Steps to Build a $1M+ Lawn Care Business... and WHY Most Fail!

Hey everyone, it's Mike Andes and you're listening to the landscape business course. You might be watching this on video. You might listen to the podcast. If you are listening to the podcast, I really recommend you watching today's episode. I'm gonna be doing some demonstrations here on the whiteboard and trying to explain a concept that I actually teach during our Augusta lawn care franchise training program. So it's usually three days. One of the first things we do is talk about this, and that is the stages of, of growth. Alright? So to just demonstrate today, I'm going to draw this out on a graph here on the whiteboard and kind of show you how you should be thinking about your business over the long term. And the reason I really want to talk about this today is because so many lawn care business owners get unhappy with where their business is at. They get frustrated by some of the things that they're struggling with. And I'm going to explain exactly why that is today, not now. I'm not going to spend two hours like we do during franchisee training, going through each stage, but I'm going to kind of briefly go through each stage and then explain why people get discouraged along the way. So there's going to be five different stages of growth in a lawn care business. And I know some people might disagree with exactly how I am breaking these up in terms of the numbers. Actually, let me just make this a little bit bigger.

Alright, so we take this across the whole board. Here you go, stage one, stage two, stage three, stage four and stage five. Alright, so stage number one here on the bottom. Stage number one is really gonna be from zero to 100,000 in revenue. That's going to be this first range. And during this stage of business, this is usually gonna be you solo route. Alright, so you by yourself, solo entrepreneur out in the truck by yourself. So 0 to 100,000 revenue, pretty easy to do 100,000 in revenue by yourself. You're doing all the work, all the invoicing, all, everything, basically. All right, next stage is gonna be 100,000 to 200,000. And some people, like, why would you even make this a separate phase? It really is a different part stage of the business because now you're gonna get a helper. Usually it's part timer, sometimes it is a full timer, but you're going to be getting help at this stage. It's very difficult to do $200,000 but by yourself in revenue without completely losing your marbles during the spring rush. So that's the next stage, the next stage. We talked about is 200,000 to 500,000 in this phase. Usually the owner is still in the field to some degree, but not as much. They're focusing on estimates, they're focusing on really growing the business now and they have multiple employees. And just for the sake of the video, I'm going to make these all a little bit bigger here with just a moment here. All right, so we got 0 to 100k, then we got 100k to 200k, then we got 200k down to 500k.

Hope this is making sense for everyone. Alright, so these are the different stages. Next stage is 500,000 in revenue. Again we're talking about annual revenue to 1 million in revenue. All right, that's the next stage. It's a fourth stage of growth. The next stage of growth is 1 million plus. Alright, so at each of these stages, when we talk about in with the franchisees at Augusta Lawn Care, we talk about some of the problems you're going to face at each one of these stages and we talk about the different questions and struggles and doubts and fears you have at every one of these stages, financially, in terms of employees, et cetera. So for example, at out here at 0 to 100,000, really a lot of people just get so enamored by the fact they're getting customers and all this and they forget that they're still in stage one. They're still in the first inning of a very long game. And the great thing about being in the first inning of a long game is if you get behind, you have a lot of time to make up. If you mess stuff up, if you don't know your estimating exactly right, if you don't know how to advertise exactly right, you have a long time to figure those things out. The other thing is, if you can really figure out systems and procedures here, it's going to set you up for success down the road. But don't get so enamored by your 5 run lead in the first inning. Realize that that could be taken away from you. If you continue to grow and you don't have systems and procedures and you're not scaling the business correctly, you could lose that lead. So don't get enamored by your customer base. At this level it's nothing to talk about. You're not running a business, you own a job. Alright, then we go into this next phase. During this phase is really where a lot of people get excited because they're making more profit. A lot of times people change their standard of living during this stage because there is a high profit margin. We're talking about that in a second. And you're having a helper. So now you get that feeling of being an employer, the boss, the boss man. A lot of pride of ownership starts to begin in this phase. And then you get really excited here because now you're really running a business. 200,000 to $500,000 in revenue is an actual business. You're doing less and less out in the field, maybe once in a blue moon, but not very much. And you are really focusing on finding people, doing marketing, creating systems. If your business is going to pass this stage, right, if you're gonna stay at this stage for the rest of your business life, you're going to probably be in the field more. You're not gonna focus in systems as much because you can still touch almost everything. And really, at this point, any employee is kind of like the extension of you, like an octopus, many, many arms, but everything leads back to the octopus. And you are the octopus in this scenario. And you have arms called employees, but everything kind of leads back to you at this stage. If you stay here, you create systems and procedures. You can always get to the next stage of growth without correct systems, without correct procedures, you're never going to be able to get to the next level of growth. And certainly you're not going to get past $1 million in annual revenue without systems and procedures. Now, today is not necessarily about the stage of the growth, because I talk about in depth in terms of the podcast, the different struggles that we face at each point. You know, the different scenarios where, for example, during this phase, the 200 to 500,000 in revenue, that's when people get really, really discouraged with their employees. And during this phase is when they a lot of times have turnover, they have a lot of callbacks, they have things breaking on job sites, and people get very, very discouraged. And. And it's very easy to retreat back in the stages of growth cycle. And so whether you look at YouTubers or people in your local market, landscapers that have built a business have three, four, five employees, two, three, four trucks. And then all of a sudden they retreat back to this stage and they're like, you know what? I'm just gonna go solo, maybe have a helper occasionally. I'm gonna just cut out all these employees that waste my life and are horrible quality and they can never take care of the customer and they're always breaking things. That is the person that goes from this stage three into stage two. So Stage one is here, two, three, four and five. And for the person that retreats in their business, they go from having employees, having multiple trucks back into stage two. And I'm going to show why that happens today. That's really the whole reason of this video, is to explain why people retreat from stage three to stage two. I'll explain here. So on this side of the graph, this is going to be profit.

Profit margin as a percentage. All right, As a percentage. All right, so down here would be 0,0%. Then let's say this is 25% and this is 50%. This is 75% and this is 100% profit margin. Alright, so let's say for example, someone made $20. If they were 100% profit margin, that means $20 would go into their pocket, there'd be no expenses. Essentially 75% profit margin means it would mean that $15 would go into their pocket at the end of the day after all expenses are paid for. So what happens many times is that when someone is starting solo stage one, they have high profit margin due to the fact that they don't have employees, they don't have multiple trucks, they don't have, they don't even have to spend a lot of marketing and advertising simply due to the fact that $100,000 revenue, you could probably do some door hangers, you could probably do a bunch of word of mouth, talk to a lot of your friends and get 100 grand in revenue or up to it in that range. So at that stage you're very, very profitable. Many times 75% is not abnormal by the time you just pay for your truck, your fuel, some, maybe a little bit of insurance. A lot of people in this stage don't even get insurance, unfortunately. But let's just say 75%, that's a probably profit margin that people will get because they're so small. They don't have employees, they don't have overhead, they don't have an office, they don't have anything in terms of overhead. It's just like them, their time and they're not paying themselves a salary. So very high profit margin. This 25% that's coming out is like fuel, cost of equipment, things like that. Very, very minimal. Now in this stage, second stage two, they get a helper and so they actually start having some overhead because they have an employee, they have payroll expenses. And so the margin begins to slip a little bit, you know, still, you know, above probably 50% margin in terms of profit margin here. But as the business is growing Their profit margin is going down due to the fact that they have employees. Another truck. Now, maybe they have to get a storage facility to keep those trucks. Maybe they have to, you know, you're paying LI and insurance and you get a bond with the state. All these things cost money. You got payroll taxes and all the rest of it. Now this is where it really gets interesting is because now, as you go from having one helper, maybe full time, now you dip down to where you're now getting three or four employees. This is where. This is why people retreat back in time. And that is when we go from stage two to stage three right here. That's when we really hit a really deep decline in percentage of profit margin. Now, I know there'll be a ton of people out there saying, I run $400,000 in annual revenue and I'm taking home $200,000 in profit. Kudos to you. Great job. You figured out how to systematize at that level. I'm talking about in generalities. 90% of the landscapers I talk to, this is the graph that they're going to follow. Okay, so here we are. We're going from stage two to stage three. Now we have a few employees, maybe three or four trucks, maybe five trucks, depending on your market, what your billing rate is. And now you can see the profit margin is like 10, 15%, maybe even less. And again, this is a range, obviously, as we go down into here, it's probably more like something like this in terms of what you could be at. And what that means is that you might be at 5% profit margin during this stage. If you're growing quickly, you have a bunch of employees, maybe you don't feel like if they're not on P4P and they are draining the clock, they are breaking things they're not being responsible to. So during this phase is very, very hard for a lot of small business owners because we look back and we're like, look, I was making half as much money. So if we go from here and go back, I was making half as much money right here. But look at my profit is significantly more than when my business is twice as big, because now my profit margin is so low. So in this case, maybe this person is doing 300,000 in revenue. But if they have a 10% net profit margin, like money in the bank, at the end of the day, they're only going to be taking $30,000 home. Whereas at $150,000 in annual revenue, you know, half of that 150,000, if they were doing 50% profit margin, they were taking $75,000 home. So they're actually making less money. Take home profit when the business is smaller than when it gets bigger. And the reason for that is because at this point of the business, stage two to stage three, it is when your expenses, the rate at which your expenses go up is greater than the rate at which your income goes up. Alright? Because up here you have such high profit margins. No employees, no storage costs, no trucks, little insurance on those trucks, not as much fuel expense, not as many damages for these employees. All the things that go along with having employees. It's very, very expensive to have employees if you pay them. A third of all your revenue goes to your employees and wages. You might as well tack on another 20% in all the related expenses like payroll taxes and uniforms and things that they break and all the rest of it. So that begins to happen. And this is where people get discouraged. This is where landscapers begin to retreat. We've all heard of people on YouTube having three or four employees, five, six employees, maybe a few trucks making 200 to 500,000 revenue and then retreating back to this point. Now, do I think that's wrong? No. Like for some people, this is where they should be at. They should make the 150,000 revenue, have a helper take home 70, 80 grand a year for themselves. And that's a great little business, you know, it's a great little way to stay out in the field. You're not gonna ever be able to manage a team. You're not gonna ever be able to go on a vacation for two weeks and still make money. That's never gonna be possible in this stage. So this is what I push the franchisees to do when we do training is get through this stage three and four, alright? This is the stage where it starts to tick back up. Okay, and maybe I did that a little too steep. Let me just fix that real quick. I want to actually make this scale so you guys can see this. I look at this in my mind when I am talking to people, whether it be franchisees or I talk to.

People. Listen to the podcast. This is the graph I'm always looking at in my mind when they're telling me where they are at in their growth and in their revenue. Because this is what happens. As you begin to grow past 500,000 revenue, you start to see a slight increase in your profit margin. What is that due to? Why is that? There's this something called economies of scale, alright? So as you begin to Grow the business past half a million in revenue, you begin to get economies of scale. What that means is now, now you get discounts for the number of trucks that you have for insurance. Now all of your trucks are the same and your guys are more efficient. Now you get more equipment. That is all the same. The crews, they begin to learn faster. There's economies of scale as you grow. Cause now when you rent out a shop for $500 a month, you have 10 trucks there essentially paying $50 per month per truck instead of when you had two trucks and, and equilibrates to $250 per truck for that rented land. There's economies of scale as you begin to grow. And there's inherent efficiencies as you grow because route density increases. If you're doing lawn care, landscaping, other economies of scale that happen is as you get more trucks, you get more word of mouth, you get people seeing your trucks. You don't have to spend as much on marketing. These are things that happen after you get through stage three. Alright, so in stage four, maybe you're at 15% margin. At stage five, maybe you're at 17 or 18% margin. And this continues to go up. That's why you talk to someone that does 4 or 5 million revenue and they can have a 25% margin. That's very difficult to do in this scenario. Down here, many times they might be at 30 or 35% because they've continued far along enough on this graph to actually have inherent economies of scale. And again, this is generalities, right? Some people are at a million plus and still at 5% because they just have not created systems. And if you don't create systems in your business, what's gonna happen is you're not gonna get the economies of scales bump. And this is what's gonna happen. You're gonna run a low margin business and you're just gonna have to keep growing and growing and growing to make even a small profit. And that is the business that has no economies of scale. And economies of scale comes with size and systems. In order to get this bump that happens after stage three, you have to have economies of scale. I'm sorry, you have to have systems and procedures that to create.

The economies of scale. So efficiencies.

And systems, alright, this is what leads to economies of scale. So this is really where I see like for example, the franchise, listening to this podcast, all the training that we give. This is the point at which I see the people who start to listen to what we talk about. Increase, create systems, create project management videos, have P4P. All of those things can kind of get hidden in this space. When you're growing because you have a higher profit margin, there's a lot of waste. But as you go here, you start getting larger in size. This is where it determines whether or not you've created those systems or if you're gonna bumble along at a low profit margin. Business past a million in revenue and always if you make a million dollars in revenue, but you're at 5% net profit, take home pay, you're looking at 50 grand in the bank at the end of the day, at the end of the year and running a million dollar business, running probably eight, 10 crews, lot of work. And you're still going to be running a very low margin business that's very susceptible to recessions, very susceptible to people leaving, susceptible to market changes. So this is what I want you to keep in mind as you're growing your business. Because in my mind, you want to be over here in your business where there's economies of scale, you have systems in place and when you have those things, you can afford to go out on vacation and the business still run and it's sustainable. Like going on vacation does not mean that you're weak. It means that you've built systems to be able to withhold and keep the business supported. Without you, that's going to be better for your employees, it's going to be better for your customers. If not everything is bottlenecked. As you as the owner, this is where in my mind you want to be. Most people when they start their business, they here at stage one, they have the ambition to get here, but what happens is their net profit margin dips and they get discouraged here because they're actually making less than they did the year before and yet they're working twice as hard. They're cleaning up after employees, they damage cases and callbacks and people making complaints because of those employees and they've met many times, will retreat backwards and that's okay. Maybe this is where you need to be. In my mind though, most of those people need to push through that stage. And when we talk about Augusta Lawn Care, we talk about these stages being the stages where you want to speed through them, you want to get them through them as fast as possible, you want to save your cash in this phase. So when you hit these phases, you can advertise and market, create the systems to get through them quickly. Because once you're on this side, you can afford a manager. You can afford to get someone to do the sales and estimating and create these systems, systems and economies of scale. You have enough trucks and redundancy built into your business model to where it becomes boring to run the business. That is the goal and that is the ambition behind creating systems. How do we make this business boring where like anyone can do it, anyone can mow the lawn, anyone can do an estimate, anyone can run the business. And that is created through systems and efficiencies and getting a certain size where you, you can afford management. Alright, so these are some things to think about. Again, these are a lot of generalities. I know maybe you disagree with this, the rate at which this declines or something like that, but this is just general information and things. The concept that I want you to get is that as you begin to grow into stage three in the 200 to 500,000 revenue, your profit margin dramatically decreases because your expenses are increasing. And as you begin to grow the business, if you don't change, you're going to run a low margin business for the rest of your life or you're going to retreat back into stage two. So I hope this helps you comment below what stage you're in and what was kind of said that might have encouraged you to get to the next stage or change the way you're doing business. Thank you so much for listening to Mike Andes on the Landscape Business course podcast.