Webinar #1: Setting up your operating Budget

alright guys here it is I have personally been waiting for four or five months trying to get Marc Bradley on the line with us and we're going to be doing a series of webinars the first one we're gonna launch today is called planning for profits Marc how are you doing today I'm doing good thanks for thanks for meeting up today absolutely so I wanted to tell a little bit of a backstory why I'm having you on the channel Marc for guys some of the guys that really followed me for a long time they knew that they used to do a podcast and I would interview like massively successful people and I was always kind of slightly disappointed like I always hunt for the meat on the bone I want to know the information that's going to transform my business but I don't want to be given theories I don't want to be given butterflies and Gardens I actually want the raw data that I can actually take home I can write down and go this is the step by step by step by step what I have to do broken down in the absolute simplest format that will help me transform my business there was only one person that ever gave that to me I quit my podcast cuz I got so frustrated the only person that ever gave that to me his name was Mike michalowicz until I met you and you started to walk me through all of these webinars where I am sitting there with the notebook and pen and paper going holy crap why doesn't why doesn't the world know about this so I started to hound you right you remember that I started texting you yeah so I'm texting I'm texting mark we got to do this we gotta do this we're gonna do this and you're like so Mike finally guys I got him on if you guys don't know mark he built a massively successful landscaping business he played over 250 people right yeah but what you do now you want a software company called lmn and what you actually do is your software system forces entrepreneurs to start to understand their numbers to analyze their numbers and what I've learned is not just the software this has been probably one of the the biggest changes that I've ever had in my business right one of the most powerful things that's ever happened to my business has been starting to implement this software and what you and I are going to do over the next 8 10 12 weeks Koller long it takes we're going to teach these guys what you've been teaching me but outside of my youtube videos these guys can go to your website at any time and get more information because you also do webinars on your website is it work or what is it yeah we do webinars every week on different topics you know to cover software and just general business know-how okay so today it's planning for profits let's dive into it yeah so I mean what we're going to talk about is budgeting and you know most small businesses don't have budgets you know and for the same reason most landscape companies really have a tough time sort of breaking the profit barrier I'll say you know most companies don't make it past the four-year point and I think the reason for that is often you know just not understanding how much opportunity there really is to make really good profit and earn a really strong wages and owner at the same time so I think sometimes people get deterring the startup years and it's hard to kind of see past that and see the opportunity and running a landscape business when you really can't sort of forecast just how profitable it could be so the budgeting tools really sort of do two things number one you're planning your profit for the coming year so that you're not just guessing and hoping that you make profit each year but also it's kind of allowing you to look into the future and see just how good of a business it could be in you know years two three four and five and beyond so I mean it's kind of the the ultimate tool needed to kind of maintain motivation and and make money in this business so you actually have created a tool that the I can set up their operating budget for the entire year ahead of time and then check in to see how they're doing in accordance to where they want to be is that right they're not guessing yeah so basically the software that we're going to show you today is completely free so the way element works you join you become a member you get free access to the budgeting software for life so everything we're gonna look at today is completely free anybody can sign up for a free account and get started and then what happens is if you're interested and you like the estimating tools and all of the other features that we offer with the software platform you can become a paid customer and and and really start to tap into some of the other features but for today we're just gonna focus on budgeting and as I said this software is completely free okay so take it away let's let's dive right into an actual budget right mark that's what we're doing yeah we're gonna actually talk through a budget together and and really just sort of look at how easy it is to create a budget we're gonna use this sample budget that I've got up on the screen this company named Fred's landscaping we're talking about a company that's gonna plan for five hundred and thirty seven thousand dollars in sales with a profit goal of seventy four thousand now keep it in mind that's after the owner has drawn a wage with and and that sort of equates to just under fourteen percent net profit so couple key things here the revenue is coming from these key areas so 25 percent of the sales are from installations or design-build work fifty percent of the revenue is coming from grounds maintenance type work and the other 25 percent is plans to come from snow so it's important that we update this because you'll see throughout the budgeting software there's a really clear sort of industry benchmarking tool that helps you understand how your expenses are aligning with where they should be or where they are industry-wide and by updating this work breakdown it creates the accurate benchmarks that we need throughout the software so let's just jump right into the sales budget to get started I just simply click on the sales budget and this is where I'm gonna forecast my revenue for the coming year so you can see here we've broken up the categories and it's gonna give you just a simple bar of how your sales are gonna transition up on the top right we've got mark part of me you can create your own categories right you're not stuck with yeah your categories are up to you so over here on the right you're gonna see what your predicted growth is for the coming year or decline if you happen to be planning for one but to your point these are all fully customizable so whatever your area work areas are I could create a new one very easy just by clicking new I could type in landscape lighting if that was something I was planning on adding and add $5,000 from this past year and say in the coming year I want to increase that to 15,000 and and it would be added to the numbers just that easy so very easy to add and customize but the point here is we want to create a sales budget that really allows us to plan expenses accordingly to make sure that at the end of the year there's a profit so I'm just gonna delete that one that I just created because it's gonna throw things off a little bit but I'm forecasting five hundred and thirty seven thousand dollars in revenue which is actually a pretty big growth it's at almost a thirty thousand and it's important that we kind of look at that and get a sense of just how much growth we're looking at so you can see down here I entered last year's revenue so this would be the 2019 revenue under with my install maintenance enhancement and snow management and then I've just simply forecasted my sales in the same categories so I can very easily click and override these it's not a difficult software to you click and it automatically updates everything so I've now forecasted my sales for the coming year and my experience in teaching thousands of contractors how to use the software is they're always really good at understanding their sales numbers every landscaper can tell you how much revenue they did last year but when I start asking questions like hey how much labor did you how much percentage did you spend on labor or what dollar value or how much profit did you make very quickly people start to get a little confused and I think that this is where having a budget really shines sales pretty easy the next expenses that we're going to get into our where it really builds that awareness in how you're operating your business and whether or not you're going to be profitable ok so the next budget is field labor and you know this one's a big one this is where we spend most of our money as landscapers the our biggest expense is Labor everybody kind of knows that and so this is important that we create a plan for labor that is gonna lead to profit and I think you know there's kind of two schools of thought out there number one often landscapers under pay their staff and they don't really realize that they might actually be able to pay them more if they manage other expenses more efficiently and then on the other flipside often people some business owners misinterpret just how expensive staff are and they overspend on on this type of expense and they understand in other areas like for example not investing in the right equipment to really allow them to leverage their labor and be more efficient so super important that we get this right this budget is really simple to enter as well so the labor burden this we fill out first this is the percentage that we actually spend on government premiums like our FICA premiums unemployment premiums anything else that were paid the government as a percentage of revenue we enter that as a percentage okay mark I want to I want to be I want to jump in here real quick so I want to be very clear when you say labor bird and you're not talking about the actual hourly rate you're talking about the additional expense that a guy costs you on top of what you already pay him like if you pay him 20 bucks an hour but you got to pay FICA and all the other taxes associated with is that right yeah that's it exactly and and you know often we don't think about this clearly enough and if we're paying somebody $20 an hour they're probably really costing us you know 23 or 24 dollars an hour and sometimes at the end of the year when contractors feel like they didn't make any money they're not too sure why well you can see here at 18% if you were spending a hundred and twenty-nine thousand on wages paying your staff there's an additional twenty two thousand here that we're also paying the government and what the software does is automatically calculate that so that as you add your staff into the system it's always building that expense for you to make sure that you're aware of it and that you can kind of include that in your plan for profit now hey this calculates it based on if I'm looking down into you've got this broken down to employee types and rates of compensation and how many estimated hours you figure each one of these categories will work right yeah so basically there's two ways to do this as you start to build it you can use rolls or you can use names if you've got the the staff already hired you might want to enter their names in here or maybe you haven't hired them yet in which case the role might be easier or you could use a combination of the two the most important thing on budgeting is identifying how many employees you have how many hours you expect them to work which is you know pretty typical of just saying looking at last year and looking at the number of weeks a year you work and the number of hours per week and then of course we want to add in their hourly rate if we think they're going to work overtime we want to add the number of hours of overtime and you can see up here up above just under the 18% labor burden we've also identified that we pay time and a half at 1.5 for overtime so what that does is as we build up our list and we enter their hours their overtime hours and their wages and a bonus if applicable we're building an actual forecasted cost of our labor for the year which is going to help us identify whether or not our plan is even going to create a profit if we stick to it what I think happens a lot in landscape businesses they kind of adjust the plan they add trucks add cruise ad sales add customers and they haven't really forecasted the year so they don't really know if the plan is even going to make money and really what this does the software in just a few hours allows you to put your plan on paper and see if it's going to be profitable for yourself so if I was adding staff for the first time I just like new and I'd simply you know add the the employee name or the role I'd update the number of employees that fit that type of rule the hours per year I'm going to enter their wage a bonus if it's applicable and hit save and we're and were set so here in this example I've got a total field labor budget of a hundred and fifty two thousand for the year and now over here I look and look at my ratios and say well my ratio is twenty four point three and the forecasted ratio of the or sorry the industry average ratio is twenty nine point three so I'm actually in pretty good shape here my wilber budget is slightly under the industry average which is a good thing provided you can still reach the sales goal that you have in mind so the next major area would be equipment but before we move on did you have any questions about the labor budget standing so does this software allow you to check in to see how you're doing it let's say you're two months into the year and you forecast you set this budget up in the beginning right mark that's the best thing and then can you kind of check in to see how you're doing can compare to where you're forecasted to go yeah absolutely so you can do that two ways so with elemen when you're using the the full package it tracks all of your time and job costing on all of your projects and actually creates all of the billing it also syncs to QuickBooks so it kind of works hand in hand with QuickBooks and does sort of all of the things that QuickBooks doesn't do but yeah absolutely throughout the year you're always going to want to check if your sales are on track and if your expenses are on track and the way you do that and that's kind of where this software becomes powerful it tracks all of the costs assigns them to each project allows you to assess profitability on each job and then also on the overall because it's recording all of the information using the time tracking app and syncing that back into the system to get accurate reporting both through a lemon and through QuickBooks okay so wait a minute I want to I want to make sure that we paint this clear because I mean I've been working with you and ensign you know I'm still grasping all of the different concepts in the time tracking yet so you have there an app for the guys that don't know this where the guys can punch in and out and it tracks the time and then it brings it back into the software and it continued everything continually updates so at any time the owner that's doing his homework can know exactly almost in a real-time basis where he is on a day-to-day basis in comparison to where his project it is for the year is that right yeah you can absolutely do that company-wide and on a job by job basis so if you have a large job maybe it's a landscape maintenance contract and it's a $300,000 contract often on those larger contracts we tend to get confused and not understand if it's going to even be profitable and we sort of wait until the end of the contract to see how profitable it was the nice part with what we built is that it tracks the hours on a day to day basis so that throughout the life of that contract you can see if it's successful so whether it's a small residential contract or a huge commercial contract throughout the life of that contract you can see how profitable it is because it tracks the labor material and equipment costs and you can see if it's going to actually come in on time or not sort of and it also performs the billing of automatically because this incredibly well will breakdown with the software system works on a job by job basis as well as the overall company basis correct that's correct yeah just want to make sure we're I'm on the same page as you with this stuff okay yeah absolutely so once we've got our labor entered the next budget that we built in is our equipment budget and this one's pretty as well really what we're doing here is we're entering our forecasted fuel cost for the year our repair costs for the year our insurance costs for vehicles for the year we enter our equipment for rentals for the year and then what we do is we come down here into our list and we quite simply what we're doing is we're just looking at all of our equipment and we're saying let's enter our trucks our excavators our mowers all the things that we have in the case of this company there's a 3/4 ton truck a five-ton truck a skid steer an excavator some snow plows and install trailer and a maintenance trailer and the way we build these out it actually builds out cost per hour and it gives you the proper bidding numbers for estimating your equipment into your job this is also where a lot of landscapers make mistakes they buy equipment and they don't fit it into the job and when they don't often they end up giving it away because they're just not charging enough for it or sometimes we buy equipment and we charge for it but we're not really sure if we're charging enough so the calculator is a pretty simple calculator that allows us to kind of build packages so you can see here my install trailer I've got the trailer plate tamper quick cuts zip levels some power tools and tools a power washer and that's really going to kind of build up my kit and as I've put the prices in it and the resale value is and the time that I'm going to use them it's adjusting that and creating an annual cost for that trailer I think as I go up into my mark can you can you back that that one slide up because I need these guys to understand exactly what this is because this was something that you and I covered kind of in a lot of detail but it's so easy to totally skip over this so you are actually a guy that has his trailer will enter all of the the material all of the equipment that's inside of that trailer the purchase price of that equipment what it cost him then when he's all done and he's used it and abuse it and he's gonna get rid of sell it he can enter whatever amount he thinks that's going to be sellable and the software will calculate what he's got to charge for that equipment to get his money back that's right not only what you'd need to charge to get it back but also we even allow for a replacement cost so as you get into estimating the estimating software is very powerful it's gonna it's going to take the information that you put here in the budget and it's gonna put that into a real-world estimating system where you're actually charging for your equipment and you can continue to charge for it long after it's paid for so that you can continue to save money to replenish that equipment in the future without always necessarily borrowing money we call that return on investment okay thanks mark no problem so particularly the way the software works is on every page we look at the industry average and we look at your ratio so in this case I'm planning for 13.6% it's a hair under the end of industry average which tells me it's a pretty reasonable plan so I'm gonna then look at materials next I've looked at my equipment my next major area of expense in my business is materials so in this case we've broken it down by the major areas of the business so we've got installation maintenance snow and ice and job site…