Completely New Way of Thinking

Discussion in 'Business Operations' started by DFW Area Landscaper, Feb 27, 2004.

  1. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Posts: 2,116

    When I started this business a year ago, my thought process was so entirely different from what it is today. This is due in large part to the valuable information I've learned from Lawnsite.com.

    When I started the business, I was thinking in terms of building up a small residential customer base to support my own living. I just wanted a source of income that couldnt' be taken away by lay off or firing. I would do the work, do the billing, do the advertising...in short I would do everything and just earn a living.

    What I didn't realize is how many fixed costs there are in this business. Getting the taxes done every year costs money. My storage unit where I park my trailer is a fixed cost. Getting my pesticide license renewed and taking the CEU's every year is a fixed cost. Getting the sticker on my truck and trailer and the annual inspection is a fixed cost. My auto insurance is a fixed cost. My general liability insurance is a fixed cost. My credit card processing has a fixed cost. Web hosting has a fixed cost. There are also a ton of non-recurring costs too. Getting a logo professionally designed is a one time cost. Getting the truck lettered is a one time cost. Getting a websight professionally designed is a one time cost. Getting set up as an LLC costs money. Getting the standard contract printed up costs money. The costs for DBA with the state and county weren't free. Had to buy Quickbooks...not free. Wanted to buy a deposit stamp to save time...not free. Had to buy PC ChargePro...not free. Uniforms...not free. The list goes on and on and on. Seemingly endless.

    In short, just being in business and maintaining a professional image has a ton of costs that I didn't realize existed. When I look at my hourly gross (when I'm working for those 8.5 months out of the year) and compare it to my variable costs, I'm pleased with the number. Then I annualize it...a lot worse, but tolerable. But when I look at the annual number after I pay all my fixed costs, it starts to take a real toll on my actual income. Then there's the self employment taxes. And the complete lack of free time during the cutting season. At the end of the day, I really have to question the legitimacy of the one man solo operation as a business model. I'm beginning to think that just about any way I look at it, the one man solo operation is a failed business model.

    So I've changed my entire mind set this season. I'm determined not to fail.

    So many costs are fixed or non-recurring. And many of these costs are the same whether you have one customer or one thousand customers. Mass production appears to be the key to success. From now on, I'm going to start thinking in terms of having employees do everything. The way I see it, if I can't afford to pay a $10/hr employee to do something, then why would I do it? Common sense that if you can't pay someone $10 per hour to do a certain task, if you're doing it yourself, you're making far less than that because you have fixed costs that an employee doesn't have. I'm quite capable of earning a decent wage in corporate america. If I'm doing a certain task, like hanging door hangers for example, but I'm thinking in the back of my mind "I can afford to do this because my time isn't worth anything, but I couldn't pay an employee to do this", then why the hell am I doing it? This goes for every aspect of the business. Whether it's sharpening blades, changing oil, hanging door hangers, folding statements and licking envelopes, washing the truck...it doesn't matter. If I can't afford to pay an employee to do the work, then logic tells me I shouldn't be doing it either.

    Either the business model of landscape maintenance works or it doesn't. I know it works because there are plenty of large multi-crew LCO's all over the country. I'm going to find out if I'm smart enough to make it work too.

    Right now, I don't have anywhere close to enough customers to justify hiring a full time employee. But I've had some really awesome luck in the stock market the last year and half, so I'm going to give this business my best shot. I'm hiring a full time employee next week. When we don't have actual revenue producing work to do, we're going to be hanging door hangers. If the business model works as I think it does, we should have a full route for a two man crew before the season ends. At that point, I plan to buy another truck and hire two more full time employees, a whole new trailer and another batch of equipment. My plan is to grow the business like this until I get to where I just don't want any more crews. At that point, I may consider putting a full time manager on the payroll or something. Either that or just grow to a certain size and try to maintain at that level.

    Maybe I'll lose a bunch of money. Maybe I'll grow this thing into a really successful business. But my goals are entirely different this season.

    Later,
    DFW Area Landscaper
     
  2. gogetter

    gogetter Banned
    Posts: 3,256

    Now you realize of course that since you made that public proclamation, we are all going to be watching your progress over the next year or two!!!:D

    Good luck!
     
  3. Doster's L & L

    Doster's L & L LawnSite Senior Member
    Posts: 616

    GOOD LUCK TO YOU!!
     
  4. swim

    swim LawnSite Senior Member
    Posts: 357

    Sounds like a plan to me. Good luck and don't let any small setbacks slow you down.
     
  5. ipm

    ipm LawnSite Senior Member
    Posts: 264

    T.A.N.S.T.A.A.F.L

    You answered the magic question.

    Now everybody knows why I never give price information out. It would be misleading to some extent.

    Every company is structured different.
     
  6. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Posts: 2,116

    ++++T.A.N.S.T.A.A.F.L++++

    What's that????
     
  7. ipm

    ipm LawnSite Senior Member
    Posts: 264

    Ther Aint No Such Thing As A Free Lunch...
     
  8. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Posts: 4,041

    Hi DFW Area Landscaper,

    Good for you! One of the famous quotes from the book The E-Myth says "Work on your business not in your business" and that's what you are doing.
     
  9. dougaustreim

    dougaustreim LawnSite Senior Member
    Posts: 488

    You brought out a very important point, the fixed costs, or in otherwords the overhead. That is a cost that must be paid no matter how much work you do.

    Many contractors, look at material costs, labor costs, and maybe equipment costs, subtract that from the price of a job, and think that that is profit.

    In national studies that I have seen for this industry, overhead will run anywhere from 35% -45% of gross. Forget to charge enough to cover that and your doomed.

    Doug
    Austreim Landscaping
     
  10. grassperson

    grassperson LawnSite Member
    Posts: 19

    Dfw-

    Good luck this upcoming year! Your a step ahead of most in our area.
     

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