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  #1  
Old 12-30-2012, 09:11 PM
Greensmith33547 Greensmith33547 is offline
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Profit

Ok, I'm a little confused. I'm starting a lawn business around March of 2013 and my wife and I met with our accountant who said that we would take the amount we charge per hour, minus the cost of business, then take 25% for taxes from profit and the rest is net. I have seen questions like this open a can of words, but can someone give me a simple yes or no? My equipment including my truck is total $405 power month if that helps? Also how do you figure cost of doing business?
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  #2  
Old 12-30-2012, 09:12 PM
Greensmith33547 Greensmith33547 is offline
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Forgot to mention this will be on Florida.
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Old 12-30-2012, 09:20 PM
Duekster Duekster is offline
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Quote:
Originally Posted by Greensmith33547 View Post
Ok, I'm a little confused. I'm starting a lawn business around March of 2013 and my wife and I met with our accountant who said that we would take the amount we charge per hour, minus the cost of business, then take 25% for taxes from profit and the rest is net. I have seen questions like this open a can of words, but can someone give me a simple yes or no? My equipment including my truck is total $405 power month if that helps? Also how do you figure cost of doing business?

405 X 12 = 4860
4860 / 9 months of work = 504
504 /160 hours a month = 3.15 per hour

You need to make a profit on that investment ? You could get 15% in the stock market?

You need your operating cost... GTO Insurance? Inflation? What

You want to make 70K a year?

70K / 9 month = 7777
7777/160 = 48 per hour

You have to pay taxes so 25% is good so you need to make $60.00 per hour
plus your EQ and operating cost.
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  #4  
Old 12-30-2012, 09:34 PM
Greensmith33547 Greensmith33547 is offline
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Quote:
Originally Posted by Duekster View Post
405 X 12 = 4860
4860 / 9 months of work = 504
504 /160 hours a month = 3.15 per hour

You need to make a profit on that investment ? You could get 15% in the stock market?

You need your operating cost... GTO Insurance? Inflation? What

You want to make 70K a year?

70K / 9 month = 7777
7777/160 = 48 per hour

You have to pay taxes so 25% is good so you need to make $60.00 per hour
plus your EQ and operating cost.
I really appreciate your reply! What is GTO insurance also what do you mean by inflation? I know what inflation is but I'm just not sure how that works in to this. So basically your saying $60 per hour total including everything, or $60 and then more for the EQ and operating cost?
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Old 12-30-2012, 09:42 PM
Duekster Duekster is offline
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Well Florida has a longer working season but you get the idea.
One word of caution, do not put too much faith in the CPA. They have no guts and deal in the past.

You need to learn your business. There are often some free account classes for start up businesses and free counseling through SCORE and Small Business Development programs.

Profit is what you make off an investment. If you had a job and earned a wage that is not profit, nor is your labor that you put in the company.

I do not know your business structure but look at the different types and how the IRS treats the income to get an idea of what is wages and what is profit. If you were a C Corp or taxed as one as a LLC then you would set a wage for yourself... any extra bonus or dividend would be taxed as a capital gain where as the wages would be taxed as wages.

Clearly most start ups do not have the ability to set up wages at first. There are a lot of considerations about what type of business to even set up but IMHO anything but a DBA sole proprietor is good if you have any assets at all.
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Old 12-30-2012, 09:42 PM
Greenboy24 Greenboy24 is offline
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You need to know your costs down to a t before you can determine an hourly rate.

Add up the total cost for the entire year(don't forget anything, lots of small bills can add up, there should be things such as maintenance and repair costs built into your budget. Your salary and company profit should be part of that total, base it off of) then divide by billable hours and you get what you need to make per hr to reach your goals.

Similar to what Duekster said don't forget to account for seasonal changes. I'm unfamiliar with the Florida market, We do our proformas and budgets over 8 months
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  #7  
Old 12-30-2012, 09:45 PM
Duekster Duekster is offline
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Quote:
Originally Posted by Greensmith33547 View Post
I really appreciate your reply! What is GTO insurance also what do you mean by inflation? I know what inflation is but I'm just not sure how that works in to this. So basically your saying $60 per hour total including everything, or $60 and then more for the EQ and operating cost?
GTO - Gas tires and oil

You need to set your equipment cost as if you are buying one 5 years from now. Inflation is pretty low.

The point is you need to consider all cost and figure out an hourly cost. If you do not pay tires this week you should save the money until you do need to replace the tires. It is coming right? same for everything.

You will not likely make your top rate but you need to know your target hourly rate and the lowest rate you can take and still pay bills.
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  #8  
Old 12-30-2012, 09:47 PM
Greensmith33547 Greensmith33547 is offline
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That all helps a lot. I guess what I'm asking is say in a perfect world I worked 10 months how much would I charge total to the customer for the hour to net say 80k a year? I'm not super business tax savvy but I'm trying to learn all I can! You have been very generous with your help!
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  #9  
Old 12-30-2012, 09:57 PM
Duekster Duekster is offline
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Quote:
Originally Posted by Greensmith33547 View Post
That all helps a lot. I guess what I'm asking is say in a perfect world I worked 10 months how much would I charge total to the customer for the hour to net say 80k a year? I'm not super business tax savvy but I'm trying to learn all I can! You have been very generous with your help!
Net is after taxes and expenses.

You add estimated taxes with likely is closer to 30%

You have to pay Self Employment taxes and FICA before you even consider income taxes

so to keep it simple 80K x 1.30 (30%) = $104,000

/10 month = 10400 / 160 hour = 65.00 hr plus your equipment cost

You do need to learn accounting, even if it takes you 3 years to get it.

I strongly suggest quickbooks or someother account program and find a pro-advisor that is willing to do books and teach you the ropes. Take classes anything. Otherwise you are doomed.

http://www.score.org/chapters-map
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  #10  
Old 12-30-2012, 09:59 PM
larryinalabama larryinalabama is online now
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What is "Profit"?

It might take a little time to figure out equiptment cost per hour, but heres a small sample.

Typical day.

Truck cost .80$ per mile x40 miles 32.00

Handheld cost 1.00$ per hour run 2.5 hours 2.50

Mower cost 8.00$ per hour run 3 hours 24.00

Just the basics run me close to 60$ per day, its really a expensive business to operate.

The plus side if my truck doesnt leave home Im not out anything
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