Take it slow and watch the cash flow. That philosophy succinctly sums up the art of financing growth for a young landscape company, according to several seasoned contractors.
Audrie Seeley, president, Audrie Seeley & Co., Kansas City, Mo., learned this lesson by watching a few of her competitors dive headfirst into the industry, never to resurface. She recalled one young, overzealous company in her market that went out and “bought 15 brand new trucks, the best of everything and only lasted two years,” she said. “They went in full speed and didn’t take it slowly. That taught me a lesson.
“There’s a misconception that money will get a good, strong business,” Seeley added, pointing out that money alone isn’t the answer to establishing a successful company - such success is a matter of using financial resources in an appropriate, disciplined manner.
SPEAKING FROM EXPERIENCE. For Seeley, who started her $4-million company from the basement of her house, growing her operation was a matter of financial discipline: She didn’t pay herself for two years and she reinvested everything she could back into the business. “Watch your numbers, such as payables, receivables and cash flow,” she said of her guiding philosophy. “If you really want (to succeed) with a passion, you have to be ready to starve yourself for a while. You need to grow slowly, adding a few vehicles a year, for example. Start out with one and let that pay for itself.”
John Luznicky, co-owner, Durham Hill Nursery, Muskego, Wisc., has taken a similar, cautious approach to expanding his business. “Part of financing is carefully charting out growth,” he noted. “You really need to be sure you’re forecasting and budgeting as best you can.”
Business Banking 101 |
Savvy contractors must know their financial terms - the first step in understanding and fostering healthy growth. So whether you need to brush up or you’re new to the game, here’s a refresher course, according to John McCarty, senior vice president, KeyBank, Toledo, Ohio. |
Durham Hill plans on adding a new crew in the spring, so Luznicky is forecasting accordingly, taking stock of factors such as what additional equipment will be needed and what can be shared with existing crews. When financing growth, estimating is critical, he said. “Compare what you said and what you did and know that the cash flow will support it. You need to know how much money you’ll take in and spend and know the difference between that gap.”
Along the same lines, Rood Landscape, Tequesta, Fla., bases its growth on predetermined financial goals, according to Bert Clattenburg, the company’s president. “We get with the managers and ask ‘How much can we afford to grow?’ We set a goal of total sales and work backward from there.”
THREE THINGS TO REMEMBER. When financing a landscape company’s growth, there are three primary points to consider.
Know the numbers. “Good accounting practices are critical,” pointed out Jonathan Bartels, owner, Northwestern Landscape Company, Puyallup, Wash. “The most important thing is to watch cash flow. See if you’re actually making a profit. If not, there’s no way you’ll have the cash flow. Make sure you focus on the bottom line.”
Don’t take on too much debt. Out-of-control debt can be a company’s downfall. To avoid this death trap, contractors should determine how much debt they can handle and stick to that ratio, according to Bartels. Generally, a two-to-one debt to equity ratio is considered healthy, he advised. “If you’re worth $1 million, you should not have more than $2 million in debt,” he said. “You need to look at how much debt and profit you have and monitor that monthly. Don’t put growth before profits. If you’re making a good, strong healthy profit and not overextending yourself, you’ll have the capital to grow.”
Luznicky defines “reasonable debt” as a financial obligation that can still be met if a job falls through. This means a contractor can’t be too conservative when making major financial choices, Luznicky noted. “You live and die by those decisions that you make,” he warned.
Clattenburg favors a common sense strategy to staying debt-free. “Try to pay down all your debt,” he advised. “Pay with cash. There’s nothing wrong with being ‘cash and carry.’ Keep it simple.”
Build a good line of credit. Whether or not they need it, contractors should work on building a line of credit, Bartels suggested. “It’s good to establish that,” he said. “If you don’t have any history, start small and prove you’re responsible. We started out at $50,000, and now we can pretty much borrow anything we want.”
A line of credit, however, should only be used to cover operational expenses and not for capital investments such as equipment, Bartels warned. “That’s when you get into trouble - when you take a line of credit and use it for capital purposes,” he said. “If you start buying things (with the line of credit), you won’t have the money coming in (for cash flow). A line of credit should only be used to help with cash flow.”
BUILDING A BANK RELATIONSHIP. Finding the right bank to do business with is critical for growing companies. With so many options available, contractors shouldn’t settle for anything less than a bank that can meet their needs exactly. “Sometimes bankers have a hard time keeping up with the growth of a company,” Bartels observed. “Sometimes banks aren’t willing to take risks as you grow. If you’re not satisfied and don’t think they’re meeting your needs, do some interviewing and find a bank that’s willing to help you accomplish your goals and do whatever it takes to keep you happy.”
When initially meeting with a bank, contractors should provide detailed financial information about their business. “The number one thing is having a financial statement,” Bartels urged. “If you don’t have one and can’t show the banker exactly what’s going on, you won’t get the money.”
John McCarty, senior vice president, KeyBank, Toledo, Ohio, recommended that contractors have three years of accountant-prepared financial statements, three years of tax returns, a personal financial statement, both conservative and optimistic projections and a cash flow budget. From his standpoint, the five most significant loan approval factors are a company’s profitability, leverage, cash flow, collateral and personal guarantee, McCarty added.
Education also is an essential part of establishing a good banking relationship. Many financial institutions simply aren’t familiar with the intricacies and quirks of a landscape business, Luznicky pointed out. “You can’t treat a landscape company like a manufacturing plant that makes 200 widgets every Thursday,” he said. “We have to educate our banker. We gave him some green industry business management publications. It helped validate some of the stuff that falls outside of the realm of normal banking - the industry’s highs and lows and ups and downs.”
Another way to educate is to have bankers visit contractors at their operations, said Rood’s Vice President, Tom Whitesell.
“Invite them out and show them your property and equipment, so they can see that you’re not a fly-by-night outfit but a company they can count on,” he suggested
Contractors should make sure their bank feels comfortable with their accountant, which can work in a company’s favor, Luznicky added. “It’s good if there’s credibility coming from another source, other than you,” he said, noting that many banks have a relationship with a local accounting firm and contractors should try to take advantage of this.
Choosing the right bank is obviously a very individual decision. Rood Landscape has found success working with local, community-oriented banks, according to Clattenburg. “You’re just a number at larger banks,” he said.
Whitesell added that working with their local farm bureau has been an effective strategy, since it understands the fluctuating, often unpredictable nature of the landscape industry, which parallels that of agriculture.
“Make sure you’re working with a business bank that understands your situation,” added Luznicky, who noted that his former bank resisted valuing his company beyond its tangible assets. “Every time we went to our previous bank, all they would say is ‘What do you have for collateral?’”
OPEN TO ADVICE. When it comes to financial matters and company growth, smaller contractors should seek outside guidance as soon as possible. “It’s never too early to bring in a consultant,” Luznicky pointed out. “The earlier you do, the earlier you’ll find out what you don’t know.”
Bartels agreed. “Make sure you surround yourself with capable, competent advisors,” he said, pointing out that his two most important advisors are his attorney and accountant. “When somebody starts a business, they need to hire a professional accountant to make sure they’re doing the books properly.”
With an accountant in particular, establishing a long-term relationship can be invaluable. “Once you find a good accountant who understands your business, the longer you’re with them, the more beneficial their advice is,” Bartels observed. As an outsider, “they can see all the pros and cons” to the financial decisions you’re making.
Always remember that a good accountant is one who’s going to do more than just come up with the numbers, Luznicky pointed out. “It’s somebody holding your feet to the fire a little more, holding you more accountable.”
The author is Associate Editor of Lawn & Landscape magazine.

Explore the January 2001 Issue
Check out more from this issue and find your next story to read.
Latest from Lawn & Landscape
- Wilson360 adds Daniel Grange as new consultant
- Batman and business
- CH Products releases new tree stabilizer
- Savannah Bananas founder Jesse Cole to speak at Equip Exposition
- Catch up on last year's Benchmarking report
- Davey Tree promotes Kevin Marks as VP of Western operations
- Bobcat Company names 2025 Dealer Leadership Groups
- Green Lawn Fertilizing/Green Pest Solutions awards employee new truck for safe driving