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Discussion in 'Starting a Lawn Care Business' started by southerlawn, Jan 25, 2013.
Welcome, and yes, stick to the plan!!
There is no magic percentage.
The 20 yo living at his parents house just starting out needs to spend more then the solo person that is maxed out and does not want to grow bigger. Then their incomes will be different. And even if the incomes were the same their need to spend would still be different thus their % will still be different.
The LCO that wants to add the 2nd truck will need a different % then the LCO that wants to add his 11th truck.
Instead of worrying about %'s better to deal with purchase costs and replacement costs.
New truck $40,000 has to be replaced 10 years so $4,000 a year has to be set a side.
$5,000 Mower has to be replaced 5 years so $1,000 a year has to be set a side.
$300 Hand held replaced 3 years so $100 set a side per year.
This process may work for some but is very impractical. one must set more back than just to replace equipment. IE: breakdowns, fuel, and consumables. I don't see it possible to project month to month with these things. On the other hand a percentage and knowing what you need to purchase a few years down the road would work
7.5% of gross to equipment.
i try for 20-30%
My thoughts right now are to give the company in the beginning 25% since I hope to be doing landscaping also, this allows for buying materials up front ( thinking is BAD idea to request materials upfront/clients my feel they are being took for a ride. Now a constant % for equipment which includes break downs and new equipment it will be 30% for a total of 55% toward the total company. As I am a member of the national guard which will help to supplement my monthly income. Any further thoughts are as always welcome.
Last year was my first year, I did the work PT and still worked my full time job, I let money from my full time job cover gas and maintenance this year and payed cash for all equipment I have now so I took every penny I made from my first season to purchase more equipment and for advertising this year! The wife really wants to see some money from this coming season but I'm still gonna try to put 50-60% back into the business from this years profit. Trying to save for a newer but used ZTR
There is no set % when your small. Look around the lawn site and you see some with all new trucks and mowers with payments and some with old junkers and some frightening annual repair bills. Figuring out the useful life of trucks trailers and equipment is more delicate and difficult than some here preach. Some pop wheelies with the mowers and take the turns on trailers too fast. Or they think every time they find themselves at a stop sign or a light that they are in race car and need to reach 20 mph over the speed limit in the next 5 seconds or they are somehow not a man. The advice a guy like that gives you on useful life of your assets is going to differ massively from some one that treats his stuff like his children.
Iv found I needed to test and experiment in all aspects of equipment life to get my numbers that I now use. 2 cycle equipment was easy to get a handle of 2-3 years and its of no more use to me and that is info we use in buying new. Trucks are much trickier they can last over 20 years but they have a point when selling makes sense where they still have half or more of their value and are young enough to have thus far been trouble free which will be ending soon and you know it. Mowers were harder to Gage since we got them all knew and running them till they died seemed to be a wise idea looking back I know long feel that way. But that info was hard to learn and I cannot give it to you you need to experience it for your self to see the truth in it.
Your far to small to think in terms of % and need to think in terms of replacements and upgrades and of course expansions, and when those purchases need to be made. Once you have a schedule of new purchases you can figure out how long you have to save up and there by have your real number.
great post thank you
When we started our Biz six years ago we decided that a safe way to run our finances would be to take 33% to run and reinvest, 33% set aside for our Taxes and 33% as Income. We run solo (my wife handle the books, I do the customer service and work) She also works clerk handling the money accounting for a supermarket. I am also retired from the same company and collect a pension from it. (so now this is my full-time gig). We use these percentages to keep me from over spending on tools we may or may not need.
I know that when you first start you may feel that you must invest money to make money. True to a certain extent. We have done this formula since the get go and it has seemed to work for us.