Budgeting is a lot more than setting random numbers for your business to try to follow. Many startup landscape businesses fail because they don’t know how to budget or know why a landscape business would budget. Setting strong budgets is the only way a landscape business can plan for profitability and growth by understanding which goals they need to hit or having a barometer for when a job or business is under pressure. Businesses can break down creating budgets in steps, helping contextualize the results and metrics the business is affected by. In the case of a landscape or lawn care business, the budgeting process can be broken down into 5 different steps.
Step 1: Determine Your Gross Income
Every budget needs a baseline. Determining your landscape business’ total gross income is the first step to any budget. Add the money earned from jobs over a set period and do not subtract any operating costs. You want to know how much money is coming into your business. Use last year’s numbers to inform what the budget should grow to for the current year. Gross income is a solid foundation to build next steps for a proper landscaping business plan.
Step 2: Track Your Spending
Keep all of your receipts. Landscape businesses need to monitor everything that gets charged to the company card. This means that you’re keeping receipts for gas, coffee, equipment, tools, marketing expenses, uniforms, materials, a portable speaker, water bottles, and even lunches. These are all minor items, but they begin to add up when you consider the spend on labor, other overhead costs, and even owner salary. If there’s financial waste, this is one of the primary places where you can find it in a landscape budget.
Step 3: Set Your Goals
Your landscape business is spending money, so those costs need to be recouped through hitting sales goals. There are two primary sales goals to consider: break even and desired profit margin over break even. For example, the break even price for selling a product would be the sum of the unit’s fixed cost and the variable cost incurred to make the product. Therefore, if it costs $20 total to produce a good, it is the break even price if it sells for $20 exactly.
In landscaping, most companies hover around a 3% profit margin (3% above BEP). An excellent goal to work towards in landscape is roughly 15% above break-even price after all business expenses and taxes. You can learn more about profit margins vs profit markups for landscape businesses in our other blog.
Step 4: Make a Plan
One would hope that numbers start making sense at this stage of the budgeting process. You know your gross income, have tracked all spending in your landscaping business, and have set goals to achieve strong business growth. It’s time to take all this context and make a strong business plan to achieve the previously set budget goals.
It’s possible that there’s substantial material waste after doing an audit of your business’ spending. How will you ensure that materials are properly used or is there excessive spending on more materials than what’s needed? That’s one example of many actionable insights that your business can identify and plan to tackle to meet budget goals. Some budgeting plans are as simple as cutting unnecessary or excessive purchases, whereas other solutions require more buy-in or adoption from the rest of the business, like on-demand video training.
Step 5: Keep Checking In
Check in on your budget goals frequently. Losing sight of budget goals can make you miss opportunities to right the ship. In contrast, overanalyzing budgets to the point of daily obsession can eat valuable hours when you could’ve been making a difference in business goals.
The idea of a budget is to make an actionable plan for growth and to take the appropriate steps to hit those landscape business goals. Continue tinkering with the budget so that it becomes an accurate forecast for growth, and identify opportunities to make your landscape business more efficient after each passing season.
Keep Learning How To Improve Your Landscape Budgets
Budgets aren’t one size fits all functions between landscaping businesses. There are a lot of similarities between businesses, but the nuances between services offered, crew members available, equipment on hand, and other variables will paint a different picture in every different budget. With that said, you’ll begin to develop a strong intimate knowledge of how you and your crew impact your business and what growth truly looks like as you scale up your landscaping business.
These steps are the basics of how to get started with your first landscape business budgets. Make sure to check out our full landscape business budgeting guide that takes you through the different kinds of budgets, setting sales goals, and how to budget for equipment, overhead, and wages.
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