Why invest in lawn care?
1. Lawn care is part of the rapidly growing Green Industry
While growth has been fueled by expansion of the housing market over the last several years, demographic trends indicate growth that will extend beyond the housing boom, with an increasingly greater percentage of homeowners hiring a professional lawn and landscape maintenance company.
Maturing Baby Boomers with more disposable income and an increasing priority on enjoying life will continue to employ the services of our industry in greater numbers to ease the burdens of maintaining their homes.
Additionally, growing numbers of dual-income families will continue to look to lawn care service providers to help them free up more time in which to enjoy the pleasures of family and home life.
Working in conjunction with favorable demographic trends is the consumer's recognition of lawn care as a truly compelling value when compared to the retail cost of products, the hassle of mixing and applying those products and the angst of uncertain results incurred by the do-it-yourselfer.
Even as the average size of the U.S. lawn decreases, more families are contracting out for lawn service, according to data from the Vermont-based National Gardening Association
In 2003, 17% or 19.4 million households hired a professional lawn and landscape maintenance company, up from 15% in 2000 and 13% in 1998
The total spent by homeowners for these services has risen from $7.9 billion in 1998 to $9.7 billion in 2000 to $11.2 billion in 2003
2. High Margins
Mowing, installation work and fertilization were the highest ranked services in a recent Lawn & Landscape survey, Research USA study, reported by Lawn and Landscape Market Trends 2001. Weed Man franchisees reported Gross Margins averaging 53.8% in its current Uniform Franchise Offering Circular. Please refer to Item 19 in the Weed Man UFOC for more specific information.
3. Limited Capital Investment
Both the initial as well as the on-going investment in real estate, fixtures and equipment is low relative to the capital requirements of most businesses.
4. Recurring Revenues
A well-run lawn care company automatically renews the vast majority of customers from year to year, allowing the company to focus marketing efforts on net growth.
5. Strong Cash Flow
Beginning in the fall of the previous service year, 15-30% of customers ultimately prepay prior to the start of current year services, while very favorable 30-day to 180-day terms are available from major suppliers. It is not uncommon for the vast majority of customer payments for spring services to have been received before a company's invoices from suppliers for the materials used in those spring services is due.
6. Barriers to Entry
State licensing requirements, while very manageable in most states, do create enough of a barrier to restrict competition from small operators and companies whose primary focus is not lawn care.
7. Limited Exposure to Recession
With the average annual cost of service less than $300 per year, lawn care is a small slice of the consumer's disposable income and one of the last budget items to be cut when belt-tightening is necessary. Also shielding lawn care from exposure to recession is its high perceived value as a low-cost service that enhances both property value and pride of ownership.
8. Adaptability to Management Systems.
Lawn care's narrow focus on growing and protecting healthy turf limits the business' complexity and allows it to be distilled down to a limited number of repetitive tasks faced by production, administrative and sales staff. These tasks are very adaptable to systems that improve profitability, increase sales and reduce the strains on management.