Should Your Lawn Care Business Focus on Commercial or Residential?

Hey, everyone, it's Mike Andes and you're listening to the landscape business course podcast. Today we have a very special episode. We're talking about commercial versus residential. Which one's better? Is there one better? We're about the cons and the pros of each of them and why you might consider doing more of a residential lawn care service versus more of a commercial lawn care service. But before we get into that, a big announcement today is that we're starting a new texting platform, a new kind of community on the texting app. So this number up here, if you're watching the video, I'm going to read it off to you, too. It's 855-575-1267. That's the number you want to text me and text one word landscaping. All right, so text the word landscaping to 855-575-1267. Text one word. Just text landscaping to that number. And I am going to about once every week, maybe once every two weeks to get started. I'm going to do special content just for the people on that platform. We're going to do giveaways, sending shirts and hats like my Augusta hat, the leather one. I'll send those out. Books, I'll send out. Direct Q and A. You'll be able to text me directly on that app or from your phone. It's just SMS text. So it's a direct SMS text to you. You can opt out at any time and special content will be going in there. Direct Q and A. I'll be doing random phone calls on there. Well, I'll just call up random people and talk to you for 10 or 15 minutes while I'm driving and things like that. Try to help you in your business. As well as all applications for the zero turn visits where we come out and we visit properties or, sorry, visit landscapers. That's all going to be done from this new platform. So just text me at 855-575-1267. Text me with one word Landscaping. That's gonna opt you in. And then from then on, you and I can text back and forth one on one. So you can ask me questions. You'll get great responses there. I'll be able to make videos and send them back to you. It'll be just like my phone number, basically, once you've opted in like that. So text landscaping to that number. And I love. I can't wait to kind of do some more intimate content. And starting in July or August of this year, you're gonna see A bunch of new content coming from me because I'm actually going to have a full time person working on my content. So it's not always just gonna be studio. It's gonna be some other cool stuff we're trying to add so you can get some more value. All right, commercial versus residential. There is no right or wrong answer here, but I want to give the pros and the cons of having more of a residential focus versus a commercial focus, and vice versa. In the landscaping and lawn care industry, we're really specifically focusing right now more on the maintenance side of things. So commercial lawn care and maintenance versus residential lawn care maintenance. But some of the same things have to do with hardscaping or landscaping as well. So let's talk about commercial things first. Why would I want to start a commercial lawn care business? What's the pros of that? Number one, less people to please usually have larger contract sizes. And so instead of trying to serve 100 people at $1,000 each for residential, you might be able to serve two or three people all at 40, $50,000 contracts. And therefore you literally have less customers to try to keep happy. Residential. Big mowing residential companies can be doing thousands of mowing customers every single week versus a commercial focused lawn care business can be doing, you know, a couple dozen and generating the same amount of revenue. And so those bigger contracts, those bigger revenue numbers, you can hit the same revenue markers with less customers to deal with, less people to deal with, less contact people, less office staff required because there's less calls and things like that. And so, and a lot of times too, they're less picky about certain things too, like, oh, and customizing the service for 100 different people versus two or three is a big significant change. So less people to please, that's a pro, a positive of having a commercial focus. It's also much quick, it's much more fat. You can much more quickly scale a commercial operation. This is why you see a lot of businesses that scale very, very quickly, like couple million in revenue very quickly within a year or two, they're almost always commercial maintenance because they can go out and get 10 or 15 big contracts that are commercial. And immediately the scale of their business, the size, the revenue that they're doing is already really high. Lots of employees, lots of trucks. Immediately they can grow very quickly because they only need several big accounts. Literally there's accounts out there that are hundreds of thousands of dollars. And if you win those accounts, you can immediately scale the size of your business. Another pro of commercial Work is usually because you're larger properties, you have less drive time. So instead of your crew behind the windshield driving for a long period of time or in between a bunch of properties for residential, they can stay on one property for the entire day or for half a day. And they do a couple properties, a couple stops each day. Another positive about commercial is that it's full service, it's year round. All right, so almost all commercial clients want a 12 year maintenance program. They want to pay you 12 times, they want to pay you throughout the entire year. It's great for cash flow. Whether you have a slow winter or a slow summer, or really any sort of fluctuations in your seasons, then it really helps with cash flow to have those commercial clients that are paying 12 months out of the year, the same amount every single month. Really, really great. And they're full service customers too. Like they're generally aren't just gonna have you do mowing, they're gonna do all the beds, all the trimming, all the mulch, all the flower installations, all the snow plowing. Like everything that you could offer many times is going to be wrapped up into a maintenance contract for a commercial property. All right, so what are the cons of commercial? It kind of relates back to, I just talked about them being full service and that is usually to get commercial clients you need to offer a lot of different services, which means a lot more equipment, a lot more different types of trucks, a lot more sizable equipment too. In terms of bigger mowers for bigger properties as well as your service mix. You're going to have to be able to do spraying or you have to be able to do snow plowing, you're going to able have to do tree trimming, you have to be able to do treatments. Because you're not going to get that commercial package, you're not going to get that commercial contract without offering all the services that they want. It's also more competitive. Another con of those commercial is much more competitive because you got these big, big players that are willing to go into a market and get these big contracts. So when I'm talking about more competitive, I'm talking about bigger commercial, not like just a little tiny strip mall. I'm talking about these bigger commercial properties where they're paying thousands of dollars every month, if not tens of thousands every month for their contract. You got big players in your market that are willing to come in and do it at a loss or break even just to get into the market, alright, so you can scale it really quick. But whether or not it's profitable is a different thing because it's much more competitive. People are willing to come in and do. Generally, when I look at lawn care landscape businesses, the ones that have 2, 3, 4, 5% profit margins are these commercial maintenance companies that have massive scale, massive volume and revenue and a small profit margins. They're playing a volume game and that's why they're able to go and be very competitive in very low prices on these jobs. So again, another con is lower pricing, lower margins. And the reason for that a lot of times is because the customer, the commercial customer is usually much more price sensitive. They just want the work done, they're less picky and things like that usually. But they also are much more price sensitive. If you're $10 more per month, they're going for the lowest bid, usually like lowest bid. And then they have certain parameters that they want you to meet in terms of insurance and things. And so usually it's like whoever gets in there with the lowest bid is going to get the job. It's very hard to do value add and then have them pay a premium or where you actually make your margin. All right, so that's commercial. The pros and the cons. I'm not trying to persuade you either way because now we're going to talk about the pros of residential. There's a low barrier to entry. All right, so residential mowing, residential lawn care services, there's a low barrier to entry, which means there's a lot of competition. That's kind of a con. However, because there's a low barrier to entry, you don't need a bunch of skilled laborers, you don't need a whole bunch of different types of services. Like I was saying, commercial properties, they want you to have the plowing, they want you to have all the spraying, they want you to have all the tree trimming, they want you to have all the things that they need for that one contract. Whereas there's a lower barrier to entry with the residential and you need less equipment, you don't need to go out and get 60 inch zero turn mowers if you're just doing residential from the get go. All right, so much less upfront capital intensity with the residential startup. Another pro of residential is higher prices and really being able to select your demographic. Alright, so certain people, certain demographics are willing to pay more money, whether it be income distribution or be age, they're retired, if they're snowbirds, things like that. There's certain people that are willing to pay higher a premium in Order to have certain value add that you offer professionalism, someone answering the phone right away and getting estimates to them within 24 hours. All the little things that you can do to add value to the customer, some people are willing to pay a premium for that and usually that's going to be a residential customer. And so where you able to add that value and add the premium pricing is where you're able to get a 15, 20 plus percent profit margin business in that residential consumer market.

All right. Another thing, another pro about residential of having a lawn care business that's focused on residential is it's usually easier to sell and bid. So traditionally you don't need a massive contract, you don't need signatures. The process, the friction in the sale of a residential mowing customer is much, much more simple than trying to sell a 12 month contract that has a whole bunch of different types of services and you have a calendar for when the services are happening and you have terms and conditions and you have payment terms and all these other things. With commercial, that can be a big sales process, can be weeks, if not months of getting those contracts squared away, lots of time invested. Whereas with residential, the sale positive thing is that you can do it over the phone, you can do a drive by and you know, have it within a matter of a couple of hours of them asking for service. They can be set up on the schedule with a credit card on file and ready to go. Really, really easy sales process and really, really easy to make those bids based on budget hours or square footage or whatever matrix you're using. To be able to bid those out quickly is a much more seamless process. Now cons of residential, because we're doing pros and cons of both. So some of the negative things about residential is it's usually less, there's less full service clients that you're selling because if you're selling them over the phone or you're selling them on a drive by, usually it's harder to get a higher percentage of full service customers. Whereas with the commercial, they're wanting all your different services, they're wanting flowers, they are wanting overseeding, they are wanting aeration, they are wanting the mulch put in, they're wanting the bushes trimmed, they're wanting the snow plowed, all of those services. The negative thing about residential is usually customers are like they're coming to you for mowing and then your goal is to use the mowing as a gateway drug really to get them into all your other services of fertilization. Everything else you can do for them. However, there's going to be a less percentage than commercial where most of them want full service. Another con about residential is usually you're going to have bigger dips and ebbs and flows in your year round cash flow. The because people are less likely to want to have a 12 month contract, they're less likely to have those year round services. And so in Augusta we're really trying to push to equilibrate that where more and more residential customers do have winter work being done, however, they're less likely to have those services than a commercial client that wants everything looking good, things blown off the parking lot, snow plowed stuff during the winter, even when it's slow. Okay. Another thing about residential, the negative things is there's more customers to satisfy. If you're going to scale up a multi million dollar lawn care business in the residential department, you're going to have hundreds if not thousands of customers you're interacting with on a monthly basis and trying to service their property, keep them happy, specify their needs and wants and desires and how they want their lawn done. Because they want their lawn done north to south instead of east to west. And you know, they want to make sure you lock the gate on certain days but not on other days. The dog can get through. Like all these different Trying to edit and modify each service to meet and tailor the service to their needs can be very annoying, can be very difficult. And that's definitely a con of residential. So those are the pros and the cons. I'm indifferent how you grow your business. I don't think there's a good way or a bad way. Those are some of the things you want to think about as you begin to plan where you want your business to go in five years. What's the focus? Is it residential? Is it commercial? What do you want your business to look like? What does your role within that business look like? And and which of these service mixes residential commercial best fits that need or desire that you want in the future? All right, couple announcements before we log out for the day. Number one is the next franchisee training for Augusta is coming up in April, just two months away. So definitely if you're interested, go to augustalawncareservices.com franchise we have a lot of new stuff we're developing for the franchisees, including version 2 of the P4P software. Really looking forward to that. Also, last update, if you're in the course on landscape, businesscourse.com, there, the Landscape Summit 2020 videos for all three days are now recorded and live available to you there. So if you're a course member, make sure if you're not a course member, you can sign up too. But if you are a course member, go to the course. Go to the very bottom on the modules page you'll see a button called Landscape Summit 2020. There's three videos in there. Those are the three days with all the recordings, I think like 16, 17 hours worth of video of all the content that we recorded at Landscape Summit. So check that out. Last thing though, make sure you do one of two things. Either join the Facebook group Landscape Business course or join the texting group. I even if you're in the Facebook group, join the texting group. There's gonna be a lot of exclusive content, especially as we hidden in 2020 of stuff I wanna be sharing, doing, doing random things, calling you, being able to help you guys one on one a little bit more instead of just in a public setting on the Facebook group. So definitely check it out. Text 855-575-1267. I need you to text me one. One word landscaping. Landscaping. If you don't how to spell landscaping, search it up on Google. L A N D S C A P I N g. Text that one word to 855-575-1267. That will get you into the group. And again you'll be able to text me directly one on one back and forth. And so unless there's people that are abusing that and always texting me, I'll keep that line of communication open where you can text me one Forward to that. So make sure you check it out again. Thank you so much for watching Landscape Business course podcast. Until next time. Be great because nothing else pays.