Entrepreneur.com says the startup lawn care business typically services 20-30 residential clients any given week. But that many customers doesn’t guarantee you’ll be profitable.
The rule of growth: Expansion increases costs and decreases net profit.
You see, when you’re small—a one-man shop or just a handful of helpers—almost everything you make goes home with you. But the downside is that when you start adding team members, margins tighten to the 5 – 10% range. That is IF you keep your rates as low as they were when you were home mowing alone.
Running a service business boils down to selling labor and man hours. When you’re operating alone, you can introduce prices that are conservative compared to the big guns in the industry. You have minimal operating costs as a small shop. But as your team expands the cost increases are nearly exponential. Think health insurance, business insurance, property insurance, business property taxes, worker’s comp, increased equipment costs, rents, HR compliance costs, legal, and technology.
The point is that if you want to go big, don’t just do it for BIG’s sake. If your goal is to up-size your lawn care business, then pay particular attention to your rates.
If your rate was $30/per lawn when you worked alone, the cost of doing business was minimal, possibly $20 per hour or per yard. Very possibly your net profit half was two-thirds or $20. But when you add new members to the team, the net profit decreases sharply, on average to less than $10/hour or by one-third.
The solution is to increase the cost of your services to cover the loss in margin. Boost the $30 to $40 and you will have covered your loss. But do it with a conscience and don’t go overboard. Too big a price jump can cost you current customers.
You’ve got to have the conversation with your customers about rates. Be prepared to state your fees. If it’s hourly, say it out loud and explain if you have a minimum charge. If you prorate your hourly costs, explain that too. Spell it out on your website and on your contract. Don’t leave it to surprise.
Because price point isn’t the reason most people select your service or you as a vendor over another, your marketing approach shouldn’t focus on price point either. Talk about the benefits of your service. You keep a property looking better than those that aren’t professionally tended and thus your service contributes to the appreciation of the property and the attractiveness of the property. Your service frees up time so that owners or property managers can better spend their time doing what they do to make the business prosper. You provide a solution. Talk about that. Repeat it.
Bottom line, your growing business can be profitable if you understand your business inside out. Know the time it takes to mow each yard on your schedule. Then address if you can increase productivity by having two crews on a street vs. one and vice versa.
Know what equipment you need and how much it costs. For equipment of course contact www.MowMore.com. If you’ve got questions about any detail of the products we sell, we will get you the answers. We’re here to help you make the best decision for your specific operations.