know from 24 years of running my own landscape business, that it's easy to become overwhelmed with all of the responsibilities of running a business. And to feel alone. That’s why my husband Tim Kearney and I started the Peer-to-Peer Network for Landscape Ontario 11 years ago. And if I were counting the full day workshops and Summit’s I’ve delivered and facilitated for hundreds of Peer-to-Peer Network members, it would be north of 50 days – with another 150 days of prep and research. And a LOT of driving across the province. But that’s WHAT I’ve done, not WHY. And speaking of that landscape business of mine, we won 20 Landscape Ontario Awards of Excellence. But that’s WHAT I’ve done, not WHY. Since 2005, almost every year, I’ve been a speaker at the LO Congress Conference – to thousands of attendees, on topics ranging from engaging the team, business systems, setting goals, leadership and more. And as well, I’ve spoken at Landscape conferences and run full day workshops across the country. But that’s WHAT I’ve done, not WHY. I also sat on the Landscape Ontario Provincial Board of Directors and was elected to the Executive Committee. But that’s WHAT I’ve done, not WHY. Three years ago I took on the curriculum overhaul and continuous improvement delivery for the Employers of Choice program, with now over 300 business owners and managers working hard to implement that robust tool box for better HR management and employee engagement. But that’s WHAT I’ve done, not WHY. Focus On What's Happening Through You, Not To You. I recently read 'The Depressed Motivational Speaker by industry consultant, facilitator and long-time LO friend, Jim Paluch. And this month, I co-facilitated another Feature Congress Event with Jim for the Peer-to-Peer Network, to share some amazing strategies to build resilience under stress. The book is a must-read for business owners. One of the most striking themes for me in this story is “focus on what's happening through you, not to you”. This one simple phrase is so powerful. Without realizing it, I believe that's what I've managed to do, through lots of challenges and adversity in my own journey - always doing my best to show up with authentic advice, separated from my own stresses. Focusing on what has been happening through me rather than to me. Leaving A Legacy I never thought of my role writing blogs, or building and leading the PP, P2P or EOC programs, or speaking at Conferences, as creating a Legacy. That is until now. I don't think that we typically start our careers with the intention of legacy. I didn’t. And for me now, here it is – a time to take a look at my Landscape Ontario legacy. The essence of my ‘WHY has always been to help hard working business owners with fresh ideas and business tools, meaningful discussions, and sharing a new perspectives, with the hope that my ideas and words will build confidence and curiosity, making the path forward a bit easier, more rewarding, and more hopeful. That’s WHY. Because I believe there’s always improvement to aspire to, and the importance of being on a shared journey, together. When you look back on the lives that your career has touched, I'm guessing that you too are building your own legacy – but perhaps without realizing it – like I have. From the people that you've worked with, to the landscapes you've designed, or built, planted, pruned, cared for, enhanced, watered, fertilized, supplied, or illuminated, your legacy lies within. There are watershed moments in every career that are transformational. But we often don't recognize it at the time. Pride is our looking-glass in real-time. Legacy is our rear-view mirror. Perhaps you have heard the phrase, “it takes a community to raise a child”. I've been thinking a lot about the LO community in the past few months, and the 'children' (businesses) it has raised, both of mine included (Water’s Edge Landscaping and Consulting By Hart). This LO community has raised tens of thousands of 'children' in its’ 50 years. And just like you, here reading this Business Tips issue for maybe the first time, or the 200th, I'm grateful to be one of them. A Fond and Grateful Farewell to Landscape Ontario I am confident that all of the Landscape Ontario ‘whats’ I’ve done over the past 15+ years has offered solutions, and some inspiration to try something new for business owners and managers. And that my ‘why’ has helped many to realize that they’re never alone if they engage in all Landscape Ontario has to offer. After 200+ business column issues for Landscape Ontario, I have just submitted my last one. I am sadly retiring from all of my work with LO. I am grateful to have had the opportunity to inspire others to challenge hard working business owners and to have shared my hard-earned wisdom on running a business and a team. For your business and your team. That’s always been my ‘why’, and why I love being a business coach – which I will continue to do in the years ahead. I encourage you to take a moment to take stock of the legacy that you are building…. And to hone in on your ‘why’ vs your ‘what’. Onwards.

What the Market will “Bare”

October 2, 2023
Every now and then, something comes across your desk or into your inbox that is worth paying attention to. If you’re a contractor who sells services to your customers, which include labour and materials, equipment and overhead costs, then this article is worth your time to read. Unless you are either entirely recession proof in your market, or aren’t trying to improve profit in your business. But if you are working hard to figure out a way to be more profitable, read on. Sometimes the most successful businesses have all of the cutting-edge technologies, software, apps, equipment and training. And some businesses have all of that, and still aren’t profitable enough to pay the owner well, build equity and an engaged, career-minded team. Enter J. Paul Lamarche, and his industry-altering pricing system. JPL’s estimating and pricing system was officially adopted by Landscape Ontario in 2005. In 2010, he wrote the book: What the Market will “Bare”. It is unique, because it is specific to landscaping, and is written in plain English. His system includes simplifying and explaining the most important factors in building a profitable business: Understand your true break-even costs (the point at which you neither lose nor make profit on a job). Creating a budget that includes all Overhead and Return on Investment. How to use a precise mathematical system based on division vs multiplication (don’t panic until at least you’ve checked it out!). How to record accurate overhead allocations, including items that are not part of your record keeping and/of cheque payment system. How to calculate return on Investment (ROI) for all vehicles and equipment. How to do a quick breakeven analysis when quoting a job (So that you know how low you can go on your price and avoid working for free – which is especially handy coming into a recessionary trending economy). How to deploy a simple, inexpensive estimating system using the calculator on your phone and a few important basics. In this easy-to-follow book, the main premise is that if your company has no debt load, then you’re more competitive and have a lower cost of doing business, which leads to more profit. The trick is how to get to no debt load (i.e. leased or financed vehicles/equipment) from where you are now, and stay there. When I first heard about JPL and his mathematical system 20 years ago, I went to a few seminars, glazed over when he started doing math on a white board, and left, thinking that I could figure it out on my own. Several hard and low-profit years later, I called him and hired him to come into my business as a consultant. It was 2007. I was 15 years into my landscape maintenance company with 20 employees, doing a million in sales, and made about 6% profit (EBITDA) after I’d paid myself fairly well. I wanted an exit strategy. I wanted to find a way to build value in my company, and have it run without me working 80-hour weeks. I wanted to prepare my business to sell. From the easy-to-use formula’s in this book I learned to build a budget, right-size the fleet and equipment, charge properly, eliminate ‘leakage’ on labour and materials, and gain ROI on my investment in the fleet. By 2014, I had only grown sales by 10% (by choice), but I reduced the number of staff by 25%, increased my own pay by 20%, upgraded the ‘fleet’ with no debt load, had a team of 3 managers (admin, sales and ops) running the day-to-day and increased profit (EBITDA) to 18%. By the time I sold the business that year, I was only at the office 1 day a week, and selling the higher end soft landscape projects 2 days a week on a 6-figure salary, with six figure profit on top. “What the Market will BARE” was my blueprint for success. At first, it was a bit daunting, but taking the time to go one chapter at a time, one example at a time, and learning the ‘math’ was well worth the effort for years to come. In this book, you’ll learn: How to calculate your overhead and ‘break-even’ How to calculate your true labour costs, including labour burden Benchmarks – and how they relate to your business Understanding the difference between markup and profit margin Setting a budget to guide your pricing Understanding Return on Investment Here’s just one example of a mistake in pricing that’s made by the majority of business owners, that this book teaches the reader to correct: You buy a load of plants for a project that cost you $1000. You decide that you want 30% profit on them. So, you take the $1000 you spent, and multiply it x 1.3 which = $1300. So you think you have a 30% profit on the plants. Right? But you don’t. $1000 (what you spent) divided by $1300 (what you charged) = 76.9%. So, if what you spent to buy the plants is 76.9% of what you sold them for to the customer, then the difference, 23.1%, is your profit. Wait. What??! Look at that again. You just short-changed yourself 6.9% (the 30% you want minus 6.9% you miscalculated), profit on your materials. For most companies who make less than 10% profit overall, this places them on the hairy edge of ‘lower than hoped for’ profit. However, if you were to read ‘What The Market Will “Bare”, you’ll understand that division is the key to profit margins, not multiplication – as used in the example above. Here’s the division example: You buy a load of plants for a project that cost you $1000. You decide that you want to make 30% profit on the plants. So, you take the $1000 you spent, and DIVIDE it by (100% - 30%), which equals 70%. ( This means you take $1000/.7), which = $1428.57 as the price to charge your customer. So you now have a 30% profit on the plants… the $1000 you spent on the plants = 70% of what you charged for them. This is just one example of simple corrections you will likely make to your business every year, sometimes every day, on pricing and profit by reading and applying this industry-endorsed pricing system. There are many more valuable lessons in the book, that will touch on and fix leakage in all corners of your operations, improve the decisions you make, and correct your pricing. On a personal note: Paul was not only my business coach, we became friends, meeting for lunch several times each year to ‘catch up’ on business, for over ten years. He helped me sell my landscape company, and he mentored me in setting up my consulting business. Sadly, Paul passed away in June of 2020 at the age of 70. His widow, Stella, has kindly offered to give all of the proceeds of the sale of Paul’s books to the Landscape Ontario Scholarship Fund, to support education of our newest up and coming landscape professionals. I hope that you purchase one, and improve the profit in your company.
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