whats a good profit?

[MowJo]

Understanding that every business and market is different, what profit percentage should I shoot for with a 2 man mowing crew?

For example:

If a 2 man crew grosses $2,000 per week
and $1,000 is deducted for direct and indirect overhead
would the resulting $1,000 net profit per week be acceptable?

What kind of gross does a 2 man crew generate in your area?

[KindGardener]

My 3 man crew (including me) grosses ~ $2000/wk, but that includes both my route ($1400 / wk) and other clean-up & installs.
I can't say that I am netting half... more than a quarter.

[kutnkru]

Is what we strive to beat on Grounds Maintenance.

Hope this helps.
Kris

[Randy Scott]

I think to answer this question, it is based on what you want to make and what you're willing to do to make that money. My goal is to make the most money I can while being happy. To me that might be $2000 cleared a week, and to the next guy it might be $200. Depends on your position financially and where you want to go. Basically what you want to make is what you will shoot for. Achieve that by whatever means is possible. I know you may have been looking more for numbers than my opinion, but those numbers can be widely different from person to person. I know you will get some numbers from the guys though. Good luck and just my 2 cents.


Randy

[awm]

I would endorce randys answer ad.The larger the
volume of work normally the lower percent net.
This seems to be true in most buisinesses.

[parkwest]

This is a question you might want to ask a local accountant. On this site you may want to define what you mean by profit. A guy on another post thought everything after fuel and maintenance was profit. My CPA friend informs me contractors who have been in business for a while typically run 5% to 8% net profit. She says new guys very rarely show a profit. All they see is cash flow and think they are rich. I know a guy who worked his butt off and grossed over $150,000 in his first year by simply going out and under-cutting everyone else price. At the end of the year his accountant told him the bad news - he was in the red by $40,000.

Let's use an example from above:

"My 3 man crew (including me) grosses ~ $2000/wk, but that includes both my route ($1400 / wk) and other clean-up & installs.
I can't say that I am netting half... more than a quarter."

If you take 120 manhours x $17.00/hr labor cost(includes taxes, insur. office overhead etc.) = $2040 just in labor cost. Yet the guy claims a 25% profit.


In other words you could gross a million and still loose money.

[Edited by parkwest on 02-11-2001 at 10:17 AM]

[MowJo]

Thanks for the replys. I agree that dollar amounts are pointless for comparisons, every business is unique. However I'm interested in seeing what more lawn companies feel is a healthy profit percentage for a two man crew. I'm establishing a new 2 man crew and want to know what percent profit they should be generating for me to make it worthwhile. My question is what percent profit do YOU strive for?

Kindgardner thinks he falls between 30-45%

Kutnkru says his profit percent averages 35-40%

My profit percentage seems to be averaging 45-50% (I am not one of the crewmembers)

In retail I've heard an industry minimum avg. is 33%. Whats our industrys minimum avg. percent?

Thanks-Mowjo

[parkwest]

With an 85% failure rate in the Lawn maint. industry I would have to guess our industry-wide average net profit would have to be a negative number.

[goose]

There has got to be a happy medium If you are paying yourself $100,000 and get 10 times the growth and only pay yourself $120,000, that is not good .I have a friend with a large company, He does about 20 million a year.I do a lot less and I par myself just as much as he does,you have got to find out where you are happy and stay in that income. I see a lot of people post on here and bad mouth there own business about not having enough money and they work 60 hours a week.Theres 2 reasons for this ,bad billing system or low balling.I love this business I never got into it to make a lot of money , it just grew into a great business .I'm rambling now. Stay positive guys

[Evan528]

goose, The diffrence is that the guy with the 20 million dollar bussiness taking home the same amount as you probly isnt touching a shoval or a mower all day while your busting your ass!

[parkwest]

goose,

your statement is the perfect example. Your pay is not included in nor comes out of your net profit. If you are going to run a business you need to master basic accounting otherwise it's like saying you're the head football coach and yet you don't have a clue what the quarterback does.

[paul]

goose; I just wonder what his company is worth, I think John Allen talked about that in one of his post. It's not all about what you take home, he might have a couple of 100K(or more) in equipment plus a building and land..... could be worth a lot more than you think.....

[goose]

You guys make this sound harder than it really is, I havnt picked up a shovel in a year and a half. Paul I'm not sure what his business is worth . Its probably worth a good bit of money.Parkwest Im not going to get in a pissing contest with you about how I run my business. That would be just like everyone who jumped on Stone last year everytime he said something that made sense to him and I. I 'm doing just find with the accounting skills that I have

[Twotoros]

I am a solo and I always figure 1/3 is my take home and that is what it takes to live. Therefore I am not making a profit. Correct?

[tazman]

With a 2 man crew, you should be billing out at a minimum of $70/hr ($35/hr per man). 40 hour work week x $70 = $2800.00/week. This year my 2 man crew will bill out $3-4,000/ week. Once the season gets going I will be able to fine tune my dollars. I would agree with the rest that a profit percent of 40-50% is doable, because we do attain those mumbers. Everyone runs their business different. It all depends on how hard you want to work and how sensible you are. It doesn't matter how smart you are in business, but how sensible. Anyway, my 2 cents. Good luck in determing your numbers.

[parkwest]

Hey Goose, didn't mean to ruffle your feathers.

I guess I've spent way too much time with accountants and lawyers over the last 26 years. I just assumed when people were using accounting jargon like "net profit" that we all meant "net profit." I guess in newspeak words mean whatever you want them to mean.

Sorry, I didn't understand. Please forgive my ignorance.

[osc]

SPEED
and how are you able to duplicate profit in multple crews.

When I run a 3 man crew with me being the 3rd man, we can cut $1,200 in grass per day with around $250 going out the door in expenses. We really don't have a lot of overhead except labor.
2 men at 8.50 per hour for 10 hours + 24% payroll taxes = $210.80 + $35-40 gas. If you want to amortize my equipment we can but I like to pay cash and write off the mowers as soon as possible then everything after that is gravy. The trick is bid on the right kind of accounts and be very quick at your job.

After 4-10's I use part timers to finish the week.

Problem: when I am not present, production gets cut in half.

Overall 2000 went well. May was a record month with 30K in grass and landscape but mostly grass, using 5 employees.

[Fantasy Lawns]

nice to take home .15 to .25 cents on the dollar or 15-25% of gross yearly .....but understand many "business" cost can be accounted as a "business expenses" (deduction) on company taxable income (fuel ....for the mowers of course ;-),phone, "business trips", eating out,"entertainment" etc,)

[OBRYANMAINT]

OSC i am sure you do well but why would you not figure yourself into the equation? you must be paid and if you figure yourself into it you will have no suprises later?!

[parkwest]

Could you guys just humor an old man for once and deduct all of your expenses like direct cost, indirect cost and overhead before telling us what your net profit is??

[lawn and stump]

Most accountants don't know anything about running a lawn bus. The best thing you can do is get a software program
so ALL your work is billed and if you do job costing for each job you will know if your making money. When I started I didn't know about job costing. I bought clip and went to their conferences and now my company is very efficent and profitable. That means you afford to pay and keep great guys
Good luck

[dmk395]

Plenty of laborers, but few businessmen here. Your net profit= the amount of money in your pocket after every concievable deduction, including Uncle Sam's share.

[osc]

I do figure myself in. I want 6-700 per day profit minimum or I stay on my regular schedule with no variations. 700 divided by 10 hours is $70 profit per hour and that's about what I cost.
Let the software firms confuse everyone. It only takes a pencil for me to calculate whether I am doing well or not. The equipment purchases are done at the end of the year when I determine I want to spend some profit.
I guess I am too simple but I can guarentee you that I do better than the guy in PARKWEST's senario. How can anyone lose money at this business? My net profit runs 70-80% except when I spend money on capital purchases in December for the next year. It's a choice that I make to save on taxes and keep up the equipment but I could keep the money instead and be fine.

The only time I give someone a price for my own labor is on a time and material job and I avoid those. Everytime you talk cost per hour with a customer you LOSE!
Give a price on the total job and it's none of their business how long it takes you.

[LJ lawn]

not to get off the subject,but by that last post it appears there is some decent scroll to be made down in southern Ohio.

[bilchak]

LJ Lawn,

I hope so. We are about ready to give it a shot in
Central Ohio.

John

[osc]

I have worked in roundtown before, I don't currently service anyone there now. It's a pretty competitive town. There are a few people there who do a real good job.

You are in a great location to service South Columbus area also.

Thomson Consumer Electronics, DuPont, PPG, Georgia Pacific. There are 4 accounts that could make a man well.

[brentsawyer]

Lawn and Landscape magazine just printed annual results about a monthe or two ago. Seems like maintenance was around 45-55% and landscaping was around 35-45%. The larger companies were at the bottom with smaller companies having highest margins. Plan to stay small and make a very comfortable salary for myself this way less headache and better work.

[Dennis]

OK i'm going to attempt to make this simple, if I am right that is!

Twotoros..in my opinion, you are exactly right...
The profit of a buss. of any type is what is left over after everything and everyone has been paid..
It is not just paying for gas and a new weedeater, you must cover everything........with the true net profit you start an IRA or invest in more equip. or something....or you could just pay yourself more...

NOW am I right or not??
Dennis

[Dochere]

Originally posted by Dennis

The profit of a buss. of any type is what is left over after everything and everyone has been paid...


I could get into the logistics of a Sole proprietorship, partnership, corps, S corps, LLC's, and such but it would take forever. The problem with this conversation is that there are people out there that believe that the businesses net profit is the amount that they put in there pocket after all the business expenses are paid. This means that these people are not taking a salary or regular pay. If they have a good week or month, salary goes up, bad, it goes down. If you and the company are the same entity, this is fine. In a corp senerio, this is not the way that this is handled, and this is not company net profit. Our store last year grossed xxxk. I took a salary of about 65k, every week same check. The COMPANY, and I are two separate entities. the company shoots for a net profit of 25-35% on all sales. I am taxed on my income. The company is taxed on its gross income, expenses are paid and what's left over becomes company assets i.e.. company net profit. If I close the company or decide to give myself a bonus out of these assets, I can do so, but I will be taxed again. In my situation the net profit of the company is just that, company net profit.

[David Gretzmier]

it's true, everyone's market is different. I can't imaging running profit like osc, the market must be wonderful. since we actually depreciate equipment ,trucks, and pay comp, insurance, corp, property, payroll and personal taxes, All of these are not linear and symetrical. some are annual, qarterly, and some are linked to payroll expense. to say that one could do it with a pencil is true. It would just take me 2 hours to do it. a day. I am happy with 500-700 production in an 8 hour day, paying people 8-12 per hour on 2 man crew. the third man adds some $$ per day, but added $$ is more noticable on larger properties.

I am confident my brother makes more than I, since he does 2400 per week by HIMSELF. We are looking at 600-700k this year, but we cross all the t's and dot the i's. he takes cash. he takes off Jan and FEB.
BUT, in 2 years I have a business I can sell. He has some equipment he can sell. I am willing to sacrifice some take home now to have a legit business I can retire on.

Dave g

[scott's turf]

If I understand the term correctly, net profit is what we get extra after paying ourselves. Now for me operating a sole proprietorship this means the amount of money left after paying everything and everyone off. I do not pay myself a wage therefor I do not make any profit. I can say that I have in my pocket at the end of the season about 1/3 what the business grossed. I worked only around 300 hrs though so I think this percentage would vary significatly.

[Fantasy Lawns]

DIRECT COST: Occur just to perform business … these expenses begin when labor is use and equipment or vehicles were put into the scope of work or when materials are used n work was performed

INDIRECT COST: flows with direct labor (taxes, insurance, fuel, deprecation etc.)

OVERHEAD COST: support the operation of a business …this takes place EVEN when NO work was done (this is the one people forget to tally)

Remember: Direct & Indirect Cost follow the crew or workers ALL day, punch in to punch out …..Overhead expense SUPPORTS the WHOLE Operation.

When you add ALL these Numbers What’s left is PROFIT …n in real life ....atleast for us ...... I want this number as small as possible .....after all your taxed on this ......look at larger corps ...they pay little taxe ....because they have a great CPA ....whom finds a place to deduct ALL Cost of Operation ....before Profit is posted !!

Dave G your right on target ....I'm with you ..... looking for the long haul is fore me ;->

[Turfdude]

I am one of many who has attended a class in landscape estimating at Rutgers College New Brunswick. Everyone has diffeent overhead of curse, but bottom line, shoot realistically for 15%-18%, if you get 22%+ you're doing great. Remember all of your office time, phone calls, estimates, etc all are a cost (be it just your time or time from family friends, etc...) When bidding landscape projects I always place an 18% profit in bids. Anyone who would put much higher would simply price themselves out of a job. Remember there are 2 different overheads fixed an variable. Detemining these costs are essential in figuring your overhead recovery. From there, add in your profit. I tink most would agre that if their stock market accounts, and/or mutuals, IRA's, etc... earned 15%-18% every year.... that one would be happy.:D

[MWM]

Please join ALCA. It will help us all. Net profit doesn't mean the same to everyone until it is too late. Some of the most successful LCO's are members and more than happy to talk to others in the industry if you just ask. I know from experience.