While commercial and residential landscaping seems like it should be mostly the same, there are some significant differences between these two areas of lawn care. If your business isn't prepared to meet the demands of new clients (whether commercial or residential), you put your business at risk of lawsuits.
Let's look at what landscaping businesses need to know about the differences between commercial and residential landscaping and how you can be prepared for them.
7 Key Differences Between Commercial and Residential Landscaping Businesses
Whether you work primarily with commercial or residential clients, it might be smart to expand to other areas of lawn care. Economic uncertainty is one of a landscaper's top 5 business risks. By connecting with a variety of clients, you can diversify your revenue sources and protect your business from changes in the market.
Because you might be looking to expand into a new area of landscaping, let's look at seven ways commercial and residential clients differ and what you'll handle these contrasts:
- Contracts. Handshake agreements might work with residential clients, but that won't fly with commercial landscaping. It's never good to rely on verbal agreements (even with residential clients). Put everything in writing, especially when you work with clients who have larger properties and more extensive needs.
- Insurance requirements. When you sign a landscaping contract with a commercial client, you'll often need to have General Liability Insurance and other small business insurance policies in place. Commercial clients typically require $1 million to $2 million in insurance coverage, where as residential clients often don't have a requirement and you can get by with lower coverage ($300,000 - $600,000). See our sample insurance quotes for landscapers to see what other landscapers typically have for coverage.
- Billing. Residential clients might pay you in a few installments. For larger commercial clients, you might bill them for monthly maintenance. These billing differences can affect your cash flow. The steady paycheck that comes with commercial work is a nice alternative to the feast or famine nature of residential landscaping.
- Profit margins. Commercial work can have small profit margins, but is more steady and lucrative because the projects are larger. Understanding these differences can be essential to make sure you have enough cash on hand each month to pay your bills.
- Equipment differences. If you're used to maintaining residential lawns, you may need to invest in bigger and better equipment to take care of larger commercial properties. As you invest in new equipment, review your Property Insurance. You may need to update your policy to cover new equipment.
- Referrals. Working with residential clients, you'll get many word-of-mouth referrals. When you work with commercial clients, these referrals can be hard to come by. You may need to network with other building services companies to find new clients. For instance, if you're friendly with a janitorial services provider, they can refer you to some of their other clients.
- Communications. When you're working with a residential client, you know exactly who's in charge of the property. You knock on their door or talk with the property management company to get answers about their landscaping preferences. When you work for commercial clients, you might be working with a secretary or administrative staff that tells you what the boss wants. In other words, you'll be working with people who aren't the decision-makers. That can lead to miscommunications and other problems, so be ready.
Be sure to check out our eBook "Planting the Seeds of Success: Business Tips for Small Lawn Care and Landscaping Businesses" for more risk management strategies and tips for landscaping businesses.