Reducing Expenses/Sizing Business Appropriately

Discussion in 'Business Operations' started by oaksandiron, Oct 11, 2019.

  1. oaksandiron

    oaksandiron LawnSite Member
    Messages: 27

    Hello, all!

    I am posting here today because we at Iron Oaks Landscapes are considering our state of the state, as it were. As every year, it is that time when I consider whether being in business for myself (ourselves, me and my husband) is the right thing to do.

    This year (our third full season) we held our own ground financially, more or less, which is an improvement over last year. But administration and the expense of running a business is stressful, the work is hard, and we are not spring chickens. We are not interested anymore in "growing a business," per se, and having a bunch of employees. We are 48 and 55 years old and will not have time to really grow something. We would like to pay our bills comfortably and make do/get by.

    So, one of the ways we consider adapting is by having outside jobs even just part-time, and doing landscaping "on the side," just the two of us. However, I do not know how we might be able to reduce our expenses like work comp, liability, etc.

    I guess my question is this: how far can we pare back, still be an official business, but not have some of the IRS and Dept of Rev. headaches? And employee headaches? Is it even possible to "just get by" doing this stuff (which, frankly, we do love the work and most of our clients)?

    Looking for practical and philosophical advice, there are no wrong suggestions, I only ask that whatever criticism or input is offered it is considerate and constructive.

    I also welcome and encourage questions that help responders understand where we are and not just assume anything about what we know/don't know, do/don't do.

    Shannon and Mike
    (no spring chickens)
     
  2. prezek

    prezek LawnSite Senior Member
    Messages: 575

    Workers comp and liability should be based off of your gross sales, no? Paring back would reduce both.
     
  3. OP
    OP
    oaksandiron

    oaksandiron LawnSite Member
    Messages: 27

    Good reminder, yes. Question, though, if I have no employees, do I have to legally carry WC? That is a full half of my insurance expenses.
     
  4. La Chandler

    La Chandler LawnSite Member
    Messages: 226

    I would be much more concerned about revenue (i.e. profit) than expenses.
     
  5. Skol

    Skol LawnSite Senior Member
    Messages: 268

    My wife and I also are in the business (no employees), and while we don't have to carry work comp, we do have a couple contracts that require it to bid.

    Also, I'm not sure how people in this business get their revenue/expense ratio out of whack. Whether you're mowing, or doing landscape install/maintenance, it's a relatively inexpensive business to get into. Would you care to shed any light on the type of work you do?

    (And please don't take that last paragraph wrong, I'm just curious).
     
    sjessen likes this.
  6. prezek

    prezek LawnSite Senior Member
    Messages: 575

    I’d ask your insurance agent. I believe here in Maryland, owners don’t have to carry it for just themselves.
     
    sjessen and hort101 like this.
  7. OP
    OP
    oaksandiron

    oaksandiron LawnSite Member
    Messages: 27

    I don't take that wrong at all. For one, I am not sure our revenue/expense ratio is out of whack, we are just trying to pare back as much as possible so as to reduce the pressure on ourselves.

    As to the kind of work we do, it is primarily landscape installation and maintenance. We have one mow route that two of us can accomplish in a day. We do some minor construction and repair work, some painting amd staining. A lot of mulching.

    We have loans on our pickup and Toro Dingo, own the SUV and the rest of the trailers/equipment. We spend about $450 a month on insurance (WC, CAP, liability) about $100 a month for accounting software and payroll and $199 a month for our CRM and estimating software.

    Every year I revisit changing the CRM and estimating software (LMN) to something less expensive but it has proven time and again to be the best fit for us.

    Then of course there are all our vehicle and equipment maintenance and repair costs, job materials, etc.

    But all of these things are accounted for in our labor rates, and we charge accordingly, so I think we are okay there.

    Does that help any?
     
  8. Mumblingboutmowers

    Mumblingboutmowers LawnSite Senior Member
    Messages: 935

    I am confused on the workers comp. I didn't even know that self employed can carry it on themselves. Or maybe you do because you are set up as employees of a corporation?? I don't know. I suppose state by state may be different?? I sure wouldn't carry it if not needed to.

    At your ages I think having enough to retire is more important than having enough to get by. Maybe you are already set up for retirement??
     
  9. sjessen

    sjessen LawnSite Fanatic
    Male, from Knoxville, Tn
    Messages: 12,859

    Wanted to respond to your thread on the iMac but it only displays on the phone.

    Solo here. Looking at what you shared it seems insurance and technology expenses are high.

    Have you considered purchasing a software program? Bought QB 2020 for $300 and it will last for 4-5 years before needing updating.

    Total insurance for 1 truck, trailer and liability with an umbrella policy runs $1800 per year. Don’t carry theft on hand helds as it was cheaper to self insure.

    At some point you will get good enough at estimating that a program may not be necessary.

    I shoot for total expenses not including my take at 30% or less. This is before taxes.

    Those numbers may not work for you since you have a different service menu. Mine is lawn and landscape maintenance only.
     
    Chilehead and Mark Stark like this.
  10. sjessen

    sjessen LawnSite Fanatic
    Male, from Knoxville, Tn
    Messages: 12,859

    A few questions. What labor rate do you shoot for?

    Have you evaluated all of the types of work that you do to see which are most profitable and which might not be worthwhile?

    Could you give a rough estimate of what the two of you would like to net before taxes?

    How much are your payments for the truck, Dingo, etc?

    What is your location?

    What I found over time is that it was better to focus on fewer service options vs adding more.

    Hope this helps even a little bit.
     
    Greencuts518 and Mark Stark like this.

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