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Business Planning Q&A with Jim Skiera and Kevin Martlage

Business Planning Q&A with Jim Skiera and Kevin Martlage

Written by Eric Petersen, CIC

We all know how critical business planning is for your organization, yet so many business owners get frozen by the mere thought of it. To help our readers understand business planning better and how to make planning a reality for their company, I went to the business strategy planning experts from our Thrive team, Jim Skiera (JS) and Kevin Martlage (KM). 

  1.   What is the most important aspect of Business Planning for a tree care company?

JSTaking the time each year to do it. It’s surprising how many companies don’t have a business plan. Step one is realizing the value of business planning and step two is committing to doing it every year. 

KM – Great points Jim, I would also like to add that I am always surprised at how many tree care companies’ plans are not strategically developed and in alignment with their company’s “why” and purpose. It is extremely important to develop a business plan for your company to ensure you are pursuing the ‘why’ strategically and fiscally responsible. Another key area is communication. Once you have a plan, let your team know how they can impact the plan and make the plan happen on a daily, weekly, monthly, and annual basis.

 

  1.   What is the hardest part about planning?

KM – Getting started on the development and then ensuring that it is properly communicated, understood, and impacted by those responsible for making it happen. There is a huge myth out there that business planning is difficult and takes some magic approach and formula to make it relevant and attainable. While there are some nuances that should be considered, the approach to developing and implementing an effective business plan starts with committing to making it happen. Intentionality and commitment to the development and need will help the team ensure that a plan is created and is ultimately relevant and sustainable by the organization. 

JS – I agree with you Kevin, for most it seems to be just getting started. Often people in the tree business do not have a business background. They know how to care for trees but often don’t know how to manage and care for a business. If you are an accomplished arborist you went through a learning process to become one. You took the time to learn the standards and best practices that guide how you approach and plan how you prune or provide other care for trees. Approach business planning in the same way. When you were new to tree care you likely worked for someone or with someone that mentored you. Find a business mentor to help you get through it the first time. There are plenty of good business people out there and most enjoy helping others succeed. You can find free business plan templates online to get you started.

One of the challenges of running your own business is remaining objective with your expectations. Having a mentor who is willing to ask tough questions about your assumptions and goals will help you develop a stronger plan. It will also prepare you for your visit with your banker should you need to apply for lines of credit or loans.

 

  1.   What differentiates Strategic Business Planning from Annual Business Planning?

 KM – Strategic planning typically has a longer time frame and it focuses further into the future (typically 3 to 5 years). Annual business planning is still strategic but is focused on the performance of the past year and what needs to happen in the near future (next year) to help achieve the overall longer term strategic plan. Both are equally important, with the differences falling primarily on the time frame being planned for.

JSA strategic plan has a longer planning horizon, that sets future business expectations and establishes the strategies to be used to meet those expectations. The annual business plan is more tactical, establishing the tasks, responsibilities and resources required to achieve those long-range goals.

 

  1.   What is the most common objection you hear to doing Business Planning?

JS I don’t have time to write up a business plan, I’m just too busy. 

KM – Yep, the time objection is the largest objection I hear as well. “It takes too much time and we do not have time to “worry” about trying to get something else completed”. 

Additionally, for those that have a business plan, there is also an objection and issue with making sure the plan is kept alive and remains relevant to the organization. Too often, organizations develop a great plan only to get busy and focused on the day-to-day “fire drills”. This always has a negative impact on the plan effectiveness and eventually leads to more lost time and course correcting that if the plan was followed and executed in the first place.

 

  1.   What is the largest myth or misconception about Business Planning?

KM – “We do not need a plan; we are already extremely successful just by taking care of our customers”

“Planning it too time consuming and we do not have the time.”

“I do not know where to even start even if I had time to create a plan.”

“Plans are too confusing and only company leadership/owners need to have a plan. It is not relevant to me.”

All comments I have heard firsthand, but are extremely detrimental to every organization in my opinion. If done correctly, business planning can take your company to the next level while making sure you remain relevant, sustainable, profitable, and a great place for your employees to continue working.

JS The reality is every business has some form of business plan; it just may not be written down. For a small company it may be in the owner’s head, and the risk with that is if something happens to that person the business fails.

 

  1.   What is the easiest way to start a Business Planning session for a tree care company?

KM – Schedule 1 one-hour-long meeting with the leaders of your organization to talk about the current challenges and successes you are seeing. During that discussion identify the top 3 areas you are challenged with as an organization and the top 3 areas you feel you are succeeding in. Next identify 1 thing you will do to maintain and support the successes and 1 thing you can do to address the challenges. Commit to meeting in 30 days to see how you are doing with those items and to continue the conversation.

The point is, if you simply begin the conversation, you will quickly understand how important it is for your company to plan your next 1-5 years and you will see how engaged your team will be in having these relative conversations. Conversations about how to improve the overall effectiveness of your team and ultimately your company. Whether planning is done formally or informally, the most important first step is to begin talking about it.

Another option is to reach out to the Arborisk Thrive team and engage in the Business Planning package which will help you organization walk through the steps while you continue to focus on your business.  

 JS – If you are going through it for the first time it may be wise to hire a consultant to help you write up your first plan. The consultant has been through it many times and can help move through the process efficiently. Because they have experience, they will ask you those tough questions and help you clarify your expectations and goals. Alternatively, as previously mentioned there are many free business planning templates available online. Start by filling out one of those templates and you can go from there. If you feel you need additional help the answers will help you identify where you need more assistance. Then if you do have a mentor or consultant review the plan with them and you will be off to a good start.

Thank you Jim and Kevin for a great conversation about business planning! Your collective experience is invaluable to ArboRisk and all of our Thrive clients. We are really appreciative to have you on the team.

If you are struggling getting started on an Annual or Strategic Planning session, reach out to an ArboRisk team member directly or enroll directly into our Strategic Planning Package today!

Tom Dunn

Elements of a Business Plan

Elements of a Business Plan

Written by Eric Petersen, CIC

At ArboRisk, we often write about how critical planning and being intentional with your business is. Obviously the more focused you can be, the quicker you will realize your goals, but how does a company stay on track in a sea of opportunity that comes their way?

The easiest way is to create a business plan for you to follow.

In the simplest terms, a business plan is a document that will guide your business through the next three to five years. As an added bonus, a business plan can help you achieve funding from a bank to continue to grow your business. 

While every business plan will be unique, there are some common elements that your plan should include. Working though each of these elements allows you to focus on your business and marketplace today and what you envision them both to be in the future.

1. Executive Summary – Even though this is the first section in the business plan, write this section last. The Executive Summary should be just that, a summary of your overall plan and why you are/will be a successful company. It is much easier to do this after you’ve written the other sections. If short on time, the Executive Summary should provide the reader the highlights necessary to understand where the business is heading.

2. Company Description – Start by describing your company structure, its management team and mission for its existence. Explain your organization’s competitive advantages and how your team is unique in delivering your service(s) or producing your product(s). This is the place in the business plan to brag about your business.

3. Services and/or Products – This section represents the chance to go into detail about the actual services and products you sell and the benefit your customers receive from them. Limiting the discussion in your plan to only your top 3 services or products will help you keep your focus on those strengths as a business. All too often, tree care companies get involved with providing so many services they do not become masters of any. It is only when a company specializes in a few select services that they truly provide value to their customers.

4. Marketing and Sales – Nothing happens for your company unless a sale is made. And you won’t make any sales if you don’t have a marketing plan to let people know who you are and the benefits that your company provides for them. This is where you explain your sales process, customer journey and post-project communication with your customers. Analyzing your market (local competitors, customer demographics and regional economics) in this section will transition you nicely to discuss your marketing efforts. Discuss your strategy for reaching your customers in-person and in-print, whether on paper or digitally.

5. Financials – The final section of your plan will include financial numbers. Use either projections on sales and expenses or a summary from the prior two years to explain the financial position of the company. This section presents your chance to request funding and explain where the funds would be directed in the company.

 

There is no one correct way to write a business plan, but incorporating the above sections into your plan will allow you to create a powerful document for your business to follow. If you are struggling with creating a business plan or setting the strategic direction of your company, sign up today for ArboRisk’s Strategic Planning Package or Business Finance Package.

Tom Dunn

ESOPs Q&A

ESOPs Q&A

Written by Tom Dunn

Josh Zeidman is a Managing Director at Lazear Capital Partners (LCP), out of Columbus, Ohio in the firm’s Mergers & Acquisitions and Employee Stock Ownership Plans (ESOP) practices. He has closed several Tree Care ESOP transactions personally and his firm has handled multiple other ESOP transactions in the Tree Care industry. 

Prior to joining LCP, Josh served as a Senior Manager at KPMG where he was responsible for leading one of the firm’s largest financial services clients and helping clients navigate complex business transactions.  

Josh completed his Masters of Accountancy at the Farmer School of Business at Miami University, where he graduated Cum Laude. He also holds his Certified Public Accountant license. Josh can be reached at (614-902-3250) jz@lazearcapital.com

We had the opportunity to ask Josh about his take on the benefits and significance of ESOP’s in the tree care industry. 

 

How have ESOP’s evolved since you started in the business and what are some of the more recent trends? 

The tree-care industry is primed for employee ownership! The strong culture and commitment to people create sustainable companies in this industry and can generate significant wealth for business owners and employees. Preserving the legacy and passing the future financial benefits to the employees is a significant value proposition for many of today’s business owners. Additionally, the tax benefits offered to the seller and to the company are unlike any other exit strategy offered to a business owner, creating significant tax benefits not offered through any other exit strategy. The idea of selling the company to the employees via an Employee Stock Ownership Plan (ESOP) is almost always a win-win for both the business owner and the employees.

With increasing corporate tax rates and near-term economic uncertainty, employee ownership will continue to thrive. It’s created for sustainable long-term value creation. Unlike a private equity or competitor roll-up, in an ESOP, the management typically remains intact, preserving the continued vision of the company without “squeezing” operational costs out of the organization.

 

Can ESOP’s work for lower valued companies or is there a minimum threshold that is typically needed to consider starting an ESOP? 

There is no hard rule about how large or small a company has to be in order to be a successful ESOP. There is an old saying where “if you have seen one ESOP, you have seen one ESOP.” Every ESOP is created individually, catering to the needs of the owners and the employees. According to the National Center for Employee Ownership (NCEO) “there are a handful of ESOPs with under 10 employees, and a larger number between 10 and 20, but in most cases at least 15 employees is a reasonable starting point”.

We encourage any business owner to sit down with an ESOP financial advisor to understand the feasibility of creating employee ownership. At Lazear Capital, we start with understanding the goals of the owner and consider over 70 different data points when preparing a Feasibility Analysis for prospective clients.

 

How do you address owners that may have an unrealistic opinion of the value of the company? 

As advisors, our firm takes a holistic approach to understanding a company’s value proposition. This involves a deep understanding of a client’s projections, capital expenditure needs, and understanding value of similar companies. We share this knowledge with business owners as a part of a detailed Feasibility Analysis prior to engagement of an ESOP transaction.

 

What type of tree care company ownership structures have you seen it work successfully for? 

We see a lot of success with employee ownership in the tree care industry. As mentioned above, every ESOP is created differently, catering to the needs and goals of the business. In the tree care industry, owners have found significant tax advantages for the business owner and the company in selling to an ESOP. When structured appropriately, a seller can defer the capital gains tax associated with their sale. Additionally, the ESOP Company can eliminate federal and most state income taxes post-closing, significantly increasing company cash flow to finance the buyout, invest in equipment, talent, and grow. Additionally, and this is important in the tree care industry, I see a lot of success when the Company’s capital expenditure needs (maintenance and growth) are properly considered and validated during the feasibility analysis process.

 

What are the typical startup costs and considerations? 

Startup costs and considerations vary depending on the size and complexity of the transaction. The startup costs are comparable to a third-party sale. Ongoing, there are several compliance costs that should be considered as part of a company’s ESOP Feasibility Analysis. Business owners are encouraged to reach out to a sell-side financial advisor to fully understand all the considerations involved in an ESOP transaction. An ESOP transaction does involve multiple parties, including a trustee, a bank, a third-party administrator, and counsel.

 

Is there evidence that ESOP’s increase worker productivity and therefore bring in higher valuations when a business is sold? 

Absolutely. There is clear evidence that once sold to an ESOP, the Company subsequently sees a direct increase in worker productivity. A 2020 study conducted by the Rutgers School of Management and Labor Relations and the Employee Ownership Foundation found that employee-owned companies outperformed non-employee-owned companies in job retention, pay, and workplace health safety throughout the COVID-19 pandemic. The study found that ESOP companies were 3 to 4 times more likely to retain staff, less likely to make pay cuts (26.9% vs. 57.3%), and more likely to take protective measures against the spread of COVID-19 (98.3% vs. 88.9%). Additionally, a 2018 study by the NCEO found ESOP participants have more than twice the average retirement savings balance of Americans nationally.

Lastly, many employee-owned companies do not pay federal or state income taxes. This significantly increases cash flow for the organization, which in turn can be used to fund future growth initiatives. This, along with statistically proven increased productivity, all drives future financial success and higher valuations in the future.

If you need further assistance with any of the core components of your business, please reach out to a member of our ArboRisk team. We have many resources that can help you with this, in addition to our Thrive Risk Management Program, which can provide one-on-one help to take your business to new heights.

Tom Dunn

The Three Most Important Words in an Interview: Tell Me More

The three most important words in an interview: Tell me more

Written by Eric Petersen, CIC

We all know how much hiring the wrong person hurts your organization, yet most tree care companies are not good at screening potential employees during an interview. The reasoning is pretty obvious, besides feeling the pressure of needing more employees on a daily basis, interviewing can be an arduous task and one that many tree care companies don’t practice and therefore are not very skilled in.

So how do you know what to ask and more importantly, how do you know if the prospective employee is telling you the truth or just what you want to hear? Many times it is difficult to decipher, but the most powerful interview tip that I’ve learned over the years is to use a simple three word phrase…

“Tell me more.”

One of the most common traps an interviewer falls into is talking too much instead of getting the prospective employee to open up. There are many reasons why this happens, but even when the interviewer applies conscious thought on not talking too much during the interview it still doesn’t always prevent it. This is why I love the “tell me more” phrase. It intentionally takes the spotlight from the interviewer and directs it at the interviewee.

This tactic is used similarly to digging deeper when on a sales call. I recently wrote an article about how to get down to the root reason or decision-making motivation when on a sales call by asking “why” three times. To read that article click here. Employ the “tell me more” phrase three times to any important interview question and you’ll gain a tremendous amount of insight about your prospective employee.

Let’s walk through an example…

Interviewer: “I see you have worked at three different tree care companies in the past, tell me more about those experiences.”

The Interviewee will typically answer with a simple statement without much substance like; “the other companies weren’t a fit for me.” The Interviewer should follow up this bland statement with the following.

Interviewer: “Tell me more about why they weren’t a fit for you. Start with the company you currently are working for.”

The Interviewee now has to actually answer the question and you’ll get an initial glimpse into that person’s personality and what they value from an employer. Still, there probably is much more to uncover so the interviewer should try to go deeper. 

Interviewer: “You mentioned that you didn’t see a chance at advancing with your old company, tell me more why that is important to you.”

Now on the third “tell me more” the interviewee has to open up about their feelings on whatever topic you have gone down and the interviewer will receive real information to help in the hiring decision.

I suggest you do this with 3 or 4 questions on every interview so you actually get in-depth answers. From there it should be fairly easy to see which prospective employee will fit with your company culture and which one(s) won’t.

For more help with your interview format and overall hiring process sign up for ArboRisk’s Thrive Hiring and Recruiting Package to work one-on-one with our team of experts.

Tom Dunn

Risk Management Concerns When Hiring Minors

Risk Management Concerns When Hiring Minors

Written by Ryan Watry

In my daily conversations with tree care companies, finding good employees seems to be the number one issue they face.  Sometimes the solution to that problem is hiring a minor to help.  Hiring someone under the age of 18 does create some different risks and needs than hiring an adult.  Here are three areas to be aware of when considering hiring a minor.

1. State Specific – Each state will have a similar but specific view on the regulations surrounding employing minors. Start by contacting your state’s Department of Workforce Development to find out specific restrictions that may apply.  For example in Wisconsin, tree work is considered hazardous employment.  This means that a minor can not operate machinery including chippers, skid steers, chainsaws, etc..  They are permitted to work on a ground crew, cleaning up and dragging brush.  You also should ask about other employment guidelines such as, the number of hours they may work and if they need a work permit.

2. General Liability & Business Auto Insurance – Depending on your insurance carrier there may be restrictions in your general liability and/or business auto policies that restrict what a person under a certain age can do and what vehicles, if any, they are allowed to drive.   Many insurance companies do not want anyone under the age of 21 to drive for your company. So it is important to check with your agent to see if there are any restrictions on employees under 18. If you are struggling with young driver eligibility, creating a driver management program within your company will help. Check out this article which talks specifically about creating a driver management program. 

3. Workers’ Compensation – Workers compensation insurance will cover any employee regardless of age.  However, there are different benefits added in for someone under 18 who gets hurt.  Again, these benefits differ from state to state, so we recommend checking with your insurance agent on your state’s specifics.  In Wisconsin, if an employee under the age of 18 sustains an injury that results in a partial or permanent disability, the lost wages (or indemnity portion of the claim) paid out will be triple what they would normally be for someone over 18.  Also you can be fined by the state and OSHA if it is found that the minor employee was operating equipment they were not permitted to.  

After researching each of these three areas, you will be able to determine if hiring a minor is right for your business.  Who knows this, may lead a young person down a career path in this exciting industry.

For more specific help on hiring and recruiting, reach out to an ArboRisk team member to discuss our Thrive Hiring & Recruiting Package or the Leadership Development Package today.

Tom Dunn