In this article we are going to begin laying the foundation of a stable and successful professional landscape design business by creating an overall focus and mission for your company, reviewing some common mistakes when first starting out, and detailing the necessary legal structures for new landscape companies.
Understanding the mission of your company is something most new business owners don’t really spend much time on, especially in the world of landscape design. It’s easy to get pre-occupied by all the other elements that your new business might need, such as marketing or client acquisition. While these aspects are undoubtedly important, it is the mission of your company that will define what your business is and what it can become.
So the common question I often get from students is – why do I need a mission statement? There are two main reasons why you should develop a quality mission statement.
First, the act of writing down a mission statement will help you focus on the goals of your business and identify the specific characteristics that differentiate it from your competition. Ultimately, a company’s mission should give anyone that reads it a clear understanding of the services of your company and its value to customers.
Second, the mission statement is a good resource for both retrospective analysis and forward-decision making for business owners. A well-developed mission statement acts a lot like the north arrow of a compass. Throughout the months or years within the industry, many things will arise that might throw your business off course, but having a well-defined mission and clear objectives for your company should guide you in making correct decisions for your future.
Perhaps the mission of your company revolves around designing rain gardens and you’re offered an exciting but expensive marketing opportunity at a grounds keeping or lawn care conference. You can feel confident in your decision to neglect that opportunity because the potential visitors of that conference don’t complement the overall mission of your company.
It’s also important to recognize that a mission statement is not a static phrase or paragraph that you just throw up on a wall or website and leave. The mission of your company is always evolving and as your company grows your mission can and should grow as well.
So then, what makes a good mission statement? A well-developed mission statement should have the following three components:
- An Identifiable market (Who are you going to serve?)
- A Company Contribution (What services will you provide?)
- A Level of Distinction (What makes your company unique?)
Now let’s see how these key elements of a mission statement can help clients identify your company’s strengths.
As an example, let us assume that a manager of a large office-park in Los Angeles is looking to hire a company to do landscape design for the property. The manager goes online and reviews two different landscape businesses.
“Business A” has a description on their website that reads “ABC Landscapes mission is to provide beautiful spaces for all to enjoy.”
While “Business B” has one that reads “The mission of ABC Landscapes is to provide beautiful and sustainable landscape design solutions for southern California properties using our premier low-maintenance design strategies.”
The park manager would most likely contact Business B because it is clear that the company not only provides the specific service they are looking for within their region, but also prides itself on having premier low-maintenance strategies. Business A could really be doing any type of work – and based on their mission statement, they might not actually do landscape design work at all.
Business B has all three essential elements of a great mission statement. It has an identifiable market, “southern California”. It explains the service or company contribution, “to provide beautiful and sustainable landscape design solutions”. And it has a level of distinction, “using premier low maintenance design strategies.” For anyone reading that statement , they have a clear understanding of the business, its services, and how it differentiates itself from competitors.
I am not saying that Business A can’t be successful, but it would take much longer to develop a following of clients that knows their company’s work because they themselves don’t define it well.
In order to help define your mission more clearly, it helps to identify a specific niche in which you are trying to sell. When I discuss this idea of a niche, I am referring to an explicit sector within the landscape profession that you will stake your claim. It could be using sustainable design materials, designing edible landscapes, or perhaps being an organic lawn care provider.
By developing a specific niche for your company, it can offer you a strategic advantage over your competitors. We will discuss this in more detail in later lessons, but it’s important to note that the green-industry is full of possible niches for you and your company to fulfill. It just takes some time and thought to identify what suits your company best.
Brainstorming Ideas & Self Reflection
One of the most important parts of developing a good mission statement is taking time to brainstorm ideas and self-reflect. These might sound like identical actions, but in fact the act of brainstorming is much different than that of self-reflection.
Brainstorming is a proactive and creative process that explores all possibilities for a specific problem or idea. For your design business and its associated mission statement, you should begin the brainstorming process by thinking of all the services within the green-industry you may want your company to offer. The list can extend infinitely, with ideas ranging from container gardening to residential tree-work and everything in between.
Self-reflection is a much slower and more introspective process. For this activity you should focus on your core values and beliefs, both personally and professional. What are your long term goals? What things motivate and interest you?
Developing and running your own business is an extremely time-consuming process and if you aren’t honest with yourself about what excites you, or what will keep you interested, then you are only setting yourself up for future problems.
Now that we have covered both the fundamentals of how to write a mission statement and its key components, along with developing a clear understanding of your personal and professional goals, you should have the ability to create a stellar mission to further guide you along the business development process.
Company Structure
The next item to consider when starting your business is the legal structure it will take. This is a much more cut and dry process than the mission statement, but it deserves just as much thought and attention.
When you register the business with both state and federal governments, the type of business entity you are creating will affect both your personal liabilities to the company and the manner in which you are taxed.
There are essentially six types of legal structures for average startup businesses: Sole Proprietorships, Partnerships (General Partnership and Limited Partnership), Corporations (C-Corps and S-Corps), and Limited Liability Corporation (LLC). We will review each briefly and I will run through some advantages and disadvantages of each type.
Sole Proprietorship
A sole proprietorship is the easiest of all the business entities to setup – essentially if you start a business and you are the sole owner with no employees, you are considered a sole proprietorship under by law.
The advantage of a sole proprietorship is that it is easy to startup, easy to file taxes for, and the profits/losses of the business can be deducted from your personal income taxes.
The primary disadvantage of a sole proprietorship is that there is no distinction between your personal assets and those of your business. This means that if your company or business were to be held financially liable for something, your personal assets would also be at risk.
Additionally, startup financing for sole proprietorships is difficult to obtain because you are not a registered business entity yet, so banks typically won’t provide business loans to cover initial expenses.
My advice to most students, when first exploring with the idea of starting their own business, is to begin as a sole proprietorship. As the business grows, and if you feel it is financially viable, you can incorporate as another entity later on.
Regardless of whether you are a sole-proprietor or another legal structure, just be sure to keep all financial accounting (bills, invoices, etc) accounted for. You will need that information later on, either when paying taxes or for other legal purposes.
Partnership
The idea of a partnership should be fairly simple to understand. It is when two or more individuals own a business. So in these examples, we can assume that you along with another friend or colleague go into developing a business together. (I should note here that if you are married and file joint tax returns, even if both you and your spouse own the business, the IRS still sees this as a sole proprietorship).
There are two types of partnerships, the general partnership and the limited partnership. We will review both briefly.
For a general partnership, it is similar to a sole proprietorship except with two or more owners. The advantages are very similar: if you own a business with another person, the IRS sees this automatically as a general partnership and the owners can still deduct financial losses of the business on their personal tax returns.
The disadvantages of a general partnership are also similar to that of a sole proprietorship, with the lack of protection of personal assets and the difficulty of obtaining business financing. Additionally, in certain circumstances, business owners could be liable for the negligent actions of their partners. This depends on the specific state your business is registered in and should be understood before making this choice.
A limited partnership is the second type of partnership and shares similarities with the general partnership but with some key differences. First, a limited partnership has two types of partners, the general partners, who act as owners and have responsibilities similar to owners of a general partnership, and limited partners who have a financial investment in the company, but are not owners and do not have control over the business workings.
A limited partnership also differs from a general partnership in the business filings. In order to become a limited partnership, you must file the proper paperwork through your state.
Both the advantages and disadvantages of the limited partnership are similar to the general partnership – general partners can still deduct business losses from their personal income tax, but with the caveat of having personal liability over the business’s debts. However, an added advantage of the limited partnership is that the limited partners can assist with raising money for the business without exposing any personal liability.
Corporations (C-Corp & S-Corp)
A C-Corporation acts as a completely separate legal entity from its owners. It requires a variety of forms, tax filings, and business fees associated with its setup and can be very difficult to run if you are just starting out in the field.
The main benefit to a C-Corp is that the owners are not financially liable for any business debts – since the business is a separate legal entity. Additionally, it can offer a further number of tax deductions than the previous types of business we previously reviewed.
The primary disadvantages of a C-Corporation are that business losses cannot be deducted from the owner’s personal income taxes , and C-Corps go through double taxation, whereby the corporation itself is taxed on profits from the quarter and then the shareholders are also taxed again on their personal income from the dividends they receive from the business.
For most landscape professionals starting out, I would highly advise steering clear of this option until you’ve developed a sound, profitable, and sustainable business model.
An S-Corporation is similar to a C-Corporation except that it can act as a “pass-through” entity. This means that profits and losses of the corporation can pass through to the owner’s personal income for tax purposes. This is an attractive option because it still provides the liability protection of the C-Corp, while also allowing tax deductions from losses similar to those of a partnership or sole proprietorship.
Much like a C-Corporation, the S-Corp does take a greater amount of paperwork and fees to register the business and you would need to engage in standard required corporate actions such as establishing bylaws, holding board meetings, and other associated actions.
Limited Liability Corporation (LLC)
The Limited Liability Corporation (LLC) essentially takes all of the previous characteristics we discussed and places them in a business entity that is extremely user friendly to a new small business owner.
Much like an S-Corp, the LLC limits the personal liability of the owners, while still allowing the income to pass through their personal accounts for tax purposes. The benefit of an LLC over an S-Corp is in the amount of paperwork and corporate filings required.
The LLC does not have to engage in the standard actions of board meetings or bylaws that would be required from a S-Corp, but still maintains personal asset protection.
Registering a business as an LLC is the most common recommendation I make for new landscape professionals that have shown growth in creating a business. After the initial sole-proprietor phase, in which they are still figuring out the legitimacy of their business, registering as an LLC is the most beneficial option.
Conclusion
As you can see, when you are first starting out in developing a landscape design business, there are many choices you will need to make. Through proper research, self-reflection, and development of a solid mission statement, you can tackle the first steps in making your landscape business as a reality.
For the next part of the Business Planning Series, please read Part 2: Industry & Consumer Analysis.
If you are starting a business and are looking for other helpful articles, be sure to read “How To Get More Landscape Design Referrals: 6 Quick Tips”, “Should I Warranty Plant Material?”, and “How To Become A Professional Landscape Designer: A Complete Guide”.