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FourSeasons
12-11-2007, 08:40 PM
Just starting out we ask what should we be charging? And the only way to know how much to charge is to figure out what your costs are first.
Then determine your profit margin from there. That should be right.

Well no one ever says what kind of profit they are making per hour after expenses. Shouldn't there be a general range we should all be in? Of course different parts of the country are going to be different but we should all be in the same range.
Do you agree?

Can some of you guys that have this down tell us what kind of profit margin newer LCOs should be shooting for.
I have found what works good for me for now.

Hopefully this makes sense.

Steve
12-11-2007, 10:17 PM
Quote[/b] ]Well no one ever says what kind of profit they are making per hour after expenses. Shouldn't there be a general range we should all be in? Of course different parts of the country are going to be different but we should all be in the same range.
Do you agree?

Hi Rob,

You know that is a very good point. We do often talk about shooting for a $60 per hour fee but the profit margin could vary dramatically depending on your expenses.

FourSeasons
12-17-2007, 10:18 AM
No replies to this.
Does that mean no one has it figured out?
Or no one wants to share?

I don't have it completely figured it out but i have a general idea.

realhuntin
12-17-2007, 01:19 PM
Quote[/b] (FourSeasons @ Dec. 17 2007,11:18)]No replies to this.
Does that mean no one has it figured out?
Or no one wants to share?

I don't have it completely figured it out but i have a general idea.
Hey Rob,

I'm not sure if I understand your question 100% Here are some accounting tips so you may find your PROFIT MARGINS.

Month-to-month these may vary. It depends on the cost of doing business, A/R (accounts receiveable), A/P (accounts payable and/or Expense Accounts along with Purchase Accounts) these all factor into your P&L (Profit & Loss).

Another way is to take all your cutting clients total all income from them, subtract your total cost for them (FUEL), this would be close. You can't use labor/time as a factor for this application. You can do this with each type of job/customer you may have, this will tell you how much you made profit and then find the profit % for each one. There is your Profit margin for each service you provide.


Hope this helps or is what your looking for.

caseyshields
12-17-2007, 02:28 PM
I think he is talking about.....if you already know your costs of doing business.....what percentage do you add in to make your profit. How much percentage do YOU add to your total cost of a job to make YOUR profit? I know mine varies from job to job and person to person. I try to make as much as I can on each job. When you tell the person the cost....and they wince....that's what I look for!
Basically, do you add 15% to total cost for profit? More? Less? What is YOUR profit margin?

pmblair
12-17-2007, 05:15 PM
Well, it would seem to me that if you know your cost to do business, then you could figure out your "profit margin" by taking your cost of business per month, divide it by the number of jobs you do, then you'll have a rough estimate of how much you're paying to do a job... then just subtract that from what you're getting payed to do the job.

Right? ...or was I WAY off there...?

realhuntin
12-17-2007, 06:36 PM
Quote[/b] (caseyshields @ Dec. 17 2007,3:28)]I think he is talking about.....if you already know your costs of doing business.....what percentage do you add in to make your profit. *How much percentage do YOU add to your total cost of a job to make YOUR profit? *I know mine varies from job to job and person to person. *I try to make as much as I can on each job. *When you tell the person the cost....and they wince....that's what I look for!
Basically, do you add 15% to total cost for profit? *More? *Less? *What is YOUR profit margin?
When doing profit %'s on large jobs such as Hardscapes and Landscapes you would have to figure what your area can take

For ex. most landscape companies buy wholesale prices and use retails pricing for the estimate for plants total cost to customers and use a multiplier of 2 for the TOTAL COST of said job, this will in return give you approx 25-30% profit but after you figure your labor cost into it your profit margin would be realisticly about 15% total profit. This is a common practice around here.

For Hardscape jobs I do it a little different. I total the cost of all materials, labor and equipment rentals (basicly all expenses) find the total add 15% for profit and 8% to that for overhead (my run time, permits, fees, office paperwork, etc).

Remember to do this PART, this is VERY IMPORTANT: If you own your equipment,(mini-skidsteer, compactor, quick-cut saw etc.) you need to add the going rate from local rental company for each day that equipment is on the job to the bid.

realhuntin
12-17-2007, 06:47 PM
Quote[/b] (pmblair @ Dec. 17 2007,6:15)]Well, it would seem to me that if you know your cost to do business, then you could figure out your "profit margin" by taking your cost of business per month, divide it by the number of jobs you do, then you'll have a rough estimate of how much you're paying to do a job... then just subtract that from what you're getting payed to do the job.

Right? *...or was I WAY off there...?
Yes Pat you are some what correct. The way you explained it would get you close, it would at the very least tell you if you should stay in business or not or at least tell you if you need to increase your pricing. As I have tried to explain a GOOD accounting system is crucial in any business, TRACT ALL expenses. this way you can accually see where you lost money and where you made money, wheater you have a solid P & L or not. A solid business continues to be solid by making appropiate changes as needed and this begins with solid accounting reports.

FourSeasons
12-17-2007, 11:43 PM
This is great info for people that aren't sure how to find what their profit is or needs to be.
But I wanted to see what you guy's average profit margin is.
If you dont mind sharing.

Actually this is probably not just a easy one number/word answer.

realhuntin
12-17-2007, 11:46 PM
Quote[/b] (FourSeasons @ Dec. 18 2007,12:43)]This is great info for people that aren't sure how to find what their profit is or needs to be.
But I wanted to see what you guy's average profit margin is.
If you dont mind sharing.

]Actually this probably is just a one number/word answer.
15-20 % depends on the job

FourSeasons
12-17-2007, 11:57 PM
Quote[/b] ]15-20 % depends on the job
Tim,

Is it the same as if maybe you were a journeyman in some trade or somewhere along those lines. Income wise? Or does it pass that? If it was about the same, what do you like about owning a business in this industry that keeps you in it instead of just going to work everyday for someone else and not have to worry about the problems that go along with running a business. And maybe making the same amount of income.

caseyshields
12-18-2007, 12:08 AM
Quote[/b] (FourSeasons @ Dec. 18 2007,12:57)]Quote[/b] ]15-20 % *depends on the job
Tim,

Is it the same as if maybe you were a journeyman in some trade or somewhere along those lines. Income wise? Or does it pass that? If it was about the same, what do you like about owning a business in this industry that keeps you in it instead of just going to work everyday for someone else and not have to worry about the problems that go along with running a business. And maybe making the same amount of income.
You are thinking of the term "profit" as YOUR paycheck. This is not correct. PROFIT is the money left over after EVERYTHING has been paid....including payroll. Payroll (including your pay as well as employee pay) is an expense.

realhuntin
12-18-2007, 02:07 AM
Quote[/b] (caseyshields @ Dec. 18 2007,1:08)]Quote[/b] (FourSeasons @ Dec. 18 2007,12:57)]Quote[/b] ]15-20 % depends on the job
Tim,

Is it the same as if maybe you were a journeyman in some trade or somewhere along those lines. Income wise? Or does it pass that? If it was about the same, what do you like about owning a business in this industry that keeps you in it instead of just going to work everyday for someone else and not have to worry about the problems that go along with running a business. And maybe making the same amount of income.
You are thinking of the term "profit" as YOUR paycheck. This is not correct. PROFIT is the money left over after EVERYTHING has been paid....including payroll. Payroll (including your pay as well as employee pay) is an expense.
This is 100% correct. Profit is what is left after you pay your self and all other expense. If you are only making enough money to cover your business expenses and what is left is your paycheck then the profit is 0%. Profit is what the company made. You must be able to seperate the two, you never touch profit for personal uses, profit is what makes the company grow, if you are comfortable with this then it's all good and works for you cool, but if you want to grow you must leave some money for the company. Remember you have to pay taxs on what you earned personaly from the business (owner draws) and what the business earned (profit).

When I stated my company makes about 15-20% profit after I checked it year-to-date it is higher. I pay myself monthly just as I was a bill, because I am a bill to the company. You must be disciplined at this, seeing all this money you have earned and wanting to spend some, you cant do it personally not saying you can buy new or newer equipment or reimbursement of owner contributions to the company. If your company has no profit and say you only have one truck and the trainy go out, cost $3k (I know from experience) now what are you to do about keeping up with your customers and getting your truck back on the raod? Profit should be a cushion, for hard times and unexpected happenings.

I know this was lengthly but I hope it brought some light to the topic, this is a GREAT ONE.

Quote[/b] ]
Tim,

Is it the same as if maybe you were a journeyman in some trade or somewhere along those lines. Income wise? Or does it pass that? If it was about the same, what do you like about owning a business in this industry that keeps you in it instead of just going to work everyday for someone else and not have to worry about the problems that go along with running a business. And maybe making the same amount of income.

To answer Rob I would have to say no, not at this point in my life, I could never work full time for anyone. I have been a business owner for 20+years and I don't know if I could work for someone else.

realhuntin
12-18-2007, 02:10 AM
Dipping into the Profit of any company is a sure way to take that company under. No if's and's or but's to it.

FourSeasons
12-18-2007, 08:04 AM
Quote[/b] ]You are thinking of the term "profit" as YOUR paycheck. This is not correct. PROFIT is the money left over after EVERYTHING has been paid....including payroll. Payroll (including your pay as well as employee pay) is an expense.
Good Point. You're right.

Steve
12-18-2007, 08:06 AM
Rob,

Reflecting on this post now, was this more of a question on how much you should be paying yourself or how much profit you should be making per job?

FourSeasons
12-18-2007, 08:25 AM
Quote[/b] ]Reflecting on this post now, was this more of a question on how much you should be paying yourself or how much profit you should be making per job?


Well I don't really know how much I should be paying myself. I take a withdraw or paycheck every month enough to cover the bills and other misc. expenses and leave the rest in my bus. acct. for things like if the truck breaks or whatever. Also for other business expenses. My acctountant told me since I am a sole proprietorship business I don't have to do that but I like to keep the money seperate.

I think everyone here is going to have different income levels because we are all at different stages in our business. When I think of how much I am making I have it stuck in my head as a hourly figure because before May of this year thats what I was working for. So I am always comparing my income to that. Just in my first year its been more than I was making even as it has slowed down. We'll see as Jan. and Feb. go by.

Isn't a bonus of running your own business after it matures the income you can draw off of it. If it is successful.

I'm not sure if I answered the question or not.

realhuntin
12-18-2007, 08:19 PM
Quote[/b] (FourSeasons @ Dec. 18 2007,9:25)] My acctountant told me since I am a sole proprietorship business I don't have to do that but I like to keep the money seperate.

I think everyone here is going to have different income levels because we are all at different stages in our business. When I think of how much I am making I have it stuck in my head as a hourly figure because before May of this year thats what I was working for. So I am always comparing my income to that. Just in my first year its been more than I was making even as it has slowed down. We'll see as Jan. and Feb. go by.

Isn't a bonus of running your own business after it matures the income you can draw off of it. If it is successful.

I'm not sure if I answered the question or not.[/QUOTE]
Rob one thing I see in this statment is what your accountant told you, now please beleive, this is coming from 20+ year of being a business owner with degrees in MIS (Management Information Systems), ACCOUNTING, SMALL BUSINESS MANAGEMENT I am not saying I know more or I am better than anyone else Im just backing up my statement with experience and education. BUT, "I would find a new accountant". It dosn't matter if your a sole-proprietorship, INC or a LLC you should always keep business sepereated from personal. He/She is right you don't have to keep it seperate, but it is best you do. I know this from fact, in 1993 I was audited by the IRS for a 103k discrepancy a customer did not issue the 1099 and I clamed the income on my taxes and in the books with out the 1099 and the customer reported the 1099 so RED FLAGS where popping up everywhere and in 1997 I was audited again for red flags. In 1998 I changed to a LLC, totally seperated business from personal and I was never bothered again. These audits stated because a large jump in income (PROFIT)from one year to another and not seperating business from personal. I congradulate you on wanting to keep it seperate. This has been a good topic for me because it has hit home in how I learned a hard lesson from the school of hard knocks and the IRS. This audit thing is the whole reason for changing and keeping seperated, if it isn't, then there is room for question, if this should ever occur. So stop the questions before they are asked when it comes to business owners and the IRS.

I know this is kinda off topic but I had to try and explain in more detail about accounting and the importance of it. All of this will show you how you can get your "PROFIT MARGIN" easier by using good accounting and why you should.

Thanks for starting this post.
Tim

Steve
12-19-2007, 08:42 AM
Tim,

Do you have any suggestions as to how much a newer lawn care operator should be paying themselves?

realhuntin
12-19-2007, 07:34 PM
Quote[/b] (Team Gopher @ Dec. 19 2007,9:42)]Tim,

Do you have any suggestions as to how much a newer lawn care operator should be paying themselves?
Well the 1st thing I would have to ask is how many customers do they have are they full or part time at the business. 2nd how much have they figuered for expenses, truck pymt, fuel, etc. total the expencses + the revenue = amount company made less purchaes (your pay).
3rd. figure your living expenses all of them on a monthly basis, add together all income (pay checks from other) subtract house hold expenses from house hold income will tell you how much you need to live on.

If the mount needed to live on is less than the business amount earned your ahead of the game. so from there the first year I wouldnt put any strain on the business or your home life, this is VERY hard to do getting started. So only take what is needed to cover homelife bills if it is less. Set money aside when your able for the RAINY DAY, and beleive you me there will be those days. You arnt alone in the feast and famine days, EVERYONE goes through them tough it out and be sure to stick to the savings schedule you make for your business and DO NOT TOUCH IT for anyother reason than what it was created for.

Example; We have 5 different business accounts, NOT counting PAYROLL, 1 for rainy days, 1 for equipment new & repairs, 1 for business expenses, 1 general fund, 1 petty cash.

Note; you can move money from the general fund to any account that might be short for monthly expenses. there may be a time that you think you have to but it can always be worked out where you don't, SO DONT TOUCH IT if it is there for a reason. This is called BUILDING a Business

Now to answer your question Steve, Don't take more than is required to cover household expenses the first year or 2 then you can revaluate your business earnings and adjust how much money you pay yourself.

Sorry I got a little windy there.

pmblair
12-20-2007, 01:48 PM
No, Tim... not windy... informative... I love reading your posts... I always learn something new!

Steve
12-20-2007, 03:47 PM
I guess another big part of this discussion is about keeping your expenses low.

How big of a deal do you find this to be?

How important is keeping your expenses low vs showing off to everyone that you seem to be going great guns?

FourSeasons
12-20-2007, 10:10 PM
Quote[/b] ]I guess another big part of this discussion is about keeping your expenses low.

How big of a deal do you find this to be?

How important is keeping your expenses low vs showing off to everyone that you seem to be going great guns?

I think when you are a newe business owner all expenses need to be kept low as possible. I don't pay on any of my epuipment. I don't have all brand new stuff but I don't need all brand new expensive stuff yet.

I used to get emabarrased in my little s-10 but I could care less now. It does the job and brings in good money. I'll buy a new truck in a couple months cash. Nothing fancy just what I need.

realhuntin
12-21-2007, 02:06 AM
Quote[/b] (Team Gopher @ Dec. 20 2007,4:47)]I guess another big part of this discussion is about keeping your expenses low.

How big of a deal do you find this to be?

How important is keeping your expenses low vs showing off to everyone that you seem to be going great guns?
That is the hardest part of the whole thing steve, keeping your expenses low, your just starting and there is alot of upfront cost that you will never recover, so the first year or two you may not show much of a profit but you made it throught the tough times so this is a big deal to everyone just starting. If the average man/woman goes out and starts a company he/she is doing it on a shoe string budget. So keep cell bills down to minium and schedule your jobs in low milage routes even if you have to move a mowing day on someone.

and yes there is always going to be the Nickle Millionaire at any business and they never last, and if they do its a bigger suprise to them than to anyone else. EVERYONE goes throught the feast and famon thing I did I have and I know what it is like to have little to no money to even go to the grocery and buy food. but determination had paid off form me. I sold my security business to Honeywell and retired to this. I really wish I would have done this type of work 20 years ago.

Steve
12-21-2007, 05:13 AM
Very interesting insight!

It seems to me, it's the expenses that is the bigger trap than anything else.

It seems we all want to look good, not just entrepreneurs but everyone in society. We all want to project the image that we are on the top of our game.

Rob you brought up a very interesting point that I wanted to explore more.

Quote[/b] ]I used to get emabarrased in my little s-10 but I could care less now. It does the job and brings in good money. I'll buy a new truck in a couple months cash. Nothing fancy just what I need.

Can you explain this a little more because I bet a lot of people reading this can relate to you. Why were you embarrassed by your truck? Who did you feel embarrassed by? Customers? Other Lawn Care Operators or just everyone and anyone?

FourSeasons
12-21-2007, 07:51 AM
Quote[/b] ]Can you explain this a little more because I bet a lot of people reading this can relate to you. Why were you embarrassed by your truck? Who did you feel embarrassed by? Customers? Other Lawn Care Operators or just everyone and anyone?

Well when I first started out I didn't really have any money. I bought it from my neighbor for $250 and put a new transmission in it myself for another $250 just to get started. I felt kind of embarassed by customers when I showed up to do work because I wasnt in any type of company looking truck. And also when I was driving around from job to job passing other lcos in a little s-10.
One time their was 4 guys (lcos) in a nice brand new chevy and we were at a stop light. I looked over and the 2 in the back (same age as me) were looking at my truck and laughing. But this is after months of being in business so I didn't really care. Because what it took them a month to make working for that other lco I made in a week easily. Of course thats during the busy time of the year.

Anyways I learned that people want to see quality work. They don't really care what your driving. But I think it might show that you have been in business longer or are more professional with at least a okay looking truck. I think it also gives off a better image to your customers. When you can upgrade then it doesn't look like they might not ever see you again. Maybe kinda shady.

Steve
12-21-2007, 08:38 AM
Rob I applaud you for sharing this insight with all of us.

I want to point a few things out to you.

Quote[/b] ]One time their was 4 guys (lcos) in a nice brand new chevy and we were at a stop light. I looked over and the 2 in the back (same age as me) were looking at my truck and laughing.
As far as this specific situation goes. The 2 guys in the back were laughing? I am guessing that they were sitting in the back because they weren't owners. They were laughing because you are a shinning example right in their face that you are in the drivers seat and you are making it happen without having to go into debt to buy a brand new truck. They use all these excuses to allow themselves to stay as employees and they fear venturing off to do what you are doing now. They laugh because it makes them uncomfortable that you called them out on their excuses. It's nervous laughter. Let them laugh. You are a success in my book.

Now for more stories.

Have you ever heard of Henry Ross Perot? http://images.forbes.com/media/lists/54/2005/C6KA.jpg

Henry Ross Perot (http://www.forbes.com/lists/2005/54/C6KA.html) - Net Worth: $4.2 billion
Source: Investments, computer services, real estate
Self made

Age: 75
Marital Status: Married, 5 children
Hometown: Dallas, TX
Education: US Naval Academy, Bachelor of Arts / Science

Former IBM salesman founded Electronic Data Systems 1962, sold to General Motors for $2.5 billion in 1984. Founded rival information services firm Perot Systems in 1988. Stepped down for politics in 1992, making 2 unsuccessful bids for presidency; warned of job losses from free trade agreements. Since then Perot Systems set up subsidiaries in India. Chairman emeritus spends time supporting military veterans. Son Ross Perot Jr. stepped down from top spot at dad's company last year, still heads Dallas real estate firm Hillwood Development. Money management firm Perot Investments lead investor in new intellectual-property fund.

When Ross Perot ran for president in 1992 it was revealed that he still drove a 1983 Chevy Nova.

Now think about that. This guy is a billionaire!

When you take a moment to reflect on it, you can see how he became a billionaire. He knew where to spend his money and where not to. He was thrifty.

<hr>

Now let's move on to another billionaire Sam Walton.

This is Sam's actual truck! See more of it here. (http://www.fmca.com/motorhometravel/spotlight/2003/0803_AR_walmart.asp)
http://www.fmca.com/motorhometravel/images/spotlight/2003/0803_walmart_c.jpg

Sam Walton (http://beginnersinvest.about.com/od/samwalton/p/aasamwalton.htm) - Despite having billions, Walton still drove a pickup truck and wore clothes from his own discount store, Wal-Mart.

<hr>


Ingvar Kamprad (http://www.forbesautos.com/advice/toptens/billionaire2006/04-ingvar_kamprad.html) - KEA founder Ingvar Kamprad, ranked 4th richest man in the world, drives a 15-year-old car and always flies economy class, in part to inspire his 90,000 employees worldwide to see the virtue of frugality.

Here is his actual car!
I am attaching the picture its a white volvo.

Net Worth: $28 billion
Vehicles Owned: 1993 Volvo 240 GL

<hr>

Now how does this effect your view on what you drive?

FourSeasons
12-21-2007, 10:32 PM
How does it go -
Those who are busy trying to look rich are actually broke
Those who look broke - are broke
And the rich look like everyday people

I think this is true most of the time.

All the time when I'm driving thru these nice neighborhoods with the huge houses, boats, nice cars, I think wow nice stuff but I bet they don't own any of it. I wonder how much they are in debt.

Steve
12-22-2007, 07:50 AM
Quote[/b] ]I wonder how much they are in debt.

There is a huge amount of debt going on now in our society. You are going to see a lot of fall out from it as well.

Keep all this in mind when you consider taking on debt yourself. Don't try to impress anyone. Do what's best for you and your business.

realhuntin
12-22-2007, 01:25 PM
Quote[/b] (FourSeasons @ Dec. 21 2007,11:32)]All the time when I'm driving thru these nice neighborhoods with the huge houses, boats, nice cars, I think wow nice stuff but I bet they don't own any of it. I wonder how much they are in debt.
Probably up to their EYE-BALLS cus the bank owns their other balls or at least one of them anyway. Your right on the money with the old saying:
Those who are busy trying to look rich are actually broke
Those who look broke - are broke
And the rich look like everyday people

elbow300
11-25-2012, 10:17 PM
I try to keep my expenses (labor, fuel, materials, repairs, etc) to between 50 and 55% of my overall intake. After that, I try to reinvest 25 - 30% back into the business. Whatever is left is profit. I use this formula to aggressively grow the company. I think this much reinvestment is important, both to the growth of the company, and also to ensure the equipment is reliable and efficient. That is critical to minimize down time. Guys standing around or having to go back due to equipment issues will eat into your bottom line quickly. Our company is largely maintenance based, so labor is by far our largest daily expense.

aduttonater
11-26-2012, 08:48 AM
I usually don't have profit figured out until the job is complete, I'm paid, and all expenses are paid. I usually take home 70% of the total job cost. This is not including paying myself or the time I had to spend in order to complete jobs. However the people that I work with get around 15% of the total job once they are paid. It helps to keep cost extremely low, and to keep it low everyday that you complete work tasks for the community.

stevef1201
11-26-2012, 11:50 AM
I looked over and the 2 in the back (same age as me) were looking at my truck and laughing.

.

Let 'em laugh!!!!
While they are still paying off thier brand new 4x4 with all the bells and whistles, You and I are going to work in our old but reliable pickups.

Mine is a 1993 Chevrolt C1500. I got it for a grand cash. The paint job was crap, But 100 worth of paint, some work, and now it looks as good as any other truck. Signs were 20 bucks eack. and Now MY Truck is looking just as professional as any out there.

I used to work for a guy who had a real old D-6 dozer, it used about 3 quarts of oil a day. I asked why he didnt buy a new one-He told me 'with oil at 89 cents a quart, and a new dozer costing about 80 grand, well I can put a lot oil in that one for 80 grand'. He's right, Its now how new, or how pretty, its will the equipment do the job, cheap enough every day to justify not buying a new one.
By the way he was RRRRRRRRIIIIIIIIICCCCCHHHHH at the time, and I bet his kids are now to as that was 30 years ago, and he was in his 70s then