1. Can’t make it to the GIE+EXPO 2017?
    LawnSite brings the trade show floor to your fingertips with our new GIE+EXPO 2017 Sneak Peek video series debuting now in the Lawn Mowing forum.

    Dismiss Notice

Large owner salary

Discussion in 'Business Operations' started by dmk395, Nov 2, 2002.

  1. Nebraska

    Nebraska LawnSite Senior Member
    Messages: 525


    Based upon the information discussed here, considering the revenue that you've reported to be in line to achieve as well as the net profit you've also reported on another board; that is one HECK OF AN ACHIEVEMENT....if I may ask what kind of net profit were you running back in the days of $250-$300k?

    I must say it's very noble of you to continue to take the time to participate in these forums.

    P.S. my order is being placed for your snow and ice management book....
  2. John Allin

    John Allin LawnSite Bronze Member
    Messages: 1,488

    Thank you for the kind words, and thank you for purchasing the book. You should know that I make VERY little money on the sale of the book - so don't go thinking I'm getting rich off it (I'm certainly no Tom Clancy).....

    You have challenged me here with the question about past profits. I dug out my financial statement from 1988 (the first year we had an outside accountant generate a formal financial statement, although from 78 to 88 we used Schedule C's to get financials). We did $410,144 in gross sales, had a gross profit of $81,996. I withdrew $24K for myself. The following year (and after I learned how to use a financial statement), we did $500,486 gross sales, with a gross profit of $130,079. I drew out $29K for myself.

    (kinda fun to go back and look)....

    1990 saw gross sales at $715,677, and a gross profit of $122,112. I drew out about the same money as the previous year for myself. Our G&A jumped quite abit that year.... which goes to indicate that Kevin Kehoe's article is right on the money....

    A very few years later, our gross sales were at $1,505,946, with a gross profit of $394,987. My draw was just a hair under $130K.

    You'll hopefully understand that I'll not share the past several years financials here...... but I will tell you that our gross margin is better now, and my retained earnings are very significant, so no-one is going to take the business away from me nor are we in any danger of being able to missmanage it to the point of going under anymore.

    Now... an analysis of the numbers will tell you that we were not doing all that well in the late 80's, and we learned a lot in the 90's. Interestingly enough - I joined ALCA in 91, and SIMA was formed in 96. Attendance at the functions put forth by those entites taught me a LOT about how to run a business. And, learning about financial statements and how they affect your business is all the difference in the world..... once you realize you're operating a business and not just cutting grass because you like being out in the elements...... Plus I LISTENED to my outside accountant and took his advice to heart when it came to running the business "by the numbers".....

    Now.... Be kind gang... I've just bared my soul here - so don't beat me up too badly.....
  3. scott's turf

    scott's turf LawnSite Senior Member
    from NH
    Messages: 949

    John, that was very informative and thanks for revieling that personal info. Some question for you: After you take your salary out of the net profit how much of the rest would you put back into the business? Does the business have a savings account that groes significantly every year?
    So it looks that your business averaged about 25% profit from the gross. Very resoureful.
  4. John Allin

    John Allin LawnSite Bronze Member
    Messages: 1,488

    We put all the 'extra' back into the business. It shows up as retained earnings/owners equity at the bottom of the financial statement each month/year. We have separate asset accounts that return some interest, and some certificates of deposit for the excess. Our debt to equity ratio far exceeds the "normal suggested business ratios", and that's a good thing too.

    One thing we do (separate from the CD's and standard accounts) is that we put 3% of all checks received into a separate account in a separate bank. On Friday a check is cut for 3% of the weekly deposit(s) and placed into this reserve account. We don't miss the 3% and don't count on using it for anything. It's just an asset that sits there (gaining some interest). It's carried as an asset on the books, and shows up as "cash on hand" at the end of the year and on the financial statements.

    While we have used that money to invest in other ventures, basically we don't use it for anything except as a 'cash reserve'. When you don't pay attention to it, it's amazing how much is actually there when I finally DO ask how much is there...... it's almost scary (and my wife doesn't really like me to know how much is there and constantly tells me to "fageddaboutit")
  5. dmk395

    dmk395 LawnSite Bronze Member
    from Ma
    Messages: 1,006


    Great information, but what would you do differently financially, if you could do things over again?
  6. Nebraska

    Nebraska LawnSite Senior Member
    Messages: 525


    The information you provide gives a good perspective, as well as a guage.

    I like that 3% idea.....Just need a good guardian of the funds like it sounds you have.

    What was the reason you went into business for yourself 22 years ago? (that's not meant to be a loaded question, just one of curiosity)

    The L&L article starts on page 88, is relatively short but full of a ton of information. In the process of putting it into action; sure it will take some time. Could only imagine the ominous task of a large company putting these methods into place for the first time.

    In table 1 of the article it shows the complexity of the company at 2002 with 1.4mill in sales with 297 customers. Does that mean that the Lawn Care company with 5000 application customers generating the same revenue would be a more difficult one to manage yet with risk further spread out?
  7. John Allin

    John Allin LawnSite Bronze Member
    Messages: 1,488

    What would I do differently, from a financial standpoint ?
    Listen to my accountant sooner. Do financial statements from day one (although we didn't have Quik Books back then).

    It's 24 years and not 22 - I had failed at two previous business attempts. Both while in college. My father was self employed so it was in the blood, so to speak. My father was in snow removal (winters as a sideline) so I started plowing at 16... back when you got out of the truck, pulled the pin, moved the plow to the right angle, and got back into the truck to get warm again.... so, plowing was in the blood then too.

    Started plowing part time first in 78, then landscaping full time in 84, first financial statement by accountant in 88. Rest is history.
  8. Mow&Snow

    Mow&Snow LawnSite Senior Member
    Messages: 335


    Do you enjoy running such a large operation, or do you think u could get as much satisfaction from a smaller one?

    I have come to believe that sometimes being bigger is not always better. Bigger will bring larger headaches too it seems.
  9. John Allin

    John Allin LawnSite Bronze Member
    Messages: 1,488

    I enjoy the lack of pressure that comes with running a larger operation. LOTS of pressure running a $500K to $3M operation. The pressure levels off for awhile after $3M and then goes down hill as you institute more layers of management, empower others to make decisions, delegate responsibility and hold them accountable for that responsibility. It actually becomes fun at a certain point, once you're no longer fighting to be certain you can earn a living. It begins to feed off itself after a certain point, and you stop worring about the possibility of 'going under'. The Goals you set become different, and achieving them becomes the focus and not just 'earning a living'.

    However, it helps that it was never, ever my intent to mow lawns the rest of my life when I started out. My entire focus and goal starting out, has always been to "manage a company" and not to "work at the business". The transition from entrepenaur (sp) to manager was relatively easy for me (and it's danged hard for some) once I realized that I was at that point (and sometimes it's very hard to recognize that).

    I get satisfaction from achieving goals. Those goals change almost yearly as some are achieved, others are disgarded as not reasonable, and new ones are added. I've failed enough to know that failure isn't the end of the world, but a learning experience for the next goal.

    I do believe that Thomas Edison was right when asked if he became discouraged at having experimented with a thousand light bulb configurations, he responded that he was not as he was only eliminating possibilities until he found the 'right one'.

    And, I also truely believe (and live by) the expression that "if you think you can, or you think you can't..... you're right".

    I very rarely think "I can't" - and when I do, I don't dwell on it - I move on to the next thing and start out with "I can do this".

    And, I absolutely love what I do...... I love going to work. I enjoy the people I have surrounded myself with as most of them are smarter than I am and I learn from them almost daily. That makes it much easier.
  10. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Messages: 1,912

    This is Good Stuff ... Thanks for the insight :->

    I REALLY Like that 3% thinking

Share This Page