very valuable lesson learned in '08

Discussion in 'Business Operations' started by LemkeLawns, Feb 1, 2009.

  1. LemkeLawns

    LemkeLawns LawnSite Member
    Messages: 81

    I thought I would share this experience with everyone in hopes that they might be able to learn from my mistake or ignorance.

    Ill start with a brief history of me and my company..... I'm 23, I started mowing grass in high school. Like most kids, cared more about the wheels on my truck than knowing how to figure expenses or making budgets. After hs, got a job at a local university on the grounds crew under a gentleman named Dan Green. He knew his stuff, from plants to pipe to paper work. I learned a great deal from him. My solo operation grew enough to make me a "full time" employee at 20. I had my dad helping part time also. Grossed 20k the first year that i kept track. Not too bad for a kid. The company has steadily grown, from 20k,80k,150k,180k. Revenue increases were great the first few seasons. 2008 we only grew 20% compared to the years before of 400% and 100%. I had a brutal wake up call in the spring of 08. I owed back taxes, had liens on my company, and my CPA wouldnt even talk to me. The problems started in 2007. I started with this CPA when he was with another firm(spring of 07), later(fall of 07) he started his own firm. The spring of 07, my father became my first "employee". He owned a part of the company, so we weren't required to pay, i emphasize pay, work comp, fica, suta, futa. Even though I wasnt having to pay these taxes and such, I wasnt charging for them either. In my talks with my CPA about these taxes, he would always say "we'll cross that bridge when we get to it." Well, when we got to that "bridge" in 08, I realized my "vehicle" to too "large." I paid the back taxes out of my own pocket, to relieve the liens. I had to raise prices across the board to accommodate the "new" taxes for my first real employee. There's now three of us.

    We all know how important it is to know our real costs of doing business. So, like any responsible business owner, I decided to draw up my first budget the spring of 08. I called on my CPA to assist me, being my first budget and all. By this time n the spring(April), i had been getting letters from the government saying i hadn't filed some paper work and owed taxes, penalties, and interest. I planed to discuss as to why these papers had not been filed. O yeah, I also had not received any financials from him since Dec 07. I was at the end of my rope with him.... I showed up to his office for our meeting very frustrated and angry at him, and guess what, he was no where around and no one was answering the phone. That was the last straw with him. I went to another firm and they were actually the ones that figured out how bad of trouble i was in with the government owing back taxes and such.

    I spent the entire 08 season fixing the mess my old d.a. CPA made. I never did make the 08 budget, i was to damn busy back tacking. There was an eight day span that i was at my new accountant's office three times. That's BS. I had very little time to grow my business, hints the 20% growth, compared to the 100 and 400% growth the previous two years. Some might blame the economy, in my specific situation, very little time was spent selling my services in the first 2/3 of the season.

    Ive finally filled in the hole that i was pushed in 2008. I have my budget for 2009, I know where I need to grow, and what kind of prices to charge.

    Some advice for the new guys, fuel and equipment are only two of your many expenses. If you plan to grow from a single operator to a million dollar company, know not only your current costs of doing business, but have an idea of your costs for the future. If your not charging for fica, futa, suta, work comp, office charges, rent, utilities and so forth, you'll be in the same position that I was in. It will not be fun. You will loose sleep. You will not grow like you want. You will have a false sense of your costs, if you aren't figuring absolutely every penny going out!!

    Don't expect there to be a single person that you can turn to that will give you the perfect answer to every question or situation. It takes a village to raise a child, and it takes a host of professionals to grow a successful business.

    My problems started in 2007, by not charging enough to cover my costs. I discovered my mistakes and other peoples mistakes in 2008. I underchared for two years. Never again!
  2. TMlawncare

    TMlawncare LawnSite Bronze Member
    Messages: 1,199

    I'm just suprised you were able to gross 80k by yourself in 06' and 150k in 07' with just you dad helping you. 150k is very hard number to obtain with a crew of 2.

    Anyway, your right you must track all expenditures to the penny so you can come out OK during tax time. This is one area you can't afford to neglet on.
  3. LemkeLawns

    LemkeLawns LawnSite Member
    Messages: 81

    Im pretty sure by obtaining those figures, it cost me my marriage. Nearly every day of the week we were putting 12-14 hr days in... there was even a few times Id b out til 1-2am mowing on some commercial properties

    DLAWNS LawnSite Fanatic
    Messages: 5,780

    That's tough, man. I'm glad to hear that you have fixed the problems, though. Some guys would have given up right then. Good for you and good luck in '09
  5. LawnTamer

    LawnTamer LawnSite Gold Member
    Messages: 3,986

    That's a good lesson to learn, and a good time to learn it. You are still young, and your business will recover quickly from this.

    It is a royal pain to keep up on taxes.
  6. Fvstringpicker

    Fvstringpicker LawnSite Fanatic
    Messages: 7,670

    I'm curious about the type tax problem you had. If your dad is/was part owner in the business, withholding tax on him is not an issue. You needed somebody like me to represent you before the IRS or tax court. File a complaint with your state's board of accountancy on your former CPA. It may save others the same type nightmare.

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