Should You Start a Business That Outsiders Control?
In 2014, Governor Jerry Brown decreed a 25 percent reduction in water usage.
“According to the California Building Industry Association, most new homes use 174,000 gallons of water per year with 57 percent used for landscapes and 9 percent used for over watering!”
One way to conserve water is to get rid of green lawns. Every square foot of grass removed means a saving of 44 gallons of water per year.
One solution: rip out all your grass replace it with rocks, Astroturf, mulch and/or native plants that require little or no moisture.
This can cost big bucks. At $3.00 per square foot, a lawn of 1,000 sq. ft. would cost $3,000. California homeowners balked at this.
Cash From California!
In November 2014, the Los Angeles Department of Water and Power came up with “Cash in Your Lawn Programs” — a rebate of up to $3.75 per square foot of lawn if residents replace grass.
Residents still balked. This meant ponying up thousands of dollars in advance for landscaping and then going through the hassle of trying to collect rebates from the government.
Enter Turf Terminators!
Savvy entrepreneurs came up with this business model:
- The Offer: Turf Terminators will rip out your grass and replace it with your choice of low maintenance ground cover. A sampling of choices from the catalog is below.
- IT’S ALL FREE! The homeowner’s entire involvement is signing the order and choosing the new ground cover.
- Turf Terminators does the work and collects the $3.75 per square foot rebate from the government.
Was It a Viable Business Model?
“We conceptualized and I did the research as to whether it would be a sustainable business, We did a lot of due diligence and research, and felt we could do landscaping services at a level lower than available rebates. We figured this would be a pretty good business to try.” —Andrew Farrell, head of business development, Turf Terminators, October 1, 2014
A Tsunami of Orders!
Launched in July, 2014 with three employees, the company hit the jackpot. In just 10 months Turf Terminators grew from three employees to a full-time staff of over 500 with more than 60,000 inquiries and 45,000 firm orders.
“We are inundated with demand,” Andrew Farrell crowed. “We hope that when we get over this initial hump of customers, we will reach outside of LA ... We’ve got thousands of people who are lining up to take part in these turf removal programs. We’re going to be doing it for a long time.”
The Egg Hits the Fan
Fast forward to July 10, 2015 and a surprise story in the Los Angeles Times:
As rebate program ends, Turf Terminators slashes its workforce
The rush of business totally depleted the $340 million allocated funding of the Metropolitan Water District of Southern California. No new rebates were available. The cream pot was as dry as everything else in California.
Turf Terminators was forced to lay off 30 percent of its workforce and furlough an additional 40 percent of its employees — throwing roughly 385 employees under the bus.
“Unfortunately, the sudden shutdown of the rebate program has forced the company to downsize its operations. A sizable percentage of the company remains fully employed and the company is still fully operational and servicing its existing customers.” —Turf Terminators corporate statement
Takeaways to Consider:
- Turf Terminators’ website landing page offers to replace grass lawn with a “California Friendly Landscape” and save the average homeowner $2,200 annually in water and maintenance expenses. This is a valid business model and a sound offer.
- When the $3.75 per sq. ft. rebate was announced, the company saw an unending source of quick riches.
- The offer — free landscaping with no fuss, no muss — was so powerful it created a bubble and broke the bank.
- It is dangerous to create a business dependent on the policies and decisions of outsiders.
- This is akin to what happened when the solid, reliable Swiss National Bank suddenly — and with no warning — “scrapped its cap” on the Swiss Franc’s exchange against the euro in January, 2014. Overnight the euro dropped 30 percent against the Swiss Franc, whereupon currency speculators and investors took a beating.
Denny Hatch is marketing consultant, copywriter and designer. The author of four novels and seven business books, his newest is Write Everything Right!
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Denny can be reached at:
firstname.lastname@example.org • www.dennyhatch.com