Mike Andes says lawn care businesses fail not from hiring or marketing but from buying too much equipment and overhead. Trucks, excavators, office space, and inventory drain cash and kill profit margins before you have enough customers to support them.
What are the specific costs of scaling a business? How do you determine those and how do you start to plan for those costs in your budgeting?
What a lot of times will lead someone to fail as they grow their business is not the customer acquisition or hiring part of the business which actually drives top line revenue. What usually is actually fixed assets. Things like offices, real estate, inventory. These things that get purchased and are fixed costs and not tied to actually getting more customers. That's a lot of times the most cash intensive part of the business. So for lawn care and landscaping, it's like equipment and trucks and excavators and loaders and then I got to have an office space to store them all. Then I got to have an office person that's overhead. All of those things can be very cash intensive and is a lot of times the demise of a fast growing business that otherwise would be profitable. But because of all these fixed expenses that have been thrown on top of it, it's really begins to dampen the growth and success and profitability of that business.
