Get Smart with Money

May 30, 2017

Just like sales and marketing, it’s your responsibility as a business owner, no matter how much you hate it, to understand finance. If you don’t already know, you need to learn how to create and read a profit and loss statement (P&L). You need to know how to read an income statement and learn cash accounting versus accrual accounting. Figure out what it means to manage debt, what it means to have a line of credit, and how to manage money correctly. Accounting is more than looking online at your bank statement and writing checks based on that. You need to get to the point where you understand finance so you can price your services and understand the profitability of your employees, your crews, and the services you provide.

A big part of getting a grip on your finances involves controlling expenses and in this business equipment is a large expense (but a necessary investment). I generally recommend that you wait until the very last minute to buy new equipment. That allows you to keep the money in the bank until the last minute. There’s a number of reasons behind that. If I need a big piece of equipment, I could buy that a week before I need it or a couple of days before I need it. So many companies and so many owners get excited by a new piece of equipment so they buy it months in advance. Generally, this is not a good idea for a whole number of different reasons.

December is when I make an exception to buying new. This is the time of year when buying lawn care equipment and pre-spending money on chemicals and supplies makes sense. You can take a full deduction in some cases of this equipment, maybe even a truck if the gross weight of that truck is high enough and you can write it off in full on your taxes in this calendar year. This brings down your tax bill for the year, leaving more money in your pocket to spend and reinvest into your business next year.

While I generally shy away from recommending debt, even if you buy your equipment in December, and you finance it, you can fully depreciate it in this calendar year even though it’s financed, saving you money. Basically, instead of giving the money to the IRS, you can take that same money and reinvest it your business.

 

On the flipside of controlling expenses, thoroughly track your time so that you can guarantee that you are averaging a minimum of $40 per hour on jobs. Now, pricing is really difficult and it’s hard to estimate how much time will be saved as you develop a more efficient process on the job. When I got started in the business I didn’t have the faintest idea how to price commercial or residential. I was clueless. I remember the challenge and the difficulty. I remember struggling to figure it out.

Mowing is generally the biggest commodity in lawn care, and so it’s easiest to find out what others are charging. It could be a big mistake, but that’s where you start. Ideally you’re not signing contracts with the clients. You’re just signing them up for lawn mowing. If you get it wrong, you can raise their price or you can let them go as a client. In the beginning days, any money feels great and wonderful because you’re making a lot of money, but you also have the lowest costs that you will have.

You will hear of companies making it work with $25 to $30 per hour if they have tons of volume and large properties, but to grow a business, I recommend at least $40 per hour.