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Why do companies fail?

billc

LawnSite Member
Location
Rochester, NY
I am starting up a lawn maintenance company, focusing on residential mowing. I want to do it right, and so learn from others. Primarily, I want to find out why this kind of company fails.

Elsewhere on the forum someone said X% of new companies fail after one year, 80% by five years.

From what you've seen, what are the reasons a company fails early on? How 'bout after a few years?

Thanks!!
 

capescaper

LawnSite Member
Location
milton delaware
most people who work for a period of time for a company decide this is a great way to make money they might know how to do the work which is the easy part actually running the business is ten times harder
 

Randy J

LawnSite Bronze Member
Location
Richmond, KY
One of the biggest mistakes I see is companies pricing their services according to the competition, without having a clue what their costs are. It doesn't do you any good to win the contract if you lose money on every mowing. You need to figure out what it costs you per hour/acre/whatever you want to use, and then add a profit to it and work from there. Costs that need to be factored in are fixed costs such as equipment costs, depreciation, business phone, advertising, etc.; as well as variable costs such as labor, fuel, oil, maintenance, miles on your vehicle, etc. The way I did it was to figure out about how many weeks I expected to mow per year (remember you probably won't mow every lawn every week during the heat of summer), how many hours per week I expected to mow and then divided my costs by that. That gives you a cost/hour. Now you can add profit and you know what to bid on each job to make sure you make money.
Good luck
Randy
 

bobbygedd

LawnSite Fanatic
Location
NJ
my opinion.....putting "the cart before the horse". buying expensive equipment, before you can justify, or afford the purchase.
 

J Hisch

LawnSite Bronze Member
Location
Evansville IN
Most companies fail becasue everyone runs out buys the best they can get, and thinks they need to have everything the competition has..... And the debt kills them.. then they get out. They blow all the money they make.. keep it simple at first untill you can grow as you have the capital..
 

kootoomootoo

LawnSite Platinum Member
Location
Obama Land.
Two companies around here went bust in the last week or so.
One is a single operator. .............. He went bust because he's a piece of crap lying sob. No cred = No future. He owes me money too! Another is a bigger co with a few trucks, skid steers and
no profit margin! Bigger is only better if you are making more.
0% net profit on 50,000 is the same as 0% on 500,000.
 

dlomb72

LawnSite Member
Location
Rhode Island
I couldn't agree with Bobbygedd more on this. If you are careful, you can get fantastic equipment for a portion of the price if you were to buy brand new. However, brand new is the no BS way to do it if you can afford it. My experience as far as businesses going under are the simple case of "too big, too fast".
 

packerbacker

LawnSite Bronze Member
Location
Overland Park KS
I worked for a guy for 5 years before going into business for myself, he did so many crazy things that i told myself i would never do but then i looked at him making over 500,000 a year and figured he had to be doing something right. Most people think this is an easy way to make money until they are out in 110 degrees for 14 hours 3 weeks straight, then they get lazy and start to cut corners. Then they start losing customers. My motto is "mow until you cant mow no mow". After you get home after a 15 hour day sit down and work more, always think and come up with new ideas. There is always someone out there that will underbid you so take the time to do the extra thing for the customer. Never and i repeat never turn down business. 99% of the time it will lead to something bigger.
 

grass_cuttin_fool

LawnSite Gold Member
Location
Virginia
I couldnt agree more on spending way more than you can afford. I see threads on here with people asking about a truck to pull a small trailer and one mower and the replys that are given to them are get a diesel 3/4 ton truck and............. price tag in the 35k range. If you can afford it then its nice but i see alot of companies that are way over there head in debt and working for a truck payment when a smaller or a used truck would be a better choice. Just my 2 cents worth
 
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