When you start a lawn mowing business in New Zealand, you can either start from scratch or buy into a franchise. Franchise agreements can be complex, so it is crucial to understand your rights and obligations going in. Alternatively, you can start your own business, but this can be challenging as you attempt to navigate business issues, employment regulations and tax planning. Therefore, if you start from scratch, you should consider creating a business plan to help you research the industry and barriers to entry, such as: 

  • expensive startup costs; 
  • saturated local markets; and 
  • how the seasonality of the work and economic downturns can affect your business’ financial position.

Ultimately, your choice should be guided by your budget (capital or ability to secure finance), your previous experience in business and your willingness to share the costs and profits of the business. 

This article will explain: 

  • how to start a lawn mowing business from scratch or through buying a franchise; and 
  • your obligations as a business owner under each model.

Starting Your Lawn Mowing Business From Scratch

One of the initial steps of setting up your business is to think about how to structure it from a legal perspective, as different structures can have different financial and tax benefits for your business. There are many ways to do this in New Zealand. Some of the most commonly used ones are: 

  • sole trader; 
  • partnership; and 
  • company. 

There are benefits and downsides of each of these structures.

Registering Your Lawn Mowing Business 

Once you have decided on a structure, you need to register your business with the NZBN or the New Zealand Companies Office. When you do this, you will receive an NZBN number automatically (companies), or you will need to apply for one yourself. Unlike registering a company, this is a relatively easy process for sole traders, partnerships and trusts, and it does not cost anything. 

Buying or Hiring Your Equipment 

Thinking about your equipment is a crucial step when you are setting up your lawn mowing business. Having the right tools will allow you to be more productive and, therefore, service more clients. 

If you are starting out, your budget might be limited, so hiring your equipment could be a more financially sound alternative than investing in cheaper tools. A commercial lawn mower is designed to last for years and withstand many more hours of use than a domestic one. While they cost more, the price difference is often justified by your increase in productivity and the longer life span of the mower. 

If you decide to buy your equipment, avoid over capitalising until you understand the needs of your business and your customers. If you decide to hire your tools, a hire purchase agreement: 

  • allows you to use them for a period of time by paying in instalment; and 
  • gives you the option to buy them once the period ends.

The type of mower that you will need depends on the scale of your business and clients. Some of the models available include:

  • walk behind lawn mowers;
  • garden tractors;
  • compact stand-on lawn mowers;
  • zero-turn mowers;
  • front-mowers;
  • riders; and 
  • robotic lawnmowers.

Other considerations when buying your equipment include:

  • what power sources are available to you; and
  • whether you will need a mulcher mower if you plan to mulch the clippings, or how you will collect and dispose of them.

You should also buy an appropriate vehicle to carry your tools. When looking for a vehicle, consider: 

  • its payload (how much weight it can carry), as driving overloaded is dangerous; and 
  • the ability to secure expensive tools.

Insuring Your Lawn Mowing Business 

It is common in New Zealand for small businesses to under-insure. However, even though the likelihood of things going wrong may be low, when it does happen, the high legal costs can put your small business under a lot of pressure. 

There are some key factors that influence which types of insurance policy you will need and how much they will cost. These include:

  • the number of employees or contractors you employ;
  • the size of your business (turnover); 
  • your industry and the type of work you carry out;
  • how much cover you need;
  • your claims history; and 
  • how long you have been operating.  

If your cash flow is tight, you are best to discuss your needs and budget with an insurance broker to decide which policies are absolutely essential for your business. At a minimum, you should consider getting public liability insurance and property insurance, but other types include:

  • business vehicle insurance;
  • business interruption insurance;
  • employer’s liability insurance; 
  • personal income protection; and 
  • credit risk insurance. 

Employing Staff 

When you are ready to grow your operations, you may consider hiring staff to help you service your client base. As an employer, you have both legal and tax obligations in New Zealand. 

When you start a new business in New Zealand, you also have some essential tax obligations and some important decisions to make, such as whether to register a trade mark for your business. 

Buying a Lawn Mowing Business Franchise 

Buying a franchise will save you time on establishing your business image and reputation. You may be able to access the franchise’s existing client base. However, you may have some duties to the franchisor, such as: 

  • reporting on the performance of the business; and 
  • meeting revenue targets.

Understanding Your Franchise Agreement 

A franchise agreement outlines the rules under which the franchisor (owner) and the franchisee (you) will have to live for the period of the franchise.

It often includes one or more schedules giving some specific details such as dates, amounts, territory boundaries and renewal rights. It will also include additional documents, such as:

  • guarantees; 
  • non-disclosure agreements, 
  • Privacy Act consents; and 
  • a disclosure statement giving details about the franchise in a formal way.

In New Zealand, there are no specific laws that regulate the ongoing relationship between the franchisor and franchisee after they sign their contract. Therefore, it is crucial to understand your obligations under the agreement to ensure the success of your business. These agreements are often complex, so you should get yours reviewed by your lawyer before signing. 

Restrictions of a Franchisee

Depending on your agreement, you may have some restrictions. For example: 

  • you may be limited to operate in a certain territory;
  • you may only be allowed to use approved suppliers by the franchisor;
  • the franchisor may be able to impose a maximum price which you cannot exceed; and
  • your agreement may include a restraint on competition for a certain area and duration.

Your franchise agreement should also contain a robust dispute resolution process. Mediation is usually the most common and faster choice, although some agreements require arbitration. 

Key Takeaways 

If you are considering starting a lawn mowing business in New Zealand, you should consider: 

  • whether to start from scratch or buy a franchise;
  • how to set up your business; 
  • whether to buy or hire your equipment; 
  • whether to employ staff; and 
  • how to protect your business.

If you decide to buy into a franchise, it is crucial to understand your obligations under the franchise agreement. These agreements are generally complex in nature, so it is a good idea to talk to your lawyer. If you need help with setting up a lawn mowing business or reviewing a franchise agreement, contact LegalVision’s business lawyers on 0800 005 570 or fill out the form on this page.

FAQs

How can I structure my business?

Some of the most commonly used business structures in New Zealand are sole trader, partnership and company. You should choose the structure which suits your business best.

How do I register my business in New Zealand?

You will need to register your business with the NZBN or the New Zealand Companies Office. When you do this, you will receive an NZBN number automatically (companies), or you will need to apply for one yourself.

Should I buy or hire my lawn mowing equipment?

If your budget is limited, hiring your equipment could be a more financially sound option than buying cheaper tools. A commercial lawn mower is designed to last for years and withstand many more hours of use than a domestic one. Once you have sufficient capital, you may decide to buy your equipment. Avoid over capitalising until you understand the needs of your business.

Should I buy a lawn mowing franchise or start from scratch?

Buying a franchise will save you time on establishing your business image and reputation. However, you may have some duties to the franchisor. Alternatively, you can start your own business, but this can be challenging as you attempt to navigate business issues, employment regulations and tax planning. Therefore, if you start from scratch, you should create a strong business plan.

RSVP for our February 11 webinar: Tips to Consider When Choosing or Changing Your Business Structure
The business uncertainty surrounding COVID-19 is likely to force many businesses to restructure in order to thrive in the new normal. LegalVision is hosting a free webinar to help businesses understand what to consider when choosing or changing a business structure. Register for free now.

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