4 Red Flags That Say It's Time to Close your Lawn Maintenance Business

Typically in my articles I look at ways of helping people save or make more money in their lawn business. This time, however, I'm going to take a look at other side of the lawn care business dream.

Here are four red flags that may reveal you need to seriously change or close down your lawn maintenance business.

1. Your Debt Is Rising

Here's the first red flag to watch for. It's called your debt-to-asset ratio. Lawn business owners will often times borrow money to purchase assets like lawn equipment. There's nothing wrong with that. But if the debt is rising and is slowly increasing while your assets are barely moving, you could be on the verge of becoming over-leveraged.

What percentage should one look for? Typically the sign of trouble is a debt-to-asset ratio of about 50% or more. What you do or don't do varies from lawn care business to lawn care business. But no matter what box we put this into, a rising debt-to-asset ratio is not a good thing.

As most know, leverage is a powerful weapon that is more like a two-edged sword. We all want to be on the right side of it.

The bottomline - the greater your leverage or debt ratios, the more debt you have to take care off which in turn drains your lawn maintenance business profitability, and the less equity you have in your business.


2. There's a Hole In Your Financial Pocket

You're losing money in your lawn maintenance business and the losses are growing. Depending on where you live there may be some areas in the tax code, such as the ability to depreciate assets that may actually be appreciating in value, make it possible for lawn care businesses to reduce their profit or show a loss even though the business is actually doing quite well.

Showing a tax loss is typically not a bad sign but if your lawn maintenance business is losing money outside of this and the tax code is only bringing that loss out in the open, there's a good chance you're staring at another red flag.

So if your losses are growing and don't seem to be disappearing, there will come a point in time where you have to look at your lawn care business and decide whether it's realistic to assume you're going to be able to come out of your losses. Can you really get over this "hump"?


3. You're Out Of Money

You can't seem to get any more money for your lawn care business. Everybody knows about businesses that were moving along nicely and then a loan application of some sort was turned down. Not good.

Yes, sometimes a reluctant banker may actually be helpful in letting you know that your lawn maintenance business is not as properly planned or viable as you think it is. Sometimes lenders keep borrowers out of trouble or at least, from getting themselves into deeper financial trouble. Like a splash of cold water on your face, a loan rejection can be a fast reality check for anyone who thinks his or her current problems aren't a big deal.


4. You're Not Smiling

You're not smiling. If you aren't having fun then you better look out. I believe a key to success is that you enjoy what they're doing. If you get up in the morning and you can't stand the thought of running your lawn maintenance business, then the truth is it's time to take a hard look at shutting down.