How to Start a Stump Grinding Business
Are you experienced with using heavy tools and like working outdoors? If you have experience working in a tree trimming business but don’t want to start a tree trimming business and face tough competition and high liability, you might consider a more niche business like stump grinding.
Often, when trees die or become a problem in a yard, such as hitting utility lines, the trees are cut down, but the extra step to remove the tree stump is not taken. Most homeowners don’t have the equipment to remove stumps from trees or large bushes but want to get them out of the way. A stump grinding business will have the right tools and labor to remove stumps quickly and easily.
According to IBIS World, tree trimming as a whole is a $21 billion industry and has grown 7.7% per year from 2015-2020. Stump grinding is a part of some tree trimming businesses, but not all, and homeowners often just need to remove an old stump to get it out of the way of landscaping or a patio installation.
Outdoor living is a large part of people’s lives at home, and they want to invest in their outdoor spaces so that they provide maximum enjoyment. Old stumps are an eyesore, or they get in the way of mowing and can be a trip hazard. It’s a service that will always be in demand, but it is subject to market volatility. It is not always a necessary service for consumers, so in economic downturns, when people don’t have as much cash on hand, they will overlook stump removal to save money.
Target customers for a stump grinding business include homeowners, realtors, architects, and construction companies that are clearing land for building. Homeowners in more established areas are more likely to have stump removal needs.
Skills, Experience, and Education Useful in Running a Stump Grinding Business
There are only a few skills required to run a stump grinding business.
- Stump grinding experience. While stump grinding is easy to learn, it’s best to have some experience to show your credibility when talking to potential customers.
- Business knowledge and experience. You will need to have some basic knowledge of marketing, contracts, finance/accounting, and human resources.
- Sales. You have to be able to make a sales pitch when you meet potential customers.
- Customer service. You’ll need to be able to build rapport with your customers so that you retain them as customers and gain repeat business and referrals.
Checklist for Starting a Stump Grinding Business
If you’re thinking about starting a stump grinding business, it’s important to do your research first. Here is a checklist to help you get started.
Step 1: Write a Business Plan
After coming up with the idea, the next step in starting your stump grinding business should be to write a business plan. The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your start-up expenses will be.
Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect stump grinding business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name. Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.
Step 3: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a stump grinding business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible for repaying them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment, though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start, which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select your Location
You don’t need a shop to have a tree stump removal business. You just need a place to store your tools and equipment, and many start out of their garage. You’ll also need to choose a service area, depending on how far you want to travel to work.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
You may need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located. Some common business registrations to research include a business license and an Employer Identification Number if you plan to hire employees.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a stump grinding service is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs. Start-up costs for a stump grinding business are mainly for equipment and a truck and trailer, so if you already have any of those things, you are ahead of the game.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
A stump grinding business will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a stump grinding business include social media marketing, ads on Craigslist, print advertising, direct mail advertising, and coupons or special promotions. Developing a website can be a significant expense, but it can also give your stump grinding business greater visibility online.
One important marketing task is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a stump grinding business. A few of these include:
– General liability insurance can help protect you from third-party claims of bodily injury and property damage.
– Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.
– Property and casualty insurance protects you if your equipment is damaged.
The cost to insure a stump grinding business will vary depending on several factors. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.
While insurance is important, ensuring proper operator safety is important due to the safety hazards of the equipment. Make sure employees keep their bodies and ears protected as the machine is loud and will kick up wood chips, rock, etc.
Step 10: Hire Employees
You may need employees to help you run the stump grinding business as you grow your customer base.
In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your stump grinding business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a stump grinding business?
The costs to start a stump grinding business are mainly for equipment. A few of the more common ones include:
– Stump Grinding Machine $6,000+ used or $15,000+ new
– Chain saw and clean up equipment such as a blower $300 – $1,000
– Safety equipment (face shield or glasses, gloves, hearing protection, etc.) $100 – $200
– Van or truck with a trailer for equipment $10,000 +
How much can a stump grinding business owner make?
Stump grinding businesses typically price their services one of two ways. The first way is to visit the property and estimate the time it would take to do the job, travel, site conditions, etc. Another method is to measure the diameter of the stump at its widest point and charge a set dollar amount per inch. With either method, most businesses will have a minimum charge to cover travel expenses and make it worth their time.
Consumers generally pay between $100 – $400 for stump grinding and removal, depending on the size. If you can build your customer base successfully and average four stumps removed per week at an average of $200, and you work 32 weeks out of the year, annual revenues in this scenario would reach $25,600. The key is to get as much volume as possible and work whenever weather permits.
Stump grinding is a business that may not make a lot of money right away because of the costly initial investment needed to get the job done. It can be an excellent way to make some additional income, but this service is often better to add along with other services such as lawn care, tree trimming, etc., since the customer base is typically the same.
Another consideration to remember is that demand for this business has seasonal variations, depending on where you are located. You can’t grind stumps in the ice and snow, so you won’t be working much or at all during certain times of the year.
Cleanup and disposal of debris is often the most time-consuming part of the job, and many operators don’t price themselves accordingly for their time. A higher price is always justified, but if the homeowner is price conscious, you can offer to let them clear the debris instead.
When evaluating your costs and pricing, be sure to add in maintenance costs such as oil changes, hydraulic fluid changes, and blade replacement. A set of teeth can cost $100 + and last for a few months before needing to be sharpened.
Are there grants to start a stump grinding business?
It’s extremely rare to find a grant to start a stump grinding business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What is the NAICS code for a stump grinding business?
The NAICS code for a stump grinding business is 561730, which is categorized under Landscaping Services.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?
Tree Care Industry Association