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  #51  
Old 04-21-2013, 01:58 PM
205mx 205mx is offline
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Originally Posted by 32vld View Post
Set aside $12,000 three years in a row. Buy a new truck cash.

Years 1 and 2 your profit margin is high.

Year 3 you buy that truck $36,000.

Third year there is no $12,000 profit because you spent that money on buying a truck. Your profit margin took a big hit for the third year.

Though because profit margin is so important to you then your evalution is that a company that just bought a brand new truck is going broke because their profit margin dried up.

Profit margins are used and good for figuring worth of large corps.

Just braging tool for the sole owners of small businesses.
bleh. dude, fixed assets dont immediately affect P&L. anything over 500 or 1000 generally should not be expensed, but listed on books as an asset
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  #52  
Old 04-21-2013, 02:39 PM
Darryl G Darryl G is offline
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54% for 2012 working mostly solo, (my son's help a bit during the summer) but that's without taking out my pay which I take as owner draws.
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  #53  
Old 04-22-2013, 04:39 PM
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tyler_mott85 tyler_mott85 is offline
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Would it be fair to say that for a more accurate view of a company's profitability and performance one should look at 3, 5, 10, 20, etc lengths of years averaging out profit margins for those periods?

Like others have said, when first starting out, if you already own your equipment you're using your profits are going to be great. You start adding additional expenses as time goes along and then maybe 4 years into it you have to spend money on a full set up, or adding an additional crew, etc. So while it may look like your business is going down hill because years 1,2,3,4 have profit margins that looks something like 30,25,20,5 respectively. But over the four years you average a 20% margin, no?

Which another important thing to look at as well would be Cash on hand, no? Maybe you have two profitable years netting you $40k profit after your solo salary. So then you take that $40k and you make large purchase one year that you haven't set aside money for ie truck replacement. Lets say you purchase a skid loader for $30k because you decide to do more dirt work. Perhaps that purchase of the skidloader gives you negative profit margin for that year. But your company still has $10k cash on hand at the end of the year.

Sure losing money year after year is bad for business, no doubt. But also important to know that even if you have a couple years back to back with negative profit margin doesn't mean you are in debt.

Sure knowing your numbers is important every year as well. If you waited 4 or 5 years to look at your margins you may have missed something in year 2 that you could of changed that would increase profit margin in the long run. Or even saved your business down the line.

My thoughts... Don't know my profit margin because I don't have a profit margin to look after.
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  #54  
Old 04-22-2013, 10:11 PM
205mx 205mx is offline
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Originally Posted by tyler_mott85 View Post
Would it be fair to say that for a more accurate view of a company's profitability and performance one should look at 3, 5, 10, 20, etc lengths of years averaging out profit margins for those periods?

Like others have said, when first starting out, if you already own your equipment you're using your profits are going to be great. You start adding additional expenses as time goes along and then maybe 4 years into it you have to spend money on a full set up, or adding an additional crew, etc. So while it may look like your business is going down hill because years 1,2,3,4 have profit margins that looks something like 30,25,20,5 respectively. But over the four years you average a 20% margin, no?

Which another important thing to look at as well would be Cash on hand, no? Maybe you have two profitable years netting you $40k profit after your solo salary. So then you take that $40k and you make large purchase one year that you haven't set aside money for ie truck replacement. Lets say you purchase a skid loader for $30k because you decide to do more dirt work. Perhaps that purchase of the skidloader gives you negative profit margin for that year. But your company still has $10k cash on hand at the end of the year.

Sure losing money year after year is bad for business, no doubt. But also important to know that even if you have a couple years back to back with negative profit margin doesn't mean you are in debt.

Sure knowing your numbers is important every year as well. If you waited 4 or 5 years to look at your margins you may have missed something in year 2 that you could of changed that would increase profit margin in the long run. Or even saved your business down the line.

My thoughts... Don't know my profit margin because I don't have a profit margin to look after.
Equipment purchases shouldn't be listed as expenses, but depreciating fixed assets. They won't affect P&L
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  #55  
Old 04-22-2013, 10:18 PM
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Efficiency Efficiency is offline
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Equipment purchases shouldn't be listed as expenses, but depreciating fixed assets. They won't affect P&L
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Isnt depreciation an expense? Can we play the question game?
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  #56  
Old 04-22-2013, 10:19 PM
205mx 205mx is offline
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Yes, but no. It's depreciated. Meaning its not a 30,000 dollar write off. Just the depreciated amount. Obviously margins aren't the defining point of a company. They do go down. But, just because you get bigger and expenses go up, doesn't mean the bigger you get the lower your margins on a yearly basis. With more expenses, the other side of the scale should also tip... Revenue
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  #57  
Old 04-22-2013, 11:19 PM
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Efficiency Efficiency is offline
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Yes, but no.
I smoked but I didnt inhale? Which one is it professor?
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  #58  
Old 04-22-2013, 11:21 PM
205mx 205mx is offline
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Yes it's an expense. But not in it's entirety, immediately
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