ThreeWide
LawnSite Bronze Member
- Location
- Georgia Z7
This is for those of you who are exclusively in the fert business...
Just spent some time with the books over the past few days and discovered numbers that were surprising. All of the pricing structures I had in place accounting for proper overhead and expenses turned out to be incorrect when looking at real life data. This is when you realize overhead is more than meets the eye.
My speculative numbers showed an anticipated profit margin of around 40%. Now this is for an owner-operator situation where there are no actual labor costs involved. There are placeholders for labor the pricing model, but at this point my company is not generating enough revenue to justify payroll. This past year was really my first complete season, so overall revenue is just getting started.
Suffice to say that my profit margin was less than anticipated due to many unforseen miscellaneous costs. Office supplies as an example, things add up quickly.
In any event, I would think an owner-operator with no labor cost should have no problem making a 40% net profit margin. That will certainly decrease when labor costs get involved. Material costs do not appear to be an issue. The problem seems to be that operating expenses are just too high, as my pricing is not on the cheap side. From truck payments, mobile phones, and storage facilities, expenses are always going to be a challenge. To be exact, my overhead expenses are about 40% of revenue. Since most of these expenses are fixed, that percentage will continue to go down as revenue increases. I'm certainly no accountant, but cannot afford to hire one either.
Just wondering what net profit you see on a yearly basis from both owner-operators and those with any amount of employees.
I found that the margin you expect is not always the one you actually receive.
Just spent some time with the books over the past few days and discovered numbers that were surprising. All of the pricing structures I had in place accounting for proper overhead and expenses turned out to be incorrect when looking at real life data. This is when you realize overhead is more than meets the eye.
My speculative numbers showed an anticipated profit margin of around 40%. Now this is for an owner-operator situation where there are no actual labor costs involved. There are placeholders for labor the pricing model, but at this point my company is not generating enough revenue to justify payroll. This past year was really my first complete season, so overall revenue is just getting started.
Suffice to say that my profit margin was less than anticipated due to many unforseen miscellaneous costs. Office supplies as an example, things add up quickly.
In any event, I would think an owner-operator with no labor cost should have no problem making a 40% net profit margin. That will certainly decrease when labor costs get involved. Material costs do not appear to be an issue. The problem seems to be that operating expenses are just too high, as my pricing is not on the cheap side. From truck payments, mobile phones, and storage facilities, expenses are always going to be a challenge. To be exact, my overhead expenses are about 40% of revenue. Since most of these expenses are fixed, that percentage will continue to go down as revenue increases. I'm certainly no accountant, but cannot afford to hire one either.
Just wondering what net profit you see on a yearly basis from both owner-operators and those with any amount of employees.
I found that the margin you expect is not always the one you actually receive.