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Mikes Lawn Landscape
07-24-2004, 08:44 AM
Attn: All I wanna start mowing lawns so I can make some money.

This is gonna be hard for you guys to grasp but If your new to this "Lawnboy game" plan on working your first year for free and I mean that literally.

I have exceeded all my Revenue and profit goals this year and you know what I'm still working for free.

Yea we can talk about cash flow and depreciation and margins but the reality is I am still working for free. My net profit might cover my investment in this business this year but it is still gonna be difficult.

So if you wanna get hot and sweaty and dirty and tired and sore and make $0.00 per hour then go buy a mower and a weed whacker and go mow some lawns.:blob2:

You guys wanna argue or brag then you don't have a grasp on business issues and I suggest you learn.

My very first lawn I mowed this year cost me $40,000 you got that kinda money to burn then I say mow some lawns. :confused:

And yes I know my costs and I knew it would be like this this year so don't give me a load of crap about needing to know my costs I know them very well thats why I am working for free.

matthew horner
07-24-2004, 09:01 AM
You should'nt fill up your gas tanks inside your enclosed trailer!

Mikes Lawn Landscape
07-24-2004, 09:11 AM
Originally posted by matthew horner
You should'nt fill up your gas tanks inside your enclosed trailer!
Thank you for that thought provoking and well thought out response to my post.
Originally posted by Mikes Lawn Landscape
You guys wanna argue or brag Or post useless info. then you don't have a grasp on business issues and I suggest you learn.

ElephantNest
07-24-2004, 09:24 AM
You want ME to learn business issues, and you can't make a profit?

LMAO

Over 20 years in this biz, and I've never, NEVER had a negative week.

Mikes Lawn Landscape
07-24-2004, 09:27 AM
Originally posted by ElephantNest
You want ME to learn business issues, and you can't make a profit?LMAO
Over 20 years in this biz, and I've never, NEVER had a negative week.

You did not understand the post did you !:rolleyes:

Mikes Lawn Landscape
07-24-2004, 09:46 AM
Originally posted by ElephantNest
Over 20 years in this biz, and I've never, NEVER had a negative week.

Elephantnest,

Since you have so much experience can you please explain break even analysis to us newer guys so we'll have a better grasp on it.

Thank You.

DFW Area Landscaper
07-24-2004, 09:53 AM
http://www.lawnsite.com/showthread.php?s=&threadid=76636&perpage=10&highlight=mikes&pagenumber=2

Mike, you aren't whining, are you?

Hell, the way you dish out advice and put people down, I figured you were getting rich out there mowing lawns.

At the very least, I thought you'd been in business long enough to be dishing out the advice you were giving, especially in light of the way you did it.

You call my business practices arrogant. You call my pricing schemes "ridiculous". You tell me my people skills are lacking at best. And all the while you're busting your butt, just as I did my first year, to make absolutely nothing.

Had I realized you were in year one, your comments wouldn't have bothered me.

It sounds as if you're surprised at how hard you've worked and how little you've made?

Now honestly, was it part of the original game plan to work your butt off for an entire year to make ZILCH?

It wasn't for me, but maybe you were able to understand the costs of being in business before you were in business better than I was. I honestly expected to make money at this in year one. And I did. I made $56.06 last year. Looks like I might clear $25K this year if things go as forecast.

Later,
DFW Area Landscaper

ElephantNest
07-24-2004, 09:58 AM
Uhhh...what are your costs, everything included......what do you need to make to get to that point......and then further, and more importantly, what do you need to make a profit above and beyond your break even point. That margin, let's just call profit margin. 8)


You tell us not to give you "a load of crap", you tell us to go get sweaty mowing and make nothing. And then you say if we disagree (argue), then we don't have a grasp on business issues. YET, You're the one working for less than peanuts, I make a nice little chunk of change every day, thank you. Mowing has gotten me to where I am today. Two nice vehicles, over $30,000 in equipment (I'm solo for the most part), my house is paid for...yada yada yada.

Yup, I have NO grasp on business issues.

SouthernFried
07-24-2004, 10:15 AM
Break even analysis when I started.

Girlfreinds moms mower $0
Freinds electric weedeater $0
broom $0
Old Mercury Marquis (paid for) $0

Total cost of equipment $0

Making copies of flyers on freinds copier $0

Distributing flyers on car windows during spare time when I wasn't doing anything else. $0

Total advertising cost $0

Gas, string, miscellaneous costs ~ $40

Income first month of mowing ~$375

Gross Profit (before taxes) first month of mowin ~$335


I have never not made a profit doing this. And, I have paid cash for all my equipment since I first started with the profits I made.

Now, you wanna start big, with a huge debt burden...ok, fine. That's one way of doing it. But, I've seen my fair share of Companies go out of business doing it that way. Also seen my fair share of companies do great with high initial debt.

So, your working for free your first year. With that debt burden you knew you would. I have never had the debt, and have never worked for free. That was my choice...and that is your choice.

What's your point?

BCSteel
07-24-2004, 10:18 AM
Hey Mike, this is a green industry forum. If you're going to go trolling try a fishing forum.

Mikes Lawn Landscape
07-24-2004, 10:26 AM
Originally posted by DFW Area Landscaper
http://www.lawnsite.com/showthread.php?s=&threadid=76636&perpage=10&highlight=mikes&pagenumber=2

Mike, you aren't whining, are you?

Hell, the way you dish out advice and put people down, I figured you were getting rich out there mowing lawns.

At the very least, I thought you'd been in business long enough to be dishing out the advice you were giving, especially in light of the way you did it.

You call my business practices arrogant. You call my pricing schemes "ridiculous". You tell me my people skills are lacking at best. And all the while you're busting your butt, just as I did my first year, to make absolutely nothing.

Had I realized you were in year one, your comments wouldn't have bothered me.

It sounds as if you're surprised at how hard you've worked and how little you've made?

Now honestly, was it part of the original game plan to work your butt off for an entire year to make ZILCH?

It wasn't for me, but maybe you were able to understand the costs of being in business before you were in business better than I was. I honestly expected to make money at this in year one. And I did. I made $56.06 last year. Looks like I might clear $25K this year if things go as forecast.

Later,
DFW Area Landscaper

DFW,

Not whining at all.

Actually this is year 2 for me but it was a heavy capitalization year for increased growth.

Not suprised at all I knew my break even point wouldn't happen until some time this year.

Making zilch this year depends on how I depreciate equipment if I take the investment and depreciate over 3 years then I actually did pretty well if I depreciate over 5 then it looks a lot better. If I take the equipment and expense it this year then no I did not make any money that was the point of my post.

Mikes Lawn Landscape
07-24-2004, 10:30 AM
Originally posted by BCSteel
Hey Mike, this is a green industry forum. If you're going to go trolling try a fishing forum.

I give up!

All you guys that have been in business for years are responding to a post that was directed at the new guys.

You guys win I am a mowron I shouldn't even be allowed to post on this forum any more

Later

SouthernFried
07-24-2004, 10:32 AM
If you expense out all your equipment this year..you will have still made money..but, it wont show on your books...and you won't have to pay taxes on it.

I know some people who would be grinning ear to ear with that sorta news :)

DFW Area Landscaper
07-24-2004, 10:35 AM
Elephant Nest,

+++what are your costs, everything included+++

I keep seeing people post this statement on lawnsite. To tell the truth, I don't know what my costs are.

Here's an example of what I mean: Door hangers in March produce a lot higher rate of return than door hangers in May. I know about what my cost is to have a printed door hanger hung on someone's door...roughly. And that varies by the size of the homes and lawns. But how much does it cost me to gain a customer from a door hanger? That's the real question and I simply don't know the answer.

Another example: I know exactly how much my equipment costs me on the front end. I can tell roughly what my depreciation expense will be for a year as long as I don't go out and buy any more equipment. But that depreciation expense isn't all there is to it. There's also repairs. I have absolutely not a clue how much I'll spend this year until the year is over. My tranny might last forever or it might burn up tomorrow. Ferris could die next month or it might last another five years. I just don't know.

Another example: Accidents happen. Yes, I have insurance, but that's not really the kind of accident I'm talking about. The nickle and dime accidents can cost you too. Last summer, I lost a brand new $40 spool of line trimmer line. It just bounced off my trailer. Two weeks ago, I accidentally severed a customers mandavilla vine with my line trimmer and had to replace it. Spilled 6 oz of MSMA on a sidewalk the other day. Had to throw out some mulch because it had molded and wouldn't look good anymore. Lost a pad lock and had to buy a whole new set of four..that's already happened several times. Got a leaf rake eaten by the chipper/shredder. These "little" costs are real and they add up.

Eventually I'll have something stolen. I've elected not to pay for the theft insurance on my liability policy. Eventually that's going to cost me. But there's no way to tell how much theft will cost me in a year or even over a period of years. Just gotta eat it as it happens.

A few weeks ago my PC was freaking out. I tried to reconfigure the thing back to it's original factory settings and it just froze up. I called HP and bought a $99/yr maintenance plan.

Last winter I decided I needed to buy leaf spring helpers for the truck. This winter, I've decided I need to invest in trailer brakes to help make my tranny last longer.

Sure, I can plug all these anticipated costs into a spreadsheet and manipulate the numbers until I am forecasting good annual profits. But the reality is, there are always costs coming up that I just didn't plan on. Did I plan on these expenses when I made that little spread sheet that sucked me into this business? Heck no.

There is no way to know how much these things will cost you until after the fact. I guess I don't fully understand the "know your costs" statement.

Later,
DFW Area Landscaper

DFW Area Landscaper
07-24-2004, 10:39 AM
++++if I take the investment and depreciate over 3 years then I actually did pretty well++++

$40K divided by 3 = $13.3K

You call $13,333 per year doing well? I thought flipping burgers paid better than that. At least if you flip burgers you won't have to pay the self employment tax.

Later,
DFW Area Landscaper

DFW Area Landscaper
07-24-2004, 10:46 AM
++++Now, you wanna start big, with a huge debt burden...ok, fine++++

Nope. Paid cash on everything. Never expensed a pennies worth of interest. Made $56.06 last year. Looks like I'll make about $25K this year before dpreciation expense. Depreciation should bring me down to something like $15K this year.

Later,
DFW Area Landscaper

pcnservices
07-24-2004, 11:03 AM
I hope I understand you right but it sounds like when you did your plan and budget you neglected a few things and now after reviewing the first year in business you came to realize it because the figures show it.

Did you budget for a salary for yourself? That's the first item on your expenditure forecast - and the most important. You cannot work for free - not even when working for yourself.

A good business and financial plan will also plan for the losses you show on your bottomline - therefore I dont understand your attitude towards your business.

If you had an accident that costed you $40 000, were you insured? If you were insured that should'nt have set you back that bad.

Review your plan, re-plan and adjust it where neccesary. When setting your targets and goals, make them realistic and achievable. There is no sense in having goals and they are unrealistic and unachievable.

Good luck
PC

Mr. Magpie
07-24-2004, 12:34 PM
I just started a business last August. I already had some small equipment and a 4 cyl. truck that I use for transport as well as work, no trailer. My costs are almost nothing, literally, compared to my cash flow. String, gas, air filters, grease/oil, small maintenance on a 21" mower, some shirts and shoes I bought, couple hats, glasses and sweat bands, a $30 map, a little extra a month for unlimited minutes on the cell phone, minimal $ for marketing ($19 per 2 long term accounts), small amount of money for postage for bills and business comes to me almost at the snap of a finger with the kids I have passing out plain business cards by the thousands $19 per 1000, plus $80 to pass them out). I make total, leaving to arriving at my house $44 per hour in my first year working about 10 hours a week, minus expenses. My brother has a business here too, he makes $70 an hour here. My buddy has 133 accounts here, $78 dollars per hour. All three of our businesses are less than 3 years old.

Mainly this is because I am in the absolute most ultimate place for a lawn service (Hollywood, FL) and because I have some serious physical lawn skills and can get from one lawn to another very quickly with a small truck and no trailer and easy ingress/egress and deployment of equipment. Also, I have no workers to train or screw things up. My bro works with me sometimes, and he's the man.

Dude, you are doing something seriously wrong. Do not spend any more times on this site. Sell all your undoubtedly high priced equipment and do it right. Sorry, you've got it all wrong.

***And stop with the door hangers, they annoy everyone and you look too desperate and they take too long to pass out, and are too expensive and they have too much room on them (all you need is a number and description of your duties.)

Mr. Magpie
07-24-2004, 12:37 PM
By the way, I do this part-time for a reason. Got other things going on and don't need any more money at the time.

Mr. Magpie
07-24-2004, 12:44 PM
Since I am making these claims, I guess I should post my equip:

21" Snapper $420;
40 cc Stihl used from my bro $200;
63cc BP blower Echo used from bro $200;
Stihl edger and hedge trimmer ~$500;
Access to chainsaw $0;
rake $15;
machette $6;
loppers $15;

Equipment has lasted one year and has 1 or 2 more years of life since I know how to maintain them. The mower's drivetrain sucks though.

Mikes Lawn Landscape
07-24-2004, 12:48 PM
Please tell me someone understands what I'm saying.

With a $40,000 investment including truck and equipment the 1st $40,000 in NET INCOME is going to pay off owners capital investment.

A new guy starting out buying a $4000 mower has to mow about 150 $40 lawns before he can even start to make a profit.

The mayor
07-24-2004, 12:59 PM
Sounds like you jumped in with both feet.Most people gradually move up.

lahanko
07-24-2004, 01:03 PM
Mike,
Been saying that for years.
Cash flow DOES not equal profit.
I cannot in my own mind come to grips that all the people on here are making a reasonable profit, money yes profit no.
1) Making payments on equipment is not my idea of a profitable business.
2) Sorry, but if you need to supply your own tools and equipment (mowers and such) and you are the one actually using your own tools (equipment) chances are pretty good you could be making more profit at something else. Sorry just don’t see the profit in it.

Turf Medic
07-24-2004, 02:20 PM
Originally posted by Mikes Lawn Landscape
Please tell me someone understands what I'm saying.

With a $40,000 investment including truck and equipment the 1st $40,000 in NET INCOME is going to pay off owners capital investment.

A new guy starting out buying a $4000 mower has to mow about 150 $40 lawns before he can even start to make a profit.

If you figure you worked for free, I will give you a chance to make a hundred dollars.

You now have a firm offer of $100 for the equity in your business and equipment.

I have listened to business owners for years doing the story on how they don't make any money, the equity has no value.

If you are able to pay off the $40000 investement the first year even if you figure a $15000 depriciation in value, and I'm not talking about what the feds will let you write off, I'm talking about actual loss in value, you have a profit of $25000 even if you don't put a dime more than the payments in your pocket.

Mr. Magpie
07-24-2004, 03:02 PM
Originally posted by lahanko
Mike,
Been saying that for years.
Cash flow DOES not equal profit.
I cannot in my own mind come to grips that all the people on here are making a reasonable profit, money yes profit no.
1) Making payments on equipment is not my idea of a profitable business.
2) Sorry, but if you need to supply your own tools and equipment (mowers and such) and you are the one actually using your own tools (equipment) chances are pretty good you could be making more profit at something else. Sorry just don’t see the profit in it.

Well, not everywhere is suited for a lawn business. Where are you located, lahanko?

pcnservices
07-24-2004, 04:41 PM
Originally posted by lahanko
Cash flow DOES not equal profit.
Very true!
Adding to this...
Growing too fast DOES affect your cashflow. And more than likely it will affect it in a negative way. If you dont take care and manage your growth rate then you will end up having financial problems. Allow your business to grow itself in a controlled and planned manner.

Avery
07-24-2004, 06:17 PM
Originally posted by Mikes Lawn Landscape
Please tell me someone understands what I'm saying.

With a $40,000 investment including truck and equipment the 1st $40,000 in NET INCOME is going to pay off owners capital investment.

A new guy starting out buying a $4000 mower has to mow about 150 $40 lawns before he can even start to make a profit.

I get what you are saying. Started off with all brand new commercial equipment. New trucks, trailers, power equipment, etc... Sure it takes awhile to recoup. the cost but anything worth doing is worth doing right. And I am not gonna trust my business to cheap, second hand equipment. Some say save up and buy as you can. Horse hockey. Finance or lease the best you can get credit for. Have at least that much faith in your business. By running cheap equipment you are selling yourself short.

ahfd311
07-24-2004, 06:38 PM
Wow. You want a whamburger and some french cries? You whine more than my girlfriend. If you work for free, why don't you quit and go work for someone?

Mr. Magpie
07-24-2004, 07:32 PM
Originally posted by Avery
I get what you are saying. Started off with all brand new commercial equipment. New trucks, trailers, power equipment, etc... Sure it takes awhile to recoup. the cost but anything worth doing is worth doing right. And I am not gonna trust my business to cheap, second hand equipment. Some say save up and buy as you can. Horse hockey. Finance or lease the best you can get credit for. Have at least that much faith in your business. By running cheap equipment you are selling yourself short.

This may not always be the most prudent thing to do. How is it a sin to have low-end equipment, as long as your work is still quick and looks good? What does "selling yourself short really mean?

"Doing it right" includes not taking unnecessary risk. At least that's what I learned from my stupid business degree. :D

Seriously though, putting yourself (and family?) through unpredictable cash flow is not worth it when you can just buy some low-end equipment and make due for a year or so while you establish yourself as a good lawn guy. Your physical skills, as well as people skills need to grow. Not grow forever, just a year or two.

Tell me, why rush it? Is there a logical reason?

cantoo
07-24-2004, 07:46 PM
A high school graduate gets a job. They buy a car to get to work. They don't make a cent until the car is paid for so using your example they don't make any money until their expenses are paid for. If they buy a $35,000 car they will likely work 2 years for free too.
This ain't rocket science of course you have business expenses that you budget and pay for.

Mikes Lawn Landscape
07-24-2004, 07:47 PM
Originally posted by Avery
I get what you are saying. Started off with all brand new commercial equipment. New trucks, trailers, power equipment, etc... Sure it takes awhile to recoup. the cost but anything worth doing is worth doing right. And I am not gonna trust my business to cheap, second hand equipment. Some say save up and buy as you can. Horse hockey. Finance or lease the best you can get credit for. Have at least that much faith in your business. By running cheap equipment you are selling yourself short.

Thank You !

And I get to do it again next March when I add the second crew.
Except next time the break even point will be June 1st not Sept 1st

Get it now guys !

ahfd311 your input is exactly what I expected from a lawn boy

packmate81
07-24-2004, 08:03 PM
wow...just saw this today...lol

my first year out i was in dept about $350,000, still had to pay operation expenses, like insurance, gas, wages, etc. had ten mowing accounts ans still made money, approx $900 a week.

now im in debt for 1.35 mill,...do a lot more, still dont sweet all day...infact not out of bed till 10am..but not the point..lol


everyone has there own system, no one is perfect, and no one is wrong..lol.....ya
if you want to get paid..do more accounts in the same time frame you do what you have...or cut your costs...whatever they are...or you shouldve bought smaller equipment, or trailer....if you only have 30,40, or 50 accounts a 52 in walkbhind,(approx. $4300) will get them done in time, but im sure you bought the $6-$7000 ZTr to start..//lol:angel:

JimLewis
07-24-2004, 08:39 PM
Please tell me someone understands what I'm saying. With a $40,000 investment including truck and equipment the 1st $40,000 in NET INCOME is going to pay off owners capital investment.

I think this is your biggest problem. And also exactly why this thread should be a major learning lesson for new guys!

Why would you start out with $40,000 invested??? That doesn't make sense to me. I understand wanting to look professional, etc. But it's not worth it if that results in you working for free.

I started out just about like Southernfried. I had almost ZERO initial investment. Sure, I had the crappiest set up in town. Sure, I wasn't proud. Sure, I was embarrased to have other LCOs laugh at me at stop lights. But I had a plan and I was making profit instantly. I wasn't trying to play catch-up for things I'd already bought. I was trying to save up for things I would be buyin in the future. I just worked my way up slowly. I still am in the process of that. We don't have the nicest or newest trucks in town. But they're paid for and they look sharp. So is all of our equipment. And I paid for it all with my profits - not BEFORE I made the money.

If you're going to plop down a huge investment. You should know that it's going to take a while to pay off that investment. No reason to whine about it. You should have expected to be in the situation you're in.

Mikes Lawn Landscape
07-24-2004, 08:57 PM
Originally posted by JimLewis
I think this is your biggest problem. And also exactly why this thread should be a major learning lesson for new guys!

Why would you start out with $40,000 invested??? That doesn't make sense to me.

$25,000 for a truck which I needed anyway my 8 yr old F150 was getting a little tired. I would need it rather I was flippin burgers or mowing lawns

$15,000 in mowers and equip I do 1 to 2 acre props. What would I mow them with if I did not have a ZTR.

I posted this for the new guys so they understand equipment takes a long time to pay off.

Last year I did the cheap equip and crappy trailer so my decision was based on capacity and expected revenue which has materialized.

txlawnking
07-24-2004, 08:57 PM
Mike, I started up this year myself with a total investment of $10,000. For my ten G, I got a 52" mower( Super Surfer ) brand new, a 21" Snapper commercial , a Kawi trimmer, and a Stihl blower, Oh and an enclosed trailer to haul ut all. Some of that money was allocated for advertising as well. I currious why/ what did you spend forty G on?? I though I was bad off with ten grand in debt, but forty??!! Why? Did you buy 3 of everything and hire 2 employee's right off the bat?? I'm not raggin' you but what did you get for that kinda coin?

packmate81
07-24-2004, 09:11 PM
1 or 2 acres.....i now do condos that have 200 or so building ea...i have 72 inch exmark deisels.....but those are used other places, we use 52s and 48s at the condos....in some cases, a walkbehind will run circles around a ztr...im not ragging either....i was a new guy 8 years ago...im only 27 now....7 crews mowing.....5 do res only, about 35-40 per day with nothing bigger than a 52 walkbehind hydo 2 guys......so as far a smaking money....i pay the guys, cover all expenses and still could by a brand new mower for them every other month and still go to the casino 3 times a week with my partner.....


you make what you want to, or not.....

Mr. Magpie
07-24-2004, 09:20 PM
Originally posted by Mikes Lawn Landscape
$25,000 for a truck which I needed anyway my 8 yr old F150 was getting a little tired. I would need it rather I was flippin burgers or mowing lawns

$15,000 in mowers and equip I do 1 to 2 acre props. What would I mow them with if I did not have a ZTR.

I posted this for the new guys so they understand equipment takes a long time to pay off.

Last year I did the cheap equip and crappy trailer so my decision was based on capacity and expected revenue which has materialized.

Do you really need a $25k truck to run a lawn business? No. My bro got a mint condition $5,500 1998 Toyota Tacoma 4 cyl. that could pull just about any trailer (with it's low weight and short gears) and drinks so much less gas.

By the way, your truck didn't "cost" 25k unless you sold your old one for $0.......

Liberty Lawncare
07-24-2004, 09:35 PM
Originally posted by Mikes Lawn Landscape
Attn: All I wanna start mowing lawns so I can make some money.

This is gonna be hard for you guys to grasp but If your new to this "Lawnboy game" plan on working your first year for free and I mean that literally.

I have exceeded all my Revenue and profit goals this year and you know what I'm still working for free.

Yea we can talk about cash flow and depreciation and margins but the reality is I am still working for free. My net profit might cover my investment in this business this year but it is still gonna be difficult.

So if you wanna get hot and sweaty and dirty and tired and sore and make $0.00 per hour then go buy a mower and a weed whacker and go mow some lawns.:blob2:

You guys wanna argue or brag then you don't have a grasp on business issues and I suggest you learn.

My very first lawn I mowed this year cost me $40,000 you got that kinda money to burn then I say mow some lawns. :confused:

And yes I know my costs and I knew it would be like this this year so don't give me a load of crap about needing to know my costs I know them very well thats why I am working for free.

Having a bad day? Dont worry it will get better.:D

Turf Medic
07-24-2004, 09:43 PM
Originally posted by Mikes Lawn Landscape

I posted this for the new guys so they understand equipment takes a long time to pay off.

Last year I did the cheap equip and crappy trailer so my decision was based on capacity and expected revenue which has materialized.

Wow, this is the first time you mention that you are trying to help the new guys understand that it takes a long time to pay off. You said that you are working for free, does that mean you put no value in the fact that you are paying off equipment. My mistake but it sounded to me like you were trying to convince people that going into the lawncare business was not a good way to make money.

Depreciation can make it look like you don't make money on paper but in the real world depreciation don't mean dick. If you don't think so write off all of the value of the equipment, sell the equipment and report the sale on your 1040 and see if the IRS thinks you made any money this year. Cash flow doesn't equal profit, but building equity does mean profit.

One last thought the fact that the IRS lets you expense out all of the equipment doesn't mean you have to toss it out, you can use it next year and then you will have 100% profit :D. There is probably no other business in the world that you can be showing an actual profit in the first or second year.

DFW Area Landscaper
07-24-2004, 09:45 PM
I agree. The issue of the truck is a confusing issue no matter how you slice it or dice it. But realize, there are a lot of employees who get a company car for free. No car payment. No insurance. No fuel. No car wash bills. No oil change bills. No repair bills. Just a totally free car. My brother in law works for Hertz and that's what he gets. My father got the same deal the entire time he worked in sales for nearly 30 years. It's unusual for an employee, but it's not totally unheard of.

Cell phones are much the same way.

And realize, those employees get a respectable salary on top of the free car and paid cell phone.

The confusion comes in when you start to think that all of your auto expenses may be considered a business expense. If you have a job, yes, you have to be at work every day on time and that means having a reliable car that you can depend on. There is a real cost associated with that. Being hit up to buy raffel tickets and girl scout cookies every week has a cost, though it was more of a ***** for me. There's also the dry cleaning bill and the wardrobe expense. Lastly, if you want to play the corporate game, you've got to network, which means spending money on expensive lunches and happy hour (though those things can be more enjoyment than PITA).

How much is a fully paid automobile worth? That's a confusing topic in and of itself. Probably warrants a separate thread all together.

So, yes. Being self employed and having the "company" pay your cell bill and all of your auto related costs is confusing when you try to compare this to employee salaries. We don't have dry cleaning bills unless we're at church, a wedding or a funeral. But at the end of the day, how much do you make in a year? It's confusing to try to pin it down, especiall when you throw in depreciation costs on top of the other confusing stuff.

Still, I think the average corporate employee is doing much, much better than the average lawn mowing guy. Just my opinion of the industry right now.

Later,
DFW Area Landscaper

DFW Area Landscaper
07-24-2004, 09:51 PM
++++in the real world depreciation don't mean dick.++++

Try explaining that to Warren Buffett. He's only one of the worlds (probably the world's) greatest investor. Second in personal wealth (worldwide) only to Bill Gates. He's the absolute smartest investor on the planet.

He would strongly disagree with the depreciation versus cash flow argument that you are making.

Depreciation is a real expense. EBITDA is a pretty meaningless accounting game. Making money before Interest and Depreciation isn't really making money, according to the Buffet school of thought. I tend to agree with him.

Later,
DFW Area Landscaper

Turf Medic
07-24-2004, 10:43 PM
Originally posted by DFW Area Landscaper
++++in the real world depreciation don't mean dick.++++

Try explaining that to Warren Buffett. He's only one of the worlds (probably the world's) greatest investor. Second in personal wealth (worldwide) only to Bill Gates. He's the absolute smartest investor on the planet.

He would strongly disagree with the depreciation versus cash flow argument that you are making.

Depreciation is a real expense. EBITDA is a pretty meaningless accounting game. Making money before Interest and Depreciation isn't really making money, according to the Buffet school of thought. I tend to agree with him.

Later,
DFW Area Landscaper



When you can expense out currently up to $102000 worth of equipment the first year, equipment that will last 3 to 5 years. Just because you can use depreciation to offset income doens't mean that you are working for free. If depreciation is a real expense, how do you explain depreciation on real estate. By saying depreciation is a REAL expense you are saying that a piece of property is losing 5% of it's purcase price every year. Where in fact in some parts of the country they are seeing double digit % increases in actual value.

My comment was made to disclaim the statement that if you depreciate the total value of your equipment the first year, you don't make any profit. You may be correct, but only on paper, and as far as the IRS is concerned. But like I mentioned depreciate all of the "profit" away and then sell the equipment and see how the IRS then treats the depreciated no value equipment. CAPITAL GAINS

I have read a lot of Buffet's commentary and I am curious where you read the making money before depreciation isn't really making money???

If you able to reduce your liabilities and thereby increase your assets, you are not working for free, no matter how you want to make it look on paper.

Turf Medic
07-24-2004, 10:50 PM
Originally posted by Mikes Lawn Landscape

You guys wanna argue or brag then you don't have a grasp on business issues and I suggest you learn.

My very first lawn I mowed this year cost me $40,000 you got that kinda money to burn then I say mow some lawns. :confused:



I think I might understand a little more after re-reading the first post. Mike when you got done mowing the first yard you were supposed to take your truck and equipment with you:D

Mdirrigation
07-24-2004, 10:53 PM
Originally posted by Mikes Lawn Landscape
Attn: All I wanna start mowing lawns so I can make some money.

This is gonna be hard for you guys to grasp but If your new to this "Lawnboy game" plan on working your first year for free and I mean that literally.

.

Mike I would have to disagree with this , My first year I was fired from my job in 1980 , I started mowing with a case hydro to make extra money , ( by todays standardt I was a scrub but then walk behinds were just becoming popular and hustler was the caddy of mowers) I was very soon making as much in a day mowing as I made in a week at a job. I saved and worked and kept buying better equip as I could afford it . I have ALWAYS made a profit , Always paid for trucks and equipment in full at the time of purchace. Hard work , and smart business decisions have paid off for me . I still wont pay 25 grand for a pick up truck , I just sit back and wait , my last pick up truck was a 1993 , f 350 diesel crew cab dually with 160,000 miles for 6 grand in excellent condition. I have been running it for 2 years with no problems at all adding 50 thousand miles to it. But there different strokes for different folks.

As far as working for free , I doubt that, If your bills are paid and you have food in your belly you are making some money . Truck , mowers and weed eaters are tools of the trade , just as wrenches and sockets are for a mechanic , if you didnt spend money for the tools you wouldnt be working at all.

Turf Medic
07-24-2004, 11:03 PM
Originally posted by DFW Area Landscaper
++++in the real world depreciation don't mean dick.++++

Try explaining that to Warren Buffett. He's only one of the worlds (probably the world's) greatest investor. Second in personal wealth (worldwide) only to Bill Gates. He's the absolute smartest investor on the planet.

He would strongly disagree with the depreciation versus cash flow argument that you are making.

Depreciation is a real expense. EBITDA is a pretty meaningless accounting game. Making money before Interest and Depreciation isn't really making money, according to the Buffet school of thought. I tend to agree with him.

Later,
DFW Area Landscaper

The 1980s were the heyday of the use of so-called "junk bonds" (high-risk, high-yield bonds) to finance Leveraged Buy-Outs (LBOs). In a leveraged buy-out the target company's assets are used as security for loans acquired to finance the purchase. Attention became focused on EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization, "operating cash flow") as a means of assessing how well a target company could generate the necessary cash to make loan payments. Highly acquisitive companies increasingly began to stress EBITDA rather than net income. Many investors, suspicious of accounting tricks used to boost earnings came to rely on EBITDA as a superior metric of corporate health -- because cash flow is more difficult to manipulate than earnings. Warren Buffet has been harshly critical of EBITDA, saying that "interest and taxes are real expenses".



DFW...found this on one of the financial sites I read, this was copied from the site, no changes, as you will notice Buffet problem with EBITDA doesn't have anything to do with depreciation, he only mentions that interest and taxes are real expensese. If interested here is the link http://www.benbest.com/business/newecon.html

Mikes Lawn Landscape
07-24-2004, 11:34 PM
A lot of you guys missed the point of my post especially you guys that have been in business 20 years and are paying cash for everything.

A new guy has to mow a lotta lawns before he can realize a profit. The advise on this forum is consistantly buy commercial buy the biggest trailer you can afford get the truck that will pull all that equipment.

A new guy comes on here "I wanta start mowing lawns" which mower should I buy. Well he better realize it will take a while to pay that mower off (Yes I knew that).

Some of you guys are questioning my investment in my business thats fine but ALL of my decisions are based on long term ROA not whats gonna happen next week.

Yes I know all about GAAP but the reality is if your gonna start up because you have nothing else to do your pay off is gonna take a while and you should know that. It will take several years to actually start making some real money.

Was I trying to help the new guys NO I was trying to scare the hell out of them.

Used equipment and trucks are fine for some but I can't afford a breakdown and I figured my chances were less likely with new equipment.

Everytime I have a breakdown it is costing me $75 per hour I think I'll take my chances with New equipment.

And no I'm not whining I'm telling it like it is. Like I said I'll be doing the same thing next spring.

For those who didn't get my post I wish you luck !

Firstclasslawn
07-25-2004, 01:53 AM
I am in my first season of business and my profits are 2k a month so you MUST be doing something wrong mike, I am in your area also, PM me to talk as I will not be checking this forum

Mikes Lawn Landscape
07-25-2004, 02:39 AM
Originally posted by Firstclasslawn
I am in my first season of business and my profits are 2k a month so you MUST be doing something wrong mike, I am in your area also, PM me to talk as I will not be checking this forum

Good for you man keep up the good work:rolleyes:

Sooners
07-25-2004, 03:05 AM
Mike,

I understand your point. That's why I don't quit my full time job with benefits yet. I am buying commercial equip. each year. On paper it's a loss, but I am building my business and filling it with good equip. while I have my main source of income to fall back on. I hope to retire early and pursue lawncare full-time. I'm just not sure if I can make enough $ full time with all the competition here.

Kelly's Landscaping
07-25-2004, 03:17 AM
Originally posted by DFW Area Landscaper
++++in the real world depreciation don't mean dick.++++

Try explaining that to Warren Buffett. He's only one of the worlds (probably the world's) greatest investor. Second in personal wealth (worldwide) only to Bill Gates. He's the absolute smartest investor on the planet.

Later,
DFW Area Landscaper

hehehehe so how many lawns does Mr Buffett cut again.

HOOLIE
07-25-2004, 03:26 AM
Right now I make enough to get by, and that's good enough for now. It seems some guys, especially the young high school crowd, and looking to become instant millionaires. Well, this is the wrong business for that dream. Most small businesses DO fail, the point being, if you can get by, you're doing OK. There's nothing wrong with having high aspirations, I'm just a proponent of the slow growth philosophy. I've known too many LCOs that try to take to much on and grow too fast, it usually doesn't work out. I'm in my 3rd year going solo, next year I want to hire somebody to help, maybe a year or two later have a second crew. And we'll see where it goes from there.

And remember, you were probably working for free at your last job, too.

lahanko
07-25-2004, 08:08 AM
Originally posted by Firstclasslawn
I am in my first season of business and my profits are 2k a month so you MUST be doing something wrong mike, I am in your area also, PM me to talk as I will not be checking this forum
Ok, what is your primary Job???
Could you replace all your equipment with one months profit, two, three, four... a year maybe two years?
Again, if lawn care is your primary job and you are the individual using your own equipment you probably could make more of an income working for someone else. It’s all a matter of how long do you want to “work for free” to build the business.
IMO

hartslawnmain
07-25-2004, 01:01 PM
I would hope that of that $40,000, the majority went towards your truck which can be used as a business and personal vehicle. You were gonna' need a vehicle regardless of whether you're in the lawn biz or not. Payments on mower and equipment could have been kept to a minimum with all the "no interest" offers available through manufacturers. Having only liability insurance, which I think you do, should not be more than 6-700/yr. I do feel it's more profitable to buy new equipment WITH a warranty, especially just starting out. With good dealer service, you have lost nothing but a day or two of downtime if something breaks. It is definitely harder to take depreciation on a used piece of equipment. Also, you may wanna' look into leasing your vehicle as opposed to buying. Keep in mind also, if you buy your wife a vehicle, this can also be used as a write off. Office space in your home, telephone, uniforms, gas, etc...are all write-offs. Can't underestimate the value of a good accountant and keeping good records along with receipts. Good Luck and keep hammering away!! It will all fall into place.

JHE
07-26-2004, 12:33 AM
Forest Gump mowed for free - but he was a gazillionaire.

Turf Medic
07-26-2004, 12:43 AM
Mow, Forest, Mow :D

PMLAWN
07-26-2004, 04:16 AM
"I think I might understand a little more after re-reading the first post. Mike when you got done mowing the first yard you were supposed to take your truck and equipment with you"

Turf has a grasp on the issue.
Everybody jumps on the guy who says that his stuff is payed for, Well this is the same thing only in reverse. Mike is right that if you apply all you costs to one job that that job is going to lose big time.
You have to spread you costs out over the life of the tool- If you have a mower that is $200.00 and you use it on 400 jobs than it costs $.50 per job. Work up a sheet on how long each tool will last and divide the cost of that tool by the hours and that is you per hour cost which is your overhead.
DFW your problem with not knowing maintenance or repair till after it happens is why we have to keep records. Hard to do when new (search Lawnsite) but you have to come up with an estimate and apply that as overhead too. This thread is a good example of the reason to know about business if you want to run a business, and if you don't, hire a good accountant.

Turf Medic----If Forest gets in this busi. we are all in trouble!

LwnmwrMan22
07-26-2004, 04:57 AM
I didn't turn a profit for the first 8 years I was working. Then I got rid of my employees. :)

Mikes Lawn Landscape
07-26-2004, 09:02 AM
Now you guys are starting to get it :D

Last year I started with what I had in the garage a lawn tractor an old trimmer and blower. Threw an ad in the paper and got some bidness. My start up last year was less than $500.00

It didn't take long to realize that my capacity was very limited with that equipment so I went out and bought a WB a Z and a 21" mower. Then gotta have a truck and trailer to pull it.

So did I jump in with both feet you bet I did but "New Guys" not you guys who have been in business 20 years understand I have to be in business at least 3 years before the original purchase of equipment starts to show good divedends. So if lawn care is a part time or something your gonna do until you find something better take a hard look at it you might find it ain't all its cracked up to be.

Walk behind mower $4000.00
Average Lawn price $40.00
Solo Profit Margin 60% (I know you solo guys in business 20 years are making a whole lot more but a new guy would do well to get 60%)

In order for that mower to pay for itself you have to mow $7000.00 worth of lawns that about 175 lawns. Then you can start making money.

Now add a Z and a truck and a trailer and it gets even more difficult.

TXlawnking,
The majority of my cost was a new truck the rest was about $15,000 in equip but at some point I would have needed a new truck and the decision came when my trailer pushed me through a stop sign on a slightly wet road.

Yea if I depreciate the truck over 5 years at $5000 and the equipment at 3 years at $5000 my bottom line looks ok for this year but it cost me real money to buy all that equipment

But without all that new equipment my revenue would have been probably a 1/3 of what it was and my customer base would be a 1/3 that aint gonna grow a business.

I appreciate everyone who responded to this post I now know who I can rely on for good solid business advise and who I can't

matthew horner
07-26-2004, 09:32 AM
Originally posted by LwnmwrMan22
I didn't turn a profit for the first 8 years I was working. Then I got rid of my employees. :)


mowerman, I'm thinking about doing this next year. Would you mind elaborating............................?

Turf Medic
07-26-2004, 09:46 AM
Originally posted by Mikes Lawn Landscape
So if lawn care is a part time or something your gonna do until you find something better take a hard look at it you might find it ain't all its cracked up to be.

Walk behind mower $4000.00
Average Lawn price $40.00
Solo Profit Margin 60% (I know you solo guys in business 20 years are making a whole lot more but a new guy would do well to get 60%)

In order for that mower to pay for itself you have to mow $7000.00 worth of lawns that about 175 lawns. Then you can start making money.



IMO you still made a profit on the first 175 lawns because you are building equity. Even figuring in an acutal loss in value of the equipment (not depreciation) due to wear and tear and the fact the equipment is no longer new you still are building at least 2500 to 3000 of equity. What business can you get into that involves a capital investment and have the business paid off in the first year or two, none that I know of.

I understand the point you are trying to make but you seem intelligent enough to have bailed out if it really was as much of a losing proposition as you have tried to make it sound.

Mudmower
07-26-2004, 10:45 AM
Equity is only good on paper, until someone PAYS you for it. In accounting circles you will see something called goodwill. If a company is bought out, a lot of times the buyer will pay for good will. Most of the time it is a name or brand. But at it's lowest level it is a form of equity.

Mike, this has truly been an interesting thread. It had me REALLY scratching my head for awhile, even questioning my own business ideas. This is a part time thing for me. I don't mow residential, I am commercial 100%, and lawn maintenance is NOT what I do. For me, this business has been a great way to offset my normal income. I have no employees, but carry full liability insurance, and pay quarterly taxes. If this was my SOLE income, I would have to expand to stay in business, thus taking on debt.

Some act as if debt is like the black plague. It CAN be if you don't manage it, it will eat you alive. The key is to have REALISTIC goals for getting out of debt. In my opinion, that is what kills most businesses. And it is not because people are bad business men/women, but because they become to optimistic and don't factor in EXACTLY what Mike brought up. Thinking that until I pay for this stuff, I am working for free. It needs to be a constant when making business decisions.

Jim

txlawnking
07-26-2004, 11:03 AM
Ok Mike, I understand your situation, I too, HAD to make the initial investment in quality equipment, I still wouldn't geta 25k dollar truck, But I understand, Unfortunatelly, I'm still pulling my nice rig with an ancient truck.. It's difficult if not damn near impossible to start up this business without either going into debt, or having upfront cash to invest in the equipment. I seriously Don't eat sometimes, because I'm not even making enouhg money to pay my bills. I think the thing that prospective LCO's really need to consider is.... CAN I SELL MYSELF AND MY PRODUCT. If not, then all the high dollar equipment in the world is nothing but a huge liability, it takes serious people, sales and business skills to make this or anyother biz succeed. But you gotta start somewhere..At least all I've got borrowed is 10, I know of lots of biz vetures that 100k is a drop in the bucket to get going.. IT CAN BE DONE, And I WILL DO IT.. I just may starve to death trying..LOL

LwnmwrMan22
07-26-2004, 11:58 AM
matthew horner -

worst thing I ever did was start hiring people

I was looking at it as a "Best Buy" "Wal-Mart" type deal where I was going after volume. Figured I could do more for less.

In a perfect world, I suppose one could do this, but with employees, it's hard to do jobs for $30.

Two things have changed since then.

1. My minimum to stop the truck is $50 / cut.

2. I only do business on contract. I do zero per time cutting, zero bi-weekly cutting unless I decide it hasn't grown enough to warrant service.

The other problem I have, I CANNOT stand fixing stuff that people missed. This is cutting grass, and unlike some people on here would like others to think, this is NOT rocket science.

I would get calls from people where the crew didn't finish a section. I would get calls from people when they got the bill, and no one had even been there to cut the grass, they just crossed lawns off the list so they could get home earlier.

I would have 2 days of rain, then everyone whining because they had to work until 7 pm on a Friday.

Anyways, this is getting off topic now.

Let's just say, my cashflow is sitting in my trailer now, instead of some slacky's pocket.