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 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