Business Idea??

Discussion in 'Lawn Mowing' started by Bull, Dec 12, 2004.

  1. Bull

    Bull LawnSite Senior Member
    from NC
    Posts: 308

    I am thinking about trying this in my area next season, do you think it will work or not. Below is just a hypothetical model.

    Buy a 48" w/b, 5x10 trailer, blower and trimmer
    pick up 25 accounts at $32.00 each, $800.00 per week
    Find one person interested in running the setup
    He / she does all of the accounts solo
    I take 25% of the money off the top = $200.00 per week
    Solo operator provides their own vehicle and buys all gas, supplies, etc.
    I'll pick up 25% of any repair cost (not maintenance) on trailer, mower, blower and trimmer
    All accounts would be residential
    I do the monthly billing for service
    Basically I am looking at $800.00 a month for whatever amount of time it takes me to do the billing
    Negatives are - what if they quit, who handles any complaints, finding the right person, and I am sure there are a few others. Do you think it makes sense to give it a try? I cannot take on anymore myself and I am trying to look at this in a different manner than adding on another crew. Basically this person would feel some ownership in what they are doing and in taking care of the equipment.
     
  2. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,564

    the idea is called having an employee.
    you shoud take more of the money if you're furnishing the equipment.

    also one gou could do those accounts in 2 days.
    why not line up another 2 days work for him and pay him $500-600/week and you make $1000.00/week

    seems like that would be the better deal for both of you.

    i don't like the idea of you only taking 25%
     
  3. Bull

    Bull LawnSite Senior Member
    from NC
    Posts: 308

    YardPro, some may disagree with this but part of my goal is that I do not want an employee. All of the numbers are hypothetical. The opportunity is there for the amount to easily double. One aspect of the idea though is to give the other person some degree of feeling as they are making very good money eventhough they are doing all of the labor I feel this may be an incentive for someone to stick with it and not hang it up in two months. I want it to be a win win situation for both of us. The problem I have had all season is that I have went through five different guys attempting to retain help. Believe me it is not long into the program that a new employee realizes what the owner is making versus what you are paying them an hour. What I was paying was very competitive in my area but most of them learned that they didn't mind making the same or a little less money per hour and be in an air conditioned environment. For myself I am going strictly solo next season. At least I am the one person I can depend on. I just feel that my idea provides someone with the opportunity to get into the business at a very good entry level, provides them with the sense that they have their own business to a degree and prevents them from having to lay out a lot of money initially.
     
  4. tonygreek

    tonygreek LawnSite Gold Member
    Posts: 3,394

    fully agree with yardpro, 100%.
    i don't see any way that the economics of this, as presented, could possibly be worth the hassles. is this person going to be a sub for you or a partner? if a sub, you can't run it as you've suggested. if a partner, under this scenario, i see a very rough road ahead, as i think your $200 per week vs. fluid reality will not meet your expectations.

    - what about insurance costs, phone, equip storage?
    - $200 per week to cover all of your overhead expenses, including equip costs?
    - who picks up those 25+ accounts? if you, that $800 per month for "whatever time it takes for you to do billing" is in all actuality nowhere near worth your time, effort, investment for $200 week, pre-tax. why not use that same amount of capital to either re-invest into yourself (training for new, higher-margin serviceline), or just pay a good part-timer signifcantly more to make him feel a larger part of the business, add those 25 accounts, and you still take home more than that $200.

    best of luck, and please keep us up on how the process moves forward.
     
  5. Bull

    Bull LawnSite Senior Member
    from NC
    Posts: 308

    Tonygreek, I can understand this being considered a waste of effort but let me bring up a couple of points. The $200.00 figure on my part could easily be $400.00 depending on the accounts. $200.00 was just used as an example. The billing at the end of the month on 25 accounts can be done in about 45 minutes to an hour easily. As for a partner or a sub he would not be either. He would probably fall into the category of a scrub. As for insurance he would need to provide that himself. My insurance cost $178.00 annually for a $1mm policy. As for storage he takes the equipment home with him. I have it covered under my policy for theft or loss. As for the phone everyone has one now days there again his phone his cost. As far as landing the accounts sure I would work to get those for him as I am currently maxed out and right where I want to be. I shuffled off several jobs to other friends in the business over the summer and as I said these accounts would only be residential and would probably fall in the category of being "tax exempt". My business name would not show on any invoices or be connected to him visably in any manner.
     
  6. muddstopper

    muddstopper LawnSite Silver Member
    Posts: 2,342

    Bull,
    I had a person offer to do for me just what you are thinking about doing. I buy the equipment and he furnishes everything else, ie, truck,trailer, gas ect. He offered to do a 50/50 split. I didnt insult him by laughing in his face but I knew right away that this arrangement wouldnt work. I think I even posted the suggestion here for other comments. Basicly what my biggest fears are/where that the person running the equipment just wouldnt take care of it and the fact that I almost knew to a certainty that he would be out mowing lawns that I didnt even know about and sticking the cash in his pocket. Wearing my equipment out without giving me my cut. If you can find someone you can trust the deal could be a good money maker but how many people do you know that you would trust to do what they say they will. Another thought is why even get in a position where you are not in total control of a situation. Afterall, it is going to be your mower and your reputation as a lawncare company that is going to be on the line. The guy pushing the mower is just trying to make a buck.
     
  7. mcclureandson

    mcclureandson LawnSite Member
    Posts: 242

    Why not do it all yourself? How much do you pay your guy BEFORE you get a full 25 accounts? Running a LCO isn't like having a rental property...you have to be personally involved with every aspect until it gets large enough to sustain itself with some degree of stability...way beyond 25 or even 50 accounts.
     
  8. tonygreek

    tonygreek LawnSite Gold Member
    Posts: 3,394

    bull, the one thing you might be overlooking is the tax scenario for you in relation to him assumedly being your scrub. i'll assume you are operating above board for these discussions? since you are taking in the money, how do you plan on paying him? under the table or 1099? if it's under the table, you are on the hook for the full 100% of the venture's taxes. if it's a 1099, then under IRS guidlines of what a sub is, you would clearly be in violation.

    having his own insurance also would cloud liabilities. i'm making this as an educated assumption, but since you are the true owner of the operation, he can have all the insurance he wants, but in the eyes of the law, i'm guessing you are the real liability holder here, given the convoluted ownership issues of the business, the equipment, the revenue allocation, and the irs classification of this guy. also, not knowing what your annual revenues are, you might want to check with your insurance agent to find out what % of gross you can spend on subcontractors. many are capped at 25% and you could find yourself dropped or not covered if the stars align in an unfortunate manner.

    i think it's great you are thinking outside of the box, but i still hold to it not being worth the effort, especially with the additional stream of conscious thoughts i just threw out. obviously what i wrote above is just that, but they are points i'd find myself extremely concerned with.

    - devil's advocate tony
     
  9. Randy Scott

    Randy Scott LawnSite Bronze Member
    Posts: 1,915

    What does that mean? Tax exempt. I don't know your state tax laws, but you provide a service, you pay taxes. You might not charge sales tax on some services, but you pay taxes on the earned income. Also, you would somehow end up being connected to him. How would you direct your overflow work to him? If you have extra work, either gained from advertising or word of mouth, you WILL be connected to this person. Directing any work to him connects you. However it turns out, you'll have been the person to refer them. I don't see how you could dodge that bullet if it goes sour.

    What you're proposing is almost a "silent partner" theory. You are the backing (somewhat) and someone else makes the money for you. If these customers will never know you, or who you are, who do they report to? The guy cutting the grass? So if this person has any ounce of brain, why would he pay you anything. All he would have to do extra is get the work himself, and pay for all the equipment. That would be the only difference from him working for you to owning his own company. If he fields complaints, does all the work, pays all expenses (except the minimal equipment costs up front), he's pretty much got his own business.

    I see one of two things that can happen. First, the individual will either be a moron and it will fall apart halfway through the season because he won't be reliable, do poor work, and everything else associated with an idiot. Or, he'll catch on to what he's doing and realize that he can do the billing and get his own customers and bail on you as soon as he finds this out.

    I know you're trying to figure out a situation to make a few bucks extra for minimal input. The problem is that really doesn't happen too often.
    Think about employees. They are employees for reasons. They don't want the responsibility of running a business, dealing with the people, taking 100% responsibility for their actions, they need guidance day in and day out. They need the security of a steady paycheck. If they come in late, well they get yelled at and that's it. They move on. They need regular discipline to keep them moving forward. Directions for the day, the varied tasks they'll perform. And that's fine. We all need employees. I'm not saying that every employee has all these attributes either. I don't want to offend some of you here that are employees. You all have your reasons and they're not all negative reasons either. Some simply don't want to own or run a business. That doesn't make you a bad employee by any means. There's nothing wrong with making money and letting someone else have the headaches. I did it for 15 years. Some days it might be the better choice.

    So then, you go to the other spectrum of an individual, someone who wants to call all the shots. For the little extra you would be providing wouldn't be much of a challenge to take on. Sure, the start would be tough to get work as opposed to you having too much work and an already established name.

    I guess anythings possible with the right person and the right set-up. Just seems like this would be a tough one to pull off.
     
  10. out4now

    out4now LawnSite Bronze Member
    from AZ
    Posts: 1,796

    Sounds great for you, how long do think they'd stay if you're taking 25% in a tight profit margin biz ? Not to mention the legal ramifications of them actually being an employee. Just set up a franchise deal instead and be legal. You get more market share through all the outlets and collect royalties plus initial fee.
     

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