Managing the Peaks and Valleys: How Landscapers Can Sculpt Off-Season Cash Flow
You can’t stop the seasons, but you can prevent what they do to your cash flow
Winter is coming. That’s bad news if you’re a cast member of Game of Thrones. Your likelihood of being killed by an ice zombie or a dragon just went through the roof. The approach of winter can be a fatal blow for landscaping businesses, too.
It doesn’t matter how much your clients love you. They’re not going to pay you to mow lawns or tend gardens that have gone dormant for the winter. Now you’ve got to coast until spring. Not knowing how to manage the consequences of abrupt changes in revenue caused by seasonal business can be a nightmare.
Understanding the crunch
Business management consultant and best-selling author Peter Drucker is known for sayings such as, “The best way to predict the future is to create it.” That’s sage advice for landscapers, especially considering they’re well aware of the cyclical nature of the business.
Business consultant Phil Harwood tells Landscaping Management magazine that landscaping companies that conquer cash flow crunch do so because they have a deep and comfortable understanding of the financials of the business. They keep a full set of financial dashboards, so they know the gross profit margin on all services. If you’re a landscaping business owner who doesn’t know what an EBITDA is, there’s no way you can make the types of financial decisions that will get a steady flow of available cash to compensate for the off-season.
Gregg Wartgow tells Green Industry Pros magazine those business owners should turn to an accountant or business consultant if building a cash flow budget or financial management isn’t your cup of tea. He tells the story of how he worked with a landscaper to reverse the timing of payables and receivables. Managing the flow of money allowed the company to pay off more than $250,000 on a business line of credit.
Nearly every business includes the words “and more” somewhere in their marketing. It’s time to figure out what that means, and how moving past obvious landscaping services can generate off-season revenue. Forbes advises business owners to diversify. There may not be lawns to mow in November, but there’s leaf pick-up, gutter cleaning services, and even snow plowing.
Consider branching out – literally – into services associated with landscaping. According to the Today’s Homeowner website, the best time to prune or trim trees is during the winter season when they’re dormant. With leaves out of the way, it’s easier to do the job, and the cold weather poses less risk of pest infestation or disease. The site tells homeowners to wait until late winter for all but blooming trees and shrubs. How many of your in-season clients need this?
Adopt a startup mentality
One of the most popular catchphrases used by startup entrepreneurs is, “the business is successful because it is scalable.” What they mean is that their business is configured to be flexible. Lawn and Landscape magazine translates that into landscaping-speak as the ability to flex up or power down with the seasons.
Startups have fueled what’s known as the gig economy. Forbes estimates that over a third of American workers have jobs that fit into this category. Flexibility for them equals freedom. For companies that also need the flexibility of growing or shrinking quickly and on-demand, the ability to rely on contractors instead of full-time employees means that payroll can mirror customer demand.
The idea can also be applied to the equipment you use. How efficient is it? Does it provide an appropriate return on investment? It might make more sense to make a capital purchase of equipment that allows a smaller team to accomplish more. This is one of the value propositions provided by battery-powered equipment.
Using battery power means that there’s no operating cost associated with fuel. Quiet operation is a feature your clients will appreciate. The investment in equipment like battery-powered wheelbarrows reduce your labor costs. For example, a Sherpa Power Pac MCE400 battery-powered wheelbarrow can easily replace at least three laborers. Use this calculator to find out how quickly it can pay for itself and start adding profit to your bottom line. Winter is coming maybe not the ice zombies, but definitely the seasonal swing in revenue.