Start & Run a Landscaping Business. Joel LaRusic
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For example, in my business, many of my full-service programs end in November. However, I offer an extra visit right before Christmas to clean up the last of the leaves and debris that may have blown around. People appreciate this small extra, as it shows I am interested in their property.
Will you sell products? To keep things simple, you should consider the application of products, such as fertilizer, as a service. But if you sell something to your customers without a service attached (e.g., summer annuals for customers to plant themselves), then you would list product sales as part of your plan.
2.6 Your market
In this section, describe your target customers, your competition, and any peculiarities about the marketplace. All of the information in this section can be extracted from your marketing plan (see chapter 6), which should be prepared first.
2.7 Your financial plan
This is where you deal with the nitty-gritty of your business plan — the numbers. Do not skip this section, even if you are only completing a business plan for your own benefit. It is important for tracking your company’s progress, or lack thereof.
To produce a financial plan, you need to complete three other forms:
• The pro forma profit and loss statement (forecast)
• The balance sheet (current snapshot)
• Cash flow projections
2.7a The pro forma profit and loss statement
At the very least, you should try to estimate your income and expenses for one year ahead of time, but I recommend trying to look ahead two years. It’s difficult to project any longer than that, especially when you are starting out, because you don’t know the industry well and you can’t anticipate what modifications you might make over time that could throw long-term projections out the door. For example, you may plan to pursue multi-dwelling property (such as condos and townhomes) contracts in your third year of business, but discover after two years that you are happy and profitable doing residential work only.
First-year forecasting can be challenging. How do you estimate what you simply don’t know? How much fertilizer or equipment fuel will you use? How many customers will you attract? How fast will your business grow? The bottom line is this: You make an educated guess and you do the best you can. After that, you will test your business savvy and your confidence in yourself and your new enterprise as you project yourself into the future and think about how you want your business to grow. You will probably be surprised at how close your estimates are if you put some thought into them.
The profit and loss statement is your guide to your business projections. (If you are new to record keeping and accounting, you may want to pause here and read chapter 7 on record keeping before proceeding.)
The first item to consider is income. As you think about your income projections, ask yourself key questions about how much work you will do. How much are you going to work each month? Will you work full time or part time? Will you work by yourself or will you have a helper or even a second crew? How much are you going to advertise? Are you going to blitz certain areas? Are you planning to use many different marketing techniques or just a couple? Over what time period will you advertise — in the spring or all through the season? Also, how motivated are you to get work? If you have a small contingency fund to get by with as you get your business started, you will be more motivated than if you have a large surplus of cash after start-up expenses. What are your financial obligations? A mortgage, car payment, and kids to support are strong motivators to turn a coin in this business!
Depending on where you live, certain months will be slower than others. No matter where you live, spring and fall will be busy. An old saying in the gardening business is that if you are not busy in the spring and fall, you’re doing something wrong. Summer can be slower if you don’t have regular maintenance customers; you may not have many in your first year, so expect to hustle. Winter revenue depends largely on where you live and if you will be offering snow-clearing services.
Set a goal for the number of regular maintenance customers you want in your first and second years. Are you starting from scratch? Perhaps set a goal of generating $1,000 per month in regular cuts by May. Regular maintenance customers are a beautiful thing because they are as close to a steady paycheck as you get working for yourself. You can count on this money each month. Will you buy any maintenance contracts (see section 3.4 in chapter 6)? Prices may vary from place to place, but a general rule of thumb is that a good residential client is worth one month’s revenue. Do you have friends in the business who may throw you a bone as they move on to bigger and better customers? Take these things into account as you forecast your revenue.
After calculating income, you need to estimate your first year’s expenses.
You can develop your own profit and loss statement using the form provided in your accounting software package (see chapter 7 for more information). Then every month you can compare your projections to your actual monthly totals. Don’t wait for the whole year to go by before you analyze how your projections/goals compare to your actual totals. Check how you are doing each month to see if you are meeting your goals, and take action if you are not.
2.7b The balance sheet
You need to include your current balance sheet as part of your business plan (see chapter 7 for more information on balance sheets). If you are preparing your business plan for an investor, you should also include a pro forma balance sheet that projects where your company will be in one year.
2.7c Cash flow projections
The cash flow projection is probably one of the most overlooked aspects of business planning. Although you have estimated, in your profit and loss statement, what your revenue and expenses are going to be, it is even more crucial to know when you will receive and spend that money.
The Importance of Cash Flow
I learned the lesson of cash flow the hard way when I started out. December was my favorite month at one time. Not because of Christmas, but because I was so busy in November, finishing up the fall cleanup and getting people’s lawns ready for winter. I made a lot of money in November, but that money had a 30-day lag since I usually billed at the end of the month and received checks throughout the following month. December, on the other hand, was slow, so I did not have to spend the money I received to buy supplies, pay staff, and so on. This created the impression that I had a lot of extra disposable income. March, on the other hand, was the opposite. I was busy, running full crews, buying lime and fertilizer and all sorts of other spring supplies, but because February was slow, I had little money coming into the business. Had I analyzed my cash flow in the early days, I would have saved myself some grief by making sure I planned for these types of situations.
Using the tool of a cash flow projection worksheet, you will be able to see trouble spots ahead of time, such as March and April when expenses are high and income may be low.
Total estimated sales for the month (from the pro forma profit and loss statement) are listed by category: cash sales and term sales. When you think about your own cash flow projection, ask yourself how much of total sales is jobs that you bill (and get paid for) when the job is done. A general rule that I use is that regular maintenance customers (i.e., those who receive scheduled weekly or biweekly visits) are entitled to the privilege of getting a single invoice at the end of the month with “net 20” payment terms, but non-regular customers are expected to pay at the completion of the job. You need to estimate how you will split the cash sales and term sales..
For term sales, you need to determine how much you expect to see in the following month (that is, how many people will pay on time). The best way to estimate is from historical data, but if you don’t have any history, try using a formula. Take your total term sales for the month and assume that you will receive 80 percent in the next month. Of the remaining 20 percent, assume that 15