THE CHALLENGE Having established himself in a profitable niche, Mr. Skolnick wants to add more locations, but he is not sure whether he wants to own the locations or franchise them.
THE BACKGROUND Like many boys growing up in the suburbs, Mr. Skolnick mowed lawns in the neighborhood. At first he did it to earn spending money, but by the time he graduated from high school, he had three employees and 110 clients. He bought his first house (for $167,000) when he was 18. His friends had headed off to college, and Mr. Skolnick realized, “I didn’t want to be cutting grass for the rest of my life.” He took landscaping courses at a vocational school and started offering additional services, like putting in patios, walkways and ponds with waterfalls. He acquired other landscaping businesses, paying much of the purchase price out of future earnings, and folded them into Josh Skolnick Landscaping.
Sensing an opportunity, Mr. Skolnick began to focus on one aspect of his business, mulching. He bought trucks and mulch-blowing equipment to spread wood chips for shopping centers, office parks, universities and municipalities. In 2007, he sold the landscaping business for $70,000 to concentrate on mulch. That company soon grew to two dozen employees who operated seven trailer- and truck-mounted units, the larger ones costing $275,000. His clients stretched from Long Island to Northern Virginia. Best of all, the mulching business increased in spring and ended in early summer, leaving him free to head to the shore and spend time on his boat — while still producing more than $1 million a year in revenue.
Ultimately, though, Mr. Skolnick put that business in his rearview mirror, too. “When I see an opportunity that’s bigger and better or more profitable,” he said, “I’m all over it.” The new opportunity was tree removal and trimming, which Mr. Skolnick stumbled upon when he arranged the removal of a dead tree for a friend. On site with the crew he had hired, neighbors up and down the block came by to ask: “Can you help me, too?”
He said he discovered an industry where major players, like Bartlett Tree Experts and SavATree, tended to concentrate more on fertilizing and maintenance and to leave the removal jobs — which can cost more than $1,000 — largely to mom-and-pop companies, many of them ill equipped for the kinds of towering mature trees that can be found in established suburbs.
“Big or small, we do them all,” Mr. Skolnick said, naming his new business after the behemoths on which he planned to build his reputation. “Our slogan,” he said, “is estimates in hours, not days.” Monster Tree took in $1.6 million in sales in 2010, its first full year in business, and grew by more than half a million dollars the following year.
Unlike lawn care and mulching, the tree business is year-round. “But the trade-off,” Mr. Skolnick said, “is my income has tripled, if not quadrupled; I’m 29 now. I have a wife and two kids.”
THE OPTIONS Mindful of the future — and that 35 percent annual increases in sales would be far less likely without opening new locations — Mr. Skolnick pondered two courses. He could open and operate a second company-owned location. To do so, he would have to assume additional debt to cover the $250,000 to $500,000 costs of opening and staffing a new office and outfitting it with the necessary equipment and bucket trucks. He would need to train a manager to run the office. He could expect to repay his debt out of operating profits.
Mr. Skolnick weighed that against his second option, franchising — “where you’re really trusting other people with your brand.” The two franchising consultants he brought in to advise him both felt strongly that he had a replicable model and good systems in place. There would, of course, be added costs in setting up as a franchiser — $100,000 or more. Thereafter, he would have to pay the salary of a full-time director of franchising. In return, the franchisees would pay him a percentage of their revenue — and there was a chance the chain could grow extremely quickly. Still, he had been told it could take 15 to 20 operating franchises, or perhaps two years or so, before he would earn back his investment.
Article source: http://www.nytimes.com/2013/09/12/business/smallbusiness/a-fast-growing-tree-service-considers-selling-franchises.html?partner=rss&emc=rss