Lawn Care Forum banner

Anyone ever had problems with payroll and cash flow?

19K views 90 replies 35 participants last post by  Service.com 
#1 ·
I started this business a year ago as a part time business while attending college. This summer I have gone full time with and now have one employee who has been helping me since mid-June. I am finding that meeting payroll puts a financial strain on the budget. I depend on this income to support my family and I only bill my customers at the end of the month. I pay him $10/hr, which is the standard rate in my area.

My question is how do you guys deal with payroll and cash flow issues? Any advice in these areas would be appreciated. Thanks.
 
#7 ·
Either your overhead is too high, your not charging enough, or you don't have enough work yet for a full time employee, I made that mistake last year had to cut my full time guy back to part time for a lil while until I got more accounts, I learned very quickly NOT to cut for $25 a week it's $50 a week min, three years of solo cutting was enough! it's time to hand the reigns over to the young guns.
 
#9 ·
Well answer this question so I could better advise you.

Which best describes your problem.

A. You pay your helper once a week or every other week, your customers pay you once per month. When your customers pay up, you can make payroll easy. When its the end of the month, pay roll is tighter. Some weeks its easy to write the checks and others its harder. but comes and goes in cycles. If you add it up on paper you don't have a problem and show a profit?

B. doesn't matter how they pay you. You constantly seem to be broke after writing payroll regardless of the time if month?


If your problem is "A". Then either save money to float you better, look into how you pay for other expenses and float time, can you bill weekly? Auto charge credit cards? Can you pay out helper every other week? Or re arrange the pay date to work better with your cash flow? Remember just because the pay period ended, does mean you have to pay up that day. You get 6 if you want to set that as a policy

If your problem is more like "B". You have money, you write payroll and then your broke again, always, every week. Your problem is you don't charge enough, pay too much for direct labor or have overhead expenses that are too high

I myself was surprised when looking up industry bench marks. While so things can be changed slightly, you would be surprised when looking at the % of where you should be spending your money and by how much it is. It said plain and simple 8-12% mangers salary. Thus sell a half million a year in work and if all you do is mange you should expect a salary of 50k per year. If you need more than that to live, then you have to sell more, cut other expenses or pick up other "jobs" like being on a crew or being a mechanic.

If you sell 100,000 in work you should expect to only take home 10k as a manger. You might also take home 16k more because you are also a labor. And maybe 5 k as a mechanic. But this is how you should try and set a budget.
 
#10 ·
I have one helper. I pay him $10 an hour. I have 65 lawns and some of them are big hoa's. I work hard six or seven days a week. On the larger properties with not allot of weed eating, I don't take him. I limit him to the hard stuff with allot of weed eating. He also runs a walk behind and is learning to run a stander. He works 3 to 5 days a week. My labor rarely gets over 12% for the week. Of course that's not counting me.
 
#11 ·
Look at your net income if you didn't have to pay a helper vs your personal expenditures. I agree with those that suggest you are not netting enough money to have a helper. You're just going to have to do all the work until you get that net income up. Make sure you are charging what it takes to run a business .
 
#12 ·
BW, one very important question has not been asked. Do you charge by the visit, or do you have monthly contracts? If you are charging by the visit, as others have stated, your rates are too low and/or your expenses are too high.

However, if you mostly have year round accounts then it is normal to experience negative cash flow this time of year. With monthly contracts you bill the same amount each month, but you are probably making more frequent visits in the summer. This is magnified in July and August because you have to cover an extra week of payroll from the same amount of income. The good news is you will be more profitable in the winter, so be sure to put back some cash for this time next summer.
______

In either case, you need to make it through August. The best thing you can do is to sell a couple enhancement jobs to generate some extra profit for the month. Propose small improvements to your existing customers without children. (They will not have back to school expenses.)

The next thing to do is manage your labor. Make sure to keep your worker under 40 hours. You will have to pick up the slack, but the last thing you need is overtime right now. You can also offer your employee some time off over the next few weeks.

A final step is to tighten up on all non essential expenses. What can you do without for a month or two? What purchases can you put off for another month?

In the long term, think about Seabee's advice on benchmarking and creating a budget.
 
#13 ·
Yeah this might be true...how many properties do you maintain on a weekly basis, and what equipment are you using?
In all sense of reality, this question does not even belong in this thread. Or forum.

He could be mowing 1 account that takes all week with a batwing mower and tractor or he could be doing 60 per day with push mowers.

It has absolutely nothing to do with his problem, because there are too many variables.

Either your overhead is too high, your not charging enough, or you don't have enough work yet for a full time employee, I made that mistake last year had to cut my full time guy back to part time for a lil while until I got more accounts, I learned very quickly NOT to cut for $25 a week it's $50 a week min, three years of solo cutting was enough! it's time to hand the reigns over to the young guns.
While all these could be true, they could all be false as well.

The OP could be making plenty of net--true net--the kind of net that is left over after all expenses are paid including labor--and still be experiencing cash flow issues.

It appears that not many people understand the importance of positive cash flow. Profitable businesses can go under due to negative cash flow and unprofitable businesses can continue to operate if they have positive cash flow.

Should be interesting to see where this goes.

Look at your net income if you didn't have to pay a helper vs your personal expenditures. I agree with those that suggest you are not netting enough money to have a helper. You're just going to have to do all the work until you get that net income up. Make sure you are charging what it takes to run a business .
You mean grossing, not netting. Net income is what is left over after all expenses are paid. If you're paying labor out of net income, you don't deserve to be in business.
 
#15 ·
In all sense of reality, this question does not even belong in this thread. Or forum.

He could be mowing 1 account that takes all week with a batwing mower and tractor or he could be doing 60 per day with push mowers.

It has absolutely nothing to do with his problem, because there are too many variables.

While all these could be true, they could all be false as well.

The OP could be making plenty of net--true net--the kind of net that is left over after all expenses are paid including labor--and still be experiencing cash flow issues.

It appears that not many people understand the importance of positive cash flow. Profitable businesses can go under due to negative cash flow and unprofitable businesses can continue to operate if they have positive cash flow.

Should be interesting to see where this goes.

You mean grossing, not netting. Net income is what is left over after all expenses are paid. If you're paying labor out of net income, you don't deserve to be in business.
I said net income with no employee figured in.
 
#16 ·
Payroll can be a challenge for me at times. It allways works out though week to week. We are allways busy but we do small jobs and we have to move around alot to be able to meet payroll. Overall you have to know how much you need to make a day with your helper to cover your expense and payroll. Set your daily goal and as long as you cover that goal everyday you should be able to pay him just fine every week. Other thing's can make it a challenge sometimes, slow paying customers and equiptment that breaks etc and mess things up sometimes, but if your going to have a employee it's wise to build up a safty net account to have backup money for slow times or bad weeks.
Just amagine larger crews of 10 or more guys totally different than just 1 or 2 guys think about how much money they need to make daily just to make it.:waving:
 
#17 ·
In all sense of reality, this question does not even belong in this thread. Or forum.

He could be mowing 1 account that takes all week with a batwing mower and tractor or he could be doing 60 per day with push mowers.

It has absolutely nothing to do with his problem, because there are too many variables.
Okay...well I think it does sir. It's a leading question...as in leading to what type of the accounts he has/what size?

Thank you though...
 
#18 ·
Once you start to have employees you need to give your accounts a second look. You can be inefficient and solo and still make money. Once you start to have employees it really exploits any inefficiencies you have. More employees only multiplies the inefficiencies and puts you in the red even more.

You need to know the time it takes to mow all of your properties as well as the drive time. You need to figure out what your cost is per man hour to operate and how much per man hour you need to be generating to cover your workers payroll and still take home your desired amount.

I had to get rid of some properties as me head count increased. Even at an ideal and efficient company with increased crew size efficiencies increase and this can't be helped. Things like travel time labor multiply and this can be helped. The most efficient crew is a crew of one usually.

Hopefully you can benefit from the increased output from adding the the second worker and it will greatly exceed the loss in efficiency.
 
#19 ·
Negative cash flow will only be exacerbated by more work.
You aren't kidding about that. Iv been in the trade 25 years this is my 11th in business and we are coming the the conclusion that we can not make any real money with employees. My data shows I make a small profit sometimes break even most time and loose my shirt some times with employees. The more work the worse it gets.
 
#20 ·
You aren't kidding about that. Iv been in the trade 25 years this is my 11th in business and we are coming the the conclusion that we can not make any real money with employees. My data shows I make a small profit sometimes break even most time and loose my shirt some times with employees. The more work the worse it gets.
Well I'f I understand this right you plan on not having employes. So let me ask you this. What is your retirement plan. What will you be doing when your 50. You can only make so much by yourself. I couldn't see how that would be enough to support you the rest of your life.

That's why I think the comment you made if I understand correctly is the dumbest most incorrect comment I've read on this sight. Yes I made $50000.00 -$60,000.00 when I was solo with part time help. I now have a bunch of trucks and bunch of employees. Yes it's a night mare a lot of the time and it takes a lot of money to operate but I make a Hell of a lot more money. I have to be more careful with my money but I do make more.
If you broke even because you have employes only a few things could be the case. You can't run a business
You don't or didn't need employes.
 
#21 ·
You aren't kidding about that. Iv been in the trade 25 years this is my 11th in business and we are coming the the conclusion that we can not make any real money with employees. My data shows I make a small profit sometimes break even most time and loose my shirt some times with employees. The more work the worse it gets.
Your either paying them too much, or again not charging enough resulting in a negative cash flow situation, so it looks like your making money but really your not. Another thing I've found is you really gotta watch your efficiency like someone said above, employees will drain you dry if you don't.
 
#22 ·
Well I'f I understand this right you plan on not having employes. So let me ask you this. What is your retirement plan. What will you be doing when your 50. You can only make so much by yourself. I couldn't see how that would be enough to support you the rest of your life.

That's why I think the comment you made if I understand correctly is the dumbest most incorrect comment I've read on this sight. Yes I made $50000.00 -$60,000.00 when I was solo with part time help. I now have a bunch of trucks and bunch of employees. Yes it's a night mare a lot of the time and it takes a lot of money to operate but I make a Hell of a lot more money. I have to be more careful with my money but I do make more.
If you broke even because you have employes only a few things could be the case. You can't run a business
You don't or didn't need employes.
Everyone business model and needs are different. Some of us Solo fellers have other interests also. Im approaching 50 and this is the perfect business for me.

As far as the OP, I can say I know a lot of lawn fellers that have a employee and don't have the income to move out of their parents house. If I were young Id bust my azz 15 hours per day and get my persona and business finances in real good shape before Id even consider hiring anyone.
 
#23 ·
Everyone business model and needs are different. Some of us Solo fellers have other interests also. Im approaching 50 and this is the perfect business for me.

As far as the OP, I can say I know a lot of lawn fellers that have a employee and don't have the income to move out of their parents house. If I were young Id bust my azz 15 hours per day and get my personal and business finances in real good shape before Id even consider hiring anyone.
bingo! that's why I bought the new mower last year, new landscape trailer this year, new back pack blowers, and a new dump trailer and some other stuff while I'm living at home and my business related stuff is my only expenses! no employees and lovin it. but yes to answer the OP's question I did have cash flow issues last year and I was making a lot more money or it looked like I was anyways. but I was paying my part time employees too much money. So really I wasn't making much more money then I am this year and I'm doing a little less driving. definitely less work, and much easier on me to not have to deal with anyone else except my customers.
 
#24 ·
Well I'f I understand this right you plan on not having employes. So let me ask you this. What is your retirement plan. What will you be doing when your 50. You can only make so much by yourself. I couldn't see how that would be enough to support you the rest of your life.

That's why I think the comment you made if I understand correctly is the dumbest most incorrect comment I've read on this sight. Yes I made $50000.00 -$60,000.00 when I was solo with part time help. I now have a bunch of trucks and bunch of employees. Yes it's a night mare a lot of the time and it takes a lot of money to operate but I make a Hell of a lot more money. I have to be more careful with my money but I do make more.
If you broke even because you have employes only a few things could be the case. You can't run a business
You don't or didn't need employes.
Why I appreciate input you an I are not on the same level and you do not know what its like to have a 26-30 week mowing season. Yet I bring in close to a quarter million every year. But lately I realized I could bring that in each year with just my partner and no employees. By shedding the extra work and cherry picking 160 accounts out of our nearly 200. Up here employees cost significantly more a 3 year vet expects 15 an hour. I have 10 year vets so take an average of 17 an hour then times it by 1.5 for ot then add on 20% for wc unemployment ssi and a few others and you see ot quickly exceeds 30 an hour real cost. The market will bare 60 an hour we charge it and it's not enough. Look I understand the faith in the employees make money model is very strong in some yet we now have 9,000,000 fewer jobs than when Obama was sworn in they just do not exist there gone. I may be late in realizing the futility of my employee pursuit but my eyes are open this year.

As for doing this when I am 50 well I am 43 now and work rings around the 18-30 year olds that make up my employee base. I can and will work another 20 years plus in the field and if you feel you aren't capable of that then thats your limitation but I do not happen to share it.
 
#25 ·
As for doing this when I am 50 well I am 43 now and work rings around the 18-30 year olds that make up my employee base. I can and will work another 20 years plus in the field and if you feel you aren't capable of that then thats your limitation but I do not happen to share it.
I am 59 now. Come next May 60. I remember how my body was when I was 43. It is the rare person that can do what they did at 43and not ache when 59.

If you are not making enough money your employees are not working efficient enough, fast enough, paying them too much, not charging your customers enough, any combination or all of them.

When you get older you will find it hard to keep the same pace. By the time you hit 62 you will need to have your retirement needs met. Whether to cut back hours, have a helper.

Or send out a two man crew and you just handle the management and non field work so they are more productive.

Or make enough money before you hit 62.
 
#26 ·
I am 59 now. Come next May 60. I remember how my body was when I was 43. It is the rare person that can do what they did at 43and not ache when 59.

If you are not making enough money your employees are not working efficient enough, fast enough, paying them too much, not charging your customers enough, any combination or all of them.

When you get older you will find it hard to keep the same pace. By the time you hit 62 you will need to have your retirement needs met. Whether to cut back hours, have a helper.

Or send out a two man crew and you just handle the management and non field work so they are more productive.

Or make enough money before you hit 62.
Everyone is different, one of my competors is 60, he can work circles around anyone that I know. My goal is too slow down a little in a couple of years, the only way Ill hire someone is if Im unable to move around.
 
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Top