Less Green

Nicholas Clements

I WAS STAYING on the outskirts of Mexico City, with no internet access. But I had my satellite radio and I was listening to CNBC. The reception wasn’t good, but the news was even worse. While bad financial news had been pouring in from every corner of the globe for months, it seemed matters had suddenly got much worse. It was September 2008.

The global financial crisis affected many companies, big and small, and the commercial landscaping company that my twin brother and I owned was no exception. That fall, as we approached contract renewal season, there were challenges awaiting us like none we had experienced since starting the company in 1992.

Properties still needed to be mowed and leaves removed, but that wasn’t where the profit was. Mulching provided a good stream of revenue to help cover costs, but it wasn’t a moneymaker. Instead, the money was in add-on services, such as seasonal flower installation, landscape installation and lawn care applications. These services could be cut out of contracts with a stroke of a pen, and they were. Our commercial customers, facing the same grim reality that we were, reduced these services to such an extent that we lost 25% of our business in one year.

In addition, customers—including our largest—were renewing late and asking that they make monthly payments starting in the spring, rather than at the beginning of 2009. This hurt, because we depended on those payments during the winter months to cover payroll and overhead expenses, and to purchase materials and equipment ahead of the spring season. And monthly payments, which would normally be paid within 30 days, were not getting paid on a timely basis.  Approaching the winter of 2008—2009, we knew we needed to take action to protect our company.

Going into the Great Recession, our company was in sound financial condition. We carried very little debt and there was a decent amount of cash in the bank. We operated the company efficiently. There was little waste. Production man hours were closely monitored and employee overtime kept to a minimum. Running a lean operation was my obsession. This was a good thing, but it left little room for savings. To keep the company in good financial shape, we needed to make changes that would hit each of our employees where it hurt the most—in their paychecks.

Initially, the plan was to lay off some of our winter employees. But after meeting with them, it was decided that each employee would take one week off without pay, so that the pain was spread out evenly among them. My brother and I withheld our salaries for two months. No contributions were made to our retirement plans. Prices and terms were renegotiated with our vendors. We went to a four-day workweek, working ten hours each day. This would reduce our travel expenses and keep our employees in the field longer each day. To reduce payroll processing expenses, we went to a biweekly pay schedule.

Our expectations in late 2008—that the upcoming year would be a challenge—did indeed become reality. With the cash we had on hand, we were able to get through the spring months, covering payroll and the hefty expenses of mulch and equipment. Without the cash, I believe the financial condition of our company would have deteriorated rapidly. We stayed on top of customers, urging timely payments. Production was tracked more keenly than ever before.

Over the years that followed, our company was able to increase annual revenue. But when we sold the company at year-end 2012, we still hadn’t reached the levels of pre-2008. Those existing customers who cut back on additional services eventually started to invest in landscaping again. We continued to work a four-day work week, a change that was initially difficult for our employees to grasp, but they soon embraced it. Contract negotiations remained a challenge with many customers still demanding that we keep prices at levels that left little room for profit. My brother and I continued to collect salaries that were 40% below where they were prior to 2009.

And so, years later, the impact of the Great Recession was still evident. Nonetheless, when it came time to sell our company, we could show the buyer that we had a company that—despite the turbulence of those years—remained on a strong financial footing and operated more efficiently than ever before. We had survived the Great Recession.

Nicholas Clements is one of Jonathan’s older brothers. He is retired and lives just outside Washington, DC. His previous blogs include Not a Good Time and Opening My Wallet.

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