Originally Posted by coolluv
Great post BTW.
I think a big part of the reason most fail in this business is the fact that they lowball prices to get work. They don't know how much they need to make in order to be profitable. Then they get to the point of crews and trucks and equipment and realize the money is not there.
Just because you gross 500,000 a year doesn't mean your making money. Some companies are just middle men. They shuffle money from customers to the bank and then to the bill collector. But they look successful.
Then at some point they get tired of the rat race and realize that its not worth the aggravation. I personally think that this industry for the most part has priced itself out of profitability. Its too much like the wild west with no regulations. Too many illegals....too many that don't know what they need to make....too much competition from too many folks without a job desperate to make a living.
Prices are falling instead of rising and the margins get smaller and it makes it really hard to make it all work once you start getting to the point of adding crews and trucks and equipment. You can survive solo, but that is all that you will do. Finding good help is another problem. Anyone with intelligence is not out running a weed wacker all day. Every business owner I talk to say employees are their biggest problem.
Just because you see a company with trucks and crews doesn't mean they are making money and are successful. Ive seen more than a few disappear and when I find out what happened its usually that they were not making enough to be profitable and didn't realize it until it was too late.
I think most make the mistake of...I will price low and make it up in volume. That never works and is the path to failure. Just because you have a couple hundred accounts and are working long days....doesn't mean your making money.
Its hard to get people to pay what you need to make in order to survive. With all of the competition its nearly impossible.
"Just because you gross 500,000 a year doesn't mean your making money."
thats a salient. Revenue is not the same as profit. No matter how high a business's revenue is the owners income could be very small or be coming from debt. Its a system that won't last forever without. most people do not understand this basic function of math, even when they say they understand it they usually won't fully comprehend.
I've explained this to people I know. A million dollar a year business with no profit. they understand and then in the next breath say " but they must be making something. they have a million in sales"
Revenue is only profit when there is more revenue than cost. wether the business has $5 in sales or 5 billion. its all relative.
Though with 5 billion in sales its a lot easier to pretend there is profit.