If you’ve been thinking about starting a lawn care or landscaping business it’s important to keep in mind that there is much more to your potential success than buying the right truck or mowers.
Like any business, and like any business owner, your ability to grow and develop a sustainable business model depends on your ability to account for potential challenges before they ever arise.
If your hope is to build a business that is in it for the long haul, plan now, and plan often.
Start by familiarizing yourself with these 10 common problems and their solutions, and you’ll already be 5 steps ahead of the competition.
Flaw #1 – No Short or Long Term Planning
It’s easy to dismiss early stage planning simply so you can get to work. Especially if you’ve been in the green industry for several years and know what you are doing, you might make the mistake of characterizing this step as a “waste of time”.
Like getting into a car with no end destination in mind or a roadmap to guide you, skipping the business planning and execution stage can result in your business ending up, literally, anywhere.
While developing a plan by no means guarantees success or means it will happen just as you intend, you can be sure no plan will lead to little direction.
Taking the time to fill out a business plan and assess your 2,5, and 10 year goals can instill in any entrepreneur a tremendous amount of confidence. With the end in mind, you can work backwards and assess each decision from day one. Is this the kind of customer I should say “yes” to? Do I rent or buy that Bobcat? Is it time to hire a sales manager?
Other questions, such as:
- Who is your ideal customer?
- What types of work will you perform?
- Where will you get your employees?
- How much money do you need to get started?
- What technology or resources will you need?
- What geographic regions will you serve?
Identify your goals, create a plan to get there, and follow it.
Flaw #2 – Insufficient Start-up Funding
The beautiful thing about starting a business in the lawn care or landscaping field is that there is a relatively low-barrier to entry financially. Some equipment, some know-how and a solid work ethic can get you pretty far.
Yet the cash flow needs of a new business can be a tricky thing, made even trickier by over-aggressive owners who have taken on significant debt-service (loans). This can occur when a new business with little to no customers buys new trucks, top of the line mowers and more bells and whistles than are necessary on day one.
Next thing you know you are struggling to make payments on a 7-year loan for a piece of equipment that has a 4-year life.
To ensure your business is not strapped for cash in the early years and you are able to reinvest in yourself on an annual basis, start small and grow as profits allow. This means buying used equipment and saving up to buy newer versions in cash.
A key element means buying the right equipment for the jobs you have, not the jobs you want. A 60” + mower deck that can’t get through Ms. Jones fence gate won’t mean a whole lot to you. As the demands of your business grow, add on your equipment, or rent until owning makes the most sense (in the case of one-off jobs where you may not use the equipment again for some time).
Following the above formula may mean business grows at a slightly slower rate than if you were taking on loan after loan, But do you know what else this methodology allows?
- A good nights sleep
- debt-free growth
- less stress during downtimes in business
- the ability to respond quickly to opportunity
Start within your means, grow at a responsible rate and buy only what you need. If you can find the right deal, buy it used.
Flaw #3 – Poor Sales/Lead Management
Many business owners are pretty good at sales. It just comes naturally to them. Put them in front of a customer and they can sell them service after service with upgrade upon upgrade.
Unfortunately, many small business owners never get in front of the prospective customer because they stink at the follow-through and administrative process. Unanswered phone calls, messages left without a response and quotes never delivered; these are the hallmarks of a stretched-too-thin business owner.
Sales being what they are (the lifeblood of any business), it’s imperative that safety nets and thorough systems be put in place to catch prospective customers before they fall through the cracks. This is especially key if you are going to put any effort into marketing your business; Why promote your brand if you never respond to inquiries?
So what can you do? For starters, you need to be realistic about your limitations as a business owner. It’s not a sign of weakness to admit that you can’t do it all. Quite the contrary, a true leader delegates and establishes systems to ensure smooth operations for their company.
While you may be the one to ultimately pitch or close the sale, you might be best served by hiring a part-time administrative assistant to answer phone calls and emails and hold your feet to the fire when it comes to following through on requests. This frees you up to focus on what you do best, while allowing someone else to sweat the details.
Other Aspects to consider including::
- Customer Relationship Management Software (CRM)
- Automated Email Systems (to help guide a prospective customer through the quoting process)
- A Virtual Assistant
- A Sales Manager
To help, visualize the process a potential customer might go through ( phone call > information request > follow-up call > appointment setting > Face to Face Meeting > Yes/No ) and then decide how you want each touchpoint along the way to “feel”, considering how each impression reflects upon you as a business owner. Then invest in the resources to make that journey happen.
Flaw #4 – Growing Too Fast
When customers come rolling in and your accounts receivable looks fat, it’s easy to conclude that “we’ve made it” and you can take whatever steps necessary to meet the perceived demands. However, this is where unprepared businesses can be digging themselves an early grave.
As business expands, so do your costs of doing business. To keep up with customer needs, this usually means significantly increased staffing, larger lines of credit with suppliers and lots of new equipment.
The danger often encountered here, and the case made for scaling your business within it’s means, is the often suffocating lack cash flow. If you have not prepared in advance, all of these new costs may not be met by the incoming customer payments in the manner you need.
Industry standards dictate that this is why you should have 10-15% of annual sales in cash available ($500,000 in annual sales = $50-75k in working capital).
It’s businesses that do not prepare for these needs that are found guilty of fatal flow #5….
Flaw #5 – Lack of Cash Flow
Cash flow challenges can cause problems, and they usually aren’t small ones.
Quite possibly the most common reason companies go out of business, cash flow challenges can stunt growth, force you to miss payroll and even alienate subs and vendors because of non-payment. Employees will walk off the job while suppliers shut your accounts down. It’s not a pretty picture.
While there are a number of reasons why lawn care and landscaping businesses get into cash flow troubles, it usually starts at the top (the ownership) and works it’s way down. Often a result of a myriad of poor decisions made along the way, the top reason is a pretty common one; customer collections.
Now, this can mean a couple of different things.It may be that a business owner is doing a poor job of collecting what he is owed and is allowing his accounts to get too far behind, or strategically the business is loaded with late-paying commercial accounts.
Commercial contracts often have 60-90 day payment terms, while residential customers understand that payment is due almost immediately. If it’s a recurring lawn care account, you might even have the customer set-up on auto pay with a credit card.
So what can you do to make sure cash flow doesn’t become an issue for your business? Plan. If you know that commercial business is going to be a large part of your growth strategy, financially prepare for that kind of customer by having enough cash reserves to handle the delayed payment terms, or begin with a healthy mix of residential to commercial accounts.
On the residential side, be explicit about your payment requirements right at the close of a sale. If you are doing medium to large one-time jobs such as installing garden beds, retaining walls or the like, let them know what is required up-front to begin the job and where other installments need to be made along the way.
It’s common practice in the residential landscaping world to require one-third up front, another third on delivery and the remainder billed at project completion. The really in-demand contractors may required a 40% deposit just to get your job in their calendar.
Remember; you are in business to service your customers in a very high way, but you are also responsible for the financial health and well-being of your business. Make sure you don’t compromise one for the other.
Flaw #6 – Lazy Estimating Processes
If sales are the lifeblood of your landscaping business, the ability to correctly price or estimate a project is a very close second.
What determines whether a project or contract is profitable is an accurate assessment of your direct and indirect costs associated with completing the job. Dire consequences may arise when the business owner or lead estimator takes the “easy route” and glosses over a few elements of a job and bids too low.
Where do businesses typically go wrong? They’ll conduct what is more or less called “drive-by estimating”, where they’ll drive by a site or quickly assess a project by comparing it to prior jobs they’ve done and presume that it must “be the same”.
This type of behavior is why construction is ranked as the second most riskiest business after restaurant ownership. It is imperative that each and every job be treated as it’s own business with the ultimate goal of efficiency and profitability (and customer satisfaction, of course).
How does a smart business owner approach a new project or service contract? What does he consider?
- The direct and indirect costs that impact the project
- The targeted profit markup
- The absolute bottom-line bid
All too often we’ve seen business owners take the lazy route, effectively shooting themselves in the foot and setting their business back by tens of thousands of dollars of debt. Legally bound by contract to honor the bid they agreed to, some businesses never make it back and are left wondering what went wrong.
Develop systems in advance, follow them time and time again, and you’ll ensure yourself a tried and true method to ensure job quoting accuracy.
Flaw #7 – No Clear Marketing Strategy or Brand Development
The term “marketing” means different things to different people. What it is not, is a flyer pinned to a laundromat wall or a craigslist ad online. While these may garner the occasional customer, marketing is many things with many moving parts.
However, this doesn’t need to be an entirely complicated activity.
To see success in the landscaping or lawn care industry, one must differentiate between marketing strategies (“I want to get young, busy families as customers because they don’t have time to mow their lawn”) and marketing tactics (“I can reach these customers by handing out flyers in specific neighborhoods or sponsoring an ad on a family-friendly pizza box”), and how they collectively work to spread your brand/business message.
While you may think this does not apply to your current or future business because “I don’t have a marketing budget”, this makes developing a plan that much more essential.
You may be investing in fewer opportunities than the guy with the multi-million dollar revenue stream, so it’s very important to ensure that the 2-3 paid tactics you do jump on a) maximize every dollar spent, and b) line up with any free marketing you might be doing so that potential customers all hear the same message.
Following this advice will help you carve out a name and a reputation in your community that will snowball into new business year after year.
Flaw #8 – Employee Challenges
This flaw could easily contain dozens of sub-flaws that characterize the difficulty often associated with employing laborers in green-industry. Truly, most of these issues arise in any industry.
Companies have entire departments dedicated to employee oversight. They will monitor hiring, employee satisfaction, on-the-job and workplace issues, professional development, legal compliance and much more.
This means that as a small business owner these responsibilities all fall on you and your management. From the beginning, the attitude and expectations you set for your staff will dictate the overall “feel” of what life is like in your company for an employee.
In addition to doing the hiring and firing, you’ll need to establish standards for customer service, job quality, conflict resolution and much, much more. Your ability or willingness in the early days of your business may determine whether your staff is an asset or a hindrance to your growth.
Remember, employees will follow your lead, good or bad. If you cut corners or dismiss customer concerns they’ll be right behind you doing the same thing.
Some of the key elements to consider as you draw up your “best practices” and day-to-day operations:
- Identify what you believe will/does make your company excellent
- Does your staff know these things?
- Do they have specific assignments to make the above happen?
- How can your employees grow in the company? Do you have a future for them?
- Once you identify “standouts”, what will you do to groom them to grow?
- What are your future staff needs based on growth plans?
These are just a handful of considerations to keep in mind. Remember, just like you, your staff are human beings that (ideally) have goals for growth and future success. The greater sense of accomplishment and contribution that they feel, the more your business will thrive.
Each business owner needs to determine how much they want to include their staff in things like goal planning, the sharing of “wins” and decision-making. While you have the final say, just feeling as though you care what they think can go a long way to winning their loyalty.
Ignore these elements, and you’ll attract the kinds of employees that are only punching the clock for a paycheck. They are loyal to one thing, and that’s money. The problem with that? Lots of other businesses have money.
Invest in them and they’ll invest in you.
Flaw #9 – No Financial Reporting By Division
Many landscaping or lawn care companies perform more than one service as a means to diversify and stay competitive throughout the calendar year. You may get your foot in the business initially by only offering one service, but chances are your business model may include expansion into other areas like irrigation, lighting, installations, excavation ,snow removal, etc.
Smart business owners will conduct financial reports for each distinct profit center as a means to determine the profitability of that service department. To do this you’ll need to accurately segment expenses and revenue as they pertain to that area specifically.
Why is this a wise move? If you aren’t inspecting these areas individually, you have no idea whether one in particular may be a drain on the company and needs a strategic overhaul or should get the axe altogether.
Likewise, you may see another department has tremendous profit margins but little volume at which point you may decide to focus more strategic efforts (sales, marketing, business development) on growing that area.
Having a clear perspective of these elements can give you new insights into your business and what next steps might be called for.
Flaw #10 – No Exit Strategy
While this one isn’t exclusive to landscaping companies, it’s still rarely considered and even more rarely acted upon.
What’s an exit strategy? Simply put, it’s having a plan at the beginning about how you’ll get out of the business in the end.
Sure, it seems a little backwards when starting a business to be thinking about how it will end, but so much of what you do in the early days will determine what choices you have left at the end.
One thing you might be wondering is “why” would one want an exit strategy, and it’s a good question, especially if you think you’ll never want to sell your business.
Considered by some to be the most lucrative part of a business process (and a highly important part of the business planning phase), a clear exit strategy can create a path to capitalize on years of hard work. Planned correctly, an exit strategy can potentially make you more money than at any phase of your business. It’s the big “cash out”
So, what are some examples of ways to sell your business?
- Sell to a Friendly Buyer: This is a scenario in which you find someone you know who will care deeply about the business and see to its long term health. This can include current managers or employees.
- Acquisition: Here you find another business that wants to acquire you and negotiate the price. While the market may determine “x” is the going rate for a landscaping business, you can name your price and they’ll either agree or walk away.
- Milk it for all it’s worth: This is where you pay yourself a hefty salary, take bonuses as you deem fit and have fun. While you want to make sure the business continues to operate at a profit and you reinvest some of the funds, this is how you get wealthy off the business without planning for a big “pay day” sale.
There is more to creating an exit pathway than we could possibly cover here, but hopefully it’s clear that what you do in the early days has implications on what you are able to do in the later years of the business when/if it’s time to leave.
In Conclusion: Avoid The Misteps
There is a concept in self-education known as “just in time” learning. The idea is that it’s better to get started with your project, take those first steps, and when you do hit a wall, find out what you need to in order to keep moving ahead.
This methodology is a great way to move beyond the planning stages of business that can at times take forever. If you wait until you know everything before you get started, you will never get started.
These elements we’ve laid out here are essential to keep in mind, but impossible to know expertly in a matter of days. For example, in common flaw #9 we discuss the importance of financially analyzing your various service areas.
You are now aware that this is an important thing to do at some point. Having said that, it’s very plausible you don’t know how to conduct a full financial analysis of one part of a business. That’s OK.
When the time comes, you’ll either learn how to do it, or you’ll hire the appropriate professional to do this for you.
To help you keep these top 10 problem areas in mind as you go about planning your business, we’ve created this simple one-page PDF download for you (get it here).
Paste it to your wall, keep it in your truck or keep it in your wallet.
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