Target Gross Margin

Discussion in 'Business Operations' started by Carriage House, Jan 15, 2004.

  1. Carriage House

    Carriage House LawnSite Member
    Posts: 27

    I am starting a new business this spring and have been reading everything I can get my hands on, or click on for that matter. Anyway, I've read different approaches for pricing such as a $1.00 per min. or timing how long it takes to provide a service and extend it out based on the desired rate of pay. But I was wondering if there is an industry standard for either gross margin or net income as a percentage of sales.

    I come from an accounting background. I work for a large grocery wholesaler, and am very numbers driven. I've always been surprised by how consistent the gross margins are of various departments regardless of the size and buying power of the store. Does the same apply here? I know there a ton of variables but I am still curious. Any help would be greatly appreciated.
     
  2. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Posts: 2,116

    As far as net income as a percentage of revenue is concerned, I hope year two is very different. I grossed a little over $36K in year one (2003) and my EBITDA was around $14K. But I have a ton of fixed costs. I don't anticipate them increasing as my revenue increases. These fixed costs are things like cell phone, storage, auto insurance, yellow pages, etc.

    As for gross margin, I was kind of sloppy in record keeping in 2003 because I didn't categorize my cost of goods sold by product. I think I'll do that for 2004 though. I can tell you that I spent $326.29 on things like small engine fuel, oil, filters, blades and line. Revenues from mowing were $19,282, so I'd guess my gross margin on mowing is probably around 98%. Obviously, that varies as some accounts are more profitable than others.

    Later,
    DFW Area Landscaper
     
  3. kris

    kris LawnSite Bronze Member
    from nowhere
    Posts: 1,579

    I would love to hear some numbers from the grocery business.

    I believe that in order to have a healthy Construction business your GM should be at least 40%

    Gross Margin - after all materials, variable labor, and equipment expenses.

    Ours was around 44.8% this past season.
     
  4. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Posts: 4,041

    Hi Carriage House,

    Here is a well put together business plan that may be helpful to you.

    *.pdf file
     
  5. Carriage House

    Carriage House LawnSite Member
    Posts: 27

    Thanks for the replys everyone. I acutally looked at that b-plan when I was going for my MBA... a lot of great stuff on the internet. As far as margins for the grocery biz.. here are the rules of thumb

    meat 20%
    produce 30%
    deli 40%
    seafood 15%
    bakery 50%
    floral 30%
    grocery 25%


    Keep in mind this is gross margin.. simply net sales divided by gross.... and as you can see the level of service and prep. to the product plays a big role...

    Thanks again,
     

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