2 Reasons Why GROWING Landscape Businesses FAIL!

Sam.

What's up, everyone? It's Mike Andes, and you're listening to the Business Bootcamp podcast. Today we're going to be talking about why the major two reasons, in my opinion, why most lawn care landscaping businesses fail. I'm going to be taking your questions at the end of the day show, but we're going to be talking about two major things, why lawn care and landscaping businesses fail. The number one reason, in my opinion, is inefficiency, and the number two reason is overhead. Right. So we're going to break these down just a little bit, and we're going to go ahead and take your questions. But before we get into the show, a big thank you, today's sponsor, which is Gusto, if you haven't Already, go to gusto.combootcamp Try their software completely free for 90 days. You can use their software to run your payroll and run a whole bunch of benefits for your employees. Check it out today. Go to gusto.combootcamp all right, so the nut the two things that most landscaping businesses fail when they're growing. Okay, so this is not a small, little, tiny lawn care landscape business is not growing. They there's no growth in the business. That's not the kind of business we're talking about today. We're talking about the business actually growing. Looks like it's succeeding, buying more trucks, hiring more employees, and is growing at an extremely fast pace. What is it that makes them fail? Because technically, on paper, they're doing really well. They're investing back into marketing. They're getting more people. They are getting more trucks and equipment and getting more customers. But what leads these, these businesses that are growing so quickly to fail? Number one is inefficiency. And I'm going to break number one's inefficiency into a couple different areas. First thing is inefficiency in the terms of labor. Okay. When it comes to inefficient labor, we're talking about employees that are on the clock and yet they are sleeping in their truck. They're on their phone load time and unload time when they're at the shop, drinking their coffee, talking with everyone else, dinking around the shop, doing whatever besides actually getting work done. That is inefficiency in the labor department, whether it be stopping at gas stations, shopping on their phone all day long, doing TikTok or Snapchat or whatever else they're doing. Those are all forms of inefficient labor. Whether the labor is not generating revenue for percentages at all or a fraction of the day that they are clocked in. Absolutely. Inefficiency of labor leads to the breakdown of a business because as it grows and the business gets more and more employees, all you're doing is adding more and more inefficiency. Because now people are waiting around on other people. Now people are waiting for their quality control or their project management, project manager, or the office manager or someone from up above to give them direction. And therefore it causes inefficiencies because now they're waiting, now they're doing long meetings, now they don't care. These are all things that start to happen because a cultural drift as a business begins to grow, as well as a lack of number two, which is systems and organization. So again, you can have inefficient organization and systems inside of your business that again cause the business to fail even as you grow. Because as you fail, sorry, as you grow, you can fail if your shop isn't organized right, if your trucks aren't organized, if you don't have a system in place to make sure that your estimates are going out efficiently and your communication is done effectively, you have a process and a system for sales and for marketing. These are all the things you have to have systems and organization for as the business grows. Because in the past, the organization could literally exist in your head. Now if it exists on paper, it doesn't exist at all. It needs to operate out of some sort of CRM, a software system. And then you need to have organization. Every single element of the business or right from who's going to do what in the office to who's going to sharpen the blades, who's going to fill up the gas in the two cycle engine oil, who is going to make sure on the weekends things are cleaned out of the trucks, who's going to unlock and lock up these needs to be systems and organization for everything inside the business as you begin to grow that business. Because the more and more complexity and people and equipment and problems and customers you involve inside of that growing organization, you're going to, it's going to fail. And if there's not organization and systems. All right, so we're talking about business as growing, succeeding by many, many definitions. However, you can still fail if you have inefficiencies in your labor or in your organization and systems. All right, the second reason why businesses, lawn care, landscaping, businesses specifically fail is overhead. Okay? We're not talking about some of the soft things like team hiring people, et cetera. There's lots of other reasons why people fail. But the two major ones that I see is inefficiency. We covered that number two, overhead. Now, overhead comes in two different forms. The first is fixed costs. And if you listen to the past couple Q and A videos you've heard me talk about in the lectures about fixed costs versus variable cost. Now variable costs are like labor. We already talked about inefficiencies there. Labor, materials, lots of inefficiencies there, you can waste material, et cetera. But I'm talking right now about fixed costs. And that's what overhead really is. Overhead is things that don't go up as the business does more work this week. If I do more work this week, more I sell more jobs, I am going to have to, I am going to have to get more labor. The same thing means that if I don't get any jobs this week, my labor, my variable costs will go down. Because it's variable, it's very variety, whatever, it varies. There you go. But fixed costs don't change. Which means if I don't have any jobs this coming week and I go out and I get a big payment on a truck or piece of equipment, or I have to pay a bunch of rent on an office space, that is fixed cost. And that is what leads the demise of many, many small businesses as they begin to grow in the landscape community. We get a big nice office, we get a big shop, we get big trucks, big equipment. And all of a sudden we now find ourselves that we are literally drowning in fixed costs. That's why I'm so against always getting payments and loans and debt is because many times it leads to fixed costs that we can't actually, as the business grows, we can't stay up with it. You're constantly on this treadmill of growth just to stay up with the payments on your fixed expenses. Your equipment, I, your trucks, your office space, storage space, all of those things can lead to a massive fixed cost every single month that regardless of how much work you sell, you have to be tied to those fixed payments. All right, the second overhead, because we talk about inefficiency and inside of inefficiency was labor and organization and systems. Now, overhead, we've talked about fixed costs, but now let's talk about unapplied labor. As the business grows, you're going to start adding in other positions like an office manager, like an estimator, a quality control person, a project manager. All these non revenue producing people are also called unapplied labor. That starts to really chip into the profitability of the business. You're growing, you're expanding. Like, oh, man, I need an office person. Okay? Now they need an assistant, okay? Now I got to go and, and get an estimator, because now they go to these sales, okay? Now I got to have a customer satisfaction person, and now I need to have a project manager, and you have a trainer. Now I need to have a mechanic. All of those positions I just mentioned don't actually make revenue for the business. What actually makes revenue for the business is mowing lawns, installing mulch, trimming bushes, and the actual service that we sell to our customers. So all of that on other, other positions, those other management, middle management positions, that is unapplied labor, okay? And in my opinion, most small businesses, as they grow, as they start to hire these other positions, they get so much overhead in this form of unapplied labor, they literally choke out their profit margins. Because guess what, if I'm running a 20% margin business and I need to go hire someone for $50,000 per year, and they are unapplied labor, which means they're straight overhead, they're straight exchange. But I need them to sustain the business and allow it to keep growing. What that means is that in order to recoup the $50,000, I spend an overhead for that person, I need to produce $250,000 in revenue, because 20% of that is their wages. And so when it comes to overhead, when it comes to unapplied labor, people like in your office, out, estimators, management, project managers, field trainers or mechanics, these are. This is all unapplied labor, and it's completely overhead. And a complete expense actually doesn't generate revenue for the business. And you've got to keep an eye on these things. Number one, inefficiency, Inefficiency in your labor, and inefficiency in your systems, your organization, in your communication. And number two, the reason why I see so many companies fail in this industry is overhead, both in the form of fixed expenses and fixed costs like their equipment, their loans, all the rest of their shop space. Or number two, unapplied labor going on, having to hire a bunch of office people, and then you have to get all the equipment for them, and then you got an estimate or get a vehicle for them. Then you got to go get a project manager, okay? Now, every single crew needs a project manager, and you eventually start running out of revenue and profit to pay all of these unapplied labor positions inside of your business. Those are the two things I see so often and for some reason right now I'm not able to see your comments. I do not know why, but if you have a question, feel free to try to post it. But I'm not seeing comments today. And I think I made a mistake on my stream, which if so, I do apologize. So I'm assuming no one can post right now. And I. I just am so sorry that for some reason I messed up on the live stream today and I can't see any comments, which is horrible. So let. Give me one second. Let me try to log into another side and see if I can take a couple questions before we log off for today. Definitely, if you. Yeah, why can't I see anyone's questions? Test.

Man. But we're here, David. I can see questions, comments now. Thank you. Hallelujah. Whoa, There we go. Okay. A whole bunch just came in. All right. I don't know why I had that blip on the radar, but let's go ahead and answer a couple of these questions and we will jump into some Q and A before I log off and I can't post. I. Okay. All right. All right, cool. All right. Any sort of questions? I can answer a couple of these and then I gotta bounce off for a franchisee call. But again, I think so often the time we focus on growth, growth, growth, growing our business. But I've seen too many lawn care and landscape businesses while they're growing, while they are quote, unquote, succeeding and growing their business, their inefficiencies in labor, inefficiencies in their organization and their systems and it's overhead expenses just eats their profits alive. And that's why so many businesses will eventually go backwards and they will actually no. Stop growing or they will shrink in size is because they start to realize that the continuous growth is actually eating in their profits and then more if they went backwards and were not as big. All right, let's get a couple of these questions and then we'll head out for the day. I have nearly three weeks of work booked up. Should I hire someone? Yes. In my opinion, when we. When we hit three weeks booked out is when we start hiring again. It's gonna depend on the time of year. If it's the spring rush. Absolutely. Go for it. You can always spend a little bit of money on marketing to keep them busy. Again, when we hit, like, literally how we like you look at last week's video I made about the step by step of how you grow your business, like from one truck to two trucks and getting your first and second and third employee, et cetera, if that's the model you're going to follow. Literally the deciding factor of when you hire that second person is when you're three weeks booked out because this is what you do, you go out and find that person and then you say okay, you're going to start in two weeks and then starting from two weeks from now, you're now going to start booking as if you already have that person. So it allows you to continually have the momentum and then have a date that you have kind of like fire under your belly to make sure you keep selling jobs and actually are able to keep that person busy once they're on board. Greater information Quick questions. Are lawnmowers in cost of goods sold or a fixed cost? They are a fixed cost. Some people would look at them as overhead too. But yeah, I'd say a fixed cost if you are doing payments on them because cost of goods sold is like the materials, the labor that goes into the actual producing of the service. And so your fixed cost is going to be if you have payments on a mower, equipment, trucks, etc. Okay, what is the best app or system to book jobs? There's a whole bunch of them. David. Just type in lawn care software and Mike Andy's and you'll see a bunch of my videos I've made on several different options. Hey Mike, I will, I will be like, I would be like to have a conversation with since I watch your videos. You are my mentor. See here there's a link below. You can book a call with me you want. What pose do you use? I think these are, these are Gildan G I L D A N and Sport Tech is the other materials you'll see me sometimes wear. That's more like wicking material but that jilledan is the ones we mean. Tori. Mike, what should I be doing? We're a smaller company just hitting a hundred thousand dollars. We're getting a lot of calls but work tends to slow down around August during the summer months we're really busy and being an owner operator with one full time employee. Do I hire another employee in person to be able to do more work, more of the work so I can focus on lining up work or keep going with one. So Tori, this really comes down to you know, your specific situation. You say here you have minimum business debt under 5k so that's very good. Allow you to grow and keep expanding. However, this is my, my philosophy. If you're wanting to grow your business and you're that booked out and you're booked out like three, four weeks, definitely go hire someone. Because even if till August, say for example, you have another employee, if that employee can make you, let's say two or three thousand dollars a month in profit. Profit I'm talking about, they can make you two or three thousand dollars a month in profit and you save that up for the next six months until it starts getting slows down a bit. That literally could mean that you could have four or $5,000 in marketing set aside, ready to go, that when you come to that slower period of time, you can pour the gasoline on the marketing. I actually get a big kick out of this because we did a poll a couple weeks ago or last week on YouTube and we asked people what their favorite form of marketing was. And so many people were like, oh, word of mouth is my favorite for marketing. That is not a form of marketing. That is a form of getting leads. And that's great. But marketing. The thing about it is I can turn it on and I can turn it off if I want more leads, I can turn the faucet on via Facebook ads, via Google Ads, via nextdoor ads, via YouTube ads, whatever. I print ads, every door, direct mail, door hangers, whatever. Marketing is great because I get to dictate that flow. All right. It's not like the rain where you just kind of like hope that you, you get rain today. That is, that is word of mouth. Sometimes it rains, it's great and just keeps coming in. It's like yes, this is fantastic. Other times like, well, I need the rain, but you need, and I need water, but you can't control the weather. And so in my opinion, when it comes to marketing, what you want to do, Tori, is if you are growing right now, it's in your spring rush, go ahead and hire the other person. If your goal in the business is to grow and store away like a little squirrel, hide all your nuts throughout the winter. When things are good in the summertime. In the next few months, hide all of your nuts away so that come August, September the grass is dry, you're not mowing very much. Then you have money to go spend trying to get people on mulch clean or mulch installs or projects or bush trimming or whatever other services you can offer. You can use the marketing to level out your cash flows and the demand for your services.

Cable Bros. Outdoor Services says we are in need of another employee. We are on Indeed Zip Coder, Facebook and in LinkedIn, but still have hardly got any decent applications in the Last week or so. Any other suggestions? I've said it before and I'll say it again. This is going to be the hardest, and it has already proved to be the hardest year to ever find labors in this industry. And I know there's gonna be somebody like, I got one or two, and they're really great, okay? But if you're trying to find 10, 20 people right now, it is very, very difficult to find people who want to work outside. And when the alternative is to sit at home playing Xbox and making 4, 5, $600 a week on unemployment because of the unemployment boost that's happened, Very, very hard to find people that want to work hard and sweat all day long and work for a living. And so it's gonna be harder than ever in terms of other ways in the suggestion. You got to get desperate. You watch the video I made last week about when you are desperate for employees and need them right away. You should be calling pastors, you should be calling local chamber of commerce. You should be talking to people. You should be literally going out with a sign with how much you pay per hour and telling people you need workers right away. You should be doing yard signs. You should be doing everything you possibly can the same way that you would if you needed work tomorrow. And you need to get your crews busy and you need to go advertise, do the same thing as if it were clients. Do it for finding new employees.

As a small company, when you are thinking about hiring your first employee, should you already have a bit of salary saved up for them or trust that your jobs will bring in enough. Again, I've always said the sales brings confidence. So if you do not know if I can afford to hire another, you know, buy another truck or hire another employee or get new office space or expand in this new market. The thing that solves that fear is sales. It's getting so many leads like, okay, look, I have so much work right now. I can definitely hire an employee, hire an employee. I can hire two employees, I can hire three employees, I can get another truck and crew, and I'd still be busy. When you have that level of confidence, that is going to be the thing that allows you to go hire someone knowing fully well that you're gonna be able to fill their schedule. So a lot of times I think people get the cart before the horse. They go get the truck, they go get the employees, and they're like, let's go get customers. No, if you let customers. And the lead flow is so great, going out and getting A new truck or not a new truck, but a truck and more employees is not a scary thing because you know you have the work for them and that you know that you're gonna fill their schedule and they're gonna be profitable from day one one. So I wouldn't worry about saving up for the salary. I would worry about saving up the jobs. That's why if I am booking myself out, say two or three weeks, then going and finding someone to hire, they give their two weeks notice. I know they're starting on a certain day and starting on that day, which is like two or three weeks from now, I'm going to start booking as if I have them. That will give me the confidence so that when they start, I already have a week or two weeks booked. Beyond that, using their labor, assuming that they're going to work out, that is the fire under your belly that makes you make sure that you can continue to grow and get that other employee really recommend Google Local Services. The amount of great leads from it is amazing. Yep. And it's going to get more and more expensive. I've said this a year and a half ago and I said it even last year. It's going to get more and more expensive and it's great because it keeps out illegal.

Other providers, other vendors, other landscape guys that are illegal or doing things that are shady or have a bad background. You have to pass a background check. You have to submit in your insurance and all the rest of it. But it's sometimes, sometimes not, you know, easy to get into. You go sometimes have a license, you know, your contractor's license or your pesticide license and they require those just to get on as a Google guaranteed or Google Local services. All right, last question. I'm in high school full time and need people to work while I'm in school. I have two weeks. I have two weeks of work already. What would be your advice? All right, Jeff, so you're booked out two weeks. I'm assuming you're in school right now. This is what you got to do. You've got to implement pay for performance. And I know I've talked about all the time, but I think pay for performance is a fundamental keystone cornerstone to. Wow. We have to run our lawn care businesses. It ties directly into the fact that we talked about inefficiencies and the organization and no inefficiencies in labor that can be cut out using P4P Pay for performance where they get a percentage of the revenue they make for the business and therefore they do not Want to stop at gas stations, be on their cell phone, dink around the shop while they're unloading debris. That's, that's the thing you have to focus on. So if I was to go hire someone, Jeff, and I was in high school or I was doing a part time job and I needed to make sure that I was not in the business day to day, and I had other employees working while I was at my other job or at school, you'd have to be sure that you're not having to micromanage them, that you have to watch over their shoulder, that you're not worried if they're stopping at gas stations or if they're worried if they're doing a good job. You need to make sure that, you know, every day they are working as hard as they possibly can because the more, the harder they work and the more money they make for the business, the more money they make. That's why P4P is so important. All right, we'll do a couple more here. Carter. Should I go about hanging door hangers? Should I go about hanging door hangers differently with COVID I don't want to make people mad and give me bad reviews. Honestly, Carter, the person that's going to freak out at you because you knocked on their door, step back 10ft, maybe even had a mask. Did they get mad at you over that because you knocked on their door, you probably don't want them as a customer anyways. Richard Korea started cutting a couple lawns, a small setup using a 21 inch mower. Pricing is a bit tough because it's taking me a lot longer than it would if I had bigger equipment to cut. Suggestions? Yeah, in bigger markets, you're going to need a zero turn. You're going to need something bigger. If your average lot size like a quarter acre and more importantly the turf square footage is like 10, 15, 20,000 square feet, you're going to need to get a zero turn. So for our corporately owned locations, some of them do get zero turns on the back of their trailer setups. Some of them do just deal with a 21 or a 30 inch push mower. But the ones with bigger properties, big properties like in North Carolina and in New York are corporately on location. I personally bought mowers like zero turn mowers, 48 inches on the back of these trucks because they have properties that are much larger. And I would be price, I would be way out of the price range if I was doing it based upon the hours it would take with a 21 inch mower. So I'm not against, against zero turns. But keep in mind if you're in bigger areas, areas with properties that are, you know, 10, 15, 20,000 square feet on average, you're going to probably need to get a zero turn. Vladimir. Mike, I live outside my service area. I rented a rented post office box. Does not work for Google my business. As a result, I'm using my home address and I'm afraid that Google won't rank me. What can I do? Yeah, so Google will rank you. It's a little bit harder. They definitely like when you do have a physical address, you could use technically a friend's address just to get the postcard for like the verification part and then change it to service area. So on Google Local services or sorry, Google My Business and Google Maps, you can change the news. You don't have an address, you just have a service area for your business. However, yes, you're 100% right, Vladimir. Google does like when you have a physical address and if it's your home, some people don't like that. Honestly though, people aren't usually going to come to your lawn care business. They're not going to show up at your house thinking it's an office typically, especially if you're not like in a, in a major area of town, like a busy area of town. So I wouldn't worry about that too much unless you know, you were really secretive or afraid that something, someone was going to show up at your house and that was a big privacy concern for you. So Richard. Yeah. So if you have a quarter acre, pretty average in terms of lot square footage, you're probably going to need something bigger than a 21 inch mower, at least a 30 inch mower. And then definitely thinking about a 32, 42 or 48 inches stand on mower would be my recommendation. All right, thank you so much everyone for watching. Hope something was said that was, you know, help your business as you grow, make sure you don't just fail while you're growing. The business is actually doing good. Like I, I saw this the other day. I was doing lectures for the business boot camp. Not business boot camp, the MBA for entrepreneurs, which is this one right here. The course. I was doing it and I said like a profitable business can still run out of money and go bankrupt because you're growing so quickly and you have so many costs and those are outpacing your income and the amount of money that you're collecting. So a growing business doing really good, really successful landscaping company if they are inefficient, if they have overhead expenses, unapplied labor, fixed costs that are exceeding what they should be, that's where people fall into a trap. That is why this is what the thing is to block against these things. Here's what you got to do. Inefficiency on labor. You got to have P4P. You got to have profit sharing. You have a great culture where people actually want to work hard, they want to improve themselves. Organization systems. You need to have systems in place. All right? You have so much inefficiency there for overhead. Those fixed costs don't have a ton of debt. Maybe when you're first starting out, you're growing, but you should not have 10 trucks and needing debt to grow. That's a dangerous spot to be that you're increasing fixed costs. When the business is that mature, unapplied labor. You do not need to be hiring a bunch of office people and getting a big office and a nice computers and office lounge area. And now you're getting an estimator, project managers. All of a sudden, half of your workforce is literally unapplied labor. In my opinion, that's extremely inefficient and leads to a lot of unapplied labor. That is straight overhead, straight expense, and not in the best interest of your business as you grow. I'm Mike Andes, lampskeepbusinesscourse. Com. We'll see you in the next video. It.