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Old 08-24-2002, 10:45 PM
mike48114 mike48114 is offline
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Join Date: Aug 2000
Location: Brighton, MI
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% of sales for budget ?

We are working on our 2003 budget. Our company is in Michigan. We were hoping someone could help with a few items... We are wondering what some companys figure for the following...

1. how much % of sales do you budget for administrative pay including taxes. State how many people your answer includes.
2. What kind of pay seems practicle for an owner of a company grossing aprox. 1 million, not making profit "yet"
3. What % of sales do you budget for labor.

Let me know what you lawn and landscape heads think !
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Old 08-25-2002, 11:21 AM
f350 f350 is offline
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your grossing near a million and yet to make a profit? where in michigan and who are you buying material from? i really think you need to go over your budget again. basically if your an owner how much do you want to make.
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Old 08-25-2002, 08:22 PM
kris kris is offline
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Mike

Spend the money on a consultant. Best money you will spend.
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Old 08-25-2002, 11:48 PM
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heygrassman heygrassman is offline
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Location: Columbus, Ohio
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Quote:
1. how much % of sales do you budget for administrative pay including taxes. State how many people your answer includes.

3. What % of sales do you budget for labor.
I have never been part of a service industry business that budgeted labor based on projected sales dollars, units yes... dollars never.

If this is an initial business plan do more digging. If this is a living business, I would have to third the above motion... consultant.
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Old 08-26-2002, 08:53 AM
LawnLad LawnLad is offline
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Location: Cleveland, Ohio
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If you're doing a million a year you should be able to justify the expense of a consultant. Contact ALCA for referrals. Further more, if you're in debt at all and essentially working to pay the bank - all the more reason to hire someone who can help you to work through your budgeting.

As well, you might find ALCA's Operating Cost Studay helpful. It will break down for you by business type and size low profit and high profit company costs by %. What you'll see when looking at the numbers is that those companies with lower over head (administrative expense, equipment and indirecet expenses) will have higher profits.

% of direct labor to sales may be between 25% and 40% depending on the type of work you do and your labor force. If you use more sub contractors on your jobs you may then have a lower labor cost but a higher sub contractor cost. This is where a consultant will be able to identify where you're making it and where you're loosing it. Also - are you breaking direct and indirect into two separate categories or do you figure no matter what a production person is doing (billable or nonbillable) that it's direct? If you do break these out, consider the impact when comparing/benchmarking your numbers.

As for pay - consider what you'd have to pay someone else to do your work. I've heard the number thrown around that you need 1 administrative support person for every million in sales - so if you figure $25 to $30 K for that person (maybe more depending on your market, their job duties, their experience, etc.) plus your pay. I've also been told that administrative salaries (pure administrative/overhead) should between 9% and 13%. If you're not making a profit - you might want to keep that number as low as possible for yourself. $90,000 (9% of $1 Mil), less $30,000 for the office help leaves you with a max salary at this point of $60,000 if you follow this rule of thumb. Obviously your situation may be different.
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