Lawn mowing is many landscape company’s main service. There is a healthy demand for this service and we have to provide it to compete.
However, there is a dark side to mowing. From tax evasion to scams, let’s break down each section of the lawn mowing industry.
Let me start off by saying that companies are here to make a profit. Meaning, after all expenses and salaries, there is some money left over to either reinvest or pay the business owners. There is also two types of companies, legal and illegal. (Illegal meaning taking cash payments to avoid taxes). There are also companies that don’t even have insurance.
These illegal companies have WAY less expenses than legitimate companies. For example, for our small company of 5, we pay roughly $1,000-$2,000 a week just in payroll taxes. Add that on top of worker’s compensation and liability insurance, we are on the hook for $5,000-$10,000 a month. Those expenses have to be figured into our pricing. So we take all of our expenses, add them to labor cost, and add our profit margins into the price. Our average price is around $35 for an average sized lot. At a 10%-20% profit margin (standard for this industry), we make $3-$6 per lawn with roughly $60,000 worth of equipment on site.
Since these illegal companies don’t have to pay $5,000-$10,000 a month, plus evading taxes, they make out richly. Their expenses are way low, so they can undercut other company’s pricing. They get these jobs and take cash. So at this point, they are committing tax fraud for Federal, State, and Local taxes. On top of that, they are not charging sales tax (which should be charged), so they can charge another 6% less on that as well.
Not only are they committing fraud, these illegal operations are conditioning customers to expect prices that are 50% less. Legitimate companies cannot compete with their pricing.
This is one of the most frustrating things for me. From day one, our company was legitimate. We wanted to be ethical and fair. But the success of these illegal operations make legitimate business owners second guess their decision to be ethical and fair.
The only thing that we can do is separate ourselves from those illegal operations by providing a better service and experience for our customers. I think that my company very well does that, and I will continue to educate others about what is going on in our industry.