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BUSINESS OPPORTUNITIES: Understanding Stump Grinding

10/2/2007

A stump grinder is a major investment. Contractors share their thoughts on purchasing stump grinders and pricing the service for profit.

Any company that’s added a new service knows bumps in the road are probable. Stump grinding is one area that can be particularly dicey because of the costly capital equipment needed to get the job done.

Considering contractors may already have the customer base, and there are businesses out there devoted solely to stump grinding, it begs the question: Is purchasing a stump grinder and adding this service a profitable proposition for lawn care and landscape businesses?

GRINDING STUMPS SAFELY

Contractors should put safety first during stump removal operations and equipment maintenance.

Because stump grinding involves heavy machinery penetrating the ground, it’s important for contractors to call utility companies to mark underground lines before grinding stumps on any property.

“That’s the biggest thing – because it’s about safety,” says Todd Patten, president of Professional Property Maintenance, Haymarket, Va. Contractors should call their local “call before you dig” numbers, or dial 811 – the national phone number created to prevent professionals and homeowners from unintentionally hitting utility lines.

Just the same, safety apparel is essential during stump removal. At the very minimum, stump grinding crew members should wear hard hats, gloves, safety goggles, ear protection, long pants and steel-toed boots, says Shawn Cressman, president of Cressman’s Lawn & Tree Care in Hellertown, Pa.

The answer depends on a number of factors, contractors say, including customer base and – most importantly – the volume of work. “It’s a good add-on service, but you have to have the work to justify it,” says Shawn Cressman, president of Cressman’s Lawn & Tree Care, Hellertown, Pa. “If you can’t operate a stump grinder three days a week, it won’t pay for itself.”

Adding stump grinding may be beneficial to a company that already does a considerable amount of tree work, Cressman says. Most of his company’s stump grinding jobs come from its existing tree work, like when a crew will already be on site pruning or removing a tree. Only about 20 to 25 percent of its stump grinding jobs take place when a property owner calls specifically to remove a stump.

Companies that perform a lot of landscape work, too, might consider investing in a stump grinder for the efficiencies it creates when doing renovations, says Todd Patten, president of Professional Property Maintenance, Haymarket, Va. “It’s a lot faster to just grind them out instead of trying to unsafely yank them with a chain and a truck,” he says. “We make so much money on the labor savings – not having to sub it out or do the running around to rent the machine.”

Also, there may be subcontracting work. Because stump grinders are no small purchase – ranging from $15,000 for a small version to more than $40,000 for a large machine on tracks – many tree and landscape companies subcontract the work, which presents an opportunity for contractors willing to make a capital investment in a stump grinder.

COST CONCERNS. Another thing to consider before purchasing a stump grinder, Patten says, is whether your insurance provider considers stump removal to be tree care work. If so, it may increase your liability and workers’ compensation rates considerably.

For example, Cressman says his workers’ comp rate for tree care workers is 25 cents on the dollar; it’s 9 cents on the dollar for landscape employees. However, Tim McCoy, who operates stump removal-only firm The Stump Man in Gwinnett County, Ga., says his insurance company does not consider him to be a tree care company. But circumstances vary by region and provider, so prospective purchasers should consult insurance professionals.

As with any large equipment purchase, maintenance costs are a concern, too. Major maintenance includes oil changes as dictated by the equipment manual, hydraulic fluid changes, periodic belt/drive tightening and teeth maintenance and replacement, Cressman says.

Depending on quality, a set of teeth can cost $120 and may last several months, depending on frequency of use. “Teeth can usually be sharpened three to five times, depending on how long you wait in between sharpenings,” Cressman says. His company rotates three sets of teeth between being used, sharpened and in reserve in the event one is broken. “One might spend $300 a year on teeth, not including the cost of any sharpening, which can be outsourced or done in house,” he says. Another cost is the replacement of the pockets that hold the teeth to the cutting wheel. “They last much longer than the teeth but must be replaced about once every two years as they become damaged or worn out,” Cressman says.

In addition, consider the cost for purchasing and maintaining a trailer, contractors say. Many smaller models come with custom trailers, Cressman says, but larger machines may require a double-axle trailer and tie-down straps, which could add $3,000 to $4,000 to the purchasing cost.

PRICE IT RIGHT. A proper pricing strategy is the trick to profitability in stump grinding. Stump grinding contractors typically price their services one of two ways. The first method is by visiting the property and giving an estimate based on the time it would take the crew to do the job, taking into consideration travel costs for the crew and estimator, the size of the stump, site conditions and the type of tree. It’s common for contractors who give lump-sum estimates to set minimums. For Patten, that figure is $200. “I always had a minimum of $50 or $100, but I finally didn’t think it was worth the time to go for less than $200,” he says.

The second pricing method is the per-inch rate, where contractors measure the stump at its widest point and charge a set dollar amount per inch. Their costs for fuel, labor, equipment, etc., would be covered in that rate; minimums are common among contractors using this method, too.

Web searches show a wide variety of prices around the country for per-inch pricing. Smaller contractors with lower overhead and insurance costs, especially stump removal-only firms, often have the leg up on pricing, contractors say.

In North Georgia, McCoy’s stump removal company is able to charge less than most tree companies because his overhead and insurance rates are considerably lower than larger contractors’ costs. His company charges a base rate of $1.50 per inch with a $75 minimum. Many tree companies in his area advertise $2 per inch, he says.

Some small companies in the Bethlehem, Pa., area charge $5 or $6 per inch, Cressman says. Though he bases his company’s rates on time and materials, Cressman’s price works out to about $7 per inch. Cressman’s Lawn & Tree Care fetches a higher price because of the additional service it delivers to differentiate itself from competitors. “Other companies will come in, grind the stump and leave, leaving a huge pile of grindings for the customer to take care of,” Cressman says. “We’ll haul away the grindings and rake the area flat.” For an extra charge, Cressman’s will plant grass seed in the area.

Cressman’s firm shoots for a 30 percent profit margin on each job, but a number of factors challenge stump grinding services from hitting their targets, including the type of stump (old rotten stumps are removed much faster than a newly cut down tree, for example), site condition challenges and whether damage occurs to teeth during grinding.

One way to improve the profitability of a newly created stump grinding service is to schedule multiple jobs in one day, which boosts the productivity of the crew, contractors say. “Usually people aren’t in that big of a hurry to have stumps removed, so they can wait a week or so,” Patten says. “Then we’ll schedule them all within a day or two and one crew will just go around doing stumps.”

Contractors agree stump grinding can be an excellent business opportunity, but adding this capital-intensive service takes careful consideration to ensure it’s the right fit. As Patten says, “It can be a really good side business if you can get enough homeowners or the right contractors who don’t own stump grinders as customers.”

By: Marisa Palmieri

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BUSINESS OPPORTUNITIES: Understanding Stump Grinding