PDA

View Full Version : Balance


picframer
06-18-2009, 07:50 PM
I was thinking tonight I have to make some serious changes in this company as it has taken on a life of it's own and I no longer have one. Don't get me wrong I am happy for all the work we have ahead of us and the clients referrals and kind comments but I was thinking while doing payroll this evening, this is insane.

Looking back over the past few weeks, with the exception of rain days which have been few, I am pounding in 12 to 16 hours a day, 6 to 7 days a week, son is hiring staff and we seem to be going further behind.

We agreed to pull any advertising including the newspaper and stop taking on any further business, as it stands we have close to two months work ahead and are running a week behind in all four areas we do.

This was supposed to be a fun retirement type business my son and I could work at during the summer along with a few of his university friends, I signed 19 payroll cheques this evening, that to me is just too much.

I have never had to cut back growth so this will be a real challenge for me as we will cut staff as we finish up jobs which is a shame as I don;t know of one staff member that isn't going above and beyond.

The other serious issue I have is all my staff will be going back to University in September, September and October are prime times here for landscaping and laying sod. I spoke to Chuck from the forum about this the other night, it is something I need to address as time flies, I just can't find people that are willing to do this type of work or if you do, let's just say they wouldn't last long.

On top of all this I have my woodworking business which is suffering, we are about to head into tall ship week and we have little inventory yet we prepaid a booth and we are in the advertisements......

Oh the trials of running companies.....

Thx for the open ear....might be over tired....dunno

justin_time
06-18-2009, 08:03 PM
You have 19 employees ? :eek:

I know how you feel, I think I worked for 14 days straight due to rain for 2 weeks so far. I'm a solo man, running a tractor. I know I can do as much and more and many lawns with a ZTR way faster but yeah, it's coming.

Keep your head up, something will be for the best

picframer
06-18-2009, 08:36 PM
You have 19 employees ? :eek:

I know how you feel, I think I worked for 14 days straight due to rain for 2 weeks so far. I'm a solo man, running a tractor. I know I can do as much and more and many lawns with a ZTR way faster but yeah, it's coming.

Keep your head up, something will be for the best

Yes, Seth had three more start today and they worked with me all day doing a wood job, they workerd out perfect. His friends from University are asking to work for us and quitting their jobs, I think something like 12 have done this.

I just need to learn to say no to projects and not keep booking stuff, I should have pulled marketing three weeks ago.

My lawyer who is a long time business friend just bought a lot on the ocean, 11 acres, I looked at it last night, he has a designer come in and wants us to do the work, it will take 5 to 6 people 8 to 10 weeks, not sure how to get out of this, I just do not have the people or the additional equipment however he has done a lot of favors for me over the years and we have been business parteners twice, both companies worked out well, they were quick build and flips we did on the side.

The ZTR will save you at least 30%, that is compareing a deck on a ZTR to a tractor, we use both but the ZTR is pretty friggin amazing.

Steve
06-18-2009, 09:09 PM
This is a very interesting question. It does make me wonder if someone were to come to you for advice on how to scale up to handle all this, what advice would you have for them? What options would they have to choose from?

swstout
06-18-2009, 09:59 PM
My problem is just the opposite. I had 3 jobs cancel today and 4 that were put on hold. 2 of the three major employers here announced major layoffs this week. The unemployment rate for the county topped 12%. I have bought supplies and new equipment based on what was happening and now wonder how to pay for them. Well, I guess I will have to use savings.

Job layoffs are spiraling out of control;not just the 2 big companies (Specialty Metals and Sunoco) but many other small companies that supply them. The third major employer is Coker College which is on Summer break. Even WalMart announced layoffs today!

People aren't spending, they are saving for the unknown. To top that off, the temps are supposed to over 100 for the next 3 days. The heat index today was 105. Have 3 spray jobs for tomorrow, 1 for Saturday (golf course), but only 4 jobs that haven't canceled or postponed for next week. It's getting scary!

Steve

justin_time
06-18-2009, 10:10 PM
People aren't spending, they are saving for the unknown. To top that off, the temps are supposed to over 100 for the next 3 days. The heat index today was 105. Have 3 spray jobs for tomorrow, 1 for Saturday (golf course), but only 4 jobs that haven't canceled or postponed for next week. It's getting scary!

Steve


Holy crap, i tought it was hot today too, it was 25 (about 75) today, and it's suppose to be 29 (84) Sunday, Monday, Tuesday and Wednesday...

majoe7
06-18-2009, 11:42 PM
Andy,

I have the same problem that you have in not knowing when to say no. Sometimes I over commit or fill the schedule to the brim. It takes a lot out of you and the money is great but not everything. I am sure that you know that with all the titles you had over the years. I have a business plan and stick to it. Mine is small growth to keep it controllable. I have a partnership in another business that takes about 50 hours of my time a week. I have given other jobs to my friends in the business being it yard clean up, new lawn account, land/brush clearing, mulch and planting. I even gave up a house check (monitor) to a friend of mine, what did that involve? I had to drive to his house and ensure that his alarm was working property and scan the grounds. Total time, 5 minutes weekly, at a cost of $50 per week. This might be a service you all can offer to your clients when they are away from their home on a vacation or a trip. You can throw it in as a perk or charge for this. This can be one thing that stands you apart from the rest. Sometimes we can’t get to the entire things we want to get too, so delegating some out is great.

With the students going back to school in September maybe if you loose some you can downsize or go to an employment agencies to hire you people that are qualified to work for you at your standards. With all the unemployment we are having here and up there in Canada you can find some skilled workers to fill your needs. I think personally that a person who is skilled and paid very well at a job they just lost will be a good candidate to help you out and stay with you for a long time. I think that I remember you pay your staff avg. about $17- 18 per hour, supply work outfits, morning meeting at the local coffee shop and treat your staff well with respect. I think Justin said he would work for or with you and strongly believe that a good person or persons would too.

From listening (reading) to you over the past several months you are an intelligent man with his priorities in check, business plan in hand and the future planned out very well. I think that you will overcome the small fork in the road. Good luck to you.

Sincerely,
John

BLC0668
06-19-2009, 12:01 AM
Holy crap, i tought it was hot today too, it was 25 (about 75) today, and it's suppose to be 29 (84) Sunday, Monday, Tuesday and Wednesday...

You think 75 is hot? You should try the 95 with 70+% humidity (heat index 100+) we have here in Missouri every summer!! I'm sure anyone in the midwest will agree you can go stand outside for 10 minutes and have sweat running down your face.

picframer
06-19-2009, 04:54 AM
This is a very interesting question. It does make me wonder if someone were to come to you for advice on how to scale up to handle all this, what advice would you have for them? What options would they have to choose from?

This is a learning experience quite different than what I have gone through in the past, what is very different from this and the security business is I invested heavy into infrasture to handle a very large amount of business, hired the people, hired an excellent marketing fellow and then the sales force, I used to say we have size 12 shoes and a size 5 company so lets grown into our shoes. I think this yard care business has size 5 shoes when it needs size 12.

I think hindsight being what it is I should have chosen one or two offerings and stuck to them. When I saw an opportunity I tested the waters so to speak bought additional equipment and advertised it and it took off because I am in a niche market, in excavation we can do things small companies can't and the big guys either can't get into the spots we do or their equipment does far too much damage.

On the wood clearing and chipping side, quite simply I need bigger equipment for the jobs I have quoted. I bought an 8" bearcat chipper, I have other equipment from this company, made in the USA, considered the best and the cost of their equipment is quite high. In three weeks the chipper has been down 5 days, there is a sensor on the main flywheel that is in a very poor location, the dust gets on the sensor eye, scratches then the unit will not feed, Deere has replaced the sensor 5 times, three days ago the fuel pump went, because it's a new brand of motor from Briggs and they have made some plant changes from the little I know, closed one big one in the states, I can't get a replacement pump for three weeks, I have already started jobs based on the fact that we have this chipper and now we have massive piles of brush to chip.

I do have two other chippers a 6" Jinma that has been down for a week as a knife cracked and jammed, did a lot of damage, I ordered replacement parts but only half of what I need is here. Then I have the third unit however it is for smaller stuff, 5" and under, it is 1/2 the speed or less of the other two.

So I returned the Bearcat as I paid close to twenty grand, there is a diesel version however it's close to thirty grand, IMHO it's not worth it, I spent hours searching and calling then doing research to ensure what I found is reliable, dead ends.

I tried renting units from CAT, no luck, all their chippers are in Quebec, or so they say, called everywhere and the biggest I can get is 4", desperate slow using them as they are manual feed, kills the arms so that is a no go.

I got so caught up in the new business coming in that I let things get out of control, I can and will reel this back in, I still wonder though, when you run an ad in the paper, you get lets say 60 calls and they are all withing what you do, you bid, you get 90% yet you have the staff and equipment for 30%, you book this out over weeks and the clients still accept, you bid some of the tougher ones high and the client still accepts, what the heck do you do?

I don't want the company to get the reputation that we are slow getting to jobs, we turn jobs away etc. the world might be big but negative news travels like lightening.

Anyhow I should have probably just stuck to mowing, organic spraying and maybe pressure washing, I would probably be 6 to 8 staff and very easy to manage, now I am in a very difficult position at this point due to equipment. This down time is really cutting into profits as things are going slower, an 8" chipper for 10 days would fix this, I just haven't pulled the trigger for a diesel unit and even if I do I don't know that I won't have issues. I can't research for reports as this is a new line.

Anyhow its almost 7, staff started arriving so I better get going.

Andy

picframer
06-19-2009, 05:41 AM
Staff meeting is over, seems now I have some tension in the ranks, work crews think the excavator and backhoe operators are wasting too much time, this is the first time I have had staff confrontations, generally speaking it is the supervisor on the crew running the biggest piece of equipment and in the heat, I think everyone including myself would like to be running machinery vs manual labor.....I will get to the bottom of it, I think they are working hard as I look at profitability and what staff need to understand is some rocks take 20 min to move, I have seen other take two hours, same with stumps or when fill is delivered, sometimes the quality is not there and we have no control.

Anyhow it's time for the old guy to hit the road.

Steve
06-19-2009, 02:55 PM
If you could drive the situation now into any direction, which direction do you feel would be ideal?

Also do you feel you have now or can create a business and operational plan for the next 12 months? Or is this still in the feeling out stages to see what the potential is?

I am sure there are others reading this who find themselves in a similar situation but don't have your experience to help in overcoming it.

picframer
06-19-2009, 04:54 PM
If you could drive the situation now into any direction, which direction do you feel would be ideal?

Also do you feel you have now or can create a business and operational plan for the next 12 months? Or is this still in the feeling out stages to see what the potential is?

I am sure there are others reading this who find themselves in a similar situation but don't have your experience to help in overcoming it.

I am sure I speak for may when I say if I have a crystal ball I would know the direction to take.

I can build an operational plan based on my current abilities, equipment, vehicles and staff, what I can't get my head around is how to handle peaks of inquiries, even though I have pulled advertising I received seven inquiries from the website today, there is no way I am going to change things to drop my rankings yet I am finding it difficult to respond to these people, I mean what do you say, too busy .....sorry??? That doesn't sit well with me.

I hanve a handle on our abilities and what all the equipment can do, I could throw another $160,000 into this from my other company and the issues would be fixed as I would have the equipment to handle this peak but I do not want to do that, I "think" I want to go back to running a simple company, 7 or 8 employees and just ride it through and have some fun.

Sprayed all day with one of the tractors, I love spraying on the X500, in and out in 20 min or less, no pressure, just you and the machine and time to think.

Calls for rain for two days so I will have time to figure this out, part of me is tempted to sub out to some local companies not doing so well but that brings on a whole bunch of headaches if they do not do quality work and I honestly do not need any head aches at the moment.

I'll post back, I was pretty down yesterday when I wrote this, it was a desperate hard day, ran a chain saw it the heat for 7 hours, not a fun thing but that crew was behind and I can really cut wood when I go at it.

Anyhow, have a super weekend, Happy Fathers Day to all, and don't forget about dad.

Andy

Steve
06-19-2009, 06:17 PM
A couple of things I wonder is, first off, is it a big deal to schedule any of the excavating stuff into the future? Can the customers understand this is a busy time of year and its no rush or do they demand service asap?

Is it possible that the time issue is something you are more worried about than your customers?

Also, at what point does the management of the staff become a big pain in the butt and how is it best to handle this? Can there be different crews that are given a task and can operate their crew like a small business? Where a crew manager gets a % of the job and therefor feels they are being compensated for the running their own staff or is this not a good way to go?

picframer
06-19-2009, 08:05 PM
A couple of things I wonder is, first off, is it a big deal to schedule any of the excavating stuff into the future? Can the customers understand this is a busy time of year and its no rush or do they demand service asap?

Is it possible that the time issue is something you are more worried about than your customers?

Also, at what point does the management of the staff become a big pain in the butt and how is it best to handle this? Can there be different crews that are given a task and can operate their crew like a small business? Where a crew manager gets a % of the job and therefor feels they are being compensated for the running their own staff or is this not a good way to go?

Very Good questions:

The excavation is booked at the moment into the last week of July, I allowed for three rain days a week, for example if we rained on a Monday and Tuesday, we would use Saturday and Sunday to catch up. I allow one day a month for maintenance per crew.

The time issue is being pushed by clients and myself, I would guess 90% of the time the client needs you within a week, it could be a water coming in the house problem, I have stumps to remove and want top soil spread and sod, etc.

Crap happens, I book the equipment, all of which is new into the schedule, I do not allow for repairs because it should be fine, however for example, one of the new excavators started loosing it's tracks at 20 hours, cost is about 4 hours one day putting them back on, John Deere investigated and discovered 80 some of these units were recalled, mine was one however it never received the replacement track, the local dealer was wild, anyhow they flew new tracks in however we lost three days of good weather then it rained for two, that put us 5 days behind.

Then lets say you ask me to level an area, I quote 7 hours, my staff do the job, you like it and want an additional area done, or you find more stumps or rocks, it doesn't make sense for me financially to move the gear and come back so we do it, I would guess this happens 80 percent of the time, clients like what they see and ask for the staff to do a little more, I have seen $1,100.00 quotes turn into $4,500 plus on a very regular basis, so now you are really far behind and people start calling.

This industry is known for not being reliable from sales calls to showing up on time, I didn't want to be one of those companies.

I was thinking while walking the dog tonight I could rent or lease one for a few weeks but I do not have anyone trained up yet, we cross train which is critical however the staff being trained are too green to let loose on your property, these units will do serious damage in seconds if you do not know what you are doing, so there is a learning curve issue.

We hired an operator a few weeks ago who graduated from heavy equipment at the community college, I would rate his work fair to good and we discuss each completed project, yes I am fussy but people are going to get what we discussed and what they are paying for, anyhow I wanted tomorrow off, a client calls at supper Ben had finished his drain and excavating an area for a garage, he was concerned so I went to see, I was concerned to as it wasn;t done right, called the employee to see why it was done this way, no real answer, so I have to go back tomorrow and fix it myself as the employee is about three hours away for the fathers day weekend.

I don't really have staff issues per say other than everyone wants to run equipment, the team leaders do a good job however there is no supervisor on the excavation side and sitting here thinking there should be as we have five units out there, a supervisor could watch the progress and correct issues, hummm thinking that is something I could do which would take some heat off.

The issue Steve is when you have this many staff, keeping track of hours, sometimes the employee doesn't agree with hours paid, inputting all this, doing the tax reports etc. it's desperate time consuming.

I think I need a mature 2nd in command, my son does an excellent job at what he does and perhaps I need to loosen the rope a little more.

Steve
06-19-2009, 10:11 PM
I think I need a mature 2nd in command, my son does an excellent job at what he does and perhaps I need to loosen the rope a little more.

It's situations like this where opportunities present themselves that people get a chance to rise to the occasion and take on the task at hand. I'd love to see how it all works out with him.

Scaling up operations like this and having proper management must be tough. It does make you think this must be why the whole franchise concept was created, to spread the management needs to a greater group while also pass on a greater opportunity to be paid for that increased responsibility.

Either that, or just having slower growth over time would potentially allow for staff to be better trained and have more a desire to get things done the proper way because they would want to keep their job over the long haul.

majoe7
06-19-2009, 10:36 PM
I don't really have staff issues per say other than everyone wants to run equipment, the team leaders do a good job however there is no supervisor on the excavation side and sitting here thinking there should be as we have five units out there, a supervisor could watch the progress and correct issues, hummm thinking that is something I could do which would take some heat off.

Andy,
I ran a company that had about 145 employees at any given time. What help me out greatly in being successful was that I had 4 Managers under me in running this company. I was the “Boss”, General Manager. 1 was in charge of payroll, 1 was in charge of schedules, 1 was in charge of purchases and the last one was in charge of employee relationship. His job was to do the hiring based on needs, put together funs days or events for staff and follow up on company policies and rules. This helped out a lot, sure they made a little more money but they had responsibilities. We would have short meetings like you do with your supervisors and go over the day business and what we were planning for the future regarding growth and direction. When I delegated these responsibilities I became freer and a better view of what was going on. I was more hands on but stayed out of the way and helped coach my managers in their daily decision making.

I think I need a mature 2nd in command, my son does an excellent job at what he does and perhaps I need to loosen the rope a little more.The issue Steve is when you have this many staff, keeping track of hours, sometimes the employee doesn't agree with hours paid, inputting all this, doing the tax reports etc. it's desperate time consuming.

No one better than family is the right person to step up to help you run this company. Your son is blood. You can give him a Small Partnership %, a Title like V.P. of Operation; name him a Managing Partner ect. As for the hours worked to hours paid, do you pay your staff form the time they leave the shop or when they get on the job? You can have the supervisors call you and report daily or track weekly on a time card the hours the employee worked. Tell the staff in a general meeting what is going to happen to ENSURE all staff is paid according to hours worked. Let them also know that they will sign a sheet at the end of the day/week/job for verification. Then you can rid yourself of one headache and potential labor issue say if you decide to terminate an employee.

I hope that this can help.

John

Steve W
06-20-2009, 02:22 AM
Yes Sir: Sounds like it's time to start molding your company. You have a good thing going and offer what people need and want. It's time to let your Son be a Boss too, or thats what I have been reading. You started this Company to have FUN. Maybe you should handle the Tractors and maybe the spraying part of the Company and let your Son handle the Mowing and Pressure washing. Kinda break it up a lil and enjoy what you are doing. You and your Son can have teams and each time will have a team leader. The team leader makes sure things are done and done the way You or your Son wants it done.
Yall can't stand there and watch every lil thing the teams do,So let the leader have some control. The meetings every morning are good. But maybe You should only have Your Son, You and the team leaders meet every morning, so that the leaders can say what needs to be said about their team, and not have to worry about stepping on John Does Toes. That way you and your Son can weed out the ones that aint working. Of course the team leaders should be ones that you know you can put trust into and they should be paid better than the other team members. Maybe have the whole teams meet once or twice per month so that the other team members know that you are still in control and so they can speak their mind also. After All, you wanted this Company to have Fun.
Maybe Have your Son as a supervisor and sombody else be one, So you can Run the company and still have your Fun doing so. That way you can still have time to do your Owner thing and go from one team to another doing what you want to do, HAVE FUN!:D You have built a good Company with your ideas and knowledge so don't go getting down on yourself when things get tough.
Hell, If you wanna see tough, Look @ my lil LCO. I have so many things I wanna do with it but can't afford to.
Andy go have your Fun and keep up the good work. You can do it!:D

picframer
06-20-2009, 03:59 AM
Andy,
No one better than family is the right person to step up to help you run this company. Your son is blood. You can give him a Small Partnership %, a Title like V.P. of Operation; name him a Managing Partner ect. As for the hours worked to hours paid, do you pay your staff form the time they leave the shop or when they get on the job? You can have the supervisors call you and report daily or track weekly on a time card the hours the employee worked. Tell the staff in a general meeting what is going to happen to ENSURE all staff is paid according to hours worked. Let them also know that they will sign a sheet at the end of the day/week/job for verification. Then you can rid yourself of one headache and potential labor issue say if you decide to terminate an employee.

I hope that this can help.

John

My Son Seth is very well trained and would do an excellent job at running operations, he currently runs the HR/hiring side, keepts track of hours, makes sure the crews he is with are doing the job the client expects at a pace I have set down.

The issue is he is in training 5 nights a week and weekends, the Canada Games are in a few weeks, this past two weeks he has only been able to work three days due to training and the olympics are his focus and should be at this point.

I am going to work on an ad this morning and get additional management in place, our profit margin in all areas remains high and the company can afford to do it so I think that is what we will try and see how it goes.

As you know introducing management creates some real issues with staff under them when the management person has not had a chance to be one of them, I have been through this so many times I know what to look for in a manager and how to manage the staff to get everything on side, it does take effort but as you noted it is worth it.

Have a super weekend!

Andy

Steve
06-20-2009, 07:49 PM
As you know introducing management creates some real issues with staff under them when the management person has not had a chance to be one of them, I have been through this so many times I know what to look for in a manager and how to manage the staff to get everything on side, it does take effort but as you noted it is worth it.

Andy,

This makes me wonder, with all your experience thus far, when is it best to bring in an outsider to manage vs. take someone from within?

Whats the benefit and downside to each of these options?

picframer
06-20-2009, 08:05 PM
Andy,

This makes me wonder, with all your experience thus far, when is it best to bring in an outsider to manage vs. take someone from within?

Whats the benefit and downside to each of these options?

Steve, I do not believe there is a generic answer, in any of the companies I run, it depends on the objective, the company, staff they will oversee and the list goes on.

In this case, I need someone other than University students, if this person works out I will give them part ownership after say a 6 month probation, I want to teach them the woodworking side also as I will go at this company this winter and build it employee wise.

Steve
06-20-2009, 08:45 PM
In this case, I need someone other than University students, if this person works out I will give them part ownership after say a 6 month probation

This is very fascinating too. I have always wondered what works best in giving someone a vested interest in a business.

Do you have any thoughts on how best to make a situation like this work? How much % of a business should a manager get? Or should they be given a % of the profits instead?

What happens if they work for a year or so and then take off, they will still have a % of the business. Is that a potential problem?

picframer
06-21-2009, 05:17 AM
This is very fascinating too. I have always wondered what works best in giving someone a vested interest in a business.

Do you have any thoughts on how best to make a situation like this work? How much % of a business should a manager get? Or should they be given a % of the profits instead?

What happens if they work for a year or so and then take off, they will still have a % of the business. Is that a potential problem?

There are many ways to reward employees for performance and staying with you. When in banking we offered a host of services and consultation, on of these services was the management of what is called employee share purchase plans, most of the big public companies have them as they offer tremendous bang for the buck.

You can set up a phantom share plan, totally legal, let's say you want your company to issue 10,000 shares and the value of your company (based on your balance sheet) is 100,000 today, that means each share is worth $10.00, as the company makes money the balance sheet changes and the shares go up.

One big advantage is you can say to staff for every dollar of your pay you invest in the company, the company will match by 25%, you need to cap your max bi weekly contribution for control, I suggest 10% of the salary or income, so if an employee wants to put in $100.00 per pay the company would put in $25.00, in this case they would get 12.5 shares, the advantage to the company among other things is your working capital just increased $100.00.

If an employee wants to leave, have it written in the plan that the shares would be returned to treasury and the shareholder would be paid based on the previous quarters balance sheet share value.

The way things are set up now is employees receive a percentage of profits in the fall of each year, based on a formula I wrote and they must stay with the company until August 31st annually, I had to pick this date as University starts up again, it is capped at $3,500.00

Shares are paid from what is called retained earnings, retained earnings are in short the profit of the company from a previous year end. If your company made an annual profit of $10,000 and you did not pay it out as a dividend, it is considered capital for the new year.

If I lost anyone, ask away, I designed over 200 of these plans for companies that had as little as 10 employees to large power corporations and telco's with thousands of employees.

You can sell shares in your company to employees as well, this is a very cheap way to raise capital.

My lawyer friend whom I spoke about in another post and has a three month job for us wanted to by a 25% ownership in my company however for now I am not going that route, I don't want to let go of that much ownership and the company does not need a capital infusion, if it did I would put the cash in however it is doing very well bottom line wise.

Steve
06-22-2009, 10:47 PM
You can set up a phantom share plan, totally legal, let's say you want your company to issue 10,000 shares and the value of your company (based on your balance sheet) is 100,000 today, that means each share is worth $10.00,

I got a couple of questions.

First, how should you create a value for you company when it comes to this? Maybe add the value of all the equipment plus one month's revenue? Or should you do something different?

as the company makes money the balance sheet changes and the shares go up.

How do you figure what the company is making for this situation? Is it before expenses? After expenses?

The way things are set up now is employees receive a percentage of profits in the fall of each year, based on a formula I wrote and they must stay with the company until August 31st annually, I had to pick this date as University starts up again, it is capped at $3,500.00

So would this be another kind of compensation plan then or is this the same as you mentioned above? What percentage of profits would you suggest a lawn care business owner use? Also, what is to stop a lawn care business owner from taking the profits and instead of paying them out in the compensation plan, to putting that money to more equipment and then telling the employees, oh well, we didn't make any profits. ?

swstout
06-22-2009, 11:27 PM
I have a few questions also. Andy, you are in Canada, I'm sure the tax and corporation laws and regulations are different. I know that bonuses here in the states are taxed on the highest tax rates, the capital gains tax rate. I received a $2,000.00 bonus when working for Homeland Security. I actually received less than $1,000.00 in the check. Granted, I got most of it back when I filed may taxes, but about 16 months later.

As a company, you would have to pay the additional 7.65% social security tax, the supplemental security tax, workman's compensation taxes and whatever other matching taxes the IRS comes up with.

Would it not be better to use the bonus structure to pay more of such benefits as hospitalization, education, or retirement expenses? With these, you could at least get tax deductions or credits. You could save money and your employees would be taxed at the lower tax rates.

Maybe the Tax lady could shed some light on this?

Steve

turfmaster
06-23-2009, 12:17 AM
Would it not be better to use the bonus structure to pay more of such benefits as hospitalization, education, or retirement expenses? With these, you could at least get tax deductions or credits. You could save money and your employees would be taxed at the lower tax rates.

Maybe the Tax lady could shed some light on this?

Steve
[/SIZE]

How about a employer contribution to a 401k.

picframer
06-23-2009, 04:27 AM
I got a couple of questions.

First, how should you create a value for you company when it comes to this? Maybe add the value of all the equipment plus one month's revenue? Or should you do something different?

You use the book value which is assets that you have on your balance sheet less liabilities



How do you figure what the company is making for this situation? Is it before expenses? After expenses?

To figure what you are making simply run an income statement, one has to be careful to not mix income with capital, they are different in accounting. Also the value is not calculated the same for example as if you were selling the company.

So would this be another kind of compensation plan then or is this the same as you mentioned above? What percentage of profits would you suggest a lawn care business owner use? Also, what is to stop a lawn care business owner from taking the profits and instead of paying them out in the compensation plan, to putting that money to more equipment and then telling the employees, oh well, we didn't make any profits. ?

There are many compensation plans one can do, this is only one, you could contribute to an employees retirement savings plan, when calculating any bonus in my case it is net income that is income after all expenses and tax, I then plan to pay out 20% of the net as it is a tax deduction for the company, at least here.

If you take all the profits and buy equipment, equipment is a capital asset and has no bearing on the income statement other than year end when you calculate deprecation, however one takes this out prior to calculating your net cash income.

If a small business is going to offer anything to an employee I strongly encourage you to write bi-laws for your company which cover this among other things, also include it in an employee handbook, it will cover your butt.

picframer
06-23-2009, 04:34 AM
I have a few questions also. Andy, you are in Canada, I'm sure the tax and corporation laws and regulations are different. I know that bonuses here in the states are taxed on the highest tax rates, the capital gains tax rate. I received a $2,000.00 bonus when working for Homeland Security. I actually received less than $1,000.00 in the check. Granted, I got most of it back when I filed may taxes, but about 16 months later.

As a company, you would have to pay the additional 7.65% social security tax, the supplemental security tax, workman's compensation taxes and whatever other matching taxes the IRS comes up with.

Would it not be better to use the bonus structure to pay more of such benefits as hospitalization, education, or retirement expenses? With these, you could at least get tax deductions or credits. You could save money and your employees would be taxed at the lower tax rates.

Maybe the Tax lady could shed some light on this?

Steve


Yes tax laws are very different between the two countries, accounting principals for the most part are very similar.

A bonus here is calculated as straight income, it's whatever the employees tax rate is for their standard income.

As a company I only have to match the unemployment income, every pay every employee must contribute a percentage of their income to Tax, Canada Pension Plan and Unemployment Insurance, as a business I have to match the unemployment income by 2.2 times for if you have $1.00 in Unemployment deductions the business has to pay $2.20 then remit the $3.20 by the 15th of the following month.

In my case all staff are currently covered health wise under their parent(s), keep in mind our health care is very different here, for the most part it's covered if you go see a doctor, drugs are your responsibility. Your 401k I believe it's called is similar to our RRSP, this is an excellent way to help them save for the future however at the age of employees I hire, they are not interested.

andyjoneslawncare
06-23-2009, 09:54 AM
I'm a little late to the conversation, and a little overwhelmed by all of this. I'm getting stressed just reading it. I always assumed that I'd always want to keep advertising and marketing and trying to get more accounts, and then just hire more people as the business grew. You're really opening my eyes to a lot of different factors and issues to consider. Honestly, when I read your original post, I was rolling my eyes at someone complaining about too much business, and every time you try to do a $1000 account, it turns to $4000. Such big problems you have! I think I'm getting it now, although I won't pretend to relate, but handling employees is a whole separate skill that I haven't had to deal with yet. I've been a GM at Red Lobster where we had a kitchen manager, dining room manager, and bar/hostess manager and I have management skills from that experience, but thats a big company that makes all the decisions for you and handbooks, 401k and healthcare options are already dictated by the company. I guess you learn and adapt as you grow your business, and since your business has been growing faster than you may have expected, all of the new stresses are getting to you. Its funny though that all we want to do is make our business grow (thats the point of a business) but when it does, you want to pull back to your comfort zone. As far as the posts about the heat, its been 95 degrees everyday for the last 2-3 weeks, and will stay that way through september here. Heat index was 117 yesterday and I was throwing up in the back of my truck by 12:15pm, then did 4 more yards. I started at 9:15 digging up roots and wacking them with an axe trying to hurry before it got too hot, but at 5am its already 80 and by 9 its 90. Driving a zrt through yards is no big deal and I'm used to it but a shovel and axe for 3 hours?! Anyway, I'd love a day thats 80 degrees! Quick question for you northerners, since lawns are a summer thing up there, how does it effect your income the rest of the year and how do you retain employees? I guess hiring from the University works out well?

turfmaster
06-23-2009, 07:23 PM
Quick question for you northerners, since lawns are a summer thing up there, how does it effect your income the rest of the year and how do you retain employees? I guess hiring from the University works out well?

A lot of guys do snow removal, snow plowing, salting.
There is more money in snow plowing than in mowing, long as we get enough snow.

Retaining employees in this business can be tough that's why I remained solo for so many years.

I have gotten lucky with some mature 16-20 year olds.
Problem is just when you get them trained the way you want them they either go off to college or move on to something else.

picframer
06-23-2009, 07:34 PM
A lot of guys do snow removal, snow plowing, salting.
There is more money in snow plowing than in mowing, long as we get enough snow.

Retaining employees in this business can be tough that's why I remained solo for so many years.

I have gotten lucky with some mature 16-20 year olds.
Problem is just when you get them trained the way you want them they either go off to college or move on to something else.

Or they start their own business, this happens(d) to me so many times in cabinetry, construction and fine woodworking that I gave up and went solo.

I do a fair amount of snow plowing, the city is very specific on gear that they will hire for sidewalks, bus stops and fire hydrants so I made sure all the tractors I bought fit the bill. I did some bus stops and fire hydrants last season, it's very long hours, basically you are given a section and you only have a certain amount of hours to do it so you run the gear 24 hours, 2 12 hour shifts.

I have my name in for the fire departments and have an in as the chief is one of my best friends, they plow their own spaces with trucks however they hire loaders to push the snow back two or three times a year, it's by the hour and very good money.

My issue will be finding people to drive the gear, I have contacted several retired military people and have three lined up.

Personally I do my woodworking from mid September to March, I really ramp up in October as one can make a lot of money during the craft season, I import 67 species of exotic woods and make high end crafts.

There is always lots to do, late fall and early spring are good times for wood clearing and chipping, the two dead months are January and February, I am going to Brazil in January for most of the month and will build woodworking inventory in February, March and part of April to get us through the summer.

Mid April excavation starts as people start having water problems and that is pretty much the circle of business life here.

Steve
06-23-2009, 08:33 PM
I then plan to pay out 20% of the net as it is a tax deduction for the company, at least here.

Ok so you would suggest 20% of the net profit be distributed to employees as a bonus? Should all employees be paid the same amount of a bonus or does it depend on their position and their length of employment? What are your suggestions on that?

picframer
06-24-2009, 04:31 AM
Ok so you would suggest 20% of the net profit be distributed to employees as a bonus? Should all employees be paid the same amount of a bonus or does it depend on their position and their length of employment? What are your suggestions on that?

I am of the opinion 5% would be a min, 20% max.

All employees should be treated the same in my experience.

Steve
06-24-2009, 04:04 PM
Andy when you helped other businesses set up these compensation plans, were any of them smaller businesses or did they usually have at least X amount of employees? Should a lawn care business with even a single employee look to offer this?

picframer
06-24-2009, 09:03 PM
Andy when you helped other businesses set up these compensation plans, were any of them smaller businesses or did they usually have at least X amount of employees? Should a lawn care business with even a single employee look to offer this?

A company of any size could do it, I think the smallest I handles would have been 20 employees, keep in mind I only dealt with corporations for the most part, a small business with one employee....personally I would not do it, I would offer some type of monetary plan rather than shares.

The past few days have been amazing, I think a lot of this was being over tired. I hired four more people including a ladscape designer and she is amazing, she is somewhat manager of operations, 28 and is very good with the staff and the staff love her. She wants to learn woodworking/snow plowing so I can keep her on year round

I have been working with the lawn care group and having a blast.

Steve
06-24-2009, 09:39 PM
personally I would not do it, I would offer some type of monetary plan rather than shares.

I bet a lot of our forum members would be in this boat. What advice would you have to them with the monetary plan?