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2004 $ results

Discussion in 'Lawn Mowing' started by meets1, Jan 31, 2005.

  1. meets1

    meets1 LawnSite Gold Member
    Posts: 3,775

    So now that 2004 is finished and 2005 has begun, how did you guys fair out for taxes?

    I had the best year to date. We took our gross x 3 this year. Although good rain all year, plenty of snow last year, etc. It all helps.

    I was also talking to a local LCO this past week and he told me he didn't do so well. I asked why and he said he pays himself x amount every two weeks. What is left is profit in his mind.

    Is this what you guys do as well or not?
  2. Mueller Landscape Inc

    Mueller Landscape Inc LawnSite Senior Member
    Posts: 489

    Your friend is correct. You should pay yourself compensation for the work that your perform, based on what the going rate is for your area, as though you were paying an employee. That is part of the cost of doing business. What is left after expenses is profit.
  3. DGI

    DGI LawnSite Member
    from SE Mich
    Posts: 173

    Excellent response, John.

    It seems like so many people have trouble understanding that their own time has value.
  4. meets1

    meets1 LawnSite Gold Member
    Posts: 3,775

    Here is how I look at the situation.

    1. You have to be able to recognize your cost per job ( be it mowing, spraying, tree work) & your profit / job.

    2. Then I think you need to know the difference b/t being paid & profit made. You need to be able to be paid for your time & work as the owner yet your business needs to make a profit.

    You could go on from this point but from a financial point of view, I think a lot of guys over look this.

    Example I can think of is say "low baller" (we use that term frequently here) charges $100 for a 2 hour job. Looks like $50 / hour he made and thinking this is great. Well then you have to take into consideration setting up job, time to get job, scheduling job, billing, collecting. Cost of vehicle, equipment used, wear-tear on equipment. Then you have the regular overhead cost of advertising, having a base for business to perform out of, insurance, just basic day - day operating cost in general.

    Once again, I am sure I didn't mention all types of expenses but using this as an example.

    Now I know one guy whose wife works part time. She pays for all household expenses. Dish, net, house insurance, mortage payment, grocery, utilities. When they need the big stuff such as furniture, car, more kid clothing, then he picks up the tab. He always brags about having all this money in savings but I don't think he realizes that he needs to draw a pay check off the company. I am not saying he needs $3000 per week or $500 / week I guess that is his decision. But from a $ point of view, I think he may be a little disoreinted!
  5. lawnguyland

    lawnguyland LawnSite Bronze Member
    Posts: 1,108

    I agree w/what's been said if you have employees.
    If you are solo op then it makes no difference if you pay yourself or not each week as at the end of each week or year you will still have the same amount of money.
  6. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    Is your question about taxes or what we had took in for total company revenue?
  7. Mueller Landscape Inc

    Mueller Landscape Inc LawnSite Senior Member
    Posts: 489

    But you will not know the amount of your real profit.
  8. lawnguyland

    lawnguyland LawnSite Bronze Member
    Posts: 1,108

    yes and no. If I pay myself 1$ or 1000$ per week my "profit" would vary greatly, by about 52,000$ per year. It's just that the 52k is in my savings acct instead of checking acct. What matters is my net that I pay taxes on at the end of the year. That # will be the same weather I put 1$ or 1000$ per week into my savings acct and "pay myself". I do see what you're saying too.
  9. lawnman_scott

    lawnman_scott LawnSite Fanatic
    Posts: 7,547

    if you simply keep records you will.
  10. Mueller Landscape Inc

    Mueller Landscape Inc LawnSite Senior Member
    Posts: 489

    The point I am trying to make is the "understanding" of what real costs are and what real profit is. Obviously you are not going to pay an employee $1 dollar per week. In order to know what your net profit is, you will need to take into account what your own hourly rate should be according to your part of the country. Then you will know whether you are charging enough to cover costs and if your business is making a profit. Without this information, you will have a hard time when and if you want to expand and begin hiring employees. You, as the owner of your business have a right to make a profit based on the risk that you have taken and you as the employee should be compensated for the labor that you provide. The numbers will tell the real story of how your business is doing, but only if you track the real numbers. So it does make a difference because the right info will help you to know if you own a "job" or own a "business". :waving:

    The taxes are a whole other matter that depend on whether you are a sole prop, incorporated or a LLC.

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