23 data to include in the business plan of your landscaping company

This article was written by our expert who is surveying the industry and constantly updating the business plan for a landscaping company.

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Ever pondered what the ideal equipment utilization rate should be to ensure your landscaping company thrives?

Or how many projects need to be completed each month to meet your financial goals?

And do you know the optimal labor-to-revenue ratio for a successful landscaping business?

These aren’t just interesting figures; they’re the metrics that can determine the success or failure of your enterprise.

If you’re crafting a business plan, investors and lenders will scrutinize these numbers to gauge your strategy and potential for success.

In this article, we’ll explore 23 critical data points every landscaping business plan should include to demonstrate your readiness and capability to succeed.

A successful landscaping company should keep material costs below 25% of total revenue

A successful landscaping company should aim to keep material costs below 25% of total revenue to ensure profitability and sustainability.

By maintaining material costs at this level, the company can allocate more resources to other critical areas such as labor, marketing, and equipment. This balance allows the company to invest in quality services and customer satisfaction, which are essential for long-term success.

However, this percentage can vary depending on the specific services offered and the geographical location of the business.

For instance, a company specializing in high-end, custom landscaping projects might have higher material costs due to the use of premium materials. Conversely, a business focusing on basic lawn care might have lower material costs, allowing for a different financial strategy.

Employee labor costs should ideally range between 30-40% of total sales to ensure profitability

In a landscaping company, maintaining employee labor costs between 30-40% of total sales is crucial for ensuring profitability.

This range allows the company to cover other essential expenses such as materials, equipment, and overhead while still making a profit. If labor costs exceed this range, it can squeeze profit margins and make it difficult to sustain the business.

However, this percentage can vary depending on the specific services offered and the geographic location of the business.

For instance, a company offering high-end landscaping design might have higher labor costs due to the need for specialized skills, but they can offset this with higher pricing. Conversely, in areas with lower living costs, labor expenses might naturally be lower, allowing for a different percentage allocation while still maintaining profitability.

The average turnover rate for landscaping staff is 92%, so budget for high recruiting and training costs

The average turnover rate for landscaping staff is 92%, which means companies should budget for high recruiting and training costs.

One reason for this high turnover is the seasonal nature of landscaping work, which often leads to temporary employment rather than long-term careers. Additionally, the physical demands and outdoor working conditions can deter employees from staying in the job for extended periods.

As a result, landscaping companies frequently need to invest in recruitment and training to maintain a capable workforce.

However, turnover rates can vary depending on factors such as company culture and the availability of competitive wages. Companies that offer career advancement opportunities and foster a positive work environment may experience lower turnover rates, reducing the associated costs.

60% of landscaping businesses fail within the first five years, often due to cash flow issues

Many landscaping businesses struggle to survive beyond five years primarily due to cash flow issues.

These businesses often face seasonal fluctuations in demand, which can lead to periods of low income. During off-peak seasons, they may still have to cover fixed expenses like equipment maintenance and employee salaries, straining their finances.

Additionally, many new landscaping companies underestimate the initial capital required to sustain operations until they become profitable.

However, the success rate can vary depending on factors such as location and market competition. Companies that effectively manage their cash flow and adapt to market demands are more likely to thrive in the long run.

Landscaping projects should aim for a break-even point within 12 months to be considered viable

Landscaping projects should aim for a break-even point within 12 months to be considered viable because it ensures the company can quickly recover its initial investment and start generating profit.

Achieving a break-even point within a year helps maintain financial stability and allows the company to reinvest in new projects or expand its services. This timeframe is crucial for managing cash flow effectively, as prolonged periods without breaking even can strain resources and limit growth opportunities.

However, the 12-month benchmark can vary depending on the scale and complexity of the project.

For instance, larger projects with extensive design and construction phases might require a longer period to break even, while smaller, more straightforward projects could achieve this goal in less time. Ultimately, each project should be evaluated on its own merits, considering factors like client expectations, market conditions, and the company's operational capacity.

Equipment rental profit margins are generally 50-60%, making them crucial for profitability

In the landscaping business, equipment rental profit margins are typically high, around 50-60%, because renting out equipment is a low-cost, high-return activity.

Landscaping companies often invest in expensive machinery like mowers, excavators, and aerators, which can be costly to purchase and maintain. By renting out this equipment, they can recoup their investment quickly and generate a steady stream of income, making it a crucial component of their overall profitability strategy.

However, these profit margins can vary depending on factors such as equipment type and market demand.

For instance, specialized equipment that is in high demand but low supply can command higher rental rates, boosting profit margins. Conversely, if a company operates in a highly competitive market with many rental options, they may need to lower their rates, which could reduce their profit margins.

Prime cost (materials and labor) should stay below 65% of revenue for financial health

Keeping the prime cost, which includes materials and labor, below 65% of revenue is crucial for the financial health of a landscaping company.

This threshold ensures that the company has enough gross profit to cover other essential expenses like overhead, marketing, and unexpected costs. If the prime cost exceeds this percentage, it can squeeze the company's profit margins and make it difficult to sustain operations.

In landscaping, where seasonal demand can fluctuate, maintaining a healthy prime cost percentage helps the company remain resilient during slower periods.

However, this percentage can vary depending on the specific services offered and the geographic location of the business. For instance, a company specializing in high-end landscaping might have higher material costs but can offset this with premium pricing, while a business in a region with lower labor costs might find it easier to stay below the 65% threshold.

Landscaping companies should ideally reserve 2-3% of revenue for equipment maintenance and replacement annually

Landscaping companies should ideally reserve 2-3% of revenue for equipment maintenance and replacement annually because it ensures the longevity and efficiency of their tools.

Regular maintenance helps prevent unexpected breakdowns, which can lead to costly delays and lost business. By setting aside a specific percentage of revenue, companies can plan for these expenses without disrupting their cash flow.

However, this percentage can vary depending on the size and scope of the company.

For instance, a smaller company with fewer clients might need to allocate a higher percentage due to the intensive use of a limited number of machines. Conversely, a larger company with a diverse range of equipment might find that 2-3% is sufficient to cover their needs, as they can rotate equipment and reduce wear and tear.

A successful landscaping company completes at least 2-3 projects per week during peak season

A successful landscaping company typically completes at least 2-3 projects per week during peak season because this level of activity ensures a steady flow of revenue and keeps the business thriving.

During peak season, demand for landscaping services is at its highest, and completing multiple projects allows the company to capitalize on this increased demand. This not only helps in maintaining a strong financial position but also aids in building a reliable reputation among clients.

However, the number of projects a company can handle may vary based on factors such as the size of the team and the complexity of the projects.

For instance, a larger company with more resources might handle more projects, while a smaller company might focus on fewer, more detailed projects. Ultimately, the key is to balance the workload to maintain high-quality service and ensure customer satisfaction.

Inventory turnover for plants and materials should happen every 14-21 days to avoid waste and ensure freshness

Inventory turnover for plants and materials should happen every 14-21 days to avoid waste and ensure freshness because landscaping companies need to maintain the quality and vitality of their products.

Plants, in particular, have a limited shelf life, and keeping them for too long can lead to decreased health and increased waste. Regular turnover ensures that the plants are fresh and vibrant, which is crucial for customer satisfaction and the overall success of landscaping projects.

Materials like soil and mulch also benefit from regular turnover to prevent them from becoming stale or contaminated.

However, the frequency of inventory turnover can vary depending on factors such as seasonal demand and the specific types of plants or materials being used. For instance, during peak planting seasons, a landscaping company might need to increase turnover frequency to meet higher demand, while in off-peak times, they might extend the turnover period to manage costs effectively.

It’s common for landscaping companies to lose 2-4% of revenue due to theft or inventory shrinkage

It's common for landscaping companies to lose 2-4% of revenue due to theft or inventory shrinkage because of the nature of their operations.

Landscaping businesses often have a lot of expensive equipment and materials that are stored outdoors or in unsecured areas, making them easy targets for theft. Additionally, the frequent movement of tools and supplies between job sites can lead to misplacement or loss, contributing to inventory shrinkage.

In some cases, the percentage of revenue lost can vary depending on the size of the company and the security measures in place.

Smaller companies might experience higher losses due to limited resources for security, while larger companies might have more robust systems to mitigate these risks. Implementing better tracking and security measures can help reduce these losses, but it requires an investment that not all companies are willing or able to make.

A landscaping company’s rent for storage and office space should not exceed 5-8% of total revenue to avoid financial strain

A landscaping company should aim to keep its rent for storage and office space between 5-8% of total revenue to maintain financial health.

Rent is a fixed cost, and if it becomes too high, it can strain the company's finances, leaving less room for other essential expenses like equipment maintenance and employee wages. By keeping rent within this percentage range, the company ensures that it has enough financial flexibility to handle unexpected costs or invest in growth opportunities.

However, this percentage can vary depending on the specific circumstances of the business.

For instance, a company operating in a high-rent urban area might find it challenging to stay within this range, while a business in a rural area might easily keep rent costs low. Additionally, a company with higher revenue might afford a slightly higher percentage for rent without feeling the financial pinch, whereas a smaller company might need to be more conservative to avoid financial strain.

Upselling additional services during project consultations can increase average project size by 15-25%

Upselling additional services during project consultations can significantly boost the average project size for a landscaping company by 15-25%.

When clients are already considering a landscaping project, they are often more open to hearing about complementary services that can enhance their initial plans. By introducing options like seasonal maintenance packages or custom lighting installations, the company can effectively increase the overall value of the project.

This strategy works particularly well because clients may not be aware of all the possibilities available to them until they are presented during the consultation.

However, the success of upselling can vary depending on factors such as the client's budget and the scope of the original project. For instance, a client with a larger budget might be more inclined to add premium features, while a smaller project might only see modest increases.

The average profit margin for a landscaping company is 5-8%, with higher margins for specialized services and lower for basic maintenance

The average profit margin for a landscaping company is typically between 5-8% due to the nature of the industry and the services offered.

Basic maintenance services, such as lawn mowing and trimming, often have lower profit margins because they are highly competitive and require less specialized skills. On the other hand, specialized services like landscape design or installation of water features can command higher profit margins due to the expertise and creativity involved.

These specialized services often allow companies to charge a premium, reflecting the added value they provide to clients.

Profit margins can also vary based on geographic location and the seasonal demand for services. In areas with a higher cost of living or during peak seasons, companies might experience increased costs that can affect their margins, while off-peak times might require discounts to attract customers, further impacting profitability.

Average project size should grow by at least 4-6% year-over-year to offset rising costs

For a landscaping company, it's crucial that the average project size grows by at least 4-6% annually to keep up with rising operational costs.

These costs include everything from increased labor wages to the price of materials like plants and equipment. If the project size doesn't grow, the company might struggle to maintain its profit margins.

However, this growth rate can vary depending on specific factors such as the company's location and the economic climate.

For instance, in a booming economy, a company might see a higher increase in project size due to more clients willing to invest in landscaping. Conversely, in a sluggish economy, the company might need to focus on cost-cutting measures to maintain profitability.

Ideally, a landscaping company should maintain a current ratio (assets to liabilities) of 1.5:1

Ideally, a landscaping company should maintain a current ratio of 1.5:1 because it indicates a healthy balance between its current assets and current liabilities.

This ratio suggests that the company has enough liquid assets to cover its short-term obligations, which is crucial for maintaining operational stability. A ratio of 1.5:1 provides a buffer against unexpected expenses or seasonal fluctuations in revenue.

However, this ideal ratio can vary depending on the specific circumstances of the company.

For instance, a company with steady cash flow and predictable expenses might operate efficiently with a lower ratio. Conversely, a company facing high seasonal demand or significant growth opportunities might benefit from a higher ratio to ensure it can seize opportunities without risking liquidity.

Effective project planning and design can boost revenue by 10-20% by highlighting high-margin services

Effective project planning and design can significantly boost a landscaping company's revenue by 10-20% by strategically highlighting high-margin services.

By carefully analyzing customer needs and preferences, a company can tailor its offerings to emphasize premium services like custom water features or intricate stonework, which typically have higher profit margins. This approach not only attracts clients willing to pay more for unique designs but also maximizes the company's profit potential.

Moreover, a well-thought-out project plan ensures efficient use of resources, reducing waste and operational costs.

However, the impact of such planning can vary depending on factors like market demand and the company's existing reputation. In areas with high competition, the ability to offer distinctive, high-margin services can be a game-changer, while in less competitive markets, the focus might shift to enhancing customer satisfaction and loyalty through personalized service.

A landscaping company should have 0.5-0.75 square meters of storage space per project to ensure efficiency

A landscaping company should allocate between 0.5-0.75 square meters of storage space per project to maintain operational efficiency.

This range ensures that there is adequate room for storing essential materials like soil, plants, and tools, which are crucial for timely project execution. Having the right amount of storage space helps in reducing delays caused by the unavailability of materials when needed.

However, the specific storage needs can vary depending on the scale and complexity of the project.

For instance, larger projects with more extensive plantings or hardscaping elements might require more storage space to accommodate bulkier materials. Conversely, smaller projects or those with minimal material requirements might need less space, allowing the company to optimize its storage resources effectively.

Client satisfaction scores can directly impact referrals and should stay above 85%

Client satisfaction scores are crucial for a landscaping company because they can significantly influence the number of referrals the business receives.

When clients are happy with the landscaping services, they are more likely to recommend the company to friends and family, which can lead to an increase in new business. Maintaining a satisfaction score above 85% ensures that the majority of clients are pleased with the service, creating a positive reputation.

However, the impact of satisfaction scores can vary depending on the specific services offered and the expectations of different client segments.

For instance, a client who hires the company for a simple lawn mowing might have different satisfaction criteria compared to someone who invests in a complete garden redesign. Therefore, it's essential for the company to understand and meet the unique needs of each client to maintain high satisfaction scores and encourage positive word-of-mouth referrals.

Landscaping companies in urban areas often allocate 2-4% of revenue for transportation and logistics costs

Landscaping companies in urban areas often allocate 2-4% of revenue for transportation and logistics costs because these expenses are a crucial part of their operations.

In urban settings, the proximity to clients can reduce travel time, but the dense traffic and limited parking can increase costs. Additionally, the need to transport heavy equipment and materials efficiently requires careful planning and investment in reliable vehicles.

These costs can vary depending on factors such as the size of the company and the scope of services offered.

For instance, a company that offers specialized services requiring unique equipment might see higher logistics costs. Conversely, a smaller company with a localized client base might spend less on transportation, keeping their percentage of revenue allocated to these costs on the lower end of the spectrum.

Digital marketing should take up about 2-4% of revenue, especially for new or growing companies

Digital marketing should take up about 2-4% of revenue for a landscaping company because it provides a balanced approach to investing in growth while managing costs.

For new or growing landscaping companies, allocating this percentage allows them to build a strong online presence, which is crucial for attracting local clients. This investment helps in creating targeted campaigns that can reach potential customers who are actively searching for landscaping services in their area.

However, the percentage can vary depending on specific factors such as the company's size, market competition, and growth objectives.

For instance, a company in a highly competitive market might need to invest more to stand out, while a company with a strong existing client base might spend less. Ultimately, the key is to ensure that the digital marketing budget aligns with the company's overall business goals and provides a good return on investment.

Seasonal service offerings can increase sales by up to 20% by attracting repeat customers

Seasonal service offerings can boost sales by up to 20% for a landscaping company by enticing repeat customers.

These services, like spring clean-ups or fall leaf removal, address specific needs that arise during different times of the year, making them highly relevant. By providing these targeted services, a landscaping company can establish itself as a go-to solution for seasonal needs, encouraging customers to return each year.

Moreover, offering seasonal packages can create a sense of urgency, prompting customers to book services before the season ends.

However, the impact of these offerings can vary depending on factors like regional climate and customer demographics. For instance, a company in a region with harsh winters might see more demand for snow removal services, while one in a milder climate might focus on year-round lawn care. By tailoring their seasonal services to the specific needs of their area, landscaping companies can maximize their sales potential and customer retention.

Establishing a material cost variance below 4% month-to-month is a sign of strong management and control.

Establishing a material cost variance below 4% month-to-month in a landscaping company is a sign of strong management and control because it indicates that the company is effectively managing its resources and minimizing waste.

In the landscaping industry, where costs can fluctuate due to factors like seasonal changes and supplier pricing, maintaining a low variance shows that the company has a good handle on its procurement processes and is able to adapt to these changes efficiently. This level of control often reflects a well-organized team that is capable of making informed decisions about material usage and inventory management.

However, the significance of a 4% variance can vary depending on the specific circumstances of the company, such as its size and the complexity of its projects.

For smaller companies or those with simpler projects, a variance below 4% might be easier to achieve and thus expected, whereas larger companies with more complex operations might find this target more challenging. Ultimately, the key is to ensure that the variance is consistently low, as this demonstrates a commitment to cost efficiency and the ability to maintain financial stability over time.