Turf Magazine - August, 2008
Creating a Lawn Care Business Plan
The first step to a successful company
Before writing a lawn care
business plan, a definition of a business plan is in order. A business plan
is a document to identify an opportunity, research why this opportunity
is profitable and the steps needed to
capitalize on the opportunity.
If you don’t know anything about business or
finances, this is a good time to begin learning, as the chances of your
business being successful will be limited without this knowledge.
Statistics from the Small Business Administration claim that over half of
new businesses fail in the first three years, and the common factor is poor
planning or undercapitalization.
The first step in creating a business plan is just
getting started. If you break the plan down to bite-sized pieces and work
on one section at a time, it won’t seem as daunting. Begin with what
you know first and describe your business and your product or services.
Work towards the more difficult subjects, such as marketing, operations and
financials. Don’t worry about it being perfect, just get the concepts
on paper as you can expand and refine later. Free resources to help
with your plan are available from your local Small Business Development
Center www.asbdcus-us.org and the Service Corps of Retired Executives www.score.org.
You need to keep in mind who your intended audience is
and why you are writing the plan. A plan for the bank will be less
interested in the exit strategy and return on investment than one for
equity investors. A plan written for internal use will be different than
one looking for financing.
Business plans tend to have a lot of elements in
common. The “Business Description” is aimed at painting a
picture of your business and why it will be successful. The
“Management” sections are researched, and a strategy of how
your business will compete and operate is developed. “Financial
Projections” show in numbers what you explained in the business plan
for the sales and expenses. Breaking these three major sections down even
further, a business plan consists of the following key components:
Management and Operations
A business plan should also have a cover, a title
page and a table of contents.
The executive summary is critical. It is the first
part of the plan, but the last to be written. It gives the reader a quick
glance of what your business proposal is about, and what you are asking
for. The executive summary should typically be about a half-page long and
include what you would cover in an elevator pitch.
The condensed version of the business concept
Product description or service proposition
This section should emphasize any unique features or
benefits over what is currently in the industry or area, or why would
someone buy your product/services over the competition. You should include:
of your market
The management team
The anticipated start date
Your equity position
How much you are asking for
The purpose of the business description is to
objectively describe and justify what the business concept is and often
What the business does
Description of services and/or products
Status of the business (start-up, expansion or
Current and future goals
Any facts or figures should be noted and sources
included in the business plan. The business description is where you are
trying to paint a picture of the potential of your business, along with the
facts of why you believe it will be successful. Try to get the reader
enthusiastic about the idea, without going overboard.
Describe the products or services your business is
selling. Keep in mind that it is important to show how your product or
service is better than the competition. If you don’t have a good
answer, then you should rethink your strategy. What is it about your lawn
care business that is going to get the customer to change doing business
with the competition?
An important part of your business plan is the
marketing section. Regardless of the quality
of your product and your service, your business will be lost in the clutter
of advertising. If you don’t know your customers, how will they find
you? All of this begins with you doing some research.
Who is your market?—The first step is to
determine who you are going to sell to by identifying common
characteristics of your market such as age, income, interests and/or
geographic locations. How are you going to effectively advertise and still
make a profit? You are trying to generate a positive return on your
marketing dollars, so use them wisely.
Competition—In today’s ultracompetitive
marketplace, there is going to be competition, no matter how creative your
business concept is. Attempting to run a portion of your business
better than the competition may be a challenge, so it is often
better to focus on being different and competing with them less directly.
Can you position your services differently? Can you serve a particular
market niche that isn’t being served? Can you add more value than the
competition? Even if you are lucky enough to not have direct competition in
your area, you will have indirect competition from the homeowner doing
their own yard work.
If you indicate in your plan that there is no
competition, it will be viewed that there is either no market for your
product or that you have not done your research. Optimally, you will want
information on at least three, but no more than five, competitors. List
information about who they are, how long they have been in business,
location, services offered, perception on pricing, quality, etc., and
compare your advantages and disadvantages.
Promotional strategy—The promotional strategy is
where most entrepreneurs fail, as they use the blanket statement that they
are going to advertise in the newspaper, on the radio and/or television
without thinking through the process or the customer. The promotional
strategy provides a map of how you are going to reach your market in the
most efficient manner possible.
Sales projections—One of the more difficult
areas of the business plan is coming up with
sales projections. This number is probably going to be wrong and
that’s OK. What you want is a figure backed up with justifiable data.
Just grabbing a number out of the air saying you will make $300,000
won’t work. Sources to help come up with this number include industry
journals, trade groups, industry experts, etc.
Seasonality—The effects of seasonality are
greater in the lawn care business than many others. Seasonality is
important because you need to see if you made enough money during the good
months to cover your overhead and personal expenses in the winter. If you
find after doing the projections that you won’t have enough left
over, you need to get more sales, reduce expenses or both.
Pricing—Pricing plays a large role on how your
product is perceived in the marketplace. Price too low compared to the
competition and your product could be perceived as cheap and unreliable.
Price too high with the features and benefits of your product and few
customers will come through the door. This is a complex issue. Here are a
few things to keep in mind.
Make sure you can make a profit at
whatever price you are selling at.
If you want to lower costs and “get your
foot in the door,” it may be better to offer discounts or coupons
until your business is better known.
Don’t be afraid to charge more for your
lawn care services than the competition if you have more or something
better to offer.
Pricing is the easiest of the marketing
mix to change.
Management and Operations
In this section, describe who is going to manage the
business on a daily basis, and who will provide strategic direction (if
these positions are separate). Each of these people needs to have a brief
biography included, as well as a résumé in the appendix. Try
to show how the experience and education of these people will be able to
successfully execute the strategy in the business plan and succeed. Many
times, the owner may not have the specific experience for this business, so
it is important to pull their other professional experience in and explain
how it will make for a successful operation. Next, a brief explanation of
the employees is in order, including:
What positions need to be filled
When they need to be filled (This is important
in developing financial projections, as you may have some employees come on
after you start)
How much they will get paid (be sure to
calculate payroll taxes as well, estimate 15 percent if not sure)
It is also recommended that you add the professional
and advisors to your business, including the board of directors,
consultants, accountants, attorneys, bankers and mentors.
Financial projections are placed at the end of the
business plan, before the appendix. It is a critical piece of the plan. The
three must-have financial statements are a cash flow statement, a profit
and loss statement and a balance sheet. The information already provided in the narrative portion of the business plan must match the
financial projections. Most financial projections are three years in
length. It is a good idea to include a “Notes and Assumptions”
to the financial projections page to help make sure all of your numbers
come through and to provide an itemized list for clarity.
Notes and assumptions to financial projections:
Break out each loan (building, equipment, inventory)
Amount and interest rate
Any monthly costs not discussed in the
business plan narrative
Cost of goods/inventory
Licenses and fees
Repairs and maintenance
Anything else that needs to be explained in
the financials that is not in the narrative
Financial Projection Section
Start-up expenses—These are the expenses you
will incur prior to opening your business. It is recommended to have quotes
available or in the appendix for the larger items. It is also recommended
that you pad your numbers some, as there will always be unexpected expenses
that were not accounted for.
Sources and uses of funds—This section details
how the loan money will be used (inventory, furniture, fixtures, equipment,
machines, repairs and improvements, working capital, etc.) and who is
providing it (bank, investor or owner). You will likely need to be
injecting 20 percent of your own money, and maybe more, depending on the
risk assessment of the business and your personal finances.
Cash flows—The cash flow statement is one of the
most important pieces of your business plan. It shows a schedule of the
money coming into the business and expenses that need to be paid and
whether you have enough cash to sustain the business based on your
assumptions. Every part of your business plan is important, but none of it
means a thing if you run out of cash. Should this number be negative, you
either need to raise sales, reduce expenses or have more cash. Your cash
flow statement will typically be three years in length, with the first year
analyzing the monthly figures and later years by quarter.
Profit and loss—This statement, while similar to
the cash flow statement, is illustrated annually and adds the effects of
noncash charges such as depreciation and amortization to get an accounting
overview of the operations of your business.
Balance sheet—The balance sheet is a
summary of the value of all assets, liabilities and equity for an
organization at the end of each year. A balance sheet is often described as
a “snapshot” of a company’s financial condition, and will
show the value of the business over time.
Personal Financial Statement - If you are looking at
bank financing, every person who will have a 20 percent or more ownership
position will need to provide a personal financial statement to show how
effective they are at managing money. This statement will show your assets
(checking and savings accounts, CD’s, IRA, 401K, valuables, home,
vehicle, etc.) as well as liabilities (mortgages, credit card bills,
installment accounts, etc.).
Appendix items are pieces of information that help
make your case. Include details and studies used in your business
Quotes for items over $500
Résumés of the management team
Demographic data and trends
Maps/floor plans/blueprints of location
Leases and contracts
Letters of support
There is a lot to creating your lawn care business
plan, but it will definitely make your business stronger. By writing your
business plan you will have a better understanding of your business and
strategies for success.
Spencer Gregory is a consultant to business owners in
the lawn care industry. More information on starting a lawn care business
can be found at www.StartingLawnCareBusiness.com. For assistance with developing business plans and business
plan reviews visit www.TheBusinessPlanFactory.com.