Lets talk margins.

Discussion in 'Business Operations' started by 205mx, Mar 14, 2013.

  1. 205mx

    205mx LawnSite Silver Member
    Posts: 2,339

    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
     
  2. Darryl G

    Darryl G LawnSite Fanatic
    Posts: 8,033

    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.
     
  3. tyler_mott85

    tyler_mott85 LawnSite Senior Member
    Posts: 582

    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. :)
     
  4. 205mx

    205mx LawnSite Silver Member
    Posts: 2,339

    Equipment purchases shouldn't be listed as expenses, but depreciating fixed assets. They won't affect P&L
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  5. Efficiency

    Efficiency LawnSite Bronze Member
    from zone 6
    Posts: 1,519

    Isnt depreciation an expense? Can we play the question game?
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  6. 205mx

    205mx LawnSite Silver Member
    Posts: 2,339

    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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  7. Efficiency

    Efficiency LawnSite Bronze Member
    from zone 6
    Posts: 1,519

    I smoked but I didnt inhale? Which one is it professor?
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  8. 205mx

    205mx LawnSite Silver Member
    Posts: 2,339

    Yes it's an expense. But not in it's entirety, immediately
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