landscaping accountant

Growing Your Landscaping Business Based On The Numbers

Are you just starting your landscape business? Are you an established company looking to grow? Scaling your business has many of the same principals, stemming from the foundation that you set. A common denominator is that your decision-making process when growing should be based on financials, not based on short term fixes and inefficiencies.

Continually assess your cash flow, and know that scaling a business uses more cash than if your business is stagnate and not growing. With an already established business, you can use some of the profits and invest back in the business for growth. With a business starting out, the slogan “cash is king” means everything. You need to make strategic moves to ensure you have enough cash to maintain operations. Think in terms of what your return is on the cash that you invest into your company. As you grow its important to measure the return you are getting per employee and per asset in your business. Failing to scale your business starts with this, and how you are financially tracking these metrics. You will be rewarded as you grow if you are making this a priority.

When a business starts, you don’t have enough funds to hire an office manager. If you are starting out and you hit $100,000 in revenue, an office manager salary of $60,000 would not be feasible or make financial sense. These overhead expenses need to be built into your model, not forced because of your inefficient systems and procedures. To maintain a healthy profit, you may forecast that we shouldn’t hire an office manager until you hit $2 million in revenue (3% of revenue). Then you know that when you double that and hit $4 million you will have enough funds to absorb another indirect/administrative manager salary. See below calculations:

3% of $100,000 Revenue = $3,000 Administrative salary

3% of $2,000,000 Revenue  = $60,000 Administrative salary

Based on the above calculations you can see that your numbers are what determine if you can afford administrative staff, not what the administrative “work load” is. Of course you also need to be monitoring profit and cash flow, and not basing your decision solely off top-line revenue.

Be realistic with your budgets. You can be aggressive in your growth strategy, but ensure that you have systems and a plan to get there. You can budget for hitting $2,000,000 in revenue this year, and hire an additional admin employee ahead of time, but this makes it even more important to hit your budget! Staffing ahead of time can be a strategy, but with this comes risk. If you don’t hit your budgeted revenue, then you may be left with excessive overhead expenses.

When scaling a business there are many factors to consider, and certain adjustments have an effect on other parts of the business. Make your decisions strategically, and make them based on the numbers.  

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