What Budget? How to Create a Budget You and Your Team Can Understand Like a Scoreboard

Steve and Liz Kevin Keim: [00:00:00] So my sh my shining area that I looked at was actually our mobility costs, so our cell phones and iPads and other tablets like that. We were on at and t a company based in Texas and most of us in Texas were on at t. And I had or was able to go just shop around to Verizon, saved the company 14 grand. In telecommunications exp expenses Speaker 2: Welcome to the Roots of Success, the Premier Landscapers podcast that brings you the latest tips and strategies for successful landscape business. I'm Jim Calli, one of the principles and coaches of McFarland Stanford. Jason New and I started McFarland Stanford to coach landscape businesses after years in the industry ourselves, now more than 10 years since we began, McFarland has a deep bench of coaches and subject matter experts who work with our clients on very specific issues of business. Whether you're struggling with people. Profits or just day-to-day challenges Our coaches and guests have the real world experience and practical advice to help you [00:01:00] build a thriving and profitable landscape business. Kevin Keim: Welcome to the Roots of Success podcast. My name is Kevin Km, and I'm your host today for McFarland Stanford. I am joined today with Steve Ali and Liz Helton from the McFarland team. If you guys wanna say hello, Steve Allie: Hello everybody. Kevin Keim: we're obviously gonna start by pointing out the fact, yes, Steve and I are wearing the same polo today and it was not planned. But either way, we're excited to talk about budgeting today with you all. For those of you who have not met Steven or Liz. Steven is our Vice President of Accounting services here at McFarland Stanford, and Liz is our chief financial officer, also known as the McFarland receipt ambassador to keep us in track. Not that I'm ever guilty of not Liz Helton: Never, Kevin never. Steve Allie: Nor am I. I'm never guilty. Kevin Keim: Never. Correct. So excited to talk about budgeting today. It's an important [00:02:00] part of every business, especially in the landscaping industry where we have a high. Labor burden as you all are well aware. So let's start Liz and Steve by saying why should somebody build a budget and take the time to do so? Steve Allie: Well number one it's, a plan, right? It's important to have a financial plan. Goals, set goals for the year. What do you want to happen, right? And just targets for your team and whether or not you're gonna hit 1 million, 2 million, 3 million, et cetera. What, and what do you have to do in order to obtain that goal? Do you need to hire new people? Do you have to let people go? What is your. Target labor percentage is gonna be, is it 30% as a whole? Is it 40% for maintenance, et cetera? All of those are important. As it, as you go throughout the year. It's a, you have to be strategic about running your business. So an important, [00:03:00] a budget is extremely important before the year starts. Liz Helton: Steve and I have a saying. We like to say that you can only manage the things that you measure. And so I think a budget really helps you measure things going into the future. And as, as Steve said it's. Plan for what you expect to happen. That doesn't mean that it's never going to change or that there's never a good reason to say below your budget or make adjustments down the road for unexpected things that come up. You can't be expected to have a budget and by November, December everything's just been perfect. Everything went exactly according to plan. So you have to be a little bit flexible, but it also gives you the ability to look back and say maybe your mid-year and say, okay. My crews are asking for more equipment or we're not hitting our sales goals, and the sales team wants more marketing dollars spent. And you can look back to your budget and [00:04:00] use that to make informed decisions. Like maybe those are costs that you hadn't anticipated, hadn't budgeted for. And so if you still feel like they're important, you gotta figure out how do we do that? Because obviously if you change one thing in the budget it's gonna have a ripple effect and everything else will change as well. Kevin Keim: Yeah, well said. There's a quote that I wrote down that I heard a couple years ago that really stands out. Budgeting is not forecasting what you hope. Happens, it's assigning your intention to numbers, right? And it's an important thing. So, so if I'm a landscaper, and I, hear this, we hear this quite a bit, right? That we're landscapers who never have built a budget. Where do I start? Liz Helton: So I think budgeting always starts with your historical data. Like you said, it's not what you hope is going to happen. So if you look back at your historical data and your direct labor costs always run 35% of your top line sales. There's no point in budgeting [00:05:00] 28% because given that in your budget, nothing else is going to change. Where are you gonna find that 7% increased efficiency? You can't just hope that over time you know it's going to get better. You have to have a plan for improving it, or your assumption should be that it is exactly the way it's always been in the past. Kevin Keim: Yeah it's, a great Steve Allie: And if you're new to budgeting, my recommendation would just be like Liz said, start with historical data and then. Plug in a growth rate, if you expect to grow 3%, 5% do that across the board. And then you update the forecast, right? Because the budget is as of 1231 going forward, right? And a forecast is when you update it every single month and start there, apply a growth rate, and then update the forecast as you go along. So the following year. You know what you're doing, you're become more efficient at it, and it becomes a valuable tool. But especially if you don't have anybody helping you. But [00:06:00] and you're new to it Kevin Keim: Yep. Steve Allie: because it is complicated and I would start simple. I. Kevin Keim: So I just wanna draw attention back to that comment you made, 'cause I think it's really impactful. One, describe to us again, or hit the highlights of what is a budget versus forecast, because you just perfectly articulated that. Steve Allie: So a budget is, I would call it a static plan, right? Versus a forecast. That's it. It whereas a forecast that's more dynamic, right? It fluctuates as time progresses. Kevin Keim: Yeah. Steve Allie: So you have a budget as of you create it in December and you don't touch it. A forecast, however, is gonna be when you complete a month. When you close a month. So say for example, if you close. January, February, March. So now you have historical data for the current year. However, your budget is not gonna change, but your forecast is gonna change for those nine months, right? So it's gonna be what will happen where a budget is [00:07:00] what you want to happen, if that Kevin Keim: Right. It does. Yeah. Great. Thank you Steve, and for, giving us that guidance. So. For those of you who've met me, you would probably think I'm the last person who would be the one who'd hosts a topic around a, about budgeting. But just to reference back to my Clifton strengths, my number one is strategic. And this I probably over budgeted across the board at Innovative. I love a good budget. More importantly, I know I love a, scoreboard and I love being able to communicate. We'll talk all about that today. We'll talk some about some of the tools and stuff to Steve's point of where you just begin to get going. But let's maybe start with what is probably the most common or the easiest thing to start with, which is your top line budget or your revenue budget. And beginning with that, so if I'm a landscaper, Liz and I am wanting to start and build a basic revenue budget for 2026 I know you talked about historical and your historical data as your starting [00:08:00] point. What's the next step in taking that to go build a revenue budget for the year? Liz Helton: Well, I think for the landscaping industry in particular, a budget has to be done on a seasonal basis. I don't think that's for most companies generally as simple as a calendar quarter because the fluctuations really vary depending on, the region of the country that you're in. Do you get more or less sunshine? Do you get more or less snow? And I think you have to really plan out if you have a million dollar top line goal, you have to plan out when are the months that you are going to be a able to actually produce that much work. January and February for a lot of places might be really slow unless you're pushing snow. And if you get a lot of that's totally different, but you have to have some. Sense of the seasonality of your business and when you are, going to have the ability to make the sales to hit your top line goal. So you wanna spread that [00:09:00] save million dollars, or if your historical number was a million dollars and you say, I want to grow. 20% this year. Where, what months is that $1.2 million going to fall in? And I would encourage companies to look back at trends month over month or quarter over quarter, just to see. Steve and I have worked with clients who they may have no reason, for example, for having kind of a bad third quarter, but for whatever reason. Historically, they just know maybe it's burnout after a busy spring and summer. Maybe their clients are, burned out with the spend. Maybe there's other factors at play. But if you know that the third quarter always hurts you really need to plan for that. That helps you avoid surprises. It helps you understand what you need to have on hand from a cash cushion perspective. Do you need a line of credit? Do you need to tap that line of credit? Kevin Keim: You [00:10:00] betcha. And I mean for those of you that are in RRA peer groups this is why we take a rolling 12 months when we look at our financial number really to make sure we're taking into accountability the seasonality of the business. And so it only makes sense that. When you go to take your budget that you're accounting for the seasonality in that as well. So it's a good point. So Steve if I'm using QuickBooks and I'm wanting to do that what, basic tools could I use to be able to help take some of those revenue numbers from historical data and, apply a budget for it for 2026 and beyond. Steve Allie: So QuickBooks has a very basic budgeting tool. They ask, they have, you're able to create budgets and forecasts inside of QuickBooks Online. Actually their enterprise suite is much more robust. But for online users it's, so you have, you're able to budget for on your balance sheet income statement and then also your your cash flows. On a different platform, on a, in a different [00:11:00] section, essentially. And so for, in QuickBooks, you're able to pull all of your historical data for the year, and then you can extrapolate that for 12 months. So basically, if you're making, if you say, for example, if you made $120,000 in maintenance revenue for the year, you would just, it would calculate $10,000 per month. Right. So real, super simple and you go down the list in terms of your top line income expenses cost of good, sold, et cetera. But there are a lot of limitations in their budgeting section, right? You can't break it up by class. And that is huge. Something that we stress it, it's so important because your maintenance department, your landscape department, irrigation, construction, they're all gonna be different. They're all gonna have different margins. And so if you're forecasting top line revenue, if one department is gonna have a higher margin, your net income is gonna be different. Right. [00:12:00] So there are better tools out there than just using QuickBooks, in my opinion. Um, Kevin Keim: Nothing. Nothing frustrates me more than knowing that classes are set up in QuickBooks yet we've just completely ignored that Steve Allie: yeah, exactly. It's not even a feature in there. And you're essentially entering data manually if you're not. If you're not taking prior year data versus in other platforms and we use a platform called Reach Reporting, and you're able to plug in various assumptions. So if you expect your sales to go at 3%, plug in if you expect your accounts payable what is your average turnaround time for paying a bill? Is it 30 days, 60 days? So that's another metric that you put in there. How often do you collect your receivables? Is it every 30 days? Is it 10 days, 60 days? Whatever it is, you're able to plug that in. And so, and you're also able to make calculated [00:13:00] fields. So if you expect your direct labor costs to be 35%, you're able to reference that back to your budget on the p and l. Kevin Keim: Yeah. Yeah. Steve Allie: And so, and then we call it a three way budget tool. And that's something that QuickBooks Online does not have. However their enterprise version does. And the way that a three-way budget works is that it incorporates any changes that you make in your income statement, and then that changes your balance sheet, and then that changes your cash flow statement. So when you're reviewing this budget, you have a good idea of what your cash flow is gonna be at the end of the year. Are you actually, if I make these changes, am I actually making money? At the end of the year. Kevin Keim: Yeah. For those of you, for those of you who are listening, you're thinking, oh boy that's a lot. And it is. Um, It's robust and Steve Allie: budgeting is, it's complicated. Kevin Keim: Yeah Correct, But it doesn't have to be is the thing I want. So Steve Allie: to be no. Kevin Keim: to [00:14:00] have people take away, right? For those of you who maybe listen to this podcast and thinking I've never had a budget. I've been in business for 10 years. I'm a $4 million company. I don't have a budget. That's okay. It's, not okay. I want you to change that behavior but, we can crawl before we walk and before we run, right? So I think that's an important part of it. And we'll talk a bit more about tools. Later in our, little show here. But I think one basic thing, I'm sure everyone who knows me is not surprised. I'm gonna bring up ai. Come on. It's just an easy opportunity in the world we live in. Steve Allie: Great point. Yep. Kevin Keim: Yeah. Just, yeah. It, it happens. Right? Take the last 24 months of your revenue. Your reports, whether that's from QuickBooks and you're exporting it, whether it's in your operational software aspire element job or whatever you're using, go export the last two years if you can get it, or one year at a bare minimum. I like to Liz, this point, I like to see trends and so therefore I like to take a bigger picture, take a bigger [00:15:00] snapshot of time, go export those revenue by month, import that into chat, GBT. And ask it to break it into seasonality, curves, and to create a recommendation for 2026 revenue projection, right? So it doesn't have to be as complex as the powerful for budgeting or suite that Steve was talking about. It can be as simple as taking the historical data that you have. I'm also a big believer, and I coach too, and what we talk about in our peer groups obviously is you should know your numbers. And so even if it's not an export. And you wanna go to our good old fashioned tried and true dear friend Excel, do that. Go build January through December for 2026. Go pull 2020 fours revenue for January. Pull 20 fives revenue for January, and then start to look at what those are, what your growth has been by percent, and take a basic straight line percent increase to it. That's a budget. It's very, rough. But it's a budget and you're taking into that [00:16:00] seasonality that Liz was taking into consideration. 'cause you're doing it month by month. And so your historical numbers will help reflect that. So whether you get as complex as reach or if you're as basic as an Excel Steve Allie: Yeah, Kevin Keim: they're all a budget. It's all great. Steve Allie: so many tools out there right now. So where chat, GPT, you can plug in your p and l and say, Kevin Keim: Yeah. Correct. Steve Allie: with these assumptions, and it will produce something. And it, go ahead, Liz. Liz Helton: Well, I think one of the benefits of using, like if you are using QuickBooks for your financial. System. Being a, being able to upload or input a budget into QuickBooks then allows you to run actual. Versus budgeted reports, which can be very helpful. In terms of isolating maybe where things have gone wrong or maybe where things have gone right. And you can say, okay because our direct labor is down now we have extra dollars that we can [00:17:00] put towards other uses in the business. The flip side is, if somebody goes and, blows an estimate and doesn't take into account the fact that materials prices have gone up significantly. You may be in a little bit of a hole. And again, looking at budget to actual allows you to make changes right then and there. You don't have to wait until the end of the year and go, oh my gosh, what happened? Nothing turned out the way we expected it. You can make changes along the way as you go. Steve Allie: Absolutely, and you don't have to just use one platform, Kevin Keim: Yeah. Steve Allie: you could have multiple budgets in different places. So if you wanted to use QuickBooks just for that feature. Go for it. Kevin Keim: Made my heart very happy by telling me that I can overanalyze things. Never. So maybe just to wrap up a, point to this, like, I think it's really important what Liz just said is whether you're using the budgeting tool inside of QuickBooks or whether you budget in some other possible way, you can still go [00:18:00] back and upload your budget into QuickBooks to be able to compare your budgeted versus actuals. So I, that can be a bit confusing. I just wanted to draw the delineation between the two there. 'cause I think it's important. To do that. I did that in my past life, right? I would play around with Excel spreadsheets and AI and do whatever, and then come back and put it into QuickBooks to track where we were as we moved through the year. Okay. Steve Allie: lot of people use the LMN budgeting Kevin Keim: Yeah. Steve Allie: Which is a really good one. Kevin Keim: Yeah, absolutely. Okay. So that's revenue budgeting. And that's one of the, with the basic budgets, let's talk about our dear friend cost and how we can manage it. And I think that we could spend a lot of time on this. And so just to keep us on track and not have a budgeting podcast that's seven hours long, although some people may want that. That's not what we're gonna do today. We're gonna try to keep it at brisk here. I think what we all would wanna focus on, the one area. What is that one area? Liz and [00:19:00] Steve, what do we talk about all the time? Steve Allie: Labor. Kevin Keim: Labor, right? Right. Okay. So this is literally where you win or lose as a landscaper, right? It's that important and impactful your business. So I'm a landscaper. I've never done a budget before. How do I take labor and how do I budget for it? How to budget for Labor Liz Helton: So I think it starts with your monthly columns and you have your seasonality built into your top line revenue. From there, if you look at your historical data and. I think it's best to do this on a class by class basis, but you don't have to. If you look at your historical data and you go, we are always between 30 and 32%. Direct labor costs as a cost of sales. That is the range that you should be budgeting. So obviously your cost of labor is gonna go up in the months where you're busier, where you're earning more money. It'll go down in slower months. But as a [00:20:00] ratio, as a proportion of your sales, you, it should be within that range. Ideally in this industry, we like to see it on average at 30% or below. But we can see wide variation among classes and that's why if you can, it's important to be able to get that historical data on a class by class basis. A maintenance division might be running as high as 40% because it is very labor intensive. A design build may be in the 25% or even less depending on the use of subcontractors. And that's just the nature of the beast. And so it's important that you can break that out by class or by division in your company because it's the only way really to tell. Where you're profitable and where maybe you're not as profitable as you think you are, if you just amalgamate everything into one into one company. Kevin Keim: Yeah. I'm gonna get on my soapbox for a minute because I want to talk about classes because I think [00:21:00] this is important, and I know we're talking about labor mainly, and we'll stick to that, but costs have a way of hiding. If you don't have them broken into classes, right? You could look at your maintenance or you could look at irrigation, or you could look at anything that looks at holistically. If it's all just cost in QuickBooks how can you, how do you know, right? How do you know that division of your company is as profitable as it should or could be? And so I know that's my soapbox about classes and how you should make sure that you use them if you have it. Properly set them up today and make sure that you're doing it by revenue and by cost so that you have both of them in there. So, So, so maybe another way to mention this, and Steven, and I'll let you talk, about this a bit more. I just feel like the way that you could look at this is boil this down to a dollar, right? So if you know that your goal is to hit 10 to 15% net profit then, reverse it from there and think, okay, what percent of that dollar. Can I afford to spend on labor? Right? And then you can [00:22:00] build a formula out from there and back it into your classes. So that's a very simplified way. But you know, Steve what other ideas do you have for a landscaper who's never built a labor budget? Steve Allie: First of all, when you're looking at historical monthly, because it li Liz, I totally agree it, it's very important to look at it monthly and but one. One thing I highly recommend make those accrual entries because if you don't, you'll have months to where you, you make three payrolls versus another month you make four. And so when you're analyzing the seasonality, it's gonna be completely different. It's not gonna be correct. So when you're building a budget and you're looking at historical data, make sure it's right, because if your numbers are not correct what are you doing? Right? You're not. It's not gonna be worth your time creating it. So, but if you're gonna start with, say, like Kevin's example, if you wanna start with 10% [00:23:00] net income margin, you work your way you can work your way up. Because historical your overhead expense is not gonna, it's not gonna change. Obviously there's gonna be periods where they do insurance. Insurance renewal rates are gonna change. Your interest costs are gonna change, but. As a whole, it should stay pretty consistent. It should stay right around that 30% income range. I would say between 20 and 30 is what I typically see. And so if you know your overhead expense is gonna be 30%. Okay, well my GP has to be, what? It has to be about four. At least 40%. Right? And so if your labor cost is 30, that doesn't leave you with a lot of room, right? Because then you're gonna have to manage materials. Materials cost right now, from what I'm seeing, are so high. And that's an easy way that you can mitigate that, that that low GP number.[00:24:00] Kevin Keim: Yep. Yep. Steve Allie: Shop around look at different vendors. I know you might be loyal to different, to certain vendors, but they might not be the cheapest out there and the highest quality. So that, would be my, because you, have three main expenses and cost of good sold labor materials, subs, and Kevin Keim: Yep. Steve Allie: so The hard, the easiest way to change GP is gonna be managing subs and materials. Labor's really difficult because you're going to have to manage overtime and stay on budget with your ops managers, Kevin Keim: yep. But. Steve Allie: materials and subs Kevin Keim: But it's critical to do it right? You can't just focus on the materials alone. Like, you're not gonna, you're not gonna budget, like squeeze your way to profitability, most likely, right? From a material perspective. Importance of Job Costing to Budgeting Liz Helton: So Kevin, this might be a good time just to talk a little bit about job costing, because if you [00:25:00] have a budget and you know what gross profit percentage you need to hit you can actually evaluate every job on whether or not it's doing that right. And if, it's not hitting the target was it. Estimated with poor information have situations changed. Or were the original hours budgeted or estimated, just completely wrong. And that allows you to evaluate almost in real time or directly after completing a job. What did we do right or wrong? And if there are things that need improvement like with estimating or with pricing, you can do that. Literally on the very next job so you don't continue to make the same error over and over again. Kevin Keim: I can't stress enough how important that is on. On projects that you guys do. A a postmortem, right? Pardon? It doesn't matter what with Project Born Dead, which way you gonna look [00:26:00] at it. But yeah, just analyze that and, see to keep yourself accountable. But okay. So, Steve Allie: do it in QuickBooks. It doesn't have to be in a, fancy, ' Liz Helton: cause every job should have its own mini budget. Right. It's priced a certain way. You have a certain number of hours you have to purchase X amount of materials. So obviously that all has to be priced right. In order to produce the gross profit percentage that you need in order to cover your fixed or overhead expenses, which, like Steve alluded to you, you pretty much already know. Kevin Keim: Yeah. Liz Helton: to be things that. You made decisions about 'em in the past, and you have to get to the end of the decision period before you can make a big change again to those overhead expense numbers. Kevin Keim: Yeah. Now, if you're listening to this and we're talking about, budgeting, you're probably, your heart's getting heart palpitations and you're worrying about this let's pull it back to, my lovely little kiss method. Keep it simple, stupid, right? So, Liz talked about earlier in this section for labor about [00:27:00] starting with a ratio, your revenue to labor ratio. Right? So I think you can start in a very simple way of knowing. I'm like, okay, I, I, I. wanna be, or we are gonna be a $4 million company next year. And I know that we are our revenue per hour or revenue per man hour. That's an important number to know. You can start to at a high level pull in what the total number of hours you would need, and you can work your way from there. Now, here's the catch that I want everyone to remember, is that when you're looking at hours, what hour are you using? Is it a true labor hour? Meaning like it's from payroll or are you doing estimated hours at a job level? Right. But I just, I want everyone to keep in mind that efficiency matters there, right? Because we're not getting. 100% of that labor hour in that job. And so I always would always tell everybody, like I always budgeted 75% in my mind, let me rephrase that. I expected 75% [00:28:00] efficiency of an hour, so I budgeted an hour at 1.25 hours. And that's how I could pack in to make sure that you had some wiggle room there on labor. Now. Don't overprice yourself on a job, right? Where you have a sales issue there too. So you gotta be mindful of this, but this top down, bottom up approach to the job level costing is an important way to do it, right? Whether you're using tools like QuickBooks or historical data, you can even just use some simple formulas in Excel. Again, I'll try to keep it simple for some people 'cause it's a good and effective way of doing it, right. Okay. The biggest thing to remember here is you're not gonna save your way to fruition with material costs. So you gotta wash your labor. It's most likely your number one expense. So budget it and manage it tightly, or it's gonna manage you right as a business. I believe that this is Ian's favorite thing to talk about when he does all these peer group calls, right? Is your overtime kills you, right? [00:29:00] So it's an important part. All right, so let's talk Liz a little bit about a p and l budgeting. I don't wanna spend a lot of time on this 'cause this can get, we can really, well I know the two of you can really geek out on this. So I don't wanna spend too much time on that. But maybe let's start with a high expectation of what, when we coach our members and other talk at industry events, speaking, give us a quick breakdown of percentage of what your p and l should look like. What's your what's your gross profit look like, et cetera. Liz Helton: So if you start with a hundred percent that's your sales, right? And hopefully nobody's expenses are more than a hundred percent, or you are, losing money at the end of the day. If we're on average targeting about a 50% gross profit margin that means that all of your direct costs, your cost of goods sold account for about 50% of. The cost of the sale that leaves you with 50%. And [00:30:00] if you have overhead or indirect expenses of about 40%, right? 50 minus 40 leaves you with a net income of 10%, which is very solid. If any of the inputs in the 50% bucket or the 40% bucket changed, it's all going to flow down to that bottom line for better or for worse. So. With everything that we talk about in finances, we always talk about focusing on the things that can have the most immediate and the biggest impact on your business. I, wouldn't really like spend more than about half a second thinking about what I'm gonna budget for my uniforms, right? Because I could cut my uniform budget by 50%. It's just such a small piece of my p and l that it's not really gonna move the needle. It's not worth the effort. Right. That's where, as Steve said, you gotta look at direct labor materials and subs and make sure that. [00:31:00] Whatever those inputs are, whatever those costs are for you, that you are recovering those in your sales price. And if that ends up being so high that you are pricing yourself out of the market then you really have to think about how much am I paying my crews? Where am I sourcing my materials from and why are my subs charging? So much because you still have to mark them up. There's a degree of management there. And to hit a 50% gross profit margin, really those three big things are, what you have to control. Kevin Keim: Steve holistically, what should they expect? An increase just generally speaking of, either materials and or even labor, quite frankly. When you're budgeting in the year. Yeah Steve Allie: I, would say on average three Kevin Keim: So a good 3% increase across the area is a good way to cover that. I think material costs, we can talk about that. We can focus on that, but I, one of the little. Again I, you guys know I love me some ai. I, in the [00:32:00] past when I was at Innovative, I took my p and ls. I, did not do a p and l budget. I wasn't that granular. At the end of the day, I still do have a lot of leading with influencing in me. And so I took that p and l and I uploaded that in chat, GBT an asset to analyze trends in my cost structure. And to Liz's point, there's not a lot of things that are. Gonna stand out, but there are a couple things that you can find. So my sh my shining area that I looked at was actually our mobility costs, so our cell phones and iPads and other tablets like that. We were on at and t a company based in Texas and most of us in Texas were on at t. And I had or was able to go just shop around to Verizon, saved the company 14 grand. In telecommunications exp expenses and moved everybody over to a new plant, which is not fun, by the way. But if y all remember back in time, I did that the week [00:33:00] before at t imploded. Remember when cell phone towers went down and nobody's phone was working? Oh yeah. I look like a damn genius because we were on Verizon. Total luck. More important thing is that I saved 14,000 bucks. Is that gonna help you every year? No. But there are areas in your GNA that you could look at and find some things here and there. The biggest thing that I always wanna point out here, going back to my AI and my love of software, I was actually banned from buying software because it. That shit adds up, right? Lots of it adds up. at that. How many things are on your p and l or in your credit card transactions that are monthly recurring bills for all these little software tools that we can talk about here in a minute, whether it's for budgeting or everything else, it adds up, man. And if you don't pay attention to that or do an analysis of that it can get a little wild. Again, take your credit card receipts or your credit card statements, upload it in the chat, GPT and ask for recurring payments. [00:34:00] Let it point to you. Liz Helton: The, the area Kevin that, we see and it varies widely across the board in part because insurance is regulated at the state level. And so every state is gonna have, some different things, but landscapers need a, basic level of insurance coverage, right? To protect your assets and your business in the event something goes, horribly wrong. And we have always. Said that you need to shop your insurance once a year. There's not a lot of incentives given for loyalty a across insurers, and at the end of the day, it's really a product that you can compare very granularly coverage versus the same coverage, and you'd be amazed at the savings that you can find there if you look at it regularly as well. Kevin Keim: Yeah. I get. Liz Helton: Same thing with software, you end up with insurance having like [00:35:00] duplicate duplicative coverage. And again, that's just wasteful. So to the extent that you can really tighten that up and only pay for truly what you need you can find some big cost savings there too. Steve Allie: Google Ads. Liz Helton: What was that? Steve Allie: out. Watch out for Google Ads. Look at your advertising expenses. Liz Helton: is another one. This is where the whole, you can only manage what you can measure. It is a big deal, right? Because you can throw unlimited marketing dollars. At various channels, right? But if you don't have the ability to evaluate where are my leads coming from? How many of those leads am I actually converting to actual clients or actual sales? The sky's the limit. You could just keep spending and spending. And maybe the truth of the matter is, there's one advertising channel that is your bread and butter, and that's really where you should be focusing. If that's the case. Kevin Keim: Yep. Yep. I don't wanna get into this whole p and l analysis 'cause again, this could be a whole seven hour [00:36:00] conversation. One of the things that I love to look at, so at our, in on, in our p and l, we had, we broke out our sales costs, so commissions and then of course our advertising costs. And the number one question I always got. From a lot of people and I coached you is what should that sales and marketing expense be? And the joke I always made was some percentage less than your growth. Because if you're growing we were growing, we grew on average, a four or four year growth. Average was 20%, and I spent about 19% out of my p and l on sales and marketing. So. I spent a lot of money with Google, but we were growing and it worked and we measured it and we knew what we were talking about Steve. So that's an important part. I cannot stress enough back, Liz, to your point about the insurance and then we can move on and talk about some fun things like tools and not p and Ls, but that insurance thing, I can't tell you how many times I hear. got a friend, I got a buddy, I got a neighbor. Steve Allie: Yeah Kevin Keim: I've been with him for 10 years. Their loyalty is, as loyal to you as you are to them. I get it. If they're one of your largest clients, maybe you should [00:37:00] consider that. But if they're not look, there are reports saying that the wild card in the industry is insurance and you can see an eight to 12% increase in it, and it's such a huge part of your p and l. You should take advantage of it. Do not forget about that Ace Advantage program of ours and be able to help find some potential relief in savings there. It's a big needle that you could move. Steve Allie: And when you're creating a budget, think of percentages, right? Like, so if on average companies spend between one and 3% of top line on advertising, Kevin Keim: Yeah. Steve Allie: budget for that. So it's 1% of your top line on your budget is gonna go on that advertising line item. 2% of that is gonna go to insurance, or possibly even three. On average. I see right around that one to two range. But you at least there's percentages. So you're able to budget. Kevin Keim: Yeah. Steve Allie: Right And Liz Helton: And what we see with advertising in, the industry is if you're spending more than 5%. Of your [00:38:00] revenue on advertising, you should look really long and hard at where those dollars are going because that is an aggressive advertising campaign and your growth should be reflected in that. If it's not, you're definitely wasting dollars. Kevin Keim: It important to note, for those of you who dunno, my backstory, I worked in the pest control industry, that number doesn't hold true to us. So when I told you my 17% very important. Remember we're getting to our, we're getting to our sales goal, $500 an annual contract value at a time. And you guys are like a 40,000. And I'm super jealous and not at all gonna, angry about that, but we're gonna move on. Okay. So that's p and l budgeting. So we've talked about forecast budgeting, we've talked about costing, focusing specifically on labor. We've talked about budgeting your p and l and managing your expenses within categories or classes. Let's talk a bit about tools. Steve, you mentioned one earlier. Why don't you talk a bit more about about reach, what it is and how effective it can be to help a, landscape. Steve Allie: Sure. QuickBooks is certainly a tool. And a lot of companies use LMN Aspire, QuickBooks Reach reporting. All of these have budgets in them. And they're as good as the information that's entered into them. And so QuickBooks obviously has that historical information that you can easily pull. Reach reporting actually links to your QuickBooks file. and then that pulls out your historical information and we're able to apply growth rates. For example I know I mentioned this before, but if you pay your bills 90 days out how much cash is in your bank account? Right. Kevin Keim: Right. Steve Allie: So we're able to utilize that tool to really provide a robust budget for your company, for the year. But again, QuickBooks is pretty simple. Element is pretty simple. They're all great, but Kevin Keim: Yeah. Steve Allie: as good as the information that's entered into them. Kevin Keim: And, so human el, human error happens. And so the more that you could automate it, the better. And so that's where a tool like Reach or something Steve Allie: Yeah. Kevin Keim: effective. But at the end of the day. I want you all to budget. And even if that budget is an Excel spreadsheet, that's just very basic, that is still effective. And it still holds yourself accountable. And again, back to that quote, it isn't hope we're talking about, right? It's intentional. We're intentionally putting numbers in there and intentionally knowing those numbers and working our way towards executing on those numbers, which is super, super important, right? Steve Allie: I would suggest getting away from Excel, though there's, so many chances of errors that go into those formulas, Kevin Keim: Yep. Steve Allie: I see it all the time. One, one little error affects the whole sheet, right? And so when you're using a a, software, those errors get mitigated. Kevin Keim: Yep. Steve Allie: So I would I, would stress not using Excel for budget, Kevin Keim: Perfect. But it's there if you need it. Steve Allie: but it's there. Exactly. Yep. Kevin Keim: You are on a timeline, if you're on a budget crunch if you're not comfortable with it. But, absolutely you should be using part of that. Look, I used Excel. I'm very comfortable with Excel. I've used it a lot. Pivot tables, you name it. And then I have my dear old friend Chad, GBT, to bail me out if I screwed something up. But, to Steve's point it's still. It still is not perfect, and you just gotta be cognizant of that. So that's part of that. But that these are all there. I think at the end of the day, my, my takeaway for you all on this is just do something. And if we can minimize human error, that's great too. To be able to make part of that. So we've gone through this exercise, we've budgeted now what, how important is it to tell your team. Liz Helton: Oh, well that is perfect segue into kind of the, next step, right? Is you have to let everybody know what the expectations are in the areas where they have control. So if on a monthly basis you have [00:39:00] outlined your sales goals and you have a sales team, right? You can break that down into a pipeline and it's overwhelming or I it, could. Be right. If you say, Hey, you know you've gotta sell a hundred thousand dollars worth of services in this month, that is. That's a lot on the first of the month, right? To just be hit with. But if you can break down those monthly goals into weekly goals or even daily goals for salespeople, it becomes a much more manageable thing, right? It, I, the daily, it depends on the salesperson that might get a little stressful, but on a weekly basis, right? If you are, if somebody's like, okay, if I sell three $20,000 jobs a week. That's, that sounds better, right? Than just this big number per month, right? You gotta break it down into bite-sized pieces, and that allows you to then evaluate at the end of week one, not at the end of month one. Right? But at the end [00:40:00] of week one, are we on track? Because if you're not. Right. Okay. What can we do? Because if you're not on track now, you not only have to meet next week's sales goals, but you have to catch up. It really allows you to to give people manageable, bite-sized things that they can control. It's no different if you say, okay we have a hundred thousand dollars job and we have budgeted 32% for. labor, what does that mean in terms of hours? And then from a scheduling perspective, how many crews, how many people, how many hours? And those project managers you can hold them accountable to keeping the team on task and obviously getting as efficient as you can on those jobs, Steve Allie: show. Show them what they can control. Right. So they, can't control. And your insurance costs, they can't control your interest. Your vehicle loan they can't control your [00:41:00] paying 8% on a vehicle. Kevin Keim: Yep. Steve Allie: Show 'em everything above the line. Everything that's included in gross profit. Just eliminate everything. So if you show your budget to your ops managers, listen, this is our target, Kevin Keim: Yeah. Steve Allie: And then as the months progress, that's your forecast, right? For Kevin Keim: Yeah. Steve Allie: Just show them everything. In gross profit, they can control that. Kevin Keim: So there's so many little nuggets in that. Just to break it down for you, there's a couple things that were said there. One of 'em was that, look, if the field doesn't see it, what's the point in budgeting? So that's one thing, right? So communicating it. The old tail, as old as time. It's the trickle down effect, right? Show them your cost of goods and know that not that if you don't focus on that, none of the rest of it necessarily matters, so to speak. If we're not, if we're not profitable above the line. And then the last thing that's in this is that we haven't talked about this, but. Open book, right? You're communicating these, this information to people, right? And letting them know whether [00:42:00] you're fully open book. I always talk about the penny exercise or the dollar exercise where you take your p and l and you break it down in a, this is $1 and you have a hundred pennies, and you explain where those a hundred pennies go. Like you can do that breakdown. It usually resonates a lot better in the field. They can wrap their mind around a little bit better than showing a giant p and l with every class and every break. That can get a little, overwhelming for that. And then lastly, Nope, go ahead. Liz Helton: go ahead, Kevin. No. Kevin Keim: I'll say lastly, I think, so we talk about these things, but then have some kind of a scorecard. Whether you're an EOS company or metronome or any of these ins operational platforms that are out there for you, knowing that scorecard, I relate it back to American football, right? You can turn on any game, and if and we know as Americans or most Americans, you know who's winning, well, we know that because there's a scorecard, a scoreboard that tells us who's winning, when the game is going to end. All of these things, budgets are that. That's when the game [00:43:00] ends. It's your clock. On the scorecard, it's also where we know our down in distance, and it's how we know whether we're winning, right? But we gotta communicate that. We have to show that whether it's on a tv, whether it's on a, dry erase board on the wall, whether it's an email or a teams message, or Slack message or a text message or group me, I don't care, send a carrier pigeon, but just tell people, right? So that they understand are we winning or are we not? Steve Allie: That's a really good analogy because when you're looking at a budget, the budget is the first quarter, the forecast is the second quarter, the third quarter, and towards the fourth quarter. A really good analogy. Kevin Keim: I don't, I, God, it pains me to admit this, but I do have to give Chris credit for part of that. Or he's gonna come after me on that. So Chris, you're welcome. Alright thank you both. I know we could continue on. I wanna wrap us up with a few key takeaways that I wrote down as we went through this. So to quote Liz, early on, you manage what you [00:44:00] measure. So we need to measure things. Historical data is where you start on any of these, right? We don't pull anything out of the air. I did write this in here. I think this is my, brain. I don't know if either one of you said this, but also 80% is good, right? We're never gonna have this. Do not overanalyze and, put yourself into analysis paralysis over this. Please use historical data. Please use trends, but also know that there are so many things you can't control the world. you just gotta control what you can to try to get a budget that's functional and working well. that budget into QuickBooks so that you can measure your actual versus your budget, whether you use the QuickBooks budgeting tool or not. There's a difference there. Labor is your number one cost, so make sure to do it. Shop your vendors around so that you can measure your materials outside of your labor. And then. Communicate your scoreboard and communicate what your [00:45:00] team members can control, right? To Steve's point, they can't control your insurance costs, so there's no point in sharing that with them. Liz Helton: And I think it's probably important, Kim, to point out that on the front end you have to communicate the expectations, right? In order to meet or exceed our budget, we need to do X, and on the backside you have to go. Okay? Did we do X? Where did we perform better than expected? Or are there areas for improvement so that you don't continue to make the same mistakes or the same misassumptions after month? Kevin Keim: Sure. Great. Well said. Steve and Liz, thank you for budgeting your time. You're Liz Helton: Well. Kevin Keim: You're welcome. And joining, in our podcast. For those of you thank you for listening to this episode of the Roots of Success podcast. We appreciate your time. We at McFarland are here to help you in whatever needs that you have. If you have any follow up questions, please feel free to reach out to Liz, Steve, or myself [00:46:00] and we thank you for your time. Steve Allie: All right. Thanks Kevin. Liz Helton: Thank you. Speaker: Thank you for listening to this episode of Roots of Success, brought to you by the subject matter Experts at McFarland Stanford have a question you want our coaches to tackle in a future episode. You could submit that@mcfarlandstanford.com slash podcast. And to find more helpful content from McFarland Stanford, follow us on X, LinkedIn, Instagram, and Facebook. If this or any of our episodes have piqued your interest in ACE Peer Group. We encourage you to join us at Ace Discovery. Just check out the events tab@mcfarlandstanford.com. This is Jason New co-founder and principal at McFarland Stanford. We'll see you next time.