Content provided by Monroe Porter with PROOF Management
For years I have lectured on the four business structures for tree care contractors that I’ve identified and the opportunities to make money at each level. The basis of much of this information has been my nearly 40 years as a consultant to contractors. These conclusions were recently reinforced by a PROOF Management Consultants analysis of thousands of data points.
A natural transition that follows the sales growth of a company exists between the four structures, but failing to maximize your profit at one level before going to the next can create devastating stress.
The following chart shows the four business models, and each is discussed further below.
Professional tradesperson
This tree care contractor still works in the field, gets most work by referral and has $200,000 to $300,000 in annual sales. He has one or two other employees and does not need many administrative systems because he works on every job. If you like to work with your hands and don’t like to be a manager, this model may be a fit.
A common mistake at this level is most contractors charge a little above wages and not enough to cover costs.
Home alone contractor
This tree care contractor concentrates on sales and project management, is beginning to develop key people and arborists to work in the field, has administrative help and does $500,000 to $1 million in annual sales.
The biggest mistake he makes is having inadequate administrative help. A strong administrator is worth the expense and can do the books, make your appointments, order materials and more.
Owner-driven organization
This is like the home-alone model except the tree care business owner is a high-energy salesman and has a detail-oriented administrator. This is the most profitable model, with between $1 million and $1.5 million in annual sales and the contractor earning $200,000 to $400,000 a year.
A note of caution: When this owner maxes out and begins to add assistants, project managers and sales people, profits do not grow at a similar rate. Many of these owners do not have the personality to manage other managers.
Contractor management team
This company has managers over departments. Owners must realize it is no longer about their being a star but rather their ability to create stars. Annual sales are anywhere between $2.5 million and $50 million.
Owners who appreciate the analytical nature of business do better in this model. But while many strive to get to this point, a lot of them do not have the patience or personality to manage this type of business.
Monroe Porter is an industry consultant and would be happy to answer your questions. He can be reached at 804-267-1688.