The Inflation Trap: Why 82% of Tree Services Fail (And How to Avoid Being One of Them)

Jeremiah Anderson

This isn't about being greedy. This is about understanding the actual math of running a profitable business.

Your dollar is worth 96.8% less than it was in 1913.

That $100 bill from 1913 buys $3.50 worth of stuff today.

The buying power has been stolen away, one year at a time, and you claim to be a free people. Lolzzzz anyways…

In just the last five years—2020 to 2025—your dollar lost another 20% of its worth.

What cost you $100 to buy in 2020 now costs $125. What cost you $1,000 to buy in 2020 now costs $1,250. What cost you $10,000 to buy in 2020 now costs $12,500. What cost you $20,000 to buy in 2020 now costs $25,000. What cost you $100,000 to buy in 2020 now costs $125,000.

But forestry mulching is still "$2,500" per acre… are y'all listening to me yet?

Y'all are still pricing your work like it's 2019. Which is why 82% of small business failures happen because owners can't handle cash flow. Not because they don't work hard. Not because they don't know trees or equipment. Because they can't price their work right.

Let's Get Into It

The threat you don't understand is the threat that will destroy you the fastest.

1913: $100 (insert 100 years of government corruption) 2020: $3.50 2025: $2.80

That $10,000 piece of equipment? Now it's $12,500. That $100,000 mulcher you were eyeing? It's $125,000 now.

But here's the thing that keeps me up at night: Forestry mulching is still being priced at around $2,500 per acre in most markets. The same price it was five and ten years ago.

Are you starting to see the problem here?

You're still pricing your work like it's 2019. And according to Business Plan Writer's 2025 data on small business failures, this is exactly why 82% of small businesses fail because of cash flow problems. Not because the owners don't work hard enough. Not because they don't know trees or equipment inside and out. They fail because they can't price their work correctly.

More accurately: They fail because they do not adjust their pricing fast enough. The currency they operate under is losing value faster than they can earn it.

The Gradual Catastrophe

So. If you don't know your number and don't adjust price fast enough, what happens? You typically will "compete" with the market by lowering prices. If a customer said no, then clearly the market is telling me the price is too high. EHHHHHHHHHHH.

Wrong. What if the customer is wrong about what price is acceptable for the work needed? Lolz nooooo. They can't be wrong... and often are lol.

Think about what you've dealt with as a small business owner over the last five years:

In 2020, the pandemic hit and supply chains collapsed overnight. The U.S. Census Bureau reported that 43% of small businesses had to shut down temporarily or permanently during that chaos.

Then in 2021 and 2022, prices shot up faster than they had in 40 years. Discovery Alert's analysis shows we saw an 8.5% drop in buying power in a single year. That's the kind of inflation your history teachers taught you about failed empires... what do I know lol.

By 2023 and 2024, everyone started worrying about stagnation, which is this weird economic condition where growth slows down, prices freeze, but your costs keep climbing anyway.

And now in 2025, according to the U.S. Chamber of Commerce Small Business Index, inflation fears are back at record highs. In fact, 58% of small business owners say inflation is their top worry right now. Yet they don't do what's needed and they don't adjust their pricing fast enough.

Here's something that really drives this home: The Chamber of Commerce found that inflation has been the number one concern for small businesses for 13 straight quarters. Not taxes. Not government regulations. Inflation.

And it makes sense when you look at the numbers. The MetLife Small Business Index shows that 80% of small business owners are worried about inflation, and 73% are worried about tariffs hitting their bottom line.

The Small Business Index itself fell from 69.1 to 62.3 in the first quarter of 2025. Business owners aren't just concerned. Our friends, peers, competition—all are drowning.

We can blame the government appropriately, but also excuses are not acceptable. So it is what it is. How do we win?

I'll get there.

Your Brain Wasn't Built For This

Here's the thing: Your neurotypical brain wasn't built for this. Human beings are really bad at spotting these kinds of gradual changes quickly enough to respond. How many trees die before an extinction-level disease outbreak is recognized?

You see fuel go up 30% and you think, "I'll just eat the cost this month and adjust next month."

Knives for your forestry mulcher jump from $20 to $50 each, and you tell yourself, "It's just one thing, not a big deal."

Those hydraulic hoses that were $75? Now they're $140. "Just a bad week for pricing, I guess."

Your insurance jumps 25%, but hey, everyone's insurance went up, right?

The problem is that all these "one things" add up. Your costs can literally double while your prices stay completely flat because you're trying to match what the guy down the road charges. And that's not how you stay in business. That's how you go broke slowly, wondering what happened.

The business admin whiplash from inflation to stagnation fears and back to inflation happens faster than you can adjust your pricing. One presidential cycle you're fighting stagnation. Next cycle you're fighting inflation. Your costs swing wildly, but your prices stay stuck because you're anchored to "what the market will bear" or "what competitors charge."

It Gets Worse: The Financial Literacy Crisis

According to a 2024 Xero survey on financial literacy among small business owners, 42% of people who started small businesses had little or no knowledge of financial management, cost analysis, or pricing strategy before they opened their doors.

Just think about that for a second. Nearly half of all business owners started their companies without understanding how to price their work.

But wait... it gets worse.

That same Xero survey found that 45% of small business owners have lost at least $10,000 because they didn't understand proper pricing. Another 13% believe they've lost $500,000 or more.

QuickBooks and CPA Practice Advisor both reported in their 2024 and 2025 analyses that over 60% of small business owners lack the financial skills they actually need to manage business finances properly.

Let me be really clear about what they don't know that is causing the pain we all feel:

•They don't know how to calculate true equipment costs. It's not just "what you paid for it" when you write the check.
•They don't understand real labor costs, which isn't just the hourly wage you pay someone. It includes payroll taxes, insurance, paid time off, and overhead that most people never factor in.
•They don't understand the difference between margin and markup, and this one mistake alone has probably killed more businesses than anything else on this list.
•And they have no system for adapting their pricing when costs change.

How Dangerous Is This Problem?

The QuickBooks research found that 55% of small business owners think they're actually good with money. But then 50% of those same business owners face serious financial problems in their businesses specifically because they are actually NOT good with money.

Have you ever heard of that Dunning-Kruger effect, "don't know what you don't know"? This is the result of that when it is operationally foundational to a ~$40 BILLION per year industry.

How do we fix this?

WELL, WE DON'T PRICE WORK BASED ON COMPETITORS!

The Herd Trap: Don't Fall For It

I cannot be more clear about this. Don't ask them. If someone asks you how much you charge, going forward, it's an industry benchmark for a company that will fail fast, and you should educate them and then distance yourself from the cancer that is their business. DO NOT FALL FOR THE HERD TRAP.

What's the herd trap?

Let me walk you through how most small business owners actually price their work, because I want you to see if this sounds familiar:

•First, they look at what competitors charge for similar jobs.
•Then they match that price, or maybe they go slightly lower to "stay competitive" or "get their foot in the door."
•Then they hope there's enough money left over after the job to pay their bills.
•And finally, they sit there at the end of the month wondering why there's never enough money.

There's fascinating research published by the National Center for Biotechnology Information and the Behavioral Economics Institute on something called herd behavior. The studies show that it only takes about 5% of any group to steer the other 95% in a particular direction, and most people will follow along without even realizing they're doing it.

In business, this looks like you saying, "Oh, my competitor charges $2,500 for mulching an acre, so I need to be somewhere close to that price to be competitive."

No. No, you really don't.

Why Your Costs Are Different

What if your costs are completely different from your competitor's costs?

•What if your competitor bought their mulcher for $200,000 five years ago when everything was cheaper, but you financed yours for $325,000 last year at current prices?
•What if they pay their crew $25 an hour and you pay $35 an hour because that's what it actually takes to get good, reliable people in today's labor market?
•What if their insurance is half of what yours costs because they've been in business for 20 years and have a great track record, but you've only been in business for two years and you're getting hammered on premiums?
•What if they own their truck outright and you're making $1,200 monthly payments on yours?

Your costs are fundamentally different. Which means your price has to be different too.

The behavioral economics research shows pretty clearly that herd behavior leads to:

•Market breakdowns where everyone ends up underpricing their work
•Wild swings and price wars that nobody actually wins
•Bad decision-making where people follow others instead of doing the actual math
•System-wide risk and financial instability across entire industries

When everyone in your market is underpricing their work because they're all copying each other, the entire industry suffers. Businesses fail. Good operators leave the industry because they can't make money. Quality drops because corners have to be cut. And customers start expecting cheap work that's not actually sustainable for anyone.

The Margin vs. Markup Disaster

Most business owners think pricing works like this:

You figure out what a job costs you, then you add a markup percentage, and that gives you your price.

So if it costs you $500 to do a job, you add 50% markup, which is $250, and you charge $750 total. That's a 50% markup, right? You're making good money.

Wrong.

That's not a 50% margin. That's a 50% markup. And there's a massive, business-killing difference between the two.

Here's the formula you should actually be using for margins:

Price = Cost ÷ (1 - Desired Margin %)

So if you want a true 50% profit margin on a $500 job, the math is:

$500 ÷ 0.5 = $1,000

Not $750.

Let Me Show You Why This Matters

If you use the markup method and charge $750 for that $500 job, your actual profit is only $250. That means your real margin is:

$250 ÷ $750 = 33%

You think you're making 50%, but you're actually only making 33%. You're leaving 17% on the table.

Over time, this gap between what you think you're making and what you're actually making leads directly to cash flow problems and business failure.

According to research from C2FO and Nine Advisory on margin compression during inflation, when your costs go up but you don't adjust your prices correctly, your margins get squeezed from both sides. Your revenue doesn't keep pace with your expenses, and eventually you run out of cash.

Real Example: The $500 Job

For that same $500 cost job:

•50% markup gets you $750 and leaves you with only a 33% actual margin
•Correct 50% margin formula charges $1,000 and gives you that true 50% profit you were actually aiming for

Enterprise Nation and Flintfox both published analyses in 2024 showing that cost-based and value-based pricing strategies are far more sustainable than competitive pricing.

If you copy their prices:

•You earn less profit than they do
•Or worse, you actually lose money on every job while they're making money

The research on herd behavior that I mentioned earlier shows that you only need 5% of an industry to influence the other 95%. This leads to industry-wide underpricing where everyone's margins get compressed, and eventually businesses start failing left and right.

The Industry Reality Check

Let me give you some numbers that might surprise you.

According to ArborNote, ArboStar, and Top Branch Tree Service's analyses of the tree care industry, most tree service operators are achieving profit margins somewhere between 10% and 20%. And honestly, most are closer to the 10% to 15% range.

Small businesses literally celebrate when they hit 15% margins. (Less than 30% is still dying, by the way.)

But here's what's interesting: Top performers in the same industry are achieving 30% to 50% profit margins.

•Well-managed companies are regularly hitting 30% to 45%
•Specialized services like Plant Health Care are seeing margins of 30% to 50%

The tree care industry is worth well over $35 billion and growing at 5-8% annually. Yet most operators are barely surviving while top performers are thriving.

It's not because they work harder.

The difference is that top performers use scientific pricing based on their actual costs instead of guessing or copying what competitors charge.

The Bottom Line

Look, I know this is a lot of information. I know it's uncomfortable to think about how much money you might be leaving on the table or how much you might be losing because your pricing is wrong.

But here's the thing: This stuff is knowable... now.

I am pushing as much transparent, honest content as I can while maintaining and improving the level of production so that you get better content but, more importantly, more useful content.

The 82% of small businesses that fail because of cash flow problems? They didn't fail because they were lazy. They failed because:

•Nobody taught them this stuff
•They followed the herd
•They confused markup with margin
•They didn't adjust their prices when their costs went up

You don't have to be part of that statistic.