Originally Posted by etwman
There is a number, which I just happened to call the "Golden Number", which is what it cost you daily to operate your business. This would be what you have to net each day to just cash flow your company. This doesn't include gas, employees, etc. These are your fixed costs, insurance, rent/mortgage, equipment payments, and the list goes on and on. You probably could put your salary in there because you have to be paid or the company doesn't exist, but that is arguable. So many guys don't know that number, or know it and divide it out over 365 days and feel confident they'll make it work. You are in a seasonal business, divide it by 365 and it will put you in the poor house real quick. Take out winter (forget snow removal, don't even bank on that) 10 weeks, less weekends, less holidays, less .5 rain days a week, and what are you left with? About 200 working days a year. Take your annual fixed costs and divide them by 200, that'll give you your golden number of what you have to earn each day, NET, than that'll cover your operating costs. You actually want to make money, you have to exceed that golden number consistantly. Is it overly conservative, maybe, but you end up working more than 200 days a year that's money in the bank. When someone outside the industry thinks its so easy to make money in this line of work you can slap them upside the head and give them this scenerio. Tell them they would be have to work all year long, stay in their current house, make 2/3 their salary, and find a way to make it work, you'd get a good look for sure. The less debt you have, the lower that golden number. Mega debt and no assets will burn you fast. There are lots of ways to lower that Golden Number. The lower it is, the better you position yourself, the longer you will last in slow times. Lets call this business 101.