How Big is Big?

[Smartgene]

I'm Gene from Leyton's Lawn Cutting Company and I'm new to the business and have been reading these boards for a couple of weeks now. Obviously, from the name of the company (named after my 5 month old son), I'm into the maintenance side of things. I'm wondering, how large a company can be built primarily through maintenace? Trying to avoid getting to personal, but I'm wondering if there are any 500k per year guys participating on this board? If you have it like that, please don't be reluctant to tell us of your success.
Gene from Mich.

[TGCummings]

Welcome to LawnSite, Gene! :D

I believe 500K in annual revenues is possible in the maintenance end of the business, but only if you're not working in it. What I mean is, at that level, you'll be managing a large number of maintenance crews (and consequently, the headaches thereof ;) ) and working on the business only. I can't imagine you'd have any time to do the work yourself at that level.

Of course, you'll have to determine whether your market can handle this volume of service.

As for the secret of success, I imagine anyone operating at that level would tell you the same thing: hard work, good systems, customer service, and integrity. Of course, each trait can be broken down and volumes can be written about each one.

Since you're just starting out, build on the basics of each principle. Learn everything you can about what you're doing. Learn about marketing, equipment, safety, etc. Build systems within your company to streamline it's effectiveness. Learn how to deal with customers comfortably. Give them the best service you can without comprising your systems (and integrity).

Build systems for employee hiring and retention. Build systems for marketing and growth. As the months and years go by you can perfect these systems. Find your comfortable level of growth.

Charge more than you think you need, and find out what your market will bear.

You can make a lot of money, or enough money. You can work with two guys and make a good living while keeping the business 'manageable'. You can run 10 crews and bring in hundreds of thousands of dollars a year (and pull your hair out all the way to the bank!). It's up to you.

But, start at the beginning.

And welcome to LawnSite once again! :D

[Runner]

Gene,
Where in Michigan are you? I may be able to help.;)

[Smartgene]

Thanks Thomas for your reply. There's a great deal of sense in what you wrote and I'm sure I'll read your post several times. As for Runner's reply, I'm in New Baltimore - I certainly do not service Flint or any areas close to Flint. I'd appreciate any help I can get and will even pay for the correct type of personal consulting. (should i have offered to pay?)
Gene

[Kent Lawns]

$500,000 is still a small company.

By the time you add revenues of mowing, mulch, clean-ups, etc. it adds up quick. Then if you do fertilizer, irrigation, snowplowing and some tree service...

[Toroguy]

At least 6 two man crews. depending on location and/or volume. Thats my guess-timate. Based on $40K gross per individual.

Good luck

[TGCummings]

Originally posted by Kent Lawns
$500,000 is still a small company

Maybe to you! ;)

[John Allin]

I believe Mr. Cummings said it quite nicely....

Although I don't quite agree with the "what the market will bear" comment, his advice is sound and would appear to have come from first hand experience.

[Kent Lawns]

Originally posted by Toroguy
At least 6 two man crews. () Based on $40K gross per individual.

Good luck


Gonna need more than luck! You'll need around $70,000 per employee to cover your costs, pay decent money and derive a decent profit.

Remember, in the North you'll add snowplowing revenues.
In the South, you add more cutting weeks.

Either way, the half million mark should be do-able with the owner plus 6 or 7 employees.

[Turfdude]

I am striving for this level. It is do-able w/ 8 guys - if the owner is still an operator, or w/ an extra man if the owner is supervisor only.
1 employee -paid well to fertilize the accounts - his/her main responsibility - we do approx 180
1 - 3 man maint crew
1 - 2 man maint crew
1 - 2 man landscape and landscape maint (mulch, prune, etc) crew

(sometimes switch 3rd man from maint crew to landscape maint crew)

I work my ass off - 50 hrs a week - 55hrs a week in field and about 3 hrs/nite in office.
No work Sundays thoug and done by 2PM on Saturday (rest of day for bids)

Cummings - you're on the ball.

I only hope to get the guys trained well enough that I only work 1/2 days next year so I dont work more than 60 hrs/week total.

Sometimes at this level it feels as if the "Business rns me more than I run it!!"

Bob

[proline32]

There is this company here in my area that is pretty darn big... they have a bunch of those mitsubishi trucks with big trailers( 7 or 8 by my count) three men per truck, they have a vacume truck for parking lot cleaning, and do other stuff as well, and lots of commercial work. They only do large commercial jobs.

[Lanelle]

The trade magazines often feature large maintenance companies and there is a list of the largest 100 companies published each year. Look at it and you will see how big is big.

[HOMER]

Like I said before......if $500,000.00 is small then I'm nothing more than a speck!

I could cut everything in town and not generate that much. It all depends on your market, population, and how much time you don't want to spend with your family.

Anything is "do-able", just gotta do it.

[Smartgene]

Someone said that I need to generate 70k per employee. So with a two man crew of employees, I need them to bring in 140k? Or was 70 k for me with one man? Clarification please.

[LawnLad]

I agree with Kent - $70,000 in revenue per employee should be your goal. Earning $40,000 per man does not give you enough revenue to pay your people so they can live to. The green industry has a problem with suppressed wages. We compete for labor with other industries and trades. To pay someone $30,000 gross, means your loaded cost may be well over $40,000 a year by the time you figure in your taxes, their health insurance, and other benefits you may need to give them.

Perhaps it's easier to look at in man hours. An employee may work 2,000 hours a year in a traditional job. Because we're seasonal, you may not have one guy hit 2,000 hours April through November, even with OT. Take your total man hours worked in your fiscal year, divide by 2,000. Thus, 10,000 man hours (payroll hours) would be equivalent to a 5 man company, even if you employ 7 or 8 during peak season. That "5" man company should at a minimum be producing $350,000 in sales.

If you want to give yourself an even tougher goal to set, remove your material costs and sub contractor costs from the equation. If you're doing $250,000 a year in sales with 4 men, or 8,000 hours, or $31.25 per hour or $62,500 per man per year... that's okay. But if you're material and subcontractor costs were $40,000 for the year, then you're really only producing at $26.25 per hour or $52,500 per man, assuming 2,000 hours. That's what you're making on your labor!

Most other trades are figuring $40.00 to $70.00 per man hour PLUS materials. $26.25 per man hour over the long haul is tough to grow on.

[TGCummings]

Originally posted by John Allin
his advice is sound and would appear to have come from first hand experience.

No, sir, I operate entirely on theory at this point, but I believe I'm on my way. While the business builds, I spend all the unfilled hours studying business and, of course, LawnSite archives. ;)

I believe a two-man crew can earn $9-$11,000/month cutting lawns on a 4-day schedule. I'm a believer in keeping a 5th day open every week for catch-up and maintenance. This is based on $40-$50/manhour, which is what I get on average now. I believe two-man crews to be the most effective, so my breakdown is like this:

Crew Revenue: $10,000
Crew Leader: $2200/month including benefits.
Crew Labor: $1800/month including benefits.
Cost of Crew: $2500/month (equipment, fuel, etc. prorated on what it costs me currently for one man)
Net Profit per Crew: $3500/month

Accordingly, each crew brings in $120,000/year (we have a year-around schedule out here) in revenue. 4 crews (8 workers) would reach the $500,000/year in revenue (or just short at $480). Net profit on 4 crews would be $168,000 annually.

Again, these numbers are pure research. I've written out dozens of projections and am constantly updating, upgrading, and reworking my numbers. Also, this is based on a 12-month season and only on lawn care (primarily mowing). In an eight-month season, 4 crews will earn you only $320,000 at this level, and net profit will be only $112,000. Always consider your market when setting price.

That's where I get the "what your market will bear" comment. I agree with John Allin in a lot of ways (if I'm correct about his stance here) in that you can set your rate and build your business model in any market. However, some markets will quickly accept your professionalism and rates, and others will be like pulling teeth. In my market, every street has three lawn guys. In a town of 150,000 people (tops!), every one of them wants to cut lawns. However, you can count the number of professional operations with one hand. Consequently, the standard rate is about 50% lower than my business model and folks have come to expect that. I stand my ground, charge my rate, and turn away from anyone who complains about it but I can't grow as quickly as I could in another market starving for the Professional.

This is not a complaint, just an example. I like to stand apart from and above my 'competition'. I don't plan to back down and I can see my business model slowly bearing out. It's slow, but it only makes each step all the more rewarding. :D

[Smartgene]

Hi Thomas,


Seems like it would be difficult to get good help at the projected pay rates that you mentioned. Also, the revenue numbers you prefer are not generally accpeted in your area. How fast are you growing in terms of accounts annually?

What states besides California have year long grass cutting seasons?

[TGCummings]

Originally posted by Smartgene
Seems like it would be difficult to get good help at the projected pay rates that you mentioned. Also, the revenue numbers you prefer are not generally accpeted in your area.

You may be right, Gene. In the long run it may not bear out, but being in business is always a calculated risk. I know from running the numbers (and if you check my profit margins on the above you'll see it's fairly tight) that I can't lower rates and then pay more in labor. I would then make nothing. :)

The area will just have to come around to my way of thinking...

[summitgroundskeeping]

Last year I read in a magazine that True Green did $1.6 billion. I would say that they are big. There are many, many $500,000 a year companies around here, and it doesn't snow often here. Just ice and heavy snow dumps a few times a year.

[AielLandscaping]

TGCummings brings up a good point about what the market will bear... i'm in california too and likewise there's a more lawn guys here then customers or so it would seem and i've never heard of anyone making 60.00 per man hour on cutting grass, it just doesn't happen here. my market for example is strapped for cash because the jobs here don't pay well, and housing costs keep going up and up... i work by myself and pull in 22.50 per hour and i know i'm higher then most eveyone else around here... i've had a thought recently about prices that people get per hour and i think i've stubbled on to something...

i think you can charge a dollar per hour for each inch your mower is wide... so if you are mainly using a 21" mower, something around 21.00 is probably a fair price (which is right for my area) and the guys who use 60 in mowers claim to get 60.00 per hour ... so if that's true and i get a 36" mower i think i should be able to make 36.00 an hour...

don't know if this helps at all but i'd like to see what others think about that pricing...

[Smartgene]

I think you may have something there. $1 per hour for each inch of your mower. I'm using 21's and probably getting close to $21 per hour, so it makes sense. If I went up to a 36 I'd make much better time and my hourly take would improve proportionately.

[TGCummings]

I don't agree with that. I run 21" mowers and average $45/hour on the job right now, and close 40-50% of my sales for new jobs. The market is tough, but patience is bearing out. I think a professional can get professional rates in any market, but you have to stick to your guns. It'll take longer to fill the schedule, but half a schedule at $45 is equal to a full schedule at $22.50. I think after adding costs and time spent working on the business, you'll find $21/hour won't make you minimum wage.

The market you're in matters, but I think you still need to hit a minimum rate in pricing to make a go in business. I can't get $60/hour for mowing in my market like others, but I still have a fixed cost of doing business and have to get that to run my business. Remember, you have to provide your own retirement planning and health insurance as well equipment, licensing, liability, etc. and these should all factor into the cost of doing business. I made up my mind that I have to make cost + desired profit or I have to find my future in another line of work. I have to work harder now on marketing and sales, but it's bearing out ... one lawn at a time...

[Russo]

Been following you thru this thread, TG. You have a plan, a drive, and vision. You will reach your goals. I, too, am steering my efforts toward the same principles of operation and client selection.

Smartgene, please listen to what he's saying. This man is researching, crunching numbers, developing a plan based costs that include nontangebles such as retirement, implementing and then recalculating, forecasting, building relationships rather than filling a schedule........

Charging a dollar for each inch your mower is wide? I don't know what to say to that.

I do know this: Rules of thumb are good " double checkers " to see if something is completely out of wack. That's all they are good for.

[Bunton Guy]

We have atleast a dozen companies in my area doing over a million a year...not just in maintenance but landscape and irrigation some doing 14+ million a year with 80+ workers

[TGCummings]

Hey Scraper,

Thanks for the kind words. Determination, calculation, and faith are great motivators but often validation is even better. ;)

[Rodney Johns]

Don't over look the small markets either. It is very possible to do 500k even in a rural area if you know how to market your business. Of course you have to cover more area but you will also not have nearly as many competitors. 1 mil seemed way out of the question to me at one time and now I am thinking 2-3 mil is not that far away. You never will know unless you try.

[John Allin]

If you think you can, or you think you can't.........

......you're right.