Watch this video and learn from Jonathan’s experience what size lawn crew to use and why.
What size lawn crew do you use and why have you always done it that way?
To answer the question, it’s important to know that we’re about 95% residential and 5% commercial. We started as commercial and shifted to residential. Along the way, we have tried all kinds of different crew sizes. It’s also important to know that we know who our ideal client is and what the size of their property is. We only go after the kind of client that is our ideal and we ignore everything else in our market.
We have everything in our market from small commercial to very large commercial; from very small residential, 7,000 gross square feet and less, all the way up to multi-acre residential properties and estates. It’s also critical to understand that what we have found best works for us, and it’s different for every company, is that each tech and each crew are charged with their own activity.
Mowing crews mow, trimming crews trim, spray techs spray, pest control does pest control, irrigators do irrigation. They don’t cross over. They’re trained in their area of expertise. That’s really important to know. When we go mow, we send our mowing teams in. And, when it’s time to prune the brushes or shrubs, a different crew comes in. There are some efficiencies lost from doing it that way, but we believe from testing and trying things that there are huge efficiencies gained. That’s important to understand to understand my answer.
For residential mowing crews, the ideal for us is three based on property size. We have tried four and we didn’t gain much. We’ve run four at times when we’re in what I’d describe as an emergency due to weather. You do get more done, but the efficiency isn’t there and your per man hour, your hourly man rate comes down. We have also tested two. Two is actually more efficient than three for smaller residential, but then you get into a new issue and that is asset utilization…trucks, equipment and such. Then you have insurance and safety risk, opportunity costs, and all these other factors to consider.
For us, at this size, three is better than two because of management, the way we pay, and all these other factors. If I was starting over and I was a small business again, then two is what I would run. I would run two man mowing crews. Again, you have to understand what kind of business we are and what market we’re serving and know that we go after the clients that we want, not the properties that are available to us. We are able to say we want properties of this size and not properties of another size. If our crews had to maintain acreage, one acre plus properties, and then they spend the other half of their day mowing properties under 15,000 square feet, the business wouldn’t work out so well.
If our irrigators had to do certain activities for one half of the day and a different activity for the rest of the day, that would completely change the decisions that we make. We’ve not always done it this way. We started out as commercial. On most of our original commercial accounts we were running four man crews. Then we realized that it made more sense on our warehouse properties that required a different service level to just run a two man crew.
We had a Scag, maybe a 61 inch rider, a 21 inch mower, a couple of weed eaters, and we realized that it’s more efficient to take some equipment off the truck and send just two men out to do this. On our bigger commercial properties we have found four man crews made more sense. We never did commercial properties that took more than a full day. Our biggest properties would be a one day job with four men on the job.
It’s a different animal when you are dealing with commercial properties that could require 16 to 20 people on the job site. That’s not what I’m talking about. We tend to cater more towards the smaller properties. As a result, our crew size can be smaller.
For bush trimming, we’ve tested everything from two men all the way to four men. Two without question generates the most production, the most profitability. Production was the wrong word to use, you can get more pure production of four people versus two, but when you look at what matters, which is how much money you’re generating per man hour, two is more efficient. Sometimes we have to sacrifice the margin to get all the work done and add a third person, but at the end of the day, two is more efficient.
That’s not where we started. That was a realization in the last three years or so, and that’s where we’re at now.
For spray techs, commercial or residential, it depends. When you are out spraying commercial properties, pulling a lot of hose, it oftentimes makes sense to put two men on that job. When you’re doing small residential, one man is perfectly acceptable as a spray tech. The same is with pest control. Irrigation oftentimes we find that one man makes perfect sense, but for many reasons a lot of times, we run a two man team for irrigation. Again, it depends on if are we doing commercial or residential, what’s going on, what’s happening, and what’s our backlog? Backlog has a lot to do with how big the crew is that we’re running right now.
In a perfect world, we would have completely consistent demand, meaning that our backlog would never grow too large. That would allow us to constantly maintain that sweet spot of profit margin, meaning that we’re running the perfect crew size. But at times we are forced to go against what we know is best and add an additional person to an irrigation crew, to a lawn care crew, to a maintenance crew, just because we have to deal with demand. We have to keep our level of customer service.
Profit is sacrificed a bit, but we continue to maintain our reputation and continue to maintain the level of customer service that we’ve promised our clients. These are example considerations. And yes, it has absolutely evolved over the years, and it will continue to evolve as our company continues to evolve.
How do you know what the optimal lawn care crew size is? In this video, Jonathan gives you some factors to consider whether you are just starting out or simply trying to become more efficient.
What factors go into determining the best lawn care crew size for your company?
I believe it’s really important to know that as your company changes, your crew size will change. A company that’s just getting started that has 1 crew and grows to 2 to 4 crews will change just as a company that has 10 crews and grows to 20 to 40 crews.
This video explains why using the right lawn care equipment can maximize your potential and bring in more profit.
This morning as you think about your business, are you putting the right equipment on the right properties? When you bid the job, are you bidding it taking into account the right production costs because you’re using the correct equipment? Are you selling work that’s bigger than you should be doing right now because you don’t have the appropriate equipment?
When do you recommend buying lawn care equipment for your company?
I generally recommend that you wait until the very last minute to buy new equipment. That allows you to keep the money in the bank until the last minute. There’s a number of reasons behind that. If I need a big piece of equipment, I could buy that a week before I need it or a couple of days before I need it. So many companies and so many owners get excited by a new piece of equipment so they buy it months in advance. Generally, this is not a good idea for a whole number of different reasons.
“I own a landscape company. When is the best time to buy lawn equipment?”
The question is, what is the best time of year to buy new equipment?
I personally like December. I like December for a whole bunch of reasons. One, it’s at the very end of the year. You can group all of your equipment purchases into one time period. Which, clearly means you have to project into next year and say, “Okay. How much are we going to grow? How much equipment are we going to need?” This requires some understanding of what’s happened in the last couple of years, along with some planning as to what you expect will happen next year, based on your marketing strategy and how much marketing you will be doing. Then also, understanding what’s happened in the past so that you can make those projections.
From that, you then say, “Okay. I think we’re going to need about this many trucks, this much equipment. Then, you group all of your purchasing, as best you can, for the year into that one time period. You go negotiate your purchase. Because, you’re buying in volume, you have more buying power, you can get a better deal. Then, what you can do from there because you timed this in December and you spent the money, at the last minute in December, you can write it off on your taxes for the current tax year.
Depreciation comes into play and things of that sort. But, you get to take the tax deduction in this year versus if you buy in January and spend the money now, you don’t get any tax benefits until the following March. For that reason, I like the buying power. I like that it forces you to think through what’s going to happen in the next calendar to do some planning. That’s important. To have several things in your business that force you to thinking and planning, that’s good. This does that. Then, the tax deduction is a big one.
Those are my very simple, basic reasons for why I think December is the best time to do it. But, the big take away is, how can you group as much of your purchasing into one time period, where you are doing all of your buying at one time? Probably all of your buying from one vendor, unless we’re talking about chemicals and such. I’m talking strictly equipment in this scenario. How can you buy all of that from one vendor and get the very best deal possible?
Is the cool lawn mower a friend recommended, the best mower for my lawn care business?
When I was at GIE in Louisville, Kentucky, I was reminded that you really don’t want to buy the cool lawn mower. What I mean by that is, walking through GIE, I’m reminded how many different brands there are and how many manufacturers there are selling walk-behinds and riders. There are Skagg and Toro and Exmark and those are just my local brands.
This video explains why there is a discrepancy between your tax return and take home pay.
When it’s time to pay taxes and you get back your tax return from your accountant, does it ever feel like your tax returns said you made a whole lot more money than you actually put in your pocket? If so, I’m going to give you a really elementary example to show you why. And again, like so many of my other videos, if you judge the video based on the accuracy of the numbers in my examples, you’re not going to like what I have to say.
I didn’t put a lot of thought into this. I put some quick numbers into a spreadsheet. They’re solely for example purposes. Don’t get caught up on anything else. Let me show you why a couple things happen in your business that just frustrate the heck out of you and then have you asking why in the world am I not making as much money as my tax return says. Let’s use this example to set it up.
You did $200,000 in revenue. You had a $110 in expenses, and again fake numbers. Don’t make any assumptions based on these numbers about what you might be able to or not be able to do within your business. In this year at different times throughout the year, you had to buy some trucks and equipment. So, you buy your first truck for 20 grand, your second truck for 12 grand, and you had to buy $15,000 in equipment. If you look at this on a cash basis and let’s say paid cash for everything, that means you should have about $43,000. So, just imagine you didn’t take a cent out of the business all year long.
In December, you should have about 43 grand sitting in your bank account, okay. For my examples, let’s just imagine you don’t get paid a cent until year-end, okay. Now, let’s talk about this. Here’s how your tax return looks so much better than your actual bank balance. We’re a year 1 business, and just imagine that magically on day 1, January 1st, you started to accrue revenue, and as a result by the year end, you had made $200,000 in your first year. You had a $110 expenses, same as I showed a moment ago, but here’s what really happens.
You go out and you … oh, let’s jump over here to the right. If you can see versus 20 grand, you go out and you buy a truck for 20 grand and you buy another truck for 12 grand and you buy equipment for 15 grand. Please keep in mind this is throughout the year. It doesn’t all have to be January 1, but you had enough cash to pay cash. At the end of the year, we’re talking my same example as on the other sheet I’ve just shown you, you have $43,000 leftover theoretically in your bank, and actually that should be the case.
However, when your accountant does your tax return, you’re shocked to find out that you should have made $82,000. The reason for that is because when you go to deduct your trucks and your equipment, your accountant has to depreciate these assets over time. She can’t fully depreciate them. If you’re thinking about the $179 deduction, just forget that for the moment and follow me here if you’re familiar with that.
What happens is, your accountant has to classify these three things as fixed assets, and she has to depreciate them on an IRS depreciation schedule defined by the IRS, and the stuff changes over time. As a result, let’s just … I can’t remember the depreciation tables but let’s just say a truck is depreciated over 7 years and equipment over 5. I doubt that’s exactly accurate. If that were the case, then in year 1 you would only be able to deduct $2800 and then $1700 on truck 2, and $3000 on your equipment.
As a result, you spent a lot of cash leaving you with $43,000 in the bank. And maybe you paid yourself that $43,000, and that salary took all the money out of the bank to pay yourself. That was your salary. But, your tax return now says you made $82,000. That means that you have to pay taxes, and again my magic goal made up 25% tax rate. You would have to pay 25%, again not accurate, on your $82,000 which would be the equal amount of $20,000 in taxes.
You’re paying $20,000 in taxes, but you only took home $43,000 so theoretically that 20 is going to come out of your 43 and you’re going to make about $22,000 for the year. That’s highly frustrating. That’s the first example of how you make far less than what you actually take home. Yeah, you make far less than what your tax return says. It’s because depreciation will get you over time.
Now, let’s continue on with the second example. Now in year 2, nothing in your business gets better. You do the exact same accounts for the exact same revenue with the exact same expenses, but you now own your trucks and equipment, so you don’t have to actually buy anything.
Now in year 2, you have the same exact depreciation as year 1 because you’re depreciating in the second year of your fixed assets, so your tax return should show that you made $82,429. And so you think, oh great, I should have $82,000 left in the bank this year. Well, actually no. Because what happened is on April 15th of the second year of your business, you did your taxes and you did your taxes for year 1. You owe $20,607 and so you had to pay the $20,000 out of the company.
The reason I use this example is, a lot of times many companies in their first couple of years don’t actually report their income as payroll, so they don’t pay payroll taxes. So then what they do is, they take the money out of the company to pay the taxes. So you’d have to take out $20,000 to pay your taxes for the prior year because, remember you took $43,000 the first year which depleted the accounts and then the second in which your tax return showed $82,000. Now, you got to pay tax on year 1 of $20,000. In year 2, you were actually doing really good except, oh, you have to pay the $20,000 from the prior year, so you only got to take home $61,000 that year. Again, all fictitious, but this is the effect of depreciation and this is the effect of taxes.
Most companies, even if you are on payroll, you might be getting some form of distributions, or you have sort of phantom profits. That’s really the wrong word to use, but you have profits that you never actually put in your pocket because you’re investing in trucks and equipment, or you may be paying cash for those things and so things never line up between your tax return and how much money is in the bank and how much money you have. These are two examples of why.
Now, the inverse of this would be an alternative, and I used this approach for many years. Now, unfortunately the IRS is really making this difficult because tax laws changed quite a bit in the last many years, but what I did in the years priors, I used the Section 179 deduction.
In early years of my business under President Bush, they had really made the 179 deduction generous. I don’t remember the number now, but you could depreciate up to like 500,000 in fixed assets in one year.
Let me explain. Using our same example, what I did is instead of paying taxes, I made payments. Actually, let me rephrase that. Instead of paying my trucks and my equipment in cash, I financed them. What happens is, at some point in year 1, I bought a truck and I made about $1600 worth of payments. Maybe on this $20,000 truck, that’s 3, 3-1/2 months of payments. Then, on my $12,000 truck, I made some number of payments. Let’s call 6 or 7 months. Then, on my equipment, I made some number of payments. Let’s call it 6 months as well of payments. So, on a cash basis if you were to look at my bank account, I’ll have about 82,000 leftover within the year because I didn’t pay cash for these things. Remember they are 20, 12, and 15,000, but I didn’t pay cash.
I actually have $82,000 dollars left in the bank. But, thanks to the Section 179 deduction, I was able to fully depreciate 100% of my trucks and 100% of my equipment. On my tax return, I only showed that I made $43,000, when in fact I actually made 82 because I had 82 left in the bank. As a result, the difference between these two numbers saved me $9857 in tax. So, had I paid cash for my trucks and not been able to fully depreciate them, I would not have saved this $9800 in taxes. But, I was able to save the taxes because I was fully able to depreciate them this year.
Now in the year 2015, when I’m recording this video, these deductions have been severely pulled back. I mean, there’s a lot of limits placed on how much you can straight line depreciate under Section 179, so it’s changed drastically. But, in years prior, I was able to use something like this.
If your business is relatively small, you’re not depreciating much. You still may be able to take advantage of quite a bit of depreciation on a truck or a couple trucks under Section 179. But, it’s nothing like it was 5, 6 and 7 years ago.
Again, in summary, these are a couple examples of why your taxes and your cash balance in your bank account or your take home pay will never line up. They’ll never match. This is a great example why.