Why Landscape Businesses FailTomChilders
Posted late last year on the U.S. Lawns website was an article entitled, “5 Reasons Landscape Businesses Fail”. The reasons listed were self-reliance, drive-by estimating, operational inefficiencies, lack of repeat customers, and an inability to replicate a profitable business model. The article also pointed out that only 15% of the small businesses (SMB) survive beyond their first five years.
So first off let’s acknowledge this article comes from someone selling a time tested franchise system, U.S. Lawns, and U.S. Lawns undoubtedly has systems in place designed to mitigate these risks and improve your probability for success (and they list them in the article as well). However, the question that remains is what does the non-franchise world say about small business failure and success. After all, the landscape services industry is predominately non-franchised owner-operator small businesses.
There is a sea of literature and research on small business failures. With just a simple Google search, a small mountain of great articles on this topic come up and we’ll dive into a mix of them – industry and non-industry sources which include LawnCareForum, the SBA, Forbes, and The New York Times.
LawnCareForum, The Top Reasons Why Lawn Care Businesses Fail, list five in this order, lack of startup funding, new owners don’t have a support staff, they utilize consumer grade lawn care equipment, don’t have a constant cash flow, and they don’t keep track of their records.
The SBA lists the reasons given in Michael Ames’s book, Small Business Management, which include lack of experience, insufficient capital, poor location, poor inventory management, over investment in fixed assets, poor credit arrangement management, and personal use of business funds. The SBA adds two more from Gustav Berle’s book, The Do It Yourself Business Book, which are very fitting for our industry, competition and low sales.
The New York Times Top 10 Reasons Small Businesses Fail include the math doesn’t work, owners who can’t get out of their own way, out of control growth, poor accounting, lack of a cash cushion, operational mediocrity, operational inefficiencies, dysfunctional management, lack of a succession plan and a declining market.
The Forbes article, Five Reasons 8 Out Of 10 Businesses Fail, starts with they are not really in touch with customers through deep dialogue, no real differentiation in the market, failure to communicate clear value propositions in a clear, concise, and compelling fashion, leadership breakdown at the top, and inability to nail profitable business model with proven revenue streams.
The Forbes article was quick to note in the beginning that at the surface level the primary reason for failure is running out of cash but that the cracks in the foundation were there long before the financial collapse. This article also listed solutions to these problems that you can view now, or later. We will cover these solutions in depth in the near future (the first three are very good and will be covered in the marketing section of the site). Also, both the Forbes and LawnCareForum limited coverage to the top five reasons for failure.
For this exercise, the US Lawns and LawnCareForum articles serve as the landscape industry’s reasons for SMB failure while the other three will represent SMB as a whole. Other than the LawnCareForums reason of using consumer equipment there are no real fundamental differences if you really think it through. For example, no support staff is a symptom of a non-profitable and/or inefficient model and drive by estimating is a real symptom of an inability to nail down a profitable business model. The rest are pretty easy to match and correlate.
By now, you might be asking where is this all going? What’s the point? The point is we are an industry made up almost exclusively of small businesses and our issues are the same that small businesses face in general. Specifically, our issues center around systematically maintaining profitability and positive cash flow, both of which are achieved through good management, marketing, accounting and finance. Now for the best part, as a small business you are a member of one the most sought after and coveted entities in America. There are tons of great resources and many are easy to use and free (or at least affordable.) The goal of this site is to put them in front of you and make you aware of them without wasting your precious time and energy. They need to be easy to find your way back to without bookmarking a thousand favorite sites or more.
Please, by all means, let us know how we are doing and let us know where we are missing the mark along the way.
Oh, and if the whole franchise option got your attention, know there are more options today than ever. Just make sure you do your homework on your options and do even more homework on understanding the ins and outs of franchising.