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Old 02-18-2009, 04:57 PM
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PROCUT1 PROCUT1 is offline
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How to fail in the lawn business by someone who did it.

I have been talking privately with members here and other places about this topic and have typed out this story so many times individually that maybe it will interest some here. Its a long read.

Most of you with starry eyes right now will read it and call BS. Most of you will say "impossible". Most of you will think youre too smart or too good for this to happen. Most of you will post every possible way that you would have done things different.

Most of you will be wrong.

This is what I experienced first hand in this business.

I cannot count how many people Ive spoken to on this board, many who you read the threads and really envy their operation, and they are going through this right now.

I have many friends and contacts all around the country that are going through this, or have closed their doors as a result of this. Every one of them including myself thought it wouldnt happen.

This is just a cut and paste of a private message that I wrote privately to another member so please excuse if its not in the best format.

The numbers in the post are approximate and used for example.....They will vary by operation.....But the moral of the story is my point, not the individual numbers.



------------------------------------------------------------------------

You have the right idea. What I keep saying on here and keep pounding is that there is a tipping point in this business where you grow, grow, grow, then all hell breaks loose.

If you work from home, work solo or with an employee or two, you can put together a nice close route and make a lot of money.

You guys can do 100 $30 lawns a week and after payroll, fuel, and small bills, you will make a very very nice living.

What happens is when you get to that point, you want to keep going thinking you can only go up.

You think, "If I put a second crew out there and do 200 lawns, Ill make a ton more money"

So you do that.

Then one day the town shows up on a complaint of running a business from your house.

Now you need to find a shop. Now you have $1000 in rent.

You think.....No big deal, I just have to mow 8 lawns a week to have that covered. But wait......You dont make 30 off each lawn after the cost of doing the job.

After payroll, gas, and bills you make $10 profit off that lawn realistically. Your rent comes out of the $10 not the $30. So in reality the first 25 lawn cuts of the week, probably a full days route, the profit will go for the shop rent.

So now you work all day monday just to pay employees fuel and your shop rent.

Now you keep growing.

Insurance goes up, rent goes up, comp goes up, taxes go up.

You bought new equipment for the second crew which you probably have a payment on.

Again all of that comes out of the $10 a lawn because your employees and direct costs get paid from the other $20.

Now you get more lawns.....Maybe you rent an office and get office help....

Bookkeeping is more complicated, so more money to the accountant.

Phones for the office, utilities..

Throw in some equipment repairs...Again a $300 equipment repair comes out of the $10 not the $30.

How many lawns you do now have to mow to pay for that repair?

You get 2 customers a week that for whatever reason arent happy and you give them a free cut to shut them up.

You still paid the direct cost to mow those 2 yards which would be $40 for them.

To make up for that, it comes out of the profit from the paying lawns.

Now you mow 4 more lawns for no profit to pay the $40 in expense.


Keep growing, more trucks, more equipment, more employees...etc...

How far can you stretch that $10?

What happens is that since your bills have staggered due dates, for a long time you will be able to pay your bills because your customer money comes in with enough time to pay a bill.

Its all timing. You think youre making money, youre paying your bills, but really youre a few late payments from going under.

You start to run short....Maybe borrow from personal money or credit to cover payroll..."Just this week" figuring you;ll pay it back when the customers pay.

Well by the time the customers pay, you have other bills to pay....And that "loan" now becomes a debt on the books.

The answer in your head will be "get more lawns"

Your competition sees your trucks and equipment everywhere and thinks youre a bigtime high roller now. You look like the lawnguys dream.


You have now reached the dreaded "mid zone"

You have all the expense of a very large operation, but still the income of a smaller operation.

When you get to this point, your expenses have grown disproportonate to your income.

I lose count of how many guys I have had this conversation with who are a carbon copy of this situation.

You cant raise prices enough to spread out your non-direct costs and still show a profit.

So many of your costs are fixed at this point, that there is not much you can reduce.

To expand requires more money that you dont have.

Now bring in the accountant or consultant.

You now find out that you have 500 lawns, but your business needs 1000 lawns to cover your expense and provide a decent salary, and show a profit.

Now you have 2 choices.

Go big.

or

Go back small.

In my case I held out so long in that mid-point that I accumulated enough debt that going back small wasnt an option for me.

I also realized i didnt like the business anymore.

I could have grown to the size I needed to be, but my heart wasnt in it anymore. I didnt want 1000 customers. I didnt want to run profit pennies on the dollar for the amount of work that it took.

I chose to sell the business, and expand my other business that was much more profitable, catered to the clients that I liked dealing with, and took my competition from everyone with legs, to only a handful of respected companies.

If I posted this on a thread like I have similar in the past, I will get 100 responses telling me Im wrong.

I heard this story 100 times while I was still small and growing and I didnt believe it either.

Well it happens everyday in this and every other business. Many of the largest operations in my area are now gone and I know the owners. They are a carbon copy of this story.

So the moral to this story is to save as much as you can while youre small and pocketing most of the money.

If you have big growth plans, realize that you can do it gradually up to a point. After that you better be prepared, and have money in the bank.

It goes up fast, then you hit the middle, and you better be prepared to stay there a while until you ride the next wave up.

Chances are you wont see it coming. I didnt. And thats why over 90% of small businesses fail in this country.

Thats my 2 cents
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  #2  
Old 02-18-2009, 05:07 PM
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PROCUT1 PROCUT1 is offline
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And to add.

Now your customers, who you have been mowing for $30 are getting flyers in their mailboxes everyday with $20 prices.

They want you to match the price or they will try them out.

What now?

It costs you more than $20 to do the lawn.

Now you post a "lowballer" thread or a "how can he work so cheap" thread here on lawnsite.

But in reality.

The guy at $20 is making a lot more money at that price than you are even if you doubled his price.

Until he decides to grow................
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  #3  
Old 02-18-2009, 05:15 PM
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White Gardens White Gardens is offline
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Sorry to hear all that Procut.

Sounds like you did the right thing by selling when you did. At least it sounds like you've got other business opportunities to pursue.

I hope you weren't so far into debt that you were able to to make a small profit off the sale.

It's a simple business cycle that you experienced first hand, and thanks for posting a good thread about it.
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  #4  
Old 02-18-2009, 07:21 PM
RLC12065 RLC12065 is offline
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Quote:
Originally Posted by PROCUT1 View Post
And to add.

Now your customers, who you have been mowing for $30 are getting flyers in their mailboxes everyday with $20 prices.

They want you to match the price or they will try them out.

What now?

It costs you more than $20 to do the lawn.

Now you post a "lowballer" thread or a "how can he work so cheap" thread here on lawnsite.

But in reality.

The guy at $20 is making a lot more money at that price than you are even if you doubled his price.

Until he decides to grow................
are you the procut from the clifton park/albany area?
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  #5  
Old 02-18-2009, 07:26 PM
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PROCUT1 PROCUT1 is offline
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Quote:
Originally Posted by RLC12065 View Post
are you the procut from the clifton park/albany area?
Not me...........
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  #6  
Old 02-18-2009, 09:32 PM
shane mapes shane mapes is offline
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Quote:
Originally Posted by PROCUT1 View Post
And to add.

Now your customers, who you have been mowing for $30 are getting flyers in their mailboxes everyday with $20 prices.

They want you to match the price or they will try them out.

What now?

It costs you more than $20 to do the lawn.

Now you post a "lowballer" thread or a "how can he work so cheap" thread here on lawnsite.

But in reality.

The guy at $20 is making a lot more money at that price than you are even if you doubled his price.

Until he decides to grow................
I read your thread and it is a slap in the face. A good slap though. A few years ago this happened to me . I blew up ,went from 32 customers to 98 in one season. i did no flyer's or anything. I had 2 part-time guys and my self. They went full time and after a few months my full time night shift job went 16 hours a day 7 days a week. So I put them in charge. My service lacked the personal touch my customers wanted. Instead of slowing my real job(had a choice) and making this one work, I closed up shop and gave all the customers away to other small time guys.I was out of bus. for about one year and started back up. This time I'm doing it slower and making sure it will work this time. Your thread has really hit home, and is an eye opener. Thank you for the reality check. Good luck in life.
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  #7  
Old 02-23-2009, 11:05 AM
Ramairfreak98ss Ramairfreak98ss is offline
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Quote:
Originally Posted by PROCUT1 View Post
And to add.

Now your customers, who you have been mowing for $30 are getting flyers in their mailboxes everyday with $20 prices.

They want you to match the price or they will try them out.

What now?

It costs you more than $20 to do the lawn.

Now you post a "lowballer" thread or a "how can he work so cheap" thread here on lawnsite.

But in reality.

The guy at $20 is making a lot more money at that price than you are even if you doubled his price.

Until he decides to grow................
Very true, i like the story We've been beat up with "lawn accounts" all last year and even so the year prior.. $20 companies/jo smoes coming in now cutting our $40/$45/even $50+ accounts with small and cheap machines all day long.

Reliability and customer service and professionalism dont mean squat to clients these days, at least not 90% of them. Ive built this business to the point that i can offer all 3 at an affordable rate. But why will a client choose to pay my rate over a guy thats 20% cheaper that offers nothing but just the straight service thats on the contract... cut lawn once a week for $20?

I've felt like i've been in the MID area for a while now. I keep saying im a "small company" which by my income sure as heck feels like it. I went from push mowing lawns to doing everything now. Your competition frequently out prices you in any aspect.

Hard to compete with hardscaping because the 100% hardscaper comes in cheaper, faster, more efficient, cheaper labor workers, cheaper product, better supply costs and can probably do a better job sometimes too than I can.

Landscaper comes in that does it 100% of the time, again cheaper supplies, cheaper labor, bang, 20 10' tall trees in the ground in 5 hours and customer is happy, my customer :/ because they were $300 cheaper in the end.

Irrigation companys come in, you bid 3k for a install job for your own client. 1800sprinklers comes in and offers it for 2k, or less even. I dont know this until the end, i try to cut down on almost all profits off the job, to offer the job for $2300 to the long time client, he tells 1800sprink that another company was lower, even though i was not, they come back $1800 WITH 7% sales tax, WTF? they get the job, client now reviews everything we do for them and thinks that we over charge, one client switched his lawn company even for 2008 because we were $39 a cut, xyb company/joe says he can do it for $28, he asks me for counter offer, i said we dont cut anything less than $30!

I can go on and on, this has to be one of the toughest "labor" businesses out there. I see big huge companies fail all the time especially now with the economy. Companies that i hated because they sucked up all residential patios and landscape jobs last year now will have zilch for work and i know are probably going to go under by end of 2009. It seems every year I've made huge drastic adjustments to where we focus our core services.

Started, i built up the lawn mowing business, look at the mowers i own now, and we now use them all 1-2 days a week, they sit for most of the week every single week.

Then bolstered landscaping, tree installs, planting, garden drip irrigation.... last year was way low on that too.

Started 12v high end lighting, did a few last year, but just mostly quotes and then sticker shock for potential clients, they go and buy a $300 malibu kit and never call me back :/

Started tree services, trimming, pruning.... now we have 3 chainsaws, pole pruners, powered telescoping pole pruner, ropes, harnesses, probably well over 10k plus a small chippper...... i used this stuff 2x last year for small jobs.

Started bulk commercial maintenance, one employee lost our only better Echo hedge trimmer that was in mint condition but 2yrs old :/ Bought 2 new stihl 81s, 24" for 1k. We got the dump trailer, built sides on it, now need a f550 12' landscape body dump truck and dump insert for the other truck.

50-60% of our work last year was maintenance, commercial mulching and trimming and weeding and bed edging services. I never thought my nearly 4k hydro bed shaper from Little wonder would ever pay off when i got it 2yrs ago. But this work is difficult at best, long lists of work with completion deadlines, employee problems, one guy wants to be home by 5pm, another 7pm, another will sleep on the mulch pile overnight and work until 11pm if i wanted.

Then after putting in 60+hrs a week for a month straight doing this work, it comes to a halt, you go back to your 2-3 residential jobs a week and now instead of needing 7 guys you need yourself and 1-2 others if that.

I go from having every truck out each day in april to 5 trucks and more trailers sitting the whole rest of the year.

Fall comes and every joe with a leaf blower wants to blow leaves for $20 an hour when we need a minimum of $150 in 2008 just to entertain sending 2-3 guys out to cleanup, blow or collect and remove leaves and fall debris.

Then you get a call from one commercial account that they're unhappy because your guys didnt pickup and dispose of a huge 6' wide, cut down hedge that another house contractor hacked at the base in may, your guys mowed around it the whole year and now they expect this to be removed as part of their leaf cleanup? It never ends.

We have a customer list of probably 500 clients, only maybe 40 are active in the present time, we've only gained as many as we lost each year for the past 3 years it seems. Its always something, or lower prices, or they move, or they do the work themselves. I feel the days of 5-10yr clients and contracts are long over. My longest is 4yrs i have a few people, most are 1 season and thats it, yet most claim they were happy with the service.
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  #8  
Old 02-23-2009, 11:54 AM
capnsac capnsac is offline
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Location: Omaha, NE
Posts: 702
Quote:
Originally Posted by Ramairfreak98ss View Post
Very true, i like the story We've been beat up with "lawn accounts" all last year and even so the year prior.. $20 companies/jo smoes coming in now cutting our $40/$45/even $50+ accounts with small and cheap machines all day long.

Reliability and customer service and professionalism dont mean squat to clients these days, at least not 90% of them. Ive built this business to the point that i can offer all 3 at an affordable rate. But why will a client choose to pay my rate over a guy thats 20% cheaper that offers nothing but just the straight service thats on the contract... cut lawn once a week for $20?

I've felt like i've been in the MID area for a while now. I keep saying im a "small company" which by my income sure as heck feels like it. I went from push mowing lawns to doing everything now. Your competition frequently out prices you in any aspect.

Hard to compete with hardscaping because the 100% hardscaper comes in cheaper, faster, more efficient, cheaper labor workers, cheaper product, better supply costs and can probably do a better job sometimes too than I can.

Landscaper comes in that does it 100% of the time, again cheaper supplies, cheaper labor, bang, 20 10' tall trees in the ground in 5 hours and customer is happy, my customer :/ because they were $300 cheaper in the end.

Irrigation companys come in, you bid 3k for a install job for your own client. 1800sprinklers comes in and offers it for 2k, or less even. I dont know this until the end, i try to cut down on almost all profits off the job, to offer the job for $2300 to the long time client, he tells 1800sprink that another company was lower, even though i was not, they come back $1800 WITH 7% sales tax, WTF? they get the job, client now reviews everything we do for them and thinks that we over charge, one client switched his lawn company even for 2008 because we were $39 a cut, xyb company/joe says he can do it for $28, he asks me for counter offer, i said we dont cut anything less than $30!

I can go on and on, this has to be one of the toughest "labor" businesses out there. I see big huge companies fail all the time especially now with the economy. Companies that i hated because they sucked up all residential patios and landscape jobs last year now will have zilch for work and i know are probably going to go under by end of 2009. It seems every year I've made huge drastic adjustments to where we focus our core services.

Started, i built up the lawn mowing business, look at the mowers i own now, and we now use them all 1-2 days a week, they sit for most of the week every single week.

Then bolstered landscaping, tree installs, planting, garden drip irrigation.... last year was way low on that too.

Started 12v high end lighting, did a few last year, but just mostly quotes and then sticker shock for potential clients, they go and buy a $300 malibu kit and never call me back :/

Started tree services, trimming, pruning.... now we have 3 chainsaws, pole pruners, powered telescoping pole pruner, ropes, harnesses, probably well over 10k plus a small chippper...... i used this stuff 2x last year for small jobs.

Started bulk commercial maintenance, one employee lost our only better Echo hedge trimmer that was in mint condition but 2yrs old :/ Bought 2 new stihl 81s, 24" for 1k. We got the dump trailer, built sides on it, now need a f550 12' landscape body dump truck and dump insert for the other truck.

50-60% of our work last year was maintenance, commercial mulching and trimming and weeding and bed edging services. I never thought my nearly 4k hydro bed shaper from Little wonder would ever pay off when i got it 2yrs ago. But this work is difficult at best, long lists of work with completion deadlines, employee problems, one guy wants to be home by 5pm, another 7pm, another will sleep on the mulch pile overnight and work until 11pm if i wanted.

Then after putting in 60+hrs a week for a month straight doing this work, it comes to a halt, you go back to your 2-3 residential jobs a week and now instead of needing 7 guys you need yourself and 1-2 others if that.

I go from having every truck out each day in april to 5 trucks and more trailers sitting the whole rest of the year.

Fall comes and every joe with a leaf blower wants to blow leaves for $20 an hour when we need a minimum of $150 in 2008 just to entertain sending 2-3 guys out to cleanup, blow or collect and remove leaves and fall debris.

Then you get a call from one commercial account that they're unhappy because your guys didnt pickup and dispose of a huge 6' wide, cut down hedge that another house contractor hacked at the base in may, your guys mowed around it the whole year and now they expect this to be removed as part of their leaf cleanup? It never ends.

We have a customer list of probably 500 clients, only maybe 40 are active in the present time, we've only gained as many as we lost each year for the past 3 years it seems. Its always something, or lower prices, or they move, or they do the work themselves. I feel the days of 5-10yr clients and contracts are long over. My longest is 4yrs i have a few people, most are 1 season and thats it, yet most claim they were happy with the service.
This is a well thought out post, and I can see you have gone through a lot of aggrivation in your time. With that being said, it made me want to quit right now, pack my balls and go home. Thank you for making me want to shoot myself.
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  #9  
Old 02-23-2009, 12:08 PM
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BSDeality BSDeality is offline
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Quote:
Originally Posted by capnsac View Post
Thank you for making me want to shoot myself.
It wasn't meant to make you want to kill of your business, just rather help you understand why businesses fail at the seemingly 'optimal' point of their business. You can have a successful business at any size, you just need to be prepared for the transitions.
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  #10  
Old 02-23-2009, 12:42 PM
capnsac capnsac is offline
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Quote:
Originally Posted by BSDeality View Post
It wasn't meant to make you want to kill of your business, just rather help you understand why businesses fail at the seemingly 'optimal' point of their business. You can have a successful business at any size, you just need to be prepared for the transitions.
You either need to be prepared for the transitions or have researched the jump you are about to make and decipher whether it will be wise or not. I think too may decisions are made with the thought that this is a good decision, and with only one man running the show mistakes are bound to happen.
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