The Answer is SCARY! (How Much Money a Lawn Care Business Makes)

Hey everyone, it's Mike Andes@landscapebusinesscourse.com and today I'm going to be sharing some numbers that are actually a little bit alarming to me about small businesses and landscapers and just how much money they're making. I'm looking at a lot of data right now because I'm getting ready for Landscape Summit 2022, just about six weeks away. Check out the link in the description if you would like to sign up for that landscapebusinesscourse.com conference. And I'm getting ready already for getting my notes together. And I do a lot of research in terms of data just to see where small businesses are in general. And one of the articles I came across that was really interesting is looking at.

Just how much money small business owners are making and what is their actual net out pay from their ventures. So this is a couple years old, but probably not too far off from the sba. The SBA came out and said, hey, the average and the median, which I'm going to explain the difference in just a second. The average and median amount that self employed people make. The median is $49,804 and the average is $73,000. So say, well, what's the difference here? Well, the median is the middle. Okay? So it's like the very middle. Whereas the average takes over all of the response and divides it by the number. So what that means is if I got like, let's say this is $0, $0 here and over here is like $1 million, for example, okay? And you got all these people responding and you got all these different. And then over here is like a whole bunch of people around here like this, right? So the average is probably going to be. Let's just move this thing this way. The average is probably gonna be somewhere in the middle, like right here. The average, right, because all of these sk, these big numbers skew the direction this way. And unfortunately this is the part that everyone aspires to be. But the bulk of people are down here. So the median is the middle. So you take how many respondents and then divide it by two, like right in the middle, this would be the median, right? Because that is like the 50th percentile. So the 50th percentile is the median. How I look at it is like the median in a road is the middle of the road between two different lanes. So therefore it's like the center. So median over here would be $49,000 and the average $73,000. This is alarming. To me for a few different reasons. Okay. The first is expectations. When someone comes into business ownership, they're expecting like immediately that they're gonna make 2, 3, $400,000. When they have to realize that probably like a couple percent. I don't know the exact numbers on this, sorry, but I'd say a couple percent are in that 200, $300,000 of annual revenue as entrepreneur, self employed. Now, this number for this median actually goes down to 22,000 for unincorporated. So people that are just doing things full time, but self employed from home, not incorporated. These are incorporated businesses. So this isn't even just like chucking a truck. This is incorporated businesses that have the median of $49,000, take home pay for the owner and an average of 73. This average is massively skewed by the fact there's a 0.1% of people that make millions and millions and millions of dollars. It skews the average, but the middle, like the 50th percentile, meaning if I make more than $50,000, I'm above average as a small business owner. And yet in so many people's mind, make a couple hundred thousand dollars, you're like a failure when you're literally shooting for like the top 2% of self employed individuals. Whereas if I look at, okay, well, I just wanted to make a living and I want to provide for my family, you still have to be above average, above the median 50 percentile. You still have to be above that just to make ends meet. So you're going to have to be like in the 60th, 65, 70th percentile just to make a decent living for your family. So I think the first thing that really worries me is expectations. People get into entrepreneurship, they expect like within two or three years, I'm making hundreds of thousands of dollars in profit. Not happening for the majority, if not like the vast majority of entrepreneurs, especially in lawn care, landscaping, where you require you to buy trucks, get equipment, get employees, all the rest of it. But the expectations is extremely damaging. It's going to lead to a lot of burnout and a lot of depression when somebody realizes that making 80gr is actually pretty good. And even that's gonna take a couple years. It's gonna take a couple years of losing money and making less than you would if you would have kept your 9 to 5 just to get to 70, $80,000 in profit a year. Talking about averages here, I believe that these numbers actually look worse for the lawn care and landscaping community. I really believe that. And Based upon what I've seen, as well as the fact that the vast majority of owners make less than $50,000, I think that this median is probably more on the realm to $40,000 and the average maybe 55 or so thousand dollars. In terms of what a landscaper, a landscape business owner, a landscape self employed person is going to make. It's concerning to me. Number one, like I said, is expectations and people quitting their job and expectation they're gonna make way more money like in a year or two. I'm just so shocked by how people think that in two or three years they're just going to make bunches of money. Like it's not like that. Business ownership is three to five years of sacrifice. And usually five years, five through seven and up to 10 is where you really start to grow and expand. Like I've been doing a gust of Lawn Care for eight years. The past two years we've done franchising. 98% of you have only heard about me in the past 24 months. But there's a lot of grind before that. Those first five, six years of struggling and figuring things out and like you're trying to make payroll and you're trying to figure out systems. That's not what seen. And so the expectation that I'm just going to become an entrepreneur, go self employed, start my lawn care business and make hundreds of thousands of dollars in profit is extremely damaging because very few people will do that. Second thing that makes me concerned is that half of owners median again $49,000, the center 50th percentile, everyone below that half of the owners self employed people in the United States could make more money if they went and just got a job. If they went out and just became a general manager, if they went out and just became a W2 employee, they'd make more money. And that's disturbing because that bottom 50th percentile takes away from the other 50th percentile that's actually succeeding. And they have to compete with these people. And in reality these people are literally putting themselves through hell for something that they could actually make more money going and becoming an employee. Now I know there are intangible benefits of becoming self employed and I'm just dwelling on the number side. So I there's benefits of governing your time and autonomy and things like that and purpose that are not tied to money. But I also see so many small business owners in massive amounts of upheaval because of these numbers. They're not making enough money because either like I said, number one, they expected too much or number two, they could be making more money as an employee and yet they're working 60 hours a week and working the evenings and making $49,000 again, 50th percentile, which is very alarming to me. The fact that like the 30th percentile person is making like 20,000, like they're not even making minimum wage, let alone amount of hours that they're working on their business. That's why I think so many times people should be an employee and just focus on growing inside of a company. It's a great place to be. You have a dependable paycheck, you can learn so much. And maybe when you're 40 or 50 and you have like 20 years of management experience, then you go start a business and it takes off and you become more over here because you have massive levels of experience and you get a learn all of those mistakes on someone else's dime and be paid a good paycheck. That's above the median, the 50th percentile of entrepreneurs. You literally have to be above average as a self employed person to make above 50 grand. Okay, per year. Number three. The third thing that kind of is alarming to me is that fact that this much profit is not enough to scale the business or get out of day to day operations. The reason I know that is because if you're making 49, $50,000 in profits, take home pay, you do not have enough money to go pay a manager, which is going to cost you 50 grand to come run the business for you. You're going to be in the business every single day, all the time. It's going to lead to burnout, it's going to lead to eventually you getting sick. It's going to lead to one day you having a family emergency and not being able to be at the business. It's not sustainable. And eventually that's why landscapers and lawn care guys eventually just close down shop. They don't even try to sell their business, they just close down because they're burnt out.

The body wears out, the family can't put up with them no longer being there. Their relationships get strained because there's no money and they're working crazy hours. And eventually it's like, hey, I'm just gonna give up, I'm just gonna throw in the towel. And it leads to burnout because you can never afford to go pay someone else, another team member, give them a great job and allow them to manage the day to day operations to where you can actually scale the business and think about working on the business and hiring more people and creating more jobs for your community. You never have that opportunity simply because you never make enough money to afford it. So these are some of the things I'm looking at. I'm somewhat alarmed by and knowing that in the lawn care landscaping community these numbers are probably lower and that so many people are getting into lawn care landscaping right now because the job market the way it is because of the pandemic and all the rest of it and they have grand illusions when they look at someone like myself that they discount the past eight years of grind and think that they're just going to become over here somewhere on this, you know, the top 21 2% when the vast majority of self employed people will make more money if they just went on God 9 to 5 job. So I don't mean to be a Debbie Downer. This should be very encouraging to you. If you believe that you have what it takes to be in the top 10, 15, 20% of entrepreneurs and so forth employed people, you can do that, you can learn, you can grow. I think a lot of people would be better off becoming a manager and learning those skills and then becoming an entrepreneur down the road, starting their own business in their 40s or 50s. And it's okay, that's fantastic. But you can get around all of this action by trying to figure things out and spin your wheels. And somehow we've demonized being an employee and I think it's wrong. And I think that.

Some of the things I talk about at conference is going to be somewhat dictated by this. It's somewhat alarming, very alarming to me, not just for self employed people, but for the lawn care and landscaping community. This will lock you up. This will lock you up. This will paralyze you from doing things in your business that you know you need to do that make all the sense in the world. But because of this, the scarcity of money will keep you from implementing the changes you need to see in your business. So hope that was helpful and we'll see you tomorrow.