How much to put back into company

Discussion in 'Business Operations' started by SDNCLAWNCARE, Nov 16, 2006.

  1. SDNCLAWNCARE

    SDNCLAWNCARE LawnSite Member
    Posts: 232

    What percentage of gross income do you guys put back into your companies? To save for growth!
     
  2. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    it changes from year to year
     
  3. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    as much as you can afford to??

    it will vary depending on your company size and growth rate...

    if you are running your business correctly,then you shouldnot be putting any of your salary back into the business. The only decision should be how much of the business profit should you take as a divinend, and how much should you reinvest into the business
     
  4. qualitylandscaping

    qualitylandscaping LawnSite Bronze Member
    Posts: 1,581

    I keep 5% of net. The rest goes back into the business.
     
  5. topsites

    topsites LawnSite Fanatic
    Posts: 21,653

    With the exception of labor and winter money and a little extra, everything I can put back into it goes, but there is reason to the madness:

    A LOT of this money goes into parts that can and will be used later, to build a stock of spare supplies that can and will last for years... This is a good idea, to have a nest egg of parts that I can use in times of drought / hard times.
    So, rather than attempt to save 10 or 20 thousand to get me through the rough, I'd rather have the parts (plus it saves time and money not having to run out every time I need something, double bonus).

    And get me through the rough it will, I've ran for 6+ months before on just what I already had, basically all you have to pay for at that time is the fuel (ok not quite, but kinda).

    At the same rate, I hunt and shop for discounts, when I have the money, I try to get 30-50% off the usual price, and when the discount comes around (it almost always does, might have to wait some time), I usually buy several year's worth at that time. So, I only buy what I need when I absolutely have to have it and there's no discount.

    Then, say I just bought 3-4 (or 5-10) years worth of blades at 30% off: Every time in the future I have to use these parts, I just earned 30% on that money, so it becomes an investment that pays back over time, it is as good if not better than interest-bearing money market accounts.
    To expand a bit, say I bought 10 sets of blades for $12 each (so $360 at 30% off = 252) and I use 1 set per year:
    First year's set, full 30% interest, 2nd year = 27%, 3rd year 24%... ... 10th year = 3% on the last set.
    Roughly speaking, my $252 investment paid me back $360 in ten years, but I started seeing money the first year, I don't know what this works out to, 15% APR?

    As can be gathered, it really is investing, right back in the company.
    Why worry about finding investors when you can do it yourself and reap all the benefits?

    Equipment is helpful as well, and it all deducts.

    I still haven't figured out what to do when I get rich via this method, which should happen one day in the next 20 or so years, thou somehow I suspect this will not be a problem no matter how you look at it :laugh:
     

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