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Discussion in 'Business Operations' started by PROCUT1, Feb 22, 2011.
Could not have said it better myself procut. You hit the nail on the head.
This thread caught my attention and I had to read. Good post, however your profit percentage I believe is incorrect.
If your profit was $3500 (revenue - cost = profit) and your costs were $23,500, profit/cost * 100 = profit percentage, no? That would give you a profit of 14.8% ~15%.
Like someone else mentioned in the thread, it's basic fundamentals that everyone SHOULD know, but doesn't know or doesn't know how to put it to good use. If you don't know your cost of doing business, how the heck do you know where you stand? When most people start out with a few lawns at a young age, this isn't an issue. Everything is mostly profit because your costs are basically just fuel and small repairs. Most probably walk to their jobs, so therefore, no truck costs, no truck fuel costs, no insurance, etc. This mentality continues when more and more equipment is purchased (trucks, riders, etc) and expenses ultimately go up. Because they don't know their true costs, they lose money, and eventually they fold up shop.
I used to be in this business full time. My business put me through college and I handed down the business to my brother where it put him through college as well. I recently am starting to get back in the business part time for supplemental income. The first thing I did was figure out what my true costs of doing business were before I even got my first job. I was amazed at what it costs to do business in this field when comparing it to what other landscapers bid certain jobs at. There is just no way some of these people are making any money whatsoever. Very enlightening. If you're one of those people who don't know their true cost of doing business, sit down for a few hours and figure it out. It may surprise you.
It surprised me when I learned. There can be a huge difference in what your gut tells you and what the numbers do.
I've watched it for years.
New guy starts up.
2 years later has every condo complex in town and a fleet of shiny equipment.
3-5 years later he is out in 1 truck with 2 guys mowing a residential route. Or back to driving an oil truck or whatever he used to do.
Seen it repeat many times.
Lived it myself.
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Make this mandatory! Awesome points, great for a learning curve!
There have been tons of posts over the years, but I don't think many have gotten the attention of this thread. I've weighed in with similar advice and then the thread goes quiet. I think no one likes to hear the bad news/truth about our cost of doing business vs selling price.
Good for you ProCut in getting people's attention.
lots of good info here
A thread like this always gets little attention.
Its so much easier to ask "how much do i charge" than to sit down and take the time it takes to figure out all this stuff.
Had i followed my own advice from the start before i let it get ahead of me I would be sitting on piles of money right now instead of still digging out of past mistakes
Another good thread I'll have to add to my "subscribed" list.
Sub'd.... Great post!!
Great post. This needs to be a read first sticky thread. Excellent stuff here.