When you buy an existing lawn care or landscaping business, you can get yourself into a real mess real quickly unless you know what you are looking for and know how to read the warning signs. In this discussion from the Gopher Lawn Care Business Forum, a new lawn care business owner shares with us his story about how he purchased an existing lawn care business and what he found once he took it over.
“I recently purchased a lawn care company, and have since been focused on turning it around over the past 6 months. I¬† have been able to lower some cost, and increase our marketing dollars. I have increased the company’s revenue by 30% over the winter by renegotiating the lawn care contracts, and getting new commercial contracts. It still blows my mind to this very day on what it actually costs to cut a residential lawn. I had no clue until I purchased this business and boy was it a shocker!
When you see lawn care businesses for sale, you will see the same thing in every ad. They all paint this rosy picture of how much money they make every year. But what they don’t tell you and most of the time you won’t know until after you purchase the business is what the REAL expenses are. When you start to look into it, you begin to realize why the business owner is selling.
Let me give you a break down of the expenses I unearthed after purchasing this lawn care business. When I factored in travel to and from a job, cost of equipment, overhead, etc… I figured early on that it would cost me nearly $45 to mow a town house, and $90 for a decent size yard every week. With the way the previous owner had things set up with the over head expenses and the way he bid the jobs, there was no way I would ever make any money! This ship was sinking and sinking fast!
If it takes me 10 minutes to travel to the job, (no travel back), it takes a two man crew to cut, edge, trim, blow, round-up, trash pick-up, etc. about 18 minutes, unloading and reloading the trailer takes 2 minutes total, you are looking at 30 minutes of cost.
My example would yield $81.69 per/hr to break even!!! I would have liked to add a 20% profit to that (I know it’s high for the industry) making our hourly rate $98.03!!!
That said, we would have needed to have a bottom line show up fee of $49.01 per/half hour. Now I see that is being mind blowing from the outside looking in because I personally would only think to pay $25 - $35 to get my grass cut. Until I owned a lawn care business. In the realm of professional services $100 per/hr is normal, whether its an electrician, plumber, bug exterminator, etc… But the perceived value of a lawn care company is typically very low. There was no way I would be able to charge what I needed!
A lot of our lawns were 10,000 - 15,000 sqft and take near an hour to complete. I don’t have an exact time but that would mean we should be charging near $100 per/cut! Holy crap! We use a 36″ walk behind on a lot of the nicer lawns because our riders would tear the properties up. There was no way this was going to happen and things needed to be changed.
I had to bring in a landscape designer to help sell some larger landscape jobs, which will bring in chunks of money. Something that I was always told is ‘big jobs, big profits. Small jobs, small profits.’ Bigger jobs are better because you are not constantly stopping, unloading, and then loading your equipment again to go to the next job, etc. When you can start working on a job and just continue working rather than stopping and loading the equipment every 20 minutes you get a lot more done.
I have noted that the most profitable part of the company so far is the full landscape installs and fertilization / chemical applications.
Then as I was digging deeper into the expenses I got to the maintenance cost of the equipment from our local dealer. The maintenance of all of the equipment was a HUGE white elephant in the room. When we took over the business, stuff was breaking left and right, honestly I may have been better off buying all new equipment.
I learned a valuable lesson in all of this. If you plan on buying an existing lawn care or landscaping business, you gotta dig into the costs of everything. And I mean everything. You need to know how much money is coming in and you need to know how much is going out. You need to know the costs of hourly operation! If you are finding that there is not enough coming in because costs are too high, you are better off running, not walking away from the deal.
That lawn care business you are about to buy, may sound like a wonderful deal until you look under the hood. In the end, you may find you are way better off, starting your own business from scratch instead of buying someone else’s nightmare.”