5 Risks to Manage

Lawn care professionals have no shortage of on-the-job hazards. They work out in the elements, handle heavy and potentially dangerous equipment and are often on tight schedules. But with proper risk management, lawn care and landscaping business owners of any size can minimize the threats to their revenue and maximize their chances of long-term success.

Here’s a look at some of the most pressing risks small landscaping businesses face and how to manage them effectively.

Risk #1: Worker injury

By far, the most significant risks to a lawn care business are worker injuries, which can hurt a business in several ways:

  • Injured workers mean decreased production capability.
  • Worker injuries can be expensive.
  • Losing an employee (even temporarily) may mean lost time as you look for a replacement.

Most states require businesses with employees to carry workers’ compensation insurance, which pays for the medical costs of treating employees who are injured on the job. Having workers’ comp insurance in place greatly reduces the financial burden on a lawn care business owner and also eliminates the possibility of being fined for noncompliance.

Workers’ comp can also cover an injured worker’s wages while they recover so the business has the funds to hire a temporary replacement. In addition to investing in workers’ comp insurance, landscaping business owners can reduce their risk of employee injuries by:

  • Providing adequate training on all tasks and equipment.
  • Enforcing rules about not working during dangerous weather conditions (like lightning).
  • Encouraging employees to drink plenty of water, eat wholesome foods and get adequate rest while working, especially on the hottest days.

The cost of workers’ comp insurance varies from state to state and business to business, so it’s impossible to give a ballpark estimate. When applying for coverage, be sure to choose the right classification codes for each of your employees, which can help cut down on costs. Employees devoted to office tasks, for instance, cost less to insure than field workers.

Risk #2: Unscheduled downtime

Profit margins are tight in most businesses. Unlike most other industries, though, a lawn care business’s productivity is highly dependent on the weather. And even when the weather is perfect, equipment failure can prevent a business from serving clients on schedule, which can mean not only lost revenue but also damaged client relationships.

While it’s not possible to prevent thunderstorms or the occasional blown head gasket, it is possible to have a plan in place for when things go wrong. Taking these steps can make unexpected mishaps less disastrous for the bottom line:

  • Have a bad-weather productivity plan. In some parts of the country, afternoon thunderstorms are almost daily in the summer, so it’s not practical to sit idle when one hits. Have a plan for your team on these occasions: catch up on paperwork, perform equipment maintenance, take the trucks in for a wash, etc. The key: see bad weather as an opportunity to do the things that don’t require sunshine.
  • Buy the highest-quality equipment you can afford. While you may not need or be able to buy top-of-the-line equipment right away, it almost always saves time and money in the long run to invest in higher-quality items.
  • Maintain equipment. Rather than waiting until something goes wrong, establish a routine for inspecting equipment at the end of each day. Do minor adjustments, repairs and maintenance work.
  • Train employees on how to recognize early signs of equipment problems. This goes hand-in-hand with the above. Your team is a valuable source of intel on how your equipment is doing. Set up a system for daily or weekly reporting on the status of equipment so you can identify and address any problems early on.
  • Establish a relationship with a repair shop. For those times when you do need last-minute repairs, it’s easier to get in when you know the people doing the work.
  • Invest in property insurance. When unpreventable storm damage, theft and other types of damage happen to your equipment, commercial property insurance can pay for repairs or replacements. A property policy can mean the difference between getting up and running in a few days or weeks when replacement costs are significant.

Risk #3: Third-party liability

While your workers and equipment are essential to your business, you’d have no business at all without clients. Unfortunately, clients also introduce a whole world of risk. Because there’s no way to cut them out of the equation entirely, it’s best to be aware of the ways they affect your liability exposure so you can keep it to a minimum:

  • Third-party property damage. One of your employees is riding a mower when he hears something metallic. He stops and realizes he’s ridden over the client’s in-ground sprinkler system. Even if the client forgot to warn you about it, your business could be held liable for replacing the sprinkler or repairing the damage.
  • Third-party injury. One of your teams is finishing a job as a thunderhead rolls in, and in their haste to get out, they leave behind a pruner. The next day, the client’s kid is playing in the yard, trips and gets nicked by the pruner’s blade. It’s nothing serious, but the parents are worried and take the kid in for a tetanus shot. And they want you to pay the doctor’s bill.
  • Dissatisfaction with your work. Miscommunication is as old as communication. You may deliver exactly what you think you and the client agreed on, but if the client disagrees, they’re not going to be happy. And depending on their disposition and the size of the project, they might share their displeasure with your potential clients, discouraging them from hiring you. Worse, they might sue you to recover the costs of your services.

The good news is that general liability insurance can pay for the legal costs if any of these types of incidents goes to court. The better news? Maintaining open lines of communication with your clients can help prevent lawsuits in the first place. For example, offering a free redo of a dissatisfied client’s lawn can keep your business out of court and preserve your reputation.

How much will general liability insurance set you back? Most of the lawn care businesses that buy through us see yearly premiums between $350 and $1,000 or so. But this cost depends on the specifics of your coverage. If you have commercial clients, for example, you’ll probably be required to sign a contract that demands limits of at least $1 million per occurrence and $2 million aggregate. If you’re working with primarily residential clients, a typical limit is $300,000 per occurrence and $600,000 aggregate. Higher limits usually come with higher prices.

Risk #4: Seasonal peaks and valleys

In most of the country, landscaping is not a year-round business. That presents the challenge of having at least a few months every year where your business is not generating revenue. Budgeting to make sure ends meet year-round is no easy feat. To ensure your finances stay healthy throughout the year, consider:

  • Enlisting the aid of a financial planner. The upfront investment will likely pay off in peace of mind and financial stability when the rush season ends.
  • Adding snow removal services to your repertoire. Many landscape businesses supplement their income with off-season services. Be sure to crunch the numbers, though: snow removal can be lucrative, but it requires a fair amount of upfront investment in equipment.

Risk #5: Subcontractors

Working with subcontractors is a great way to expand your offerings to clients without a major upfront investment. But be aware that subcontractors also introduce risk to your business. Insurance carriers are particularly wary of these relationships and usually require the following from lawn care businesses that use subcontractors:

  • Subcontractors must carry liability insurance with a minimum limit of $1 million.
  • The policy must include additional insured status for your business.
  • You must have a written contract between you and your subcontractors.
  • There must be a “hold harmless” agreement in that contract that favors your business.

Without going into detail, each of the above helps reduce the liability your business has for any problems the subcontractor causes. In the event that a third party sues the subcontractor and names your business as a co-defendant, these provisions will ensure that the subcontractor’s insurance, rather than yours, covers the costs.

Planting the seeds of success

Like a healthy lawn, a healthy business requires foresight, planning and regular maintenance. Just as knowing where to look for infestations and rotting makes you a better landscaper, knowing where to look for business risks can make you a more successful business owner, no matter what the weather brings.