Adding a maint. division to existing company

Discussion in 'Business Operations' started by SprinklerGuy, Dec 13, 2001.

  1. all right, here goes. I have asked a version of this question before but now I will try this new, user-friendly forum.....

    I own a lawn sprinkler contracting/landscape contracting/sprinkler repair business with currently 4 employees. A 2 man/3man crew and 2 service techs. I would like to add a lawn maint. division. The possibility of having accounts that renew monthly is exciting to me. I have tried to shake these feelings against my better judgement, but I cannot.

    My question is, how likely is it that a lawn maint. division can be started without too much input from the owner? I do not want to be TOO, TOO involved with the customer complaints etc. I want to sell the jobs, do the jobs once with the crew and then just check in once in awhile. To do this I know I will need a very knowledgable, self-starting type worker to head up this division. I would like this guy to go on the routes and participate in them as well. Run the mower, make sure all is well etc.

    I have kinda run the numbers and it seems the profit margins are a little short of what I am wanting. Let me know how off base I am here: Keep in mind I will probably pay cash for the equipment and let's just pretend the equipment exists already for ease of computation.

    Foreman 600 per week
    Helper 320-350 per week
    Dumpster 100 per week
    Fuel 100 per week
    maint ???
    advert/misc 100 per week

    Total 1250 roughly per week

    Keep in mind also that I will target neighborhoods that usually aren't targeted, smaller, less money, kind of a mow and blow situation as opposed to full scale landscape maint. The trimming of bushes/trees and fert. to be extra.

    AT the above expenses I will need to have rev. of 250 per day, I was planning on targetting 20-25 dollar per week yards. This is a lot???? I mean a lot of yards per day to recoup? 10-12 @ 20 or 25 dollars. I was hoping to run the crew 3 days to start and use the other 2 days to help contracting crew with sprinklers/landscape or do trimming on our accounts. Any suggestions or critique? Thanks in advance.
     
  2. MowMoney

    MowMoney LawnSite Member
    Posts: 55

    If you're not going to handle customer complaints then who is?
    My experiance has been that the person to make the initial personal contact (selling the job) is going to be the first person that client is goint to want satisfation/ resolution from. I had i posted a similar question, you may be interested in reading it. Lawngodfather posted a good reply.
    As far as costs go you need to consider equiptment cost, regardless of whether its paid cash or not. Its still a cost. Also Insurance and employer cost beond what the employee is paid (payroll taxes, unemployment insurance ect.) I'm not sure how big the yards you will be maintaining are there but in Chicago my crews will easily do 20 to 25 yards with 2/3 man crew. I think your cost will be closer to $1900/$2100 per 6 day week. Also dont forget that there is overhead you have to consider as well(book keeping, invoicing, ect). And you said you will be selling the job, that takes time and time after all is money!

    Good luck
     
  3. We only will work 5 day weeks.....never weekends. Just a personal rule, that's a whole 'nother thread.

    Thanks for your reply, do you remember when the thread you started was, I'll search, just don't know what to search for.

    As for the equip costs, yes I understand that. I will build that in as a debt repayment figure later, just wanted to know about once it is up and running.

    As for the employee costs, you're right. Sorry. Add about 200 to that cost as I only pay my share of the Fica 7.65, and my costs for workmans comp are about 5% after mods. Also, insurance on the truck and trailer, 150ish, add'l liability 100 per monthish. So actuall my weekly costs might be more like.....$1625 to 1700. Right?

    I guess I would need to do 20 of those 20dollar yards to make 200-300 per week profit if nothing goes wrong. Not worth it. But what if I could do 15 $30 yards per day.....sounds to me like This may not work like I want it to.

    Except that the extras like trimming and fertilizing might make up for it??????? This is gonna take some more thinking huh?
     
  4. MATTHEW

    MATTHEW LawnSite Senior Member
    from NE OHIO
    Posts: 665

    You might be surprised how much money you will spend on parts and upkeep for commercial eqiupment, especially if the users abuse them. When I started, I did $250.00 per day with relatively few expenses. Equip. was paid off. But after the numbers were done-it was sad. You said you wanted to add an extra service to improve profits. I do not believe mowing will boost those numbers, but drop them. Lawn applications reap 4-5x as much profits per hour than does maintenance.
     
  5. MowMoney

    MowMoney LawnSite Member
    Posts: 55

    Tony,

    That thread I was talking about is "Looking to hire maintenance account rep. NEED HELP" its in business eliments.
     
  6. Tony-

    Plug the numbers into the spreadsheet and see what you come up with and then lets talk about the numbers !!

    Decisions need to be based in fact and cold hard numbers.

    I will submit that 20 dollar yards ain't gonna cut it , har, har, har...

    If your billing out every hour you pay those employees,and you should be, then you should be looking at gross income per day of at least $ 480. At $ 20 per yard thats 24 yards per day, probably not doable in your area.

    You should charge a minimum of one hour labor on each yard and make sure your recovering support time as well in the estimating process.

    Production and quality based bonus system would make the employees more efficent and make you a lot more money.

    A foreperson making that money with a bonus system tha enforces quality should be able to handle the customer service work, but you will still have some marketing and public relations work to do.
     
  7. Randy Scott

    Randy Scott LawnSite Bronze Member
    Posts: 1,915

    I guess my really only response to this is, of course it can be done, and you can make a profit. Everybody else runs a maintenace/mowing business, why couldn't you. Since you are already in the green industry and obviously are making it, you are a step ahead of people just getting into it. You already have clientel you can upsell your new service to. You will be involved wether you think so or not. If you hire someone to take care of it 100%, he might as well start his own business then. Even if it doesn't make the type of profit your sprinkler work does, but it is making profit, then why not add the service. Maybe I am wrong on this, but lets say you average 35% profit in your sprinkler division and only 15% profit in your mowing division. If that mowing division is doing that profit, then that is money you would've never seen or had, correct? Sure it isn't the best, but it is in addition to what you are already making. I am new to the business owning thing, but does that make sense or am I missing something? You veterans would know better than me.
     
  8. Thanks Dale, I hadn't thought of plugging numbers into your COOL spreadsheet, other than existing ones of course!!

    Randy, as for the profit margins etc. For me my quality of life is important. If I am only making 15% margins that is fine if it is 20,000 month revenue (3k).

    The amount of extra profit is directly related to headaches though. If my headaches due to a new endeavor are let's say a 7 on a scale of 1 to 10, then my profits better be a significant addition to my personal income, otherwise not worth it to me.

    Also, the learning curve makes a difference. If the learning curve is too steep for me, I may as well figure out how to fix more sprinklers etc, something I already know how to do and am set up for.

    BTW, do you think that the McDonalds' store managers think they could start their own restaurant? Believe it or not, I really think there are a lot of quality individuals out there that only want a real good salary without the actual ownership headaches. I would like to find a few!!!
     
  9. MowMoney

    MowMoney LawnSite Member
    Posts: 55

    QUOTE Originally posted by SprinklerGuy [ Believe it or not, I really think there are a lot of quality individuals out there that only want a real good salary without the actual ownership headaches. I would like to find a few!!!]

    Yea, wouldnt we all! Randy, I agree with GUY on this. It's one thing to say 15% of X is more than 0% of X but the fact is, if you're not more than carefull in your calculations that 15% might cost you 20% makeing your profit -5%. By that I mean there is whats called an opportunity cost. By starting this new division he will have to dedicate X amount of time and resources, regardless of the desire for it to be self efficient, particularly in the beginning. This time and resource is taken away from his other division (and believe me it will) and it will suffer for it. This ultimately effects the bottom line. If division A is generating 35% profit with said time and resourses and those resources were shifted to division B making 15% profit, well then the way I see it that move just cost you 20% making your profit -5%

    Now thats not to say that one shouldnt consider a new division but rather to be sure of all the costs involved both tangible and untangible. I currently run 3 divisions ( installations/paving, maintenance, snow control) and over the years I have noticed that one division suffers when the other demands more attention. It shows on the bottom line and the numbers dont lie. The best way I see making it work in a possitive way is to establish systems of operations, budgets and a method of checks and balances. I am currently in the process of building my own, I'll keep you posted!!!
     
  10. kris

    kris LawnSite Bronze Member
    from nowhere
    Posts: 1,578

    You need to find a good guy .... It can be done.

    I can't comment on the $20 lawns... we are not aiming for that market... that's not to say there isn't money to be made there.

    We started maintenance division 2 years ago ... It made a small profit the first year...this year we doubled the gross from the first year.... all the numbers have not been crunched yet.

    We started by targeting long standing customers(commercial) that use us regularly over the years... you must have a huge customer list that you could tap into. I say go for it.
    Start shopping for a guy that can cover just about everything for you.
     

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