Are you thinking of starting a lawn care business this spring? As the manager of a microloan program, I have seen several loan applications from seasonal businesses including lawn care businesses. The challenge for the average lawn care service is that it is a really simple business to start, but it is actually very difficult to manage cash flow to sustain the business. So today, I wanted to use ProjectionHub – Business Loan Level to create a set of 24 month financial projections for a lawn care business. The resulting Excel template will be an excellent guide for other seasonal businesses to create a set of financial projections. Let’s get started.
First we need to start with your sales projections. So I created Adam’s Lawn Care on ProjectionHub, and started by adding our first and only service… lawn care.
So here you can see that I am assuming we will charge $55 an hour for our service, it will take 40 days for the average customer to pay us, and finally I am assuming that all of our annual sales will occur in the 9 middle months of the year, from March to November.
Now let’s assume that you are in the commercial lawn mowing business, so you spend the winter months going from business to business signing contracts for the coming year. Let’s assume you are able to get 50 business customers and the average customer will be charged for one hour of your service each time you mow. Now I just need to enter in the number of hours I expect to provide each month. To keep things simple I am going to assume that we provide service in increments of 50 hours, so in months where you only mow once, you will only provide 50 hours of service.
Before I show you how I projected sales for the first two years, I also want to assume that in year two I will be able to sign a total of 75 clients to a year long contract.
Now that we have our sales projections input, it is time to move on toward expenses.
Cost of Goods Sold for Lawn Care Business
Now you need to enter your general monthly expenses which you can see vary by month just as your revenue varies by month.
Next I am going to add equipment. Let’s assume you purchase a lawnmower in month 1 for $4,000.
Cash Flow Statement
Now that we have added all of the needed info let’s check out our cash flow statement and see how the business is doing. We are assuming that you started out with $3,000 in cash in the bank on month 1. The only problem is that in your first month it was still winter so you did not generate any revenue. You were able to start working in month 3, but then it takes 40 days on average to get paid by your customers, so you don’t actually receive any payment until month 4. With the current situation you run out of cash in month 2 and have a negative cash balance for the first 6 months as seen below:
Small Business Loan for Lawncare Company
So at this point your best option is to seek a small business loan for your company. You may start with friends and family, and then seek out microlenders and other organizations that make small loans. You will need about $6,000 to safely make it through your first year. So let’s add a $6,000 loan to your projections that we assume is from your friends and family.
This solves your cash flow problem for a while, but the first year you were using your old truck and a fairly slow and limited lawnmower. In year 2 you are going to need a used truck, a trailer, and another lawn mower. Let’s say you are going to need to come up with another $35,000 in month 1 of your second year. You were profitable in year 1 so you do have some cash, but is it enough. Take a look at month 1 of year 2:
As you can see you have about $30k in savings from last year’s profits in month 13, but after your purchases, you drop to a negative cash balance over $5,300.
If it was not for the seasonality of the business, your cash balance would have remained positive, but you must remember that you won’t generate any revenue during certain months of the year, and you must built that into your financial projections.
Now get started with your own financial projections using http://www.projectionhub.com