It’s no secret that things left to themselves deteriorate.
Profitability for landscapers is no exception.
Without an effective cash management system in place, your profits will dwindle. In fact, cash flow problems are the main reason 82% of small businesses fail. You may be surprised to learn that only 40% of small businesses are profitable. Of the remaining 60%, only half break even, and the other half loses money continually. Yikes.
Profitability for landscapers doesn’t have to be so precarious, and operating a successful landscape business doesn’t have to be so challenging. You can protect yourself and your business.
Examine the following strategies and consider employing some (or all!) of them to give your business a boost.
Profit First
You can implement a cash management system like Profit First that works for you, so you never have to worry about profitability again. Systematizing the process means that profit becomes inevitable — it’s not just icing on the cake. To do this, you create separate bank accounts for goals and strategically disperse your incoming cash among them.
By designating money to accounts for specific purposes, you always have what you need and you minimize the risk of running out of money for those anticipated needs. The separate accounts keep you accountable and in the black in every category.
For example, you won’t have to skip paying yourself one Friday because you used that money on Thursday for a supply run. You will have money set aside for payroll and separate money allocated for supplies. Profit First also keeps you from turning to lenders who offer quick cash at devastating interest rates.
Timing
As you know, timing is a key factor in profitability for landscapers – maintaining a balanced cash flow year-round is critical to success. With a system like Profit First, you won’t lose sleep over the off-season because the cash you need for operating expenses will be right there in its designated account. Similarly, you won’t dread April 15 because for the previous 11 months, you will have been depositing money steadily into an account just for taxes.
Speaking of timing, another way to improve profitability for landscapers is to shorten the turnaround time for collecting payments from your customers. If you are allowing a 30 or even 60-day grace period for payments, you’re allowing quite a lag in your cash flow. Instead, keep a credit card on file for each customer in order to have payments deposited on the day of service. This empowers you to be in control of the timing. Most customers are happy to provide a card, as it’s one less bill they’ll have to remember to pay.
Precise bookkeeping
How accurate is your bookkeeping? Maintaining correct records (and paying attention to them!) is essential to profitability for landscapers. According to the 2020 QuickBooks State of Payments report, 61% of small business owners don’t know how much they spend each month. You need to know where you stand financially so you can make informed decisions for your business. Ignoring financial statements or inaccurately forecasting your future cash flow can be a fast-track ticket to debt.
Some business owners don’t prioritize bookkeeping because it isn’t a customer-facing activity. But accurate books are essential to growth. It doesn’t stop there. If your books are accurate, but you never review them, you’re not able to make informed decisions. If you feel overwhelmed already, consider outsourcing your bookkeeping. Then you’ll gain not only accurate books, but also a seasoned professional who can guide you in interpreting the data to make smart business decisions.
Pricing
Now turn the magnifying glass on your own prices. When was the last time you increased prices? If you’re consistently busy, it may be time to raise your fees. Similarly, if there are clients you’ve had for years, have you adjusted your prices to accommodate inflation? You could be the one stifling your own growth by not charging what you and your team are worth! A price increase is not something to take lightly, so be strategic in how and when your fees change and how you communicate the shift to your customers.
Dollars and cents
It’s not a popular way to improve profitability for landscapers, but take a hard look at your spending. Really examine it with a critical eye, and consider bringing in a third-party bookkeeper to look at it with you. Are there places where you can trim costs? Maybe there’s a vendor offering supplies at a lower price point than the one you’re using, or maybe you’re paying for overhead you don’t need or subscriptions that no longer serve your business well. Invest time researching competitor prices on items you purchase and consult with your staff to see if there’s anything you pay for that’s hardly used.
Examine your services
Perhaps there is an additional service (or two) that you could offer through your company. If you’re in a cold climate, consider adding snow removal services in the winter. Or there could be a mosquito or pest deterrent product you could add to your arsenal of offerings. Simultaneously, consider what you offer customers right now. Are some services costing you too much in labor, supply, or equipment costs? Are you paying for machinery that’s rarely used? Consider what you can offload.
Equipment upgrades
Though it feels counterproductive to spend money, investing in better equipment can improve profitability for landscapers. Repairing old equipment can be costly. There’s the dollars and cents cost of needed parts and labor but also the opportunity cost of being without equipment during the repair. Plus, newer equipment is likely more efficient, which could free up time for your crew and allow them to visit more customers per day.
Profit First in Action
Two years ago, a landscaping company with revenue of $3M came to us in dire straits. You’d think they would have enough money, but they were bleeding cash. And worse — they had no idea where it was going.
We implemented Profit First, created multiple bank accounts, and the problems quickly came into focus. We were able to address the issues that caused the cash flow problems. In their very first off-season after implementation, they had the cash they needed to make it through unscathed.
Maintaining profitability for landscapers doesn’t have to be stressful. If you’re ready to protect yourself from becoming a failed business statistic, give us a call. My team and I would love to hear more about your pain points and see if we can push past your obstacles together. You work hard. You should be able to enjoy the benefits of owning your business instead of fretting continually over its vitality. Schedule a call to get started today.
