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View Full Version : Where do you stand? As a company


paponte
11-14-2004, 06:54 PM
I hear alot about bidding and pricing on this forum, and what some people would consider "low ballin". Just wanted to know what type of companies, and business men/women were asking these questions and providing answers here on lawnsite.

All confidential, and no questions pertaining to any one individual. Where do you stand as a company? Last season, or as we sit now?

YardPro
11-14-2004, 07:03 PM
2-3 hundredK here (wish I kept more of it though)
a few years back we were well over 1/2mill, but have downsized our pool division due to lack of qualified help

bobbygedd
11-14-2004, 07:32 PM
let's hear the net too while you're at it. i know guys grossing 500k, and netting 40 grand.

DennisF
11-14-2004, 08:45 PM
I agree with Bobby. I'd like to hear some net figures...especially from solo's.

paponte
11-14-2004, 09:24 PM
let's hear the net too while you're at it. i know guys grossing 500k, and netting 40 grand.


I think finding out net will involve too many variables. Aslo in that scenerio, the company as a whole can be grossing $500K, and he as an individual may be taking $40K of it. No way in hell is a company itself grossing that amount with such a little net total. :)

Turfdude
11-14-2004, 09:35 PM
Paul, You skipped one category that we were in last year, now I hope to be in the latter this year! Can't complain, we do O-Tay Buckwheat :drinkup:

paponte
11-14-2004, 09:42 PM
Paul, You skipped one category that we were in last year, now I hope to be in the latter this year! Can't complain, we do O-Tay Buckwheat :drinkup:

You do ok? I'm still trying to figure out who's mattress is higher, your's or Rod's! payup

jwholden
11-14-2004, 09:47 PM
Excellent idea for a poll.

Smithers
11-14-2004, 09:55 PM
I am a part timer, solo (sometimes with my wife), and our revenue for this year was $12,000 with a net profit of about $5,000. I even missed the first month of the season, which really hurt me since i had no clients the first month a half.

I started out with nothing...not even a truck to my name. This business is great for part time....i keep dreaming one day to be full time.

Landmark
11-14-2004, 10:20 PM
I don't post very often so people will not recognize the my name. Last year we grossed $198,000 and my net was $71,000. This year we have done about $220,000 so far and my net looks right now to be a lot better than last year as I tried not to purchase any new large toys.

lafrance4078
11-14-2004, 11:09 PM
I also missed the first month of the season and then had to play catch up the next month so that I had clients. I grossed about 6k last season with net of 4k. Next season is shaping up well though. I have already signed several contracts for the next year in really nice neighboor hoods. My objective for next year is 60k gross and 30k net. I am also part time solo but am looking at an employee full time next year. Currently writing my business plan.

paponte
11-15-2004, 06:23 PM
Thanks for all the input so far. Polls are turning out how I expected them to. For all you part timers that replied, good luck. It's a tough business, and I would say 90% of people keep it as just a part time job. Seems that you are all doing well. Thanks again. :)

Lawn-Scapes
11-15-2004, 06:44 PM
Paul,

How will this poll tell you anything? You will not know whether a solo like myself making 100K+ or a 2-3 man operation making 100k+ participated in it?

o-so-n-so
11-15-2004, 07:00 PM
I am a part timer or I hold down a full time 3rd shift job. Myself and a helper for 2004 is in the 100K - 200K bracket. Profit % was not that good. Seems like I had more $$$ when I was grossing 40K annually. Maybe going to change my role as the owner next year and and turn over some "in the field" responsibility to someone else. I wore about 10 hats this year and didn't really accomplish much. Gotta change my direction............

bobbygedd
11-15-2004, 07:05 PM
see that. this is exactly what i mean. gross means nothing. anybody can spend a ton of money on advertising, equipment, and get alot of work at low end prices, and gross a whole lot of money. it's the net that separates the men from the boys

Smithers
11-15-2004, 07:06 PM
o-so-n-so,

i am a part timer too, but i am curious to know how you were able to make $100-$200K this year. What kind of projects did you do? How many clients did you have? Mostly landscape projects or grass cutting and fertilizing?

thanks. george

paponte
11-15-2004, 07:08 PM
Paul,

How will this poll tell you anything? You will not know whether a solo like myself making 100K+ or a 2-3 man operation making 100k+ participated in it?

Tom, I have read your posts and replies, and can tell you are doing well for yourself and are in fact a good business man. Though as you stated, the poll will not tell me the amount of employees per company, it does give an idea of the companies we are talking with. Also it gives us an idea of what other companies are doing, and for those part timers and/or beginners it shows somewhat of a promise or vise versa they can see that the majority on here does not make over $100K.

Again I am not picking on anyone, and/or praising anyone. Was just curious, and my thought seem to be right. Again, thanks to all on the input and posts. :)

Rollacosta
11-16-2004, 06:31 PM
see that. this is exactly what i mean. gross means nothing. anybody can spend a ton of money on advertising, equipment, and get alot of work at low end prices, and gross a whole lot of money. it's the net that separates the men from the boys



very true it's all about net not gross...i know of 1 guy who has a £250,000 worth of kit and 6 emloyees...he nets less than a pal with no kit all bar a truck and petrol hand tools,saws blowers etc oh and climbing gear [i'm a tree service]..i went mad buying kit £100,000 worth and i never earned more than £8,000 net in 3 years ,i never did the maths properly :angry: could have folded..when buying kit [exspensive kit] you realy realy got to do you'r homework

o-so-n-so
11-16-2004, 10:22 PM
petrentz,

This is how it breaks down for me. I profit least in the lawn area.

40% Stump grinding
27% Lawn (includes scape maint)
20% Installs (1st full year)
9% Tree
4% Other (includes spring/fall clean ups)

and never a day without something to do..........

Jamesgateslandscaping
11-16-2004, 11:35 PM
I will gross about 30-32K this year (not including plowing). This is a 3 man crew. I am a senior in high school also with lots of new lawn toys!
What do you guys think?

tiedeman
11-16-2004, 11:48 PM
very true it's all about net not gross...i know of 1 guy who has a £250,000 worth of kit and 6 emloyees...he nets less than a pal with no kit all bar a truck and petrol hand tools,saws blowers etc oh and climbing gear [i'm a tree service]..i went mad buying kit £100,000 worth and i never earned more than £8,000 net in 3 years ,i never did the maths properly :angry: could have folded..when buying kit [exspensive kit] you realy realy got to do you'r homework


sorry I had to comment, but that is cool that you can put the pounds mark for your currency. I have never seen someone do that before in a forum

rodfather
11-17-2004, 06:00 AM
29% net...and that DOES include salary for your's truly :D

YardPro
11-17-2004, 06:45 AM
just giving figures does not reflect the companies health.

in the 10 years i had my own business before merging with my current company, my business grew but my keep stayed the same. I kept the same amount at $350K as I did when i was doing $100K. The partner i took on is an excellent businessman, so that has changed.

The othe thing to look at when doing gross $, is is it mowing or construction. We do installs that we will use $$15K + in materials.
you do 10 of those a year and that's $150K.

That will inflate your #'s really quick.
with only mowing the #'s will be a higher % profit.
the other thing is that as a company grows the higher the Gross sales the smaller the margin becomes.
this works very well, look at walmart for example.

For the guys with lower numbers don't sweat it. you're pocketing probably as much as larger companies are. the difference is that the larger guys are building net worth in thier business bu acquiring, property etc.

we have a nice office on the beach, nice new trucks ( I drive 3 month old 2500HD with a service bed). We have workman's comp, general liability. We have a few very well paid employees ( 2 that 40K/year, two that make $30K/year, and the seasonal's make good hourly wages).
Out of th $300K we turn a net profit of about 5%. (net is after all expenses)

LwnmwrMan22
11-17-2004, 07:01 AM
I'm a solo op, doing approx $120K gross, including snowplowing and fertilzing / weed control.

I can average about $18k / month in the summer, but it drops down $5k / month in the winter since I only plow 15 smaller commercial accounts.

I'll net about $20 / year, as a take home salary, but only because I've bought $100K+ of equipment in the last 2 years.

I believe in having a new backup for everything, that way I'm never broke down.

paponte
11-17-2004, 07:42 PM
I would have to strongly disagree with all of you saying that it's what you net that counts. Let's not get this confused with what YOU as an individual takes home, I am talking about the company itself. Net depends greatly on business management, and how well you run your business.

The greatest expense of a business being payroll, greatly affects a business' net profits as a whole. This doesn't mean that the company is not profitable by all means. I can be grossing $100K a year or $500K per year, and still taking the same paycheck. This doesn't mean that because I was making a higher percentage of my gross income based on $100K, that the company was more profitable.

Branching Out
11-17-2004, 08:45 PM
I don't post very often so people will not recognize the my name. Last year we grossed $198,000 and my net was $71,000. This year we have done about $220,000 so far and my net looks right now to be a lot better than last year as I tried not to purchase any new large toys.

Remember this....If you are buying "toys"...that expense is actually a net in the end and should be considered in your final numbers....as long as they are paid for in full......

As my accountant said when I signed on..."It's my job to make you money...You, just have to do the work"...That was money well spent......Business 101...Hire an accountant...it is invaluable...the money saved by doing it yourself is not near what it can cost you in the end.....

rodfather
11-17-2004, 09:00 PM
Ok Paul, you wore me down and I have nothing to hide from the IRS either.

I will pull around 95K in salary this year on top of our 29% net profit (and that is after EVERYTHING) including my salary. My dental, eye, and major hospital is paid by my firm for another 7 grand a year too. Add in dinners with clients, gifts, etc...well you get it.

If ya wanna backtrack and do the numbers, knock yourself out.

paponte
11-17-2004, 09:54 PM
Add in dinners with clients, gifts, etc...well you get it.

Rod, your gf is not considered a client. :p

Kelly's Landscaping
11-17-2004, 09:59 PM
It never fails if someone asks what the gross is bobby always and I mean always makes a big deal about the net. It was only this summer he came to the realization that employees are a good thing. I remember reading his post it sounded like he had discovered the wheel. I am not going to get into a pissing match with bobby on income I know he takes home more then me at the moment he also has given lessons on how to rip people off like sand instead of fertilizer. The thing about gross is that is what the total sales are if you can cut cost and find ways of saving money then you really make out with the higher gross.

Allot of small companies have very low expenses i.e. it costs me a lot more to insure a fleet of 3 trucks then some one with only one. So they can see profit levels of 70-80% obviously when you get larger those numbers cannot be maintained. I also see the other end of the numbers where some of you state you know a guy who knew a guy that only makes 5-10% profit. Those numbers are negligible and if that is all you are making you need some serious business lessons. I find our company on the 3rd category at 200-300 k a year our profits are 40-50% I can see they will go down, as we get larger but many costs of ours go down as well. So at the 1 million mark 30-35% is about what I expect. As many know I have a partner so that eats into my end but it also increases our income over what I could ever do solo. Next season when we have our growth spurt I may become a bit more vocal but for now your right bobby your always right hail bobby.

bobbygedd
11-17-2004, 10:06 PM
kelly, i believe you're finally beggining to smell the coffee

YardPro
11-17-2004, 10:08 PM
I would have to strongly disagree with all of you saying that it's what you net that counts. Let's not get this confused with what YOU as an individual takes home, I am talking about the company itself. Net depends greatly on business management, and how well you run your business.

The greatest expense of a business being payroll, greatly affects a business' net profits as a whole. This doesn't mean that the company is not profitable by all means. I can be grossing $100K a year or $500K per year, and still taking the same paycheck. This doesn't mean that because I was making a higher percentage of my gross income based on $100K, that the company was more profitable.


bingo

that's my point also

Greenkeepers
11-17-2004, 10:19 PM
I've been in this for 5 years now. This is my 3rd year full time and we started out at 12k the first year and now are over 300k this year. What are most of you guys s or c corps or what?

YardPro
11-17-2004, 10:22 PM
It never fails if someone asks what the gross is bobby always and I mean always makes a big deal about the net. It was only this summer he came to the realization that employees are a good thing. I remember reading his post it sounded like he had discovered the wheel. I am not going to get into a pissing match with bobby on income I know he takes home more then me at the moment he also has given lessons on how to rip people off like sand instead of fertilizer. The thing about gross is that is what the total sales are if you can cut cost and find ways of saving money then you really make out with the higher gross.

Allot of small companies have very low expenses i.e. it costs me a lot more to insure a fleet of 3 trucks then some one with only one. So they can see profit levels of 70-80% obviously when you get larger those numbers cannot be maintained. I also see the other end of the numbers where some of you state you know a guy who knew a guy that only makes 5-10% profit. Those numbers are negligible and if that is all you are making you need some serious business lessons. I find our company on the 3rd category at 200-300 k a year our profits are 40-50% I can see they will go down, as we get larger but many costs of ours go down as well. So at the 1 million mark 30-35% is about what I expect. As many know I have a partner so that eats into my end but it also increases our income over what I could ever do solo. Next season when we have our growth spurt I may become a bit more vocal but for now your right bobby your always right hail bobby.


50% profit??
i find that highly dubous with those #'s. also your logic does not add up. you site it costing more to insure 3 trucks than one and that affecting the net (also you had those backwards. gross is total, net is after expences))
this does not negatively affect net. if you are insuring three trucks you have three crews generating income, and since PER vehicle the insurance will be cheaper ( most ins. companies give a group rate). then it will actually ADD to the profit margin.
Studies show that labor accounts for roughly 50% of a business's expenses (most of the time it's more like 60%).
so tell me how you can generate 300k and have a 50% PROFIT???
if you take a business class you'll come to find out that a 10% profit is adequate for business growth.

also how is your company set up. You generate a 50% profit and uncle sam will eat you alive. Any accountant will tell you to lower that #. he will strongly advise you to spend money and get that number down.


again i cannot see a 50 % profit on those #'s

take your gross and subrtact all insurance, fuel, labor, repairs, expendables (trimmer line, mower blades etc.) rent, auto payments, materials, YOUR salary, accounting fees, payroll taxes, and then whatever is left is your net profit.

that is then taxed at almost 40% for corporations.
so why would you let uncle sam get $20,000.00 when you can distribute that money in either new equipment, salaries, etc???? does not make any sense does it???

grassyfras
11-17-2004, 10:26 PM
Part timer. Gross about 25k. Spent 21k on new truck, mower, trailer etc. Profits went to retirment plan, and living expenses which is low I live with my parents full time student. No employees.

paponte
11-17-2004, 10:30 PM
You generate a 50% profit and uncle sam will eat you alive. Any accountant will tell you to lower that #. he will strongly advise you to spend money and get that number down.

True, I would even go as low as 40% to say start spending before you give your $$ to the government.

LwnmwrMan22
11-18-2004, 09:56 AM
True, I would even go as low as 40% to say start spending before you give your $$ to the government.

I would say go as 20%. Shoot. When you're running your own business, and you've got your living expenses paid, your retirement being made, insurances, etc., why not buy more stuff??

By more stuff I don't mean trimmers and blowers, I mean houses or buildings. There's ways to run the business so you're able to incorporate this, as another company that your company owns.

Diversify.

I did this 3 years ago, bought a house next door that my neighbor put in his will that I had an opportunity to buy at tax value.

This week I just got done building a 40' x 50' pole barn on the property. I rent the house out, and the building is mine. Another business expense.

If you're making 100k+, and say you're taking 50% TRUE profit, I just don't understand that.

You're going to be paying $20K in taxes on that income, when you could go buy a building for $150K - $200K and spread the payments over 15 years.

I don't know.

I guess I just don't understand when people on here try to say they're taking in 40-50-60-80% true profit, why you wouldn't put some of that money back into your own pocket by purchasing tax writeoffs that the government themselves tell you to take??

paponte
11-18-2004, 06:55 PM
Nice mwrman. I wouldn't agree more. By buying your your adding $$ to your business as a whole. Wise words spoken. :)

YardPro
11-18-2004, 08:12 PM
bingo.

acquire capital.
buy a nice building, or a piece of property and a building to store your equipment, etc.

all this builds equity in your business.

the other option, however, and the one i feel is more likely is that the #'s are not accurate.
i hear all the time "I made $X off a job" . i say no way. they swear they made $1500 from a $2000.00 job.
then i ask how much were materials. -$350
how much did you pay your help -$150.00
how much fuel burned in the truck, etc. hunh????
how many miles you drive?? - what?
how much did you pay yourself - $1500.00, i told you...
that is not profit.....

here is the problem. vehicles cost at a minimum $.36/mile to run.
insurance costs money from every job
income tax obligations cost from every job
office expenses come off every job.
time for estimating, billing, fueling trucks, working on broken equipment, talking with clients, jetting stuck in traffic, etc cost from every job.


if you are truly making a 50% real profit you are doing very well. if you are not re investing it, you should fire your accountant, receive thanks for contributing so much to the government and lessening my need to contribute, or become legitamate and pay taxes, get insurance etc...

Kelly's Landscaping
11-18-2004, 09:46 PM
Yard I am an S corp. any equipment we buy And we do buy a lot is considered profit I have something like 58k in deductions being rolled over from last year alone that we could not use up. That does not count this years right offs as long as you are buying trucks and equipment you can lower your taxable income dramatically as we do.

On to the truck insurance example that you totally miss represented you assumed all 3 trucks go out every day that is not the case ones a dump truck 2 are pick ups. We use the best truck for the job but that means down time and it is a cost as for insurance rates the numbers really did not move that much when we started adding more trucks.

Now for numbers you can re calculate all you want and tell me they do not add up but you do not take in effect the level of owner participation in our company nor the hours we put in it. One nice thing about being the boss we do get to pay ourselves what we feel like. One last note the 40% tax bracket you spoke of for corporations is for C corporations not S we get taxes at the individual rate any loses in the company go through to us and any profits in the company go through to us there is not the double tax hit the public corporations get.

Now yesterday we did $1194 in clean ups our gas ran us 40 dollars our labor ran us 330 dollars now you can take out a little for all the operating costs but last I knew 824 after expenses was a good day and significantly over 50% giving me a nice cushion after you minus one days worth of insurance and phone bills.

bobbygedd
11-19-2004, 07:23 AM
"take out a little for all the operating costs"?? i bet your daily operating costs are somewhere between $250-$350

karen1122
11-19-2004, 01:32 PM
Gentlemen, Gentlemen, Gentlemen

(Oh and you too Bobby)

You are all speaking in accounting terms where stated profitability can be used to convey any message you want. Remember that Enron was profitable according to their Income Statement.

Has anyone heard the saying "Cash is King, Profits are an Opinion)

Try evaluating your business on a Cash Flow basis rather than confusing the message with investment and other activities designed to lower your taxable income. This is the real yardstick

Lawn-Scapes
11-19-2004, 01:37 PM
You sayin' I should work for cash?

karen1122
11-19-2004, 01:47 PM
Take a peak at the following links and it may explain why the net numbers on this thread vary so much as all of them can be significantly manipulated in order match a specific purpose.

www.entrepreneur.com/Magazines/MA_SegArticle/0%2C1539%2C265225----1-%2C00.html

www.moneychimp.com/articles/financials/cashflow.htm

LwnmwrMan22
11-19-2004, 02:03 PM
Take a peak at the following links and it may explain why the net numbers on this thread vary so much as all of them can be significantly manipulated in order match a specific purpose.

www.entrepreneur.com/Magazines/MA_SegArticle/0%2C1539%2C265225----1-%2C00.html

www.moneychimp.com/articles/financials/cashflow.htm

Of course, if you have more "cash flow" in, than "cash flow" out, you're profitable, maybe.

I would even argue that you COULD have more cash flow out than in, and still be profitable for a period of time.

Take this example.

Say you have $15,000 and you wanted to buy a $30,000 skid steer, and pay for it in 5 years. You finance $25,000, roughly $550 / month, keeping $10,000 in the bank.

Now, for ease sake, you only have one job for that 5 years, to move dirt from area A to area B. You get paid $500 / month to move this dirt. Once it's all moved from A to B, you then get paid $500 / month to move from B to A and so on for 5 years.

Each month you have negative cash flow, $550 going out for the payment, $500 coming in for doing the work. However, are you not still being profitable since you're gaining a piece of equipment, that after the 5 years are up, you will own??

I realize that this is a VERY simplistic view of it and there are many other contributing factors that would cause NO ONE to take on this specific situation, but if you wanted to, we could change the numbers +40% to include fuel, insurance, yada yada yada, I think I was still able to make "A" point, one that I'm sure many will disagree with.

LwnmwrMan22
11-19-2004, 02:09 PM
Gentlemen, Gentlemen, Gentlemen

(Oh and you too Bobby)

You are all speaking in accounting terms where stated profitability can be used to convey any message you want. Remember that Enron was profitable according to their Income Statement.

Has anyone heard the saying "Cash is King, Profits are an Opinion)

Try evaluating your business on a Cash Flow basis rather than confusing the message with investment and other activities designed to lower your taxable income. This is the real yardstick


This statement too is an opinion.

You're SUPPOSED to have investments, that's what makes this country work. If everyone sat around and had a 80% POSITIVE cash flow, no money going out, no one would have any money, because no one would buy anything. Personally, IMO, your cash flow should be as close to even as possible, each year, ONCE you have EVERYTHING else set in your goals / bills for that year.

If you're just going to hoard your money, not invest in tax deferred opportunities that the governement sets out for you, THAT'S where you're selling yourself short, IMO.

bobbygedd
11-19-2004, 02:12 PM
karen, i notice you mention my name every time you post. tell me, do you call out my name, late at night, also?

karen1122
11-19-2004, 03:55 PM
LwnmwrMan22,

The number one reason the businesses fail in the US is due to a lack of cash.

Cash Flow Analysis is a tool to analyze your company's health. The conclusions drawn from it are to direct your investment decisions, not preclude them.

Below is a quick excerpt from the attached website. The example may be simplistic, however, when the complexities of a real business are evaluated, the conclusions may not be so obvious.

www.acctsite.com/articles/cashflowdetailed.htm

There are frighteningly many small business owners out there who do not understand their cash flow statement. A shocking fact considering that all businesses essentially run on cash. And Cash flow is the life-blood of your business. Some business experts go so far as to say a healthy cash flow is even more important than your businessís ability to deliver its goods and services! You may find that perspective hard to swallow, but consider this Ė if you fail to satisfy a customer and lose that customerís business, you can always work harder to please the next customer. But if you fail to have enough cash to pay your suppliers, creditors, or your employees, youíre out of business! Cash Flow Verses Profit

Profit and Cash flow are two entirely different concepts, each with entirely different results. The concept of profit is somewhat broad and only looks at income and expenses over a certain period of time, say a fiscal quarter. Profit is a useful figure for calculating your taxes and reporting to the IRS.

Cash flow, on the other hand, is a more dynamic tool focusing on the day-to-day operations of a business owner. It is concerned with the movement of money in and out of a business. But more importantly, it is concerned with the times at which the movement of the money takes place.

Theoretically even profitable companies can go bankrupt. It would take a lot of negligence and total disregard for cash flow, but it is possible. Consider how the difference between profit and cash flow relate to your business. For example, if your retail business bought a $1000 item and turned around to sell it for $2000, then you have made a $1000 profit. But what if the buyer of the item is slow to pay his or her bill, and six months pass before you collect on the account? Your retail business may still show a profit, but what about the bills it has to pay during that six-month period? You may not have the cash to pay the bills despite the profits you earned on the sale. Furthermore this cash flow gap may cause you to miss other profit opportunities, damage your credit rating, and force you to take out loans and create debt. If this mistake is repeated enough times you may even go bankrupt!

karen1122
11-19-2004, 03:58 PM
karen, i notice you mention my name every time you post. tell me, do you call out my name, late at night, also?

Bobby,

You are such a god on this site. How can I not think ahead to anticipate your witty comments.

and No, I do not call your name, however, I do usually think of you right before I flush

bobbygedd
11-19-2004, 04:00 PM
Bobby,

You are such a god on this site. How can I not think ahead to anticipate your witty comments.

and No, I do not call your name, however, I do usually think of you right before I flush
so then....as you're wiping? :blush: i'm flattered

karen1122
11-19-2004, 04:04 PM
nah, after that. Some how your name comes to mind after I stand up and look down into the bowl.

PR Fect
11-19-2004, 04:09 PM
Now you are talking Gross, I thought they wanted Net

bobbygedd
11-19-2004, 04:23 PM
you're weird. why are you looking into the bowl? sicko.

DennisF
11-19-2004, 05:02 PM
LwnmwrMan22,

The number one reason the businesses fail in the US is due to a lack of cash.

Cash Flow Analysis is a tool to analyze your company's health. The conclusions drawn from it are to direct your investment decisions, not preclude them.

Below is a quick excerpt from the attached website. The example may be simplistic, however, when the complexities of a real business are evaluated, the conclusions may not be so obvious.

www.acctsite.com/articles/cashflowdetailed.htm

There are frighteningly many small business owners out there who do not understand their cash flow statement. A shocking fact considering that all businesses essentially run on cash. And Cash flow is the life-blood of your business. Some business experts go so far as to say a healthy cash flow is even more important than your businessís ability to deliver its goods and services! You may find that perspective hard to swallow, but consider this Ė if you fail to satisfy a customer and lose that customerís business, you can always work harder to please the next customer. But if you fail to have enough cash to pay your suppliers, creditors, or your employees, youíre out of business! Cash Flow Verses Profit

Profit and Cash flow are two entirely different concepts, each with entirely different results. The concept of profit is somewhat broad and only looks at income and expenses over a certain period of time, say a fiscal quarter. Profit is a useful figure for calculating your taxes and reporting to the IRS.

Cash flow, on the other hand, is a more dynamic tool focusing on the day-to-day operations of a business owner. It is concerned with the movement of money in and out of a business. But more importantly, it is concerned with the times at which the movement of the money takes place.

Theoretically even profitable companies can go bankrupt. It would take a lot of negligence and total disregard for cash flow, but it is possible. Consider how the difference between profit and cash flow relate to your business. For example, if your retail business bought a $1000 item and turned around to sell it for $2000, then you have made a $1000 profit. But what if the buyer of the item is slow to pay his or her bill, and six months pass before you collect on the account? Your retail business may still show a profit, but what about the bills it has to pay during that six-month period? You may not have the cash to pay the bills despite the profits you earned on the sale. Furthermore this cash flow gap may cause you to miss other profit opportunities, damage your credit rating, and force you to take out loans and create debt. If this mistake is repeated enough times you may even go bankrupt!




The SBA has published data that concludes that 95% percent of all business failures are the result of poor management. Cash flow is indeed a major reason that fledgling business's fail, however mis-management is the key reason for business failures in the U.S.

YardPro
11-19-2004, 05:31 PM
cash flow is improtant for the day to day runnings of the busness, especially as the business grows, but profits are important cuase without them you run out of cash flow.

YardPro
11-19-2004, 05:48 PM
Yard I am an S corp. any equipment we buy And we do buy a lot is considered profit I have something like 58k in deductions being rolled over from last year alone that we could not use up. That does not count this years right offs as long as you are buying trucks and equipment you can lower your taxable income dramatically as we do.

On to the truck insurance example that you totally miss represented you assumed all 3 trucks go out every day that is not the case ones a dump truck 2 are pick ups. We use the best truck for the job but that means down time and it is a cost as for insurance rates the numbers really did not move that much when we started adding more trucks.

Now for numbers you can re calculate all you want and tell me they do not add up but you do not take in effect the level of owner participation in our company nor the hours we put in it. One nice thing about being the boss we do get to pay ourselves what we feel like. One last note the 40% tax bracket you spoke of for corporations is for C corporations not S we get taxes at the individual rate any loses in the company go through to us and any profits in the company go through to us there is not the double tax hit the public corporations get.

Now yesterday we did $1194 in clean ups our gas ran us 40 dollars our labor ran us 330 dollars now you can take out a little for all the operating costs but last I knew 824 after expenses was a good day and significantly over 50% giving me a nice cushion after you minus one days worth of insurance and phone bills.

the s corpotation allows you to build capital and roll losses onto your personal income.

here a few problems. you say you can pay yourself whayever you want. I agree, but we are talking about company profits, not personal income. the companies profits are AFTER all slaries, including yours.
And the tax deductions you're speaking of are not limited to S coprs. ANY office/work equipment and any vehicle is 100% tax deductable. But here's where the confusion comes in. If you are financing the vehicles then you are not taking the full purchase price off your yearly profit sheet.
you cannot be keeping 50% of the money cuase you just spent almost 60K on trucks.

There is another glaring problem with your math.
From the 1194 you brought in today. You need to subtract all your overhead. the $330.00 was for other workers. Was workmans comp and payroll taxes included? also i take it that was helpers, not your salary. then subtract your salary.

next take out for the vehicle deprication. A $25K truck is another$100.00/day per vehicle.

do you have an office?? what's the rent, utilities, property taxes. etc. divide that by 160/employee(month's hours)

If you are working out of your house your company should be paying you rent, etc. and you should be saving for an office, or property at a minimum.

For us a $10.00/hr employee costs us $20.00/hr to work.

this takes into consideration all the overhead recovery, and NON BILLABLE TIME.........

that's what kills the math. think about all the time you are not billing, but have to pay employees.

you are being unrealistic on your actual operating costs.

bobbygedd
11-19-2004, 05:51 PM
yea kelly, yard pro is correct. please document this as #1

Kelly's Landscaping
11-19-2004, 09:57 PM
Bobby he is not totally correct I get taxed either way since it goes on a personal level weather I pay myself 60 k a year as a salary or take no salary and pay myself 60 k a year in draws as capital gains. At the end of the year any moneys not spent as part of the operations is profit you think by taking column A and putting it in column B it changes it your wrong you just paid the taxes In another way but you still paid them. Our VP in his debates brought up S corps and the legal loop hole Edwards uses by paying himself in capital gains instead of some ridiculous salary he saved him self 600 k in Medicare tax if the salary is less then the social security maximum then you would save there as well since you do not need to pay that tax on anything other then income.

Now I happen to be very frugal and can live quite well off of less then 10 k a year so if I wish I can spend all my profits on new equipment but my spending habits are not on trial here. What I told yard was accurate and manipulating ones bottom line by raising or lowering your personal salary does not change the fact that we made X and kept X. All the stuff mentioned by him is a gimmick, as for depreciation I do not rotate my stuff every year so itís not that important to know that to the exact cent. Dose the truck pull the trailer then it still works does the mower cut the lawn then it still works. As for operations cost of replacements only enters in when something needs to be replaced and of course our government does not agree and claims its not a replacement only profits you choose to spend.

Oh bobby my operating expenses are 53.94 a day 365 days a year not 250. And yard the unbillable time I gave in my example to you was included as was pay roll and comp the numbers would not have been worth much otherwise.

Lawnworks
11-20-2004, 12:20 AM
For us a $10.00/hr employee costs us $20.00/hr to work .

how much do you charge per man hour?

bobbygedd
11-20-2004, 07:15 AM
KELLY, KELLY, KELLY. how can your operating costs be $53 a day? you are screwing up somewhere, MY OPERATING COSTS , before payroll, are $55 a day, and i am operating with bare bones minimum, all used equipment, i don't own a truck that was built within the last 2 decades! i think u r miscalculating somewhere

YardPro
11-20-2004, 07:45 AM
how much do you charge per man hour?average around $40/hr

YardPro
11-20-2004, 07:59 AM
Bobby he is not totally correct I get taxed either way since it goes on a personal level weather I pay myself 60 k a year as a salary or take no salary and pay myself 60 k a year in draws as capital gains. At the end of the year any moneys not spent as part of the operations is profit you think by taking column A and putting it in column B it changes it your wrong you just paid the taxes In another way but you still paid them. Our VP in his debates brought up S corps and the legal loop hole Edwards uses by paying himself in capital gains instead of some ridiculous salary he saved him self 600 k in Medicare tax if the salary is less then the social security maximum then you would save there as well since you do not need to pay that tax on anything other then income.

Now I happen to be very frugal and can live quite well off of less then 10 k a year so if I wish I can spend all my profits on new equipment but my spending habits are not on trial here. What I told yard was accurate and manipulating ones bottom line by raising or lowering your personal salary does not change the fact that we made X and kept X. All the stuff mentioned by him is a gimmick, as for depreciation I do not rotate my stuff every year so itís not that important to know that to the exact cent. Dose the truck pull the trailer then it still works does the mower cut the lawn then it still works. As for operations cost of replacements only enters in when something needs to be replaced and of course our government does not agree and claims its not a replacement only profits you choose to spend.

Oh bobby my operating expenses are 53.94 a day 365 days a year not 250. And yard the unbillable time I gave in my example to you was included as was pay roll and comp the numbers would not have been worth much otherwise.

live on less than 10 K?? now i really doubt your numbers.
that's $192.00/week???


how han you live off of that??????
then the business must be paying alot of your bills, ant that comes off of business profits.

the whole deal with the S corp is you are not taxed on what you make, only what you spend.

if you pay yourselp a high salary YOU have to pay the tax. why not spend it and let uncle SAM get less.

You are using YOUR income as your profit rate.. that's inaccuract. your COMPANY PROFIT is AFTER your salary.

The reason your company has to turn a profit, especially as a corp. is that since the owners are not responsible for financial responsibilities of the company, the company as to turn a profit to borrow money for acquisitions.

You said your companies vp...... do you notown the corp????

also there is no way your operating costs are $53.00/day.
with the almost $60K in trucks you own, the depreciation on them alone is more than that??
your workman's comp is 8-10 % of your payroll.
general liability runs a daily amount.
what about equipment deperciation and repairs and wear and tear.

these are all daily costs.

so you are telling me that for you to do business it only costs you $13,00.0/ year with all office expenses, accounting fees, fuel, insurances (workmans comp, liability, and auto), equipment repairs and depreciation, automobile repairs and depreciation/repairs/etc