Landscapers whose landscaping businesses are expected to make a profit can do many things to increase not only the chances of making that profit but also inflate the amount of profits that are made. These methods fall into two categories which are 1) Those that increase income, and 2) Those which reduce outgoings.
As for specifics, the ways to increase revenue include gaining more clients, increasing average order values, and increasing the fees charged for services. More often than not it will be these sorts of tasks that most business owners will try to focus on as they perceive earning more income as the only way to increase profits, but that is not true.
A business can increase its profits considerably by earning the same as it has, but by then reducing the amount of its outgoings. This means that with not a single extra client you could see profits increase. Taking this a stage further you need to identify what costs can be reduced, and some costs which can have a huge impact if you can reduce them, are called fixed costs.
What Are Fixed Costs?
Before you reduce costs, you first need to know what they are, and this is why we want to first define what fixed costs are. Often referred to as “overheads”, these are the costs whose amounts do not usually change each month, or if they do, it is only by small amounts. They tend to be costs that a business must pay to remain trading. Examples of fixed costs include:
- Rent or mortgage on business premises
- Wages and salaries
- Insurance premiums
- Property taxes
- Local taxes
- Utility bills
- Regular advertising
- Loan payments
- Professional fees e.g. lawyers/accountant
- Memberships/subscriptions to professional bodies
Some of these might indeed vary, such as the business’s electricity power bill. However, as the business must pay a minimum charge each month to retain its power supply, this is why it is considered a fixed cost.
What Are Variable Costs?
To give you a comparison as to what would not be considered a fixed cost, here are some variable costs that apply to a landscaping business, along with explanations as to why they are not considered fixed costs.
- Materials and supplies will vary from client to client, and job by job
- Plant hire which again will vary depending on the work being undertaken
- Temporary staff costs as this can be seasonal or based on the number of landscaping jobs on the order books
- One-off and irregular advertising
- Company credit card interest will vary based on the outstanding balance
Ways For Landscapers To Reduce Fixed Costs
The specifics concerning how to reduce each fixed cost will depend on what it is, why it is paid, and whether reducing it would have the potential to negatively impact the business. Nevertheless here are some options to consider.
Rent/Mortgage: Either try to negotiate a rent reduction with your landlord or consider moving to suitable, but cheaper premises
Advertising: Look for alternative advertising channels, especially online which offer an excellent ROI
Staff Costs: Consider whether you need all the staff you currently employ or whether there is potential to switch some to part-time or temporary positions
Insurance Premiums: Get quotes from other insurers to see if you can get lower premiums for the same cover
Loan Payments: Speak to your bank to see if there is any way of restructuring your loans to make repayments lower