Get an Investor or Downsize?

Discussion in 'Business Operations' started by MikeTA95, Dec 31, 2013.

  1. djagusch

    djagusch LawnSite Platinum Member
    from MN
    Posts: 4,202

    Financial issues won't go away with reducing income (unless unprofitable). I would rate each of your accounts into 3 classes. One is loser accounts (no, to very little profit, pita customers, off the beaten path), two decent accounts (won't make you rich but pays decent, also customers you enjoy working with, potential is there for more profits, not too far away), and third great accounts (profits are great, customer like you, are nearby).

    Figure out your work load with the great and decent accounts.
    Go over the great accounts and put them into a schedule. See if there are holes in slots or how you can fit decent accounts in the route or if need be a second route. The second route could be you going out solo 2 days while the 2 guys work on some easy going clients. The loser accounts ditch but do it respectfully.

    That process should keep your income up with increasing your net % also.

    Lastly since now you have a scheduled work load now you know how much equipment you need. Ditch everything else. Use the least amount of gas and payroll you can. Fast food? No, a loaf of bread and jar of peanut butter can stretch a week.

    These steps will help get the financial house in order the quickest (highest income/net). After you get them in order work on putting money back into the biz with upgrading equipment.
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  2. TuffTurfLawnCare

    TuffTurfLawnCare LawnSite Senior Member
    Posts: 668

    I and probably many others would love to hear the hard truth of your business and why it got to this point. It could be a learning experience for many people here, and many more to come.
     
  3. hackitdown

    hackitdown LawnSite Silver Member
    Posts: 2,490

    This is a good approach. The only thing I would add, is that instead of just ditching the loser accounts, determine a fair price where you will make excellent money, and offer that to these folks. Most will bail, but some will stay on. That gives you some opportunity to increase pricing on some of the so-so (or even top tier) accounts.

    As stated above, location is critical. Driving 20 minutes to generate $40 in revenue is a losing business model.
     
  4. Patriot Services

    Patriot Services LawnSite Fanatic
    Posts: 12,531

    It sounds like a classic case of failure to reinvest in equipment. No matter how well a piece is serviced it will eventually surpass its worth to fix in addition to lost productive hours.
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  5. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 16,438

    Theres more than 2 options.

    Taking on investor is a horrible option and you will loose your business.

    Trying to go another year just like you are is a good option, and if you want to get big you may very well struggle a couple of years.

    Downsizing is another option, it just makes it much harder to grow again.

    Going SOLO is likely your best option, sell off what you don't need, accounts and all and get your personal finances in order and you should do fine.

    If Im reading correctly, your not even grossing 100k with 2 crews, don't see how you staying afloat. Sound like you have major cash flow problems.

    You have a lot of time till spring to think things through.
     
  6. Kelly's Landscaping

    Kelly's Landscaping LawnSite Platinum Member
    Posts: 4,276

    That's the problem you get when you start a company that is under funded from day one. You don't have the money to replace your stuff and your stuff wasn't good enough to make you any money.

    60% may be is starting number but regardless of that, what is it he thinks hes getting for that assistance. Using his number he would be entitled too 60% of the profit which there has not been any and will not be much of one for the foreseeable future. You as an employee would be entitled to a paycheck and if you were compensated for all the hours you worked there likely wouldn't be anything left over. While it's not a good deal for you it's a lousy deal for him too. Lets get real for a second he want's your income to go past 100k. A single crew of just 2 men should already be past that number. So lets pretend you make it to 100k and after expenses you have a whole 5-10% profit and with those numbers I highly doubt it will be that rosy. That means his 60% cut for the year will be a whole 3-6 thousand dollars. You starting to see how this deal sucks for both of you.

    I happen to have a partner and were going into year 12. But that would never have worked if one of us was expected to work and the other not too. It also wouldn't have worked if our skill sets didn't complement each other so well. Nor would it have worked if our personalities were both alpha males. There is a lot of things that prevent partnerships from working but one guy doing it all is very easy to spot as a certain future failure.
     
    Last edited: Jan 1, 2014
  7. A. W. Landscapers  Inc.

    A. W. Landscapers Inc. LawnSite Bronze Member
    Posts: 1,287

    It sounds like you need to put your company in survival mode.

    Hopefully it is not too late to get your business into a more stable position.

    You can probably get a lot of advice right here but without knowing more specific information about your business and the situation you are in, it will be tough to give you the best possible advice.

    Contact your local S.C.O.R.E. chapter and get your company the help it so desperately needs. http://www.score.org/about-score

    If you post really specific details, some of us here may be able to provide some guidance that you might find beneficial but I can totally understand if you are not comfortable sharing more specific details on an open forum.

    From the sound of your posts, you are going to have some very tough business decisions to make and you are going to need to make some of them quickly. You might be looking at a rapid resizing and restructuring of your business and there is no guarantee that the business will survive this process. The decisions that you will be making are critical to the survival of your business and without knowing all the facts, the advice you are getting here are just our best guesses based on the limited amount of information you have provided. Good luck.
     
  8. Patriot Services

    Patriot Services LawnSite Fanatic
    Posts: 12,531

    Something tells me he is going to take a 100% off the top until he gets his stake back. This is borderline loan sharking. Watch Goodfellas a few times. Your mower broke? Eff you pay me. Your guys quit? Eff you pay me. You'll get the idea.
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  9. tyler_mott85

    tyler_mott85 LawnSite Senior Member
    Posts: 582

    Yeah don't give up the controlling share of your company no matter what. No deal unless he's 49% or less...
     
  10. THORNTON SERVICES LLC

    THORNTON SERVICES LLC LawnSite Senior Member
    Posts: 405

    Every year I raise certain customers pricing so that they will eather get someone else or I will hit my numbers , this helps me stay solo and keeps the profits up. I would at minimum raise the prices on the non profitable ones so that you can make money , you will probally be surprised you will lose less than you think most customers know when they are sticking it to you so you probally won't lose as much as you think as long as you did a decent job. Also of your 2 crews evaluate there pay etc you may have one person that tears up more stuff than what they are worth so don't forget to go through your employees and build on a good base this would be the factor that made me decide weather I wanted to cut back to one crew or solo with a helper etc. If the guys do a good job and are not getting a bunch of overtime etc then it may be best like they said above to keep going for another year , and see how price increases work for you etc , the equipment thing you will have to work with until you get your finances under control , maybe take a crew back to push mower only route if you can do this , push mowers are cheap to operate etc. just evaluate your equipment and get rid of accounts that you do not have equipment for as well. With two routes I would think that you could easily get 1 good solid profitable route set up for your best two guys. As far as the downsizing being a image thing , I personally believe that customers will respect you for your decision as long as you are professional about it and it won't look bad on your company but if you can't keep it together and miss cuts and people cancel etc then that will look bad on you so do what you need to.
     

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