Starting your own tree service? A good business plan will give you focus
When a tree care professional starts thinking about opening his or her own business, it may be hard not to imagine buying that first brush chipper, landing that first job and depositing that first check.
In reality, there are many steps to get to that point. Perhaps the most basic is developing a business plan.
For a startup business in the United States, it’s essential because lenders will require one to even consider an application for financing. So unless you’re one of those rare new-business owners who have the wherewithal to finance your business yourself, you will need to create one.
But Craig Damos says the need for a solid business plan is fundamental for more reasons than financing. That document will help the owner understand why he is starting a new business and how he is going to do it.
“It’s about focus,” Damos says. “A focus on what’s the need for their business. What’s their product? What’s their service? I think there’s also something magical about it when you put it to paper. It’s a discipline that creates the focus.”
Damos knows what he’s talking about. As a certified public accountant, he spent 20 years with an accounting firm. Then he worked for a large general contractor based in Des Moines, Iowa, first as the chief financial officer before being promoted to CEO and president.
In 2011, he started his own consulting business, The Damos Company. He focuses on three areas: planning, executive coaching and profit enhancement. He not only helps businesses get started and then grow strategically, but he’s done it himself by practicing what he preaches.
Damos says people can get intimidated by the idea of creating a business plan, but they shouldn’t.
“People get overwhelmed by a business plan,” he says. “I don’t think it has to be ‘War and Peace.’”
Damos’ plan, for example, was about a dozen pages long.
OPPORTUNITY, NEED, SERVICE
He finds that the best business plans address three main areas: opportunity, need and service offering.
Opportunity as assessing what the opportunity is for your business. Why do you want to start your own business? What’s the market? How certain are you that you’ll be successful?
Next is understanding what the need is for what you want to do. What need will your businesses satisfy? What is the demand?
Third is service offering. After you understand the opportunity and the need, determine what services you are going to provide to satisfy that need.
SALES, MARKETING, FINANCIAL
The business plan for The Damos Company also included sales, marketing and financial plans. A sales plan examines what product or service a company expects to sell and what kind of volumes it could reach. For a tree care company, this could be the services you plan to offer (for example, tree trimming, removals, stump grinding or plant health care).
As Damos was creating his plan, he met with a couple of marketing and social media firms to figure out a marketing message and to create a website. This helped him determine his message and what types of customers he would target.
Finally, Damos recommends having a financial section within a business plan. This would estimate sales, the cost of goods or services, gross profit margin, overhead expenses, cash flow and more.
Damos says cash flow is “king” in any business, but it is particularly critical for a startup. That’s definitely the case for a tree care company, which involves work that typically cannot be done by hand or solo. That means a business owner likely will have equipment and employees.
Employees want their paychecks, and payments need to be made on equipment that was financed. But customers may not pay their bills for 30 or more days.
“The contractor must figure out a way to fund that payroll, let alone the equipment amortization,” Damos says. “I think the mistake that a lot of businesses make is they start off by having not enough capital. The business plan should include an income and cash flow projection.”
Luckily, there’s help available to answer these questions and put together a business plan. One option is a consultant.
There also are low-cost or even free resources. A local or state economic development department may be able to point someone toward financing possibilities and provide insight to the tree care and labor markets in the area. The U.S. Small Business Administration and Small Business Development Centers have offices across the United States.
Damos also recommends doing your own research. He says the first thing he would do as a tree care contractor is ask industry groups like Tree Care Industry Association and the International Society of Arboriculture for material for someone looking to get into the business.
He also would look at industry publications and talk to owners of existing tree care companies.
“If I wanted to start a business in Des Moines, I might go to somebody in Omaha and talk about tree trimming,” he says. “It’s always amazing what even your competition will tell you.”
For the writing of the business plan, there are many templates out there. In fact, Damos used one himself, finding it on the Harvard Business School website.
Finally, Damos says his top tip is to review and update the business plan regularly. He again uses himself as an example. Executive coaching was not part of his original business plan for The Damos Company, but after receiving a couple of inquiries about offering that service, he added it, and now coaching makes up the bulk of his business.
“The business plan is a living document that needs to change and adapt,” he says.
Whether you are thinking of starting your own tree service or are a veteran owner, a proper business plan is essential. An expert explains why in this Tree Views blog post.