With a total market size of $128.8 billion in 2022 and a steady growth of +5.3% CAGR from 2017 to 2022, the landscaping industry is one of the fastest home services sectors in the US. If you’re looking to start your own landscaping business, you might wonder how much profits you can realistically make with such a business.
Indeed, the industry is also very competitive: there are over 632,800 landscaping companies across the country..! This makes it even more difficult to gain new customers and increase profits.
So if you’re preparing a business plan for your landscaping company, make sure to prepare a solid financial plan to understand how much profits you can make with such a business.
In this article we’ll look into public benchmarks and industry averages to find out how much revenue and profits you can make with a landscaping business. Let’s dive in!
What is the average turnover for a landscaping business?
As explained above, there were over 632,800 landscaping companies in the US in 2022 generating a total revenue of $128.8 billion. In other words, the average US landscaping company generates an average annual turnover of $203,509.
Yet, you must understand that this is only an average. Larger companies (think franchises) will earn significantly more while the smaller ones (e.g. one-man companies) typically have lower annual revenue (less than $100,000 a year).
When it comes to salaries, ZipRecruiter reports that the average annual salary of a landscaping business owner is about $73,517.
What is the average profit margin of a landscaping business?
Lawncare Millionaire reports that the average net profit margin of a landscaping business is between 5% and 20%. As they don’t seem to have any real backup for that data, we decided to look into by looking at a landscaping company’s financial statements.
Our estimate is actually lower. We found that on average, a landscaping business with 6 employees generating a total annual turnover of $700,000 can reach a profit margin of about 10%. See more on that below.
Whilst profit margin differs significantly from business to business depending on the type of services offered. For example, whilst a small planting job costs less than $750, setting a sprinkler system can easily cost up to $2,000, drainage $1,750, etc.
Of course, profits not only depend on the sales, but also costs. When assessing how much profits your company can make you should also look at costs.
How much does it cost to run a landscaping business?
The operating costs of a landscaping business depend on the type of services you are offering, the number of employees you have, and various other factors.
Here is a quick list of the recurring costs you will incur:
- COGS (~15% of sales): this is the sum of the variable costs you need to pay for to your suppliers. This can include plants, flowers, loam and other soil materials, chemicals, bags, trash bags, etc. This will also include the cost of the infrastructure when you install things like sprinkler systems, drainage, fencing, decks, etc. Of course this will be billed to your clients but the cost you incur to buy it from the supplier(s) goes in your COGS.
- Staff costs (~50-60% sales): this is by far the most important expense. It includes salaries, bonuses and any other taxes and benefits you must pay to your employees.
- Marketing (~3-5% of sales): You must spend money on advertising and marketing your landscaping business, especially if you’re just starting off and need to attract new customers.
- Other expenses (~10-15% of sales): this includes fuel costs to travel from one job to another, leasing expenses (if you’re leasing the vehicles and machines), rental costs for your office and/or warehouse, etc. It also includes other non-operating costs like bookkeeping fees, legal costs, insurance, etc.
We have identified the total monthly expenses for running a landscaping business to be within the range of $20,700 and $33,000. This is true for a company with 6-8 employees and earning a monthly revenue of $65,000. To learn more about the cost breakup, read our detailed guide here.
How to forecast profits for a landscaping company?
In order to calculate profits for a landscaping business, you must first forecast sales and expenses.
Profits = Sales – Expenses
Forecasting sales for a landscaping business
Forecasting sales for a landscaping requires 2 simple assumptions:
- the number of contracts (customers)
- the average contract value
Revenue = # contracts x Average contract value
For example, if in a month you have performed 30 contracts with an average contract value of $2,000 then monthly revenue is $60,000:
Revenue = 30 contracts x $2,000 = $60,000
For more information on how to build financial projections for a landscaping company, read our article here.
Forecasting expenses for a landscaping business
There are 2 types of expenses for a landscaping company:
- Variable expenses: these are the COGS as explained earlier (the cost to purchase the plants, loam, flowers, etc.). They grow in line with your revenue: if your turnover increases by 10%, variable expenses grow by 10% as well
- Fixed expenses: salaries, fuel, rent, marketing and all the other costs listed above
Calculating profits for a landscaping business
When we refer to profits, we usually refer to EBITDA (Earnings before interests, taxes, depreciation and amortization) as it represents the core profitability of the business, excluding things such as debt interests, non cash expenses and other non-core expenses.
In order to get to EBITDA, we use the following formula:
EBITDA = Revenue – COGS – Operating Expenses
We’ve included below the illustrative profit-and-loss of a landscaping company (from our financial model template for landscaping businesses).
Gross margin (sales – COGS) is about 85% and pretty much the same for all landscaping companies.
Instead, EBITDA and net profit margins can vary significantly from one business to another. That’s because EBITDA and net profits are margins after fixed costs have been taken into account. For example, a large company with various teams will be able to pool some fixed costs (e.g. marketing, rent, etc.) to generate economies of scale and effectively be more profitable.
On average, a company with 6-8 employees and a $60,000 – $70,000 monthly revenue would attain EBITDA margin of 15% and Net Profit margin of about 10%.
How to increase profits for a landscaping business?
There are various methods of increasing the profitability of your landscaping business, and they include:
- Service expansion: If you are servicing only residential clients, consider expanding into the commercial segment, and vice versa
- Upgrade equipment: Upgrading to more efficient equipment can help you to complete tasks quickly while lowering your costs
- Increase client retention: New client acquisition is costlier than existing client retention. Focus on retaining existing clients by offering discounts, stellar customer service, etc.
- Provide add-on services: Add-on services such as landscaping curbing can bring in an additional $6-$14 per foot of laid concrete.
- Bundled services: Offer bundled services at a discounted price. This can reduce your marketing costs while also increasing the possibility that clients will accept such discounted services
- Provide off-season services: Landscaping is the last thing on mind during winter months. That’s when you can offer a different set of services such as snow removal or outdoor holiday decorations
- Expand service area: Start offering services outside your regular service area. This can help you to earn new clients
- Google listing: List your business on Google My Business to improve the online visibility of your business
- PPC ads: Use social media and search engine PPC ads to ensure that your business gets noticed
- Leverage social media: Use social media platforms like YouTube, Instagram, Facebook, and Twitter to connect with your clients on a personal level, and even share tips and tricks
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