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Quoting Landscape Management Magazine:

"What's your salary? Based on their work with over 50 companies across the country, the consulting firm of KehoeGuido found that owner-managers in high profit companies under $3 million in annual sales are earning combined salary (pay for managing their companies) and dividends (pay for return on ownership investment) at a rate of 8% of sales. In other words, in a high profit $2 million contracting business, the owner-manager grosses $160,000 per year, of which $100,000 is salary and $60,000 is dividends."

If you follow the average, than you'll need a company that grosses $625,000 to pull $50,000 a year salary.
 

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Discussion Starter · #10 ·
I am somewhat confused too. I think for most companies in that range their debt is unbelievable, whereas a company like mine was built with little debt and after a few years of braking our backs we feel a nice profit.
 

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This is also dependent on whether your incorporated or sole proprietor.


Incorporated. The owner draws a salary. Can make that salary anything he/she wants. Within the limits of the net profits.

Sole proprietor. The net is basicaly the salary.
 

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As the gross increases....the expenses increase dramtically. Most mom and pop shops with a foreman and a couple of crews can gross around 300k before theres a point when you have to hire management personal(thats not cheap......50k?) Profit margins on an operation from 100k-300k are around 30%(least for us). 300k-500k will have additional equipment purchases, more trucks,more grunts,and dont forget the new foreman/manager. Profit margins shrink as the gross increases. You might get 15%-20% in this range. As you work your gross towards 1 mil.the profits at that point maybe 5%-10%. Ive heard of some companies doing a mil + with profit margins of 5%....to me thats not worth the hassle. I feel most companies in the half mil area, with higher profit margins will fare better in the end. Bigger is not always better. The one plus I can see... having a very large company... is the sale value for the owner. If he has an exit plan worked out...and the timing is right.....he may be able to sell biz for a handsome figure and retire.
 

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I plan on making $50k this year, won't take it all home, though. I'm busting my --- nonstop and working alone, and I'm not sure whether or not I'll be hiring anyone in the future. If not, I'll be just fine with it, making about that much yearly for a while. Every time I look at the numbers of starting to hire people, the amount of money that I make decreases drastically. Yuck.

:D
 

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Yes it definitely is not a linear relationship comparing profit margin to gross income. For instance with my business I worked solo last year PT mowing lawns and still cut my hours at my full time job. The business is small so I was only grossing about $1000 per week durring the summer. So after expenses I was only making about what I would have if I had just worked at my FT job for 40 hrs. Instead I was busting my but working at least 50 hrs per week. This year I hired someone and have only worked about 50 hrs total this year and am still grossing around $750 per week and working FT at my other job. So you can see that in this case my profit went down but my "hourly rate" is way up. Last year I was grossing about $50/hr and this year I am grossing around $275/hr. This is what employees can do for you although it isn't without stress. Last year when I worked solo there were less headaches but I sure was tired. I feel that in this business it is very hard to be solo and make enough money without killing yourself.
 

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Scotts Turf...you hit the nail right on the head. THis year we added a couple more worker bees to the landscape side of the business....and man have my profits shot up!! And as you mention, we're not as tired and braindead as we were when we were doing it completely solo. I dont know that I'll ever go back to me doing everything....more than the physical part, I would get so mentally tired from all the things I had to do to keep the business running.. The behind-the-scene prep work is significant if you provide a wide range of landscape services...
 
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