View Full Version : Big time company

09-30-2000, 01:32 PM
Did any of you guys read the September Lawn & Landscape? I saw an article about two guys that had a landscaping business that were making $1,750,000 in 1999, the 2000 goal was $2,000,000. They said that they had %75 was landscape maintenance, %15 landscape installations, and %10 snow removal. Of course all that money was before they paid employees, taxes etc.. But still, they had probably at least 1 million just for themselves! I guess we could ALL be that successful if we had enough work to go around for everyone in town. I know even if I ted my town, I wouldn't make any more the $50,000 after taxes, etc.. We all have goals, go for 'em!

09-30-2000, 02:20 PM
Oh, I'm sure they made AT LEAST $1,000,000! LOL

Please, guy.

I'm buddies with a half dozen guys who GROSS $2,000,000 and let me assure you, there isn't that kind of margins.

09-30-2000, 03:28 PM
I thought that way too. But after I paid more attention to the BUSINESS side of it, I now know where it all goes. Its kinda like the 3 stooges episode. Curly wins 50k as a prize, after taxes hes left with $1.50.

09-30-2000, 06:03 PM
Yep that Erin broderick woman was complaining that after she got the 2Mill bonus. The gov got 1.1mil of it

09-30-2000, 07:38 PM
Like I said, if you play your cards right you could be in that boat as well. You have all the advantages of being young, ie. no personal expenses. If you take advantage now you can build an empire. Think big. Build up enough assests like equipment and equity now and you will be living like a king, and don't squander your money. Build up your equipment with the money that you make mowing grass and use the other maney that make from that night job for leisure. once you have a reasonable amount of equpmetn and assests your expenses will be limited. And remember, don't under sell yourself.

09-30-2000, 10:08 PM
Just to give you an idea what it's really like.......
The guy that owned the tree service i used to work for grossed 3,000,000 the last year i was there , about 12 employees, he made about 200,000 for himself. And that was pretty good, now guess where the rest of that dough went?

09-30-2000, 10:44 PM
I'll take a guess where it all went:
Local Taxes
Federal Taxes
State Taxes
Trailer license plates fee
Gas for mowers/equipment
Gas for truck
New equipment
Storage Unit
Truck payment
Liability insurance premiums
Truck insurance premiums
Office supplies
Truck repairs
Cell phone bill
Health insurance
Landscaping supplies
Accountant fees
Unemployment taxes

I'm sure there are more that I can't think of right now. And every one of the expenses I listed were more costly than I envisioned when I set out on this voyage called self employment. I have a college degree in business and still never understood accounting and finances until I began my business. By the way I would much rather bill $90,000 and take home $70,000 than bill $5 million and take home $50,000. Trust me it happens all the time.

09-30-2000, 11:01 PM
You forgot the big one! Employee paychecks!!!Ouuuchh

10-01-2000, 02:45 PM
I think we all have the dream to be a 10 million dollar company. We all also realize the more we grow the more the profits diminish

10-01-2000, 10:17 PM
Where is tha page of that article could not find it in Lawn&Landscape Sept.

10-01-2000, 10:19 PM
Barkleymut some of those expenses do not relate to everyone...our expenses equal 20% not including owner salaries

10-02-2000, 12:04 AM
20% seems extreamly cheap. What kind of equipment and labor do you use.

10-02-2000, 12:38 AM
It seems that even a small business that is running completely legally --- paying all taxes, licenses and fees, would still have at least 50% expenses.

Richard Martin
10-02-2000, 06:02 AM
I am a , for the most part, one man operation and my overhead last year was 23% of gross. That included my personal income taxes, FICA etc.. The point where overhead starts to erode profits occurs the minute you hire full-time help. My average lawn service was $33.10 last year and took about an hour to do. 23% of $33.10 is $7.61. Subtract my overhead cost of $7.61 from my average cut of $33.10 and you get an average of $25.49 that I earned for each hour of work that I did. From my observations I have noticed that for each additional man you hire the amount of time spent on a job goes down by 33%. So, instead of being on a job for 60 minutes I will only spend 40 minutes on the job. This increases my hourly wage to $38.23 <b><i>before</b></i> the additonal overhead (wages, fuel, additional equiptment wear and tear etc..) associated with an additional man are calculated in. If you hire a man at $10.00@hr. and your employee costs are 50% of wages it costs you $15.00@hr. to pay this man. Add in $1.00 per 20 minutes for increased machine use and you have a cost to have this man work of $18.00@hr. Take the $18.00@hr from my wages of $38.23@hr and I am now only making $20.23@hr. If I hire another man to take my place and I stay home I will only profit $2.23@hr. The percentage of gross that would be profit to me would be roughly 6 percent. These numbers are variable and change from company to company but not by a great deal unless the company is cheating someone. Some of the ways to cheat are: Doing crappy work and rushing through jobs, underpaying your help, hiring full time help and paying them in cash (this means you are not paying the 50% employee costs)and cheating on your taxes. The truely sad part is a lot of smaller companies never sit down and figure out what their REAL costs are and operate in the red just long enough to go bankrupt. This IS what happens to a lot of those guys that you see cutting grass in the spring that are gone by summers end.

lawrence stone
10-02-2000, 08:32 AM
You must have went to school when they were teaching that "new" math.

How do you come up with 23% total overhead when SS and medicare taxes are 15% of the net?

On 10k if you had 15% overhead you would net $8500.
15% of $8500 is $1275.

Now if you take the 15%=$1500 overhead and add the social security taxes that is $2775 or 27.75% alone.

[Edited by lawrence stone on 10-02-2000 at 12:35 PM]

10-02-2000, 04:40 PM
Again the owners pay is not included...which means the self-employment tax (Social security and medicare)...***which is from net not gross***. We don't have employees so that is not considered. Alot of what Barkleymut had listed expenses that can be tax deductible..such as Truck expenses, gas, cell phone bills, truck repairs ( out when you lease ), no state income tax in Texas...it just depends on how and where you run your business.

Richard Martin
10-02-2000, 07:22 PM
Lawrence Stone wrote:

{How do you come up with 23% total overhead when SS and medicare taxes are 15% of the net? }

I would show you the specific numbers but there are some things I keep to myself. My tax preparers take full advantage of the tax laws. I keep very detailed records and can tell you in an instant any statistic about my company at any point in time, past, present and future (yes, I make projections).

As I stated in my original message the specific numbers can vary from company to company. The point of my original message was to show how a company could do 2 million in gross and not profit the owner 1 million.

lawrence stone
10-02-2000, 07:35 PM
Richard wrote:

>I would show you the specific numbers but there are some things I keep to myself.

Specific numbers are not needed. I used the 10K figure for its easy to show a percentage of 10k or 100k.

The tax bite on a self employed low earner is at least 30%.

If you had zero overhead you would still have a 30% tax liability even if you made only $15k.

10-02-2000, 08:15 PM
You can not just give percentages of deductions..point is there are many loop holes that accountants can find to give you tax credits lowering your overhead. I read about this person that had salary from his primary job of $40,000 a year. When his new business expenses were deducted, not only did he pay zero taxes but he qualified for the earned income credit, so the IRS actually paid him.
So depending on each ones situation it changes...that is one reason how some of us make it and others don't....finding the loop holes helps greatly. Obvouisly some people have better accountants than others.

[Edited by LoneStarLawn on 10-03-2000 at 12:17 AM]

Richard Martin
10-03-2000, 02:46 AM
Lawrence Stone wrote:

{The tax bite on a self employed low earner is at least 30%}

Not quite. I have the IRS Form 1040-ES instruction sheet directly in front of me. The estimated tax (including self employment tax) on <b><i>net</b></i> earnings below $26,250.00 is 15%. This is for a single person. It is not difficult to imagine a tax bite below 10% of gross in this category.

I paid about 12% of gross earning in taxes, FICA etc.