Do you know – really know – that your business is making money?

If you know it for a fact and have no doubt your business is making money, and are comfortable with the percentage of profit your company achieves, there is no reason to read this article. However, if you “think” you’re making money or are not quite sure if you are, please read on.

Bob Rouse, TCIA’s senior vice president of business support, has on hand the two workbooks published in the 1990s by the NAA, now TCIA, that the author mentions. Rouse and his team are in the midst of revising TCIA’s business resources and courses. All photos by TCIA’s Chris Hall.

I will tell you that I fell into this latter category, thinking I was making money, for too long. Despite having a great foundation of education, a father who had business savvy in the industry and peers who owned or managed successful tree care companies, it was easier to assume I was making money rather than knowing for certain where I stood. This sounds kind of dumb as I write it – actually, very dumb. I was working too hard every day in my business rather than on my business to give this aspect the attention it deserved.

It turns out I was not alone being in this position. Many owners or managers may not know this fact about business – 90% of startups fail in the first five years. Not all failures can be attributed to poor financial knowledge, and I do not know if this 90% rate is applicable to the tree care industry, but those odds of success are pretty grim.

“Stay small, get a good accountant and go fishing,” were the words of Professor Gordon S. King, professor of arboriculture at UMass Amherst.

Did I listen? Apparently not, as I spent 12- to 16-hour days climbing or in a bucket truck during the day, then doing estimates and returning phone calls when the job was completed. Sound familiar? If not, and your early years were not as demanding or chaotic, hats off to you. Those of you who started with similar situations to mine, please keep reading.

Blindly going …

“Tree care companies make money despite themselves.”

– the late Robert Felix, former executive vice president of the National Arborist Association (NAA), now TCIA

That statement was generated by my father through his numerous interactions with member companies throughout the years. It was based on the realization that many tree care companies had not been utilizing or prioritizing traditional financial-management strategies and planning. While companies were doing “OK,” they were not as strong as they could have been and were taking risks that were not based on sound financial practices.

These two workbooks were published by the NAA/TCIA in the 1990s to help members improve their financial practices.

To address this lack of strength, the Association (NAA/TCIA), in its never-ending pursuit of advancing the tree care industry, initiated a simplified management tool. This tool was incorporated into two workbooks published by the Association, “Job Estimators’ Workshop, A Guide for Establishing an Hourly Rate for Estimating Purposes,” and “The Tools of Management, The 7 Basic Tools to Assist (sic, Help) Managers Maximize Their Effectiveness,” both written by Howard L. Eckel. (See photos) Copies of these two program workbooks were preserved and sent to me by my friend and colleague, Ben Tresselt III, owner of Arborist Enterprises Inc., an accredited, 33-year TCIA member company based in Manheim, Pennsylvania.

Based on establishing a “break-even hourly rate,” this guidance enabled businesses to plug in all the expenses associated with what it costs to have one production employee per hour for each hour they work. Many owners did not realize what factors (costs) they need to account for.

Real-world costs

In addition to what an employee is paid hourly, here is a list of costs often ignored or unrealized:

• Paid holidays.
• Vacation time.
• Payroll taxes and company match (of FICA taxes).
• Workers’ Comp insurance, plus all other insurance (auto, liability, health).
• Equipment costs.
• Equipment fuel and maintenance.

Failing to account for any of these or other operating costs can make or break the best arborist/owners’ efforts to succeed. Being a great arborist does not include being a great business owner. Knowing where you stand on every job, based on the hours it took to travel to and from and to satisfactorily complete the job and manage the resulting debris (dump fees or time to unload), is a must to succeed.

Having this knowledge will better enable you to realize the following benefits:

• Financial reward for your blood, sweat and tears.
• Paying your staff with higher wages and benefits = loyalty.
• Making better decisions.
• Updated equipment.
• Minimized risk.
• Ability to price jobs properly and provide flexibility/creativity in tight pricing or bidding situations.

This does not have to be complicated. Most all software programs provide a “job-costing” template of some type. However, these are only helpful if you are plugging in the right numbers.

Summing up
Lastly, if this aspect of business does not appeal to you or is not your “thing,” you need to hire someone to handle it. You cannot afford not to. A CPA is essential for audits, reviews and tax filing. They also can help you identify your costs and get you started on being among the 10% of companies that make it, rather than the 90% that do not.

Andrew “Andy” W. Felix is founder and past president of Tree Tech Inc., a dual-accredited, 37-year TCIA member company based in Foxboro, Massachusetts. He is also a past chair of TCIA’s Board of Directors.