Retire as a Lawn Care Millionaire: Secret to Growing a Massive Business!
Every global business started as a small business years ago. It is not rocket science for your lawn care business to grow to the point where you can retire and watch your business continue to grow even when you step away through retirement.
There are seven levers you can leverage to increase cash flow into your lawn care business. They also work in other industries and businesses, but our focus is the lawn care business. These levers are like handles that you can pull to improve your business at any time.
This is one of the biggest levers you can pull to improve your business. Once you figure out how to increase your pricing, all other aspects of your business get a massive turnaround. For instance, if your profit margin is 10% and you manage to increase your price by just 5%, your profit margin would increase to 15%, and you would have increased your profit by 50%.
Volume implies the number of services you offer to customers. This is another lever you could pull in your business. You can add more services, so you can increase customer inflow. You could easily add a fertilization or clearing unit to your mowing business without overloading your existing structure. The goal here is to increase the number of services to increase the number of visits and thereby increase the volume of units per year. However, you have to consider the capacity of your business and your staff strength to be sure you can take on new services.
Cost of goods sold (COGS)
These are the costs incurred on labor, materials, and subcontractors. Since the lawn care business is a service-based one, COGS could refer to the material costs that go into the equipment that needs to be purchased, the number of labor you have to employ, and other things directly tied to completing a job. You need to reduce your COGS because it is the primary source of cash outflow from your business, which is the opposite of what you want. It could also be referred to as Cost of Sales. The more COGS you have to pay out, the lower your profit margins. You should try to keep your COGS as low as you can without compromising your service to increase your profits.
Operating expenses are the expenses your business incurs by doing normal business operations. It includes equipment, inventory costs, marketing, payroll, and insurance. Operating expenses cannot be completely removed from your business, but they can be reduced. For instance, you don’t need to have so much management staff for your small business because there really isn’t much to manage anyway. You don’t need to employ a full-time manager, accountant, and the likes for your business when you learn to handle all that by yourself. You want to reduce your operating costs as much as you can to increase profits in your business.
You want to reduce the time it takes to collect on account receivable (people that owe you). If your business only makes a profit on paper, you’re not doing as well as you should. You could set a system that allows you to use credit cards or receive a 50% down payment before the job is done. If credit cards are declined, you stop work right away. You shouldn’t work for people and allow debts to pile without collecting. If you have more money going out than coming in, sooner or later, your cash flow will be wiped out. You could also set policies that tell customers that they have to pay within seven days of job completion. You could also implement automated messages to remind them after getting their invoice. If you don’t have automation, you should follow up a few days after they get their invoice. The sooner you can collect the money you’re owed, the better for your business and cash flow.
Inventory (Work in Progress - WIP)
Inventory is a bottomless pit. You need these pieces of equipment to complete the jobs you take, but you cannot afford to keep them in the garage for too long. Other factors can increase your WIP time such as sun, rain and other changes in local weather conditions. Extended WIP periods negatively affect your business because you have to wait longer to finish the last bits of the contract before charging the invoice.
Most people don’t look into this factor because lawn care is a service-based business. However, it is another important lever you can pull to improve your business. Accounts Payable is the money you need to pay out from your business, either for supplies or repairs. You can increase the time on accounts payable by asking your suppliers or repairers to bill you at the end of the month. By doing so, you increase the time you have to pay out any expenses your business incurs. Therefore, allowing for more money to come in before it goes out.
How to increase growth and the number of customers you have
When you’re building a new business, you’re building an asset that will later become a money-making machine for you. So, you want to do everything you can to increase the value of the business and consequently, your net worth. You may not see the profits you’re making as it is on paper, and you may wonder if you’re making any profits at all, but there’s a saying that goes, “Growth sucks cash.” If you’re really growing, you will have to be pumping most of, if not all of the profits back into the business.
Your business needs all the money you can put into it. You create a cycle that constantly pumps resources back into the business to purchase equipment, hire employees, and marketing. As a growing business, you constantly need to get new equipment and human resources for your operation.
Marketing is one of the major ways to increase your prospective customers, so it helps to invest in that aspect of your business. Established businesses still devote a huge chunk of their income into marketing, and it is even more important for a growing business to generate attention. You want to get your business out there and become synonymous with the service you offer – that is the driving force for investing in marketing.
Many people would rather invest in stocks, bonds, and real estate than in their “small” business, but small businesses have better ROIs than all of these when run properly. You can also build systems that work in your small business even when you are not around. It makes it easier to retire from your small business than any kind of investment.
The first few years of your business should be dedicated to investing in marketing and the general growth of the business. It is very easy to get discouraged at this stage because even though you close accounts and make profits, you may not be able to cash in as much as you’d like. Remember, as long as you do not give up and maintain your conviction, then you’re on the right track. You’re building a business you can retire from in a few years and by then, it will all be worth it.