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What is your profit margin?


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  #11  
Old 12-17-2007, 11:57 PM
FourSeasons FourSeasons is offline
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Quote:
Originally Posted by [b
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.
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  #12  
Old 12-18-2007, 12:08 AM
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Quote:
Originally Posted by [b
Quote[/b] (FourSeasons @ Dec. 18 2007,12:57)]
Quote:
Originally Posted by [b
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.
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  #13  
Old 12-18-2007, 02:07 AM
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Quote:
Originally Posted by [b
Quote[/b] (caseyshields @ Dec. 18 2007,1:08)]
Quote:
Originally Posted by [b
Quote[/b] (FourSeasons @ Dec. 18 2007,12:57)]
Quote:
Originally Posted by [b
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:
Originally Posted by [b
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.
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  #14  
Old 12-18-2007, 02:10 AM
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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.
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  #15  
Old 12-18-2007, 08:04 AM
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Quote:
Originally Posted by [b
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.
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  #16  
Old 12-18-2007, 08:06 AM
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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?
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  #17  
Old 12-18-2007, 08:25 AM
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Quote:
Originally Posted by [b
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.
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  #18  
Old 12-18-2007, 08:19 PM
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Quote:
Originally Posted by [b
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
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  #19  
Old 12-19-2007, 08:42 AM
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Tim,

Do you have any suggestions as to how much a newer lawn care operator should be paying themselves?
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Old 12-19-2007, 07:34 PM
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Originally Posted by [b
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.
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