Am I growing too fast?

[Mattcrump]

Hey guys.... Just wondering what the maximum amount of work I should take on is. This is my first year owning a company and I am 8 months in. Started with 4 accounts and now I am just under 60. I am also a full time firefighter/paramedic. I am at the point where my website and word of mouth have brought in so much business that I am having to drop some of my residential customers to make room for the commercial customers that pay more.

When I first started, I set a $35 minimum per yard. I am at the point now where I have dropped all of those and my cheapest yards are around $45. However, I had 4 different commercial company's call me this week for bids. I have already gone out and walked the properties and if I get any of them I am considering dropping about 30 of my residential customers to make room for these big properties. I will also have to probably hire two full time guys and buy another truck and two z- turns and probably 2 more combi tools and another blower. I am trying to figure out if it will be worth it to keep the accounts and pay these guys to cut them for me or to drop them and not have to pay.

The commercial bids were.... $500/month...$1500/month... $4500/month and $1200/month on bi weekly schedules. I also have a business partner who works a different shift than I do at the FD. None of the commercial properties need landscape. Just a bunch of mowing, weed eating and spraying.

Suggestions?

[MountainViewGreenskeeper]

It depends what does your business plan say?

[Liberty Landscaping LLC]

My friend that is something only you can answer. Do you want to take on a crew? I would average what it would cost to pay two guys for a week and see how many accounts they would handle in a week. See how much profit is left after that alone.
Me personally: Find two guys that work hard go out with them for a week or two and see if your happy with their work. If you are growing that fast I would buy a used f 250 and a trailer on craigslist and send them out to work when the truck dies then buy something new or a lot younger.

[Steve]

I agree. Work the numbers and look into how much the extra costs would be for the additional employees and equipment. Then compare that to the income that would be generated from them.

Let us know what you come up with.

A big problem that kills small companies is implosion because they grow so fast they aren't keeping accurate up to date records of their accounting. So they don't tend to see they are losing money until it is too late.

[Mattcrump]

Ok that is good advice...

My business plan basically was to turn a profit within the first year. Pay cash for everything and get my foot in the door and see if this was something I thought I could be successful at and make money with. Our plan also includes the freedom for us to explore entrepreneurial avenues within our company which means we wanted to build the company to the point of having a crew to do the actual work for us while we are our bringing in business and making sure they are ready to do the work. (Schedule, maintenance...etc)

Well up to this point I have done exactly that. Minus my one 36inch Toro walk behind which I owe around $3,000 on. Everything else (2 echo weed eaters, 1 echo edger, 2 Stihl 600 Backpack blowers, 1 Stihl combi tool with edger, weed eater and trimmer attachment, Honda commercial 21inch and 6x12 landscape trailer) as well as all of my tools and extra equip have been paid for with cash made from the business.

As of now I have a guy working with us twice a week and I am paying him $12/hr cash. He is a hard worker and I can count on him to get the work done by himself if I have to run and take a look at a property across town or have to leave him for any other reason. If I hire two guys full time I will most likely have to lower the hourly rate a bit but am unsure what a fair price would be for a guy working out in the sun 40 hours a week. I refuse to hire somebody I do not know and trust and will be able to count on, so with that being said I do not mind paying well as long as I know the work will be done the right way.

Also, I have a big advantage. As of last week, my fiance is now an accountant and she will begin taking over our books. This will allow my partner who was doing the books to take a bit of a breather and start helping me out with everything I have on my plate. (Scheduling, maintenance, advertising, pursuing business, furthering education...etc)

I believe what I will ed up doing is keeping all of my properties and allowing both guys to work full time for us every week. With fall right around the corner, I can definitely use guys out doing fall cleanups and gutter cleaning. Here in Alabama we clean up a yard and two weeks later its time to do it again.

[Mattcrump]

As far as the truck goes... I was thinking one of those gas burner box trucks used for about $10,000 - $15,000 and once the engine dies on it, just replace it with a new one. This way I will not have to lease space for my equipment and I can keep it at my house in the truck locked up and can continue working out of my garage to cut costs

[Steve]

Matt,

As you are working through this, others may be in the same position or getting there.

Can you list what you will need to expand? And what you are thinking the expansion could generate?

So far I see you want two employees and a $10,000 truck. What might you pay those two? $11 an hour? $10?

[Mattcrump]

Steve,

I currently have one employee I pay $12/hr. If he wants to go full time I will keep him at that for now until he has been with us for a while longer. I will probably also make him a foreman.

Right now My company is as follows. Myself and my business partner. We each have a truck. We are 8 months old and have a 6x12 landscape trailer, a 36 inch toro walk behind and a 21 inch Honda. We have two Stihl 600br bp blowers. 1 ECHO weed eater and 1 ECHO edger. 1 Stihl Combi tool with an edger, weedeater and hedger attachment. That is our main frontline equipment.

Our goal is to have people cutting grass for us asap while we can effectively manage the company from an office and out bringing in new business as well as overseeing the work and taking care of issues that arise. We are at the point now where we can't handle much more work on our own. We have to invest in the company to move forward. Otherwise we will be stuck with the same customers now and be cutting grass ourselves. In order to grow, I must first have the guaranteed work coming in. I have just put a bid on 2 commercial properties that a big trash company uses. They liked me and my numbers and so they replied today with an email asking me to bid on 4 more of their properties across the state. Unfortunately the properties are very spread out and I would have to travel up to two hours one direction to get to some of them. I don't know that I can do that. The money would have to be very good. The kicker is that they want one company doing all of it. That may not work out for me.

I also have two other commercial bids out. One is a decent sized... $3000/month account and the other is at a large supermarket in a new shopping mall. That is about $650/month. If I keep getting the opportunity to place bids and actually pull in some of this work I will have to hire two full time guys, buy a box truck, buy at least two z turns and probably two more combi tools and another blower.

At this point I will pay these guys to cut as many of our properties as they can. Once I get to the point of them cutting full time and Me and Chris cutting full time I will then start another truck.

That is my game plan thus far.... Again, I am new at this and am learning as I go. If anybody has advice I am all ears.

[Steve]

You got a lot going on!

Be vary wary of accepting bids outside of your service area. The drive time will eat up cash quickly.

I will have to hire two full time guys, buy a box truck, buy at least two z turns and probably two more combi tools and another blower.

Have you sat down and put pen to paper to figure out these costs and how long they will last for? Then figure out how much this equipment is costing you per hour?

Add the employee costs and you will see what your hourly break even point is.

Also, you will have to figure out how you are going to manage the staff to make sure they are doing the job and doing it right. You also gotta make sure they are where they should be and not taking extra work on the side, while using your equipment to do it.

Ultimately, someone will need to spot check the jobs randomly and also keep tabs with the customers to make sure they are satisfied with the work.

[Mattcrump]

Steve,

You are right. All of that is definitely expensive but I have to invest into my company if I expect it to grow. I caught a huge break though. The girl I was dealing with emailed me back and said the other properties have been stopped. The original 2 properties I went and bid on are the only ones they are going to hire someone for right now which means I dont have to travel.

It also means that as of right now I can do them on my own without having to hire anybody yet. So as of right now it is all profit with no extra expenses.

[Steve]

Have you thought about what profit % range you would have to hit in order to make the expansion worthwhile?

Say for instance you tally up all the expenses to add on a 2nd, 2-man crew. What % profit do you feel you would have to make over your expenses to be happy with the expansion? 10%, 20%? More, less?

[Steve]

What's your thoughts on a healthy growth range versus what makes for too much?

[jhinton]

This is simple economics RAISE YOUR PRICES!

We have a saying in my family (all service type business owners)
I ok being tired and I am ok being hungry, but I am not ok being both.
Don't work yourself to the bone for little money.
If you are overbooked, drop the lowest 10% of your customers.
You should look long and hard at your numbers and find out where you need to be! It's all in the numbers, they will tell you if you can expand and take on the labor burden and extra overhead or if you are just pricing yourself to low and working for peanuts.

I would first look at all the accounts you have and find out percentage wise, what profit margin you are making on each. If you do not know this number, then you do not know your numbers and true cost/profit.

Once you have that information, implement contracts and reorganize so your service route is the most profitable you can make it. (This will more than likely lose you few more clients)

Your end goal should be that you retain the most profitable clients, with contracts and a favorable more efficient route and free up some more time to pursue even more profitable commercial work.

As a bonus, if you can get the less profitable customers under contract, you can then sell them to the jokers in town cutting yards at $35 a piece...