· Winter Down Season Business ·
The Winter Down Season Business
Your business model provides a combination of services but no snow plowing. When the winter season approaches, your company starts to close down the operations of the day-to-day service side of the business. That means you probably lay off your field crew from November to February or keep on only your top team members for strategic planning and key functions that involve the spring relaunch. When March arrives, you begin servicing your customers again.
Because you provide only one service, you fall into the one trick pony blueprint.
The down season can impact a company’s cash flow if cash has not been managed properly throughout the year. This area can be challenging for many lawn care and landscape businesses. During the down season, many companies support the day-to-day operations with customers’ prepayments for the following season. However, those prepayments aren’t the company’s money until those services are delivered.
Another common issue is that prepayments are often not set up properly in the accounting system. Often, companies pay tax on prepayments because they are being received and recorded as income in the current year. Some companies even receive these funds and record them as a liability. After they record the funds, the companies spend them, counting the expenses in the current tax year. When the new year rolls around, they find that they don’t have the cash flow they need to launch their season once production ramps up, and they can’t claim the expenses in the new year because they already claimed them in the prior year. Meanwhile, the liability is still sitting on the balance sheet of the prior year.
Labor & Materials
Sometimes, a one-trick pony business fails to fully identify their labor burdens. As a result, their perceived labor costs are inaccurate, which affects anything they are connected to, such as pricing. Because the margins and mark-ups are not at the correct percentages for labor on any work or estimates, pricing on services and service packages is typically wrong, with “wrong” meaning “not priced to achieve maximum profit.” In addition, one-trick-pony businesses often don’t have their margins and mark-ups on their materials at the accurate percentages.
Route set-up can also be an issue for one-trick ponies. To maximize your profit, you must set up your routes efficiently, not only in terms of creating the route but also in terms of managing the skill level of the crew on the ground. Depending on the services provided and the customer base, some routes may require more attention to detail than others. A well-established route can bring in 20% profit or more versus a merely efficient one that brings in 15% profit on average or even creates a loss if not priced properly.