LCOs and budgeting

Lawn care services can provide an excellent revenue stream, whether that's your primary business or as an additional service that you provide to your existing customer base.

However, when preparing a budget for a lawn care company or division, there are some important benchmark distinctions that you need to understand.

Unique budget benchmarks

1. Revenue: A full-time lawn care technician working 40 man-hours per week for seven months should produce between $150,000 and $200,000 per year. Technicians working in a non-seasonal area should produce more. A good minimum daily revenue goal for a technician is $1,000. This translates into the following:

   $1,000 per day x 7 months x 22 work days per month = $154,000 per year

   $1,000 per day ÷ 8 man-hours per day = $125 per man-hour

2. Customers: It requires about 350 customers generating roughly $450 per year each to keep a technician busy throughout the season.

   350 customers per year x $450 per year per customer = $157,500

3. Direct costs as a percent of sales:
   • Materials usually run between 20-25%.
   • Field labor usually runs 20% +/- 5%.
   • Labor burden (payroll taxes, insurances, holidays, vacations, health care, 401K, etc.) usually runs 30% +/- 5% of field labor costs or 5% +/- 2% of sales.
   • Field equipment and vehicles usually total 8% +/- 2% of sales. This includes all costs such as fuel, depreciation, insurance, repairs, mechanics, etc.
   • Subcontractor costs are minimal if there are any at all.
   • Direct costs total approximately 50% of sales +/- 5%.
4. Gross profit for a lawn care company is usually 50% +/- 5% of sales.
5. General and administrative (G&A) overhead costs: G&A overhead costs for a lawn care company or division usually adds up to about 30% +/- 2% of its sales. On a per man-hour (OPH) basis, it is about $35 +/- $3. These figures are significantly higher than those for a landscape maintenance or installation company. G&A overhead for landscape companies usually equals 25% of sales. Measured on a per man-hour basis, landscape maintenance companies usually run $10 +/- $2 per man-hour while the OPH for an installation company is usually $18 +/- $5.

The primary reason why G&A overhead costs are so much more for a lawn care company is that it requires more marketing and advertising costs. These can run as high as 6% of sales. All other G&A overhead costs are equivalent to those of a typical landscape company.

Budgeting for a lawn care company is very similar as doing so for a landscape maintenance or installation one. However, there are important distinctions that, once understood, make the budgeting process more meaningful and accurate.