Day 45 | $31,450 paid | $59,267 till freedom
Things have taken a turn for the better with the landscaping business, and Michael and I are anxiously waiting to see if our first potential client will accept our quote and become our first actual client.
My fingers are tightly crossed because I’ve stopped looking for a second job. This is it. This has to work.
For awhile, it looked like getting calls from customers was going to be an impossible challenge. Michael and I put up colored flyers all over his neighborhood and mine a few weekends ago, and even though the informational and attention-getting flyers listed both the company’s URL and phone number, we barely saw the needle move on site visits, nor did we get any phone calls. We were feeling extremely frustrated and didn’t know how else to drum up business, short of going door-to-door selling ourselves, which we were loath to do.
The thing is, we’re corporate boys. When I launched a product as a product line manager a few months ago, I didn’t have to do any marketing myself. The company I work for executes multi-million dollar marketing campaigns and gets millions of visits a day on its website. The marketing is already there, so the demand for the product is basically built-in, and I don’t have to worry about demand generation too much. As long as the product is good, it’ll sell. In other words, build a good product, and because of Marketing’s efforts, they will come.
Despite managing a product line that brings in hundreds of millions of dollars of top-line per year and Michael managing billions of dollars of inventory in his supply chain job, we didn’t have a clue how to generate demand for our little landscaping business.
We’re not in Kansas anymore. There is no brand recognition and there are no multi-million dollar marketing campaigns. It’s just a couple of dudes and a site we built ourselves on a domain name we reserved for 25 bucks.
Then we had a buddy offer to talk us up in his neighborhood listserv where xersicaping had just become a hot topic. I told him sure, please go ahead, but I didn’t think much would come of it. Then out of nowhere, bingo! We got a phone call from Seema, a woman who lives in his neighborhood. It just goes to show you that people really do hire services like ours based on word of mouth, and not on generic, untargeted marketing vehicles like flyers.
Anyway, per my post on 10/6, Michael went to Seema’s house to check it out. I was in Ann Arbor when she called, so I couldn’t join him. After meeting Michael, she asked us for a quote, but didn’t want it unless it included irrigation work, which we won’t touch due to the associated liability and complexity. I tried to subcontract an irrigation company, but because of the drought Austin is currently experiencing, all the irrigation businesses were completely overbooked and not interested in being a sub.
Michael and I were sure we had lost Seema as a potential client when a week went by and we still didn’t have line of sight to getting her an irrigation quote. However, quite the opposite was true. Seema apparently still felt good about us because after we explained the situation to her, she contacted the company that had installed her sprinklers in the first place to get a quote from them. She emailed us yesterday and told us that she got an acceptable quote from her irrigation guy, he’s coming to do the work on Saturday morning, and would we place provide her with our quote for the rest of the job?
Michael and I were on cloud 9. We had a conference call last night at 11:30 PM–it’s the only time we both had free–nailed down the quote, and then he sent it over. Since Michael was the one who went to the customer’s site while I was in Ann Arbor, he has been the only one communicating with her during this entire process; we wanted to give Seema a single face for our company so she didn’t feel like a number.
The quote was for 600 square feet of turf to be removed in a fairly intricate pattern and replaced by mulch. We charged her wholesale on the materials, and we are looking to make money on the labor only. The total job came out to $890, profit of $616 split two ways, so $308 each. We estimated it would take 16 labor hours or 8 hours each, so that comes out to $38 per hour before taxes. In other words, we can show up at the house at 8 AM on Saturday, get a good work-out in under the sun, beautify the neighborhood, swap some stories, tell some jokes, and leave at 4 PM with $306 in each of our pockets.
So now we’re waiting for Seema’s response. Michael sent the quote out this morning, and roughly 12 hours have elapsed so far.
I’m stoked. I’m just hoping she’ll come back with a positive response. Michael and I went back and forth on whether the quote was reasonable or not, and based on the one quote we were able to get from another landscaping company when we were doing our competitive analysis (we tried to get more but couldn’t), we convinced ourselves that yes, it’s extremely reasonable, and that other companies would probably charge her $2,500+.
Disruptive Innovation: The Theory Behind Our Landscaping Business
I think Clay Christensen, the man behind the theory of “Disruptive Innovation,” would be proud of us. Or if not proud, he’d at least understand what we’re trying to do. I took his class during my second year at HBS, and his theory is that as businesses evolve and grow, they naturally look for bigger and bigger revenue and profit opportunities, primarily due to the law of large numbers. In order for, let’s say, a landscaping business that makes $100k in revenue in Year 1 to grow by 20% in Year 2, it must sell exactly as much in Year 2 as it did in Year 1, plus another $20k. Let’s call the landscaping company Blockbuster. How’s Blockbuster going to get find that extra $20k? By doing a lot of small little residential jobs? No, it’s going to go after huge commercial jobs because those will be more impactful to the P&L if it can find them.
In shifting its focus, however, Blockbuster has to develop new skills, and get more sophisticated, because many commercial jobs will require bigger and more powerful lawnmowers, for example, or high-end masonry skills, or fountain installation skills, etc. Buying this new equipment and hiring skilled labor costs money–those new lawnmowers bring on a ton of overhead, and the wage of somebody qualified to install a fountain is certainly higher than somebody who just plants bushes under the “little residential” model. So now Blockbuster finds that it basically has to take on commercial jobs and only the biggest residential jobs because it can’t waste time and resources on the little jobs that it would have charged $500 to $2k each. That $500 job, after direct labor and material costs, won’t even put a dent in the overhead of Blockbuster’s lawnmowers. And because Blockbuster’s going after bigger jobs, it probably has an office and staff now–at least a receptionist–and it might have even paid serious cash for a professional website, too, so that it looks legit. So the cost Blockbuster charges on the new jobs not only must pay for the direct material and labor, it must also fund the equipment and other overhead. Whatever’s left goes into Blockbuster’s owner’s pocket as profit, or salary. And since this is his one and only job, it has be enough to sustain him and his lifestyle.
So now Blockbuster is going to focus only on the big jobs, and in doing so, it’s forced to cede the low-end market of smaller jobs. And if it doesn’t cede them outright, it won’t charge customers in that particular market very reasonable prices like it might have before it loaded up on expensive overhead and skilled labor, either–its new cost structure simply won’t allow for it.
And that’s where Michael and I step in.
Our business is streamlined, focused, and lean. We don’t have a receptionist–it’s Michael’s wife. We don’t have an office–it’s our houses. We don’t advertise (anymore)–we rely on word of mouth and we’ll have a referral bonus policy and we’ll visit the houses that neighbor our customer sites to spread the word. We don’t have a professional site–we paid $25 for a domain name and I built the site. We’re not using high-end equipment, we’re using the stuff that’s already in our garages. We don’t have a Ford F250 and trailer, we’re renting a trailer for $25 and pulling it with Michael’s Tahoe. Masonry skills? Fountain installations? We don’t have ’em because we won’t touch that kind of work.
We are the Redbox to the Blockbuster of landscaping companies. It turns out that a lot of customers are okay with paying only $1 instead of $5 to rent a DVD, and would rather pocket the $4 instead of having a jinormous selection of videos, a real live person to help them out, the option to buy candy and popcorn, climate control, and touching and feeling the DVD cases. And slowly but surely, Redbox, through its innovation, is disrupting the hell out of Blockbuster with its low cost structure and lean business model.
So as high-end companies like Ecotopes charge their prices to xeriscape a yard, we’ll charge ours. Because we don’t need to make COGS and overhead and salary. We just have to fund our direct costs and make sure there’s a little left over for our pockets.
Surely, we are not for everyone. We are for people who want a xeriscaping job that’s “good enough.” We are for people who shop for their landscaper like Redbox customers rent their DVDs. You’ll never find us xeriscaping a yard in a gated community full of mcmansions. But will we be in the Circle C’s and Scofield Farms and Pioneer Crossings and Wells Branches of Austin? Absolutely.
We just need to get our foot in the door. Hopefully Seema will give us the nod.