# Profit Margin



## darkstar

What do you all think is a good profit margin for a small tree service? Im looking for answers that perhaps do include fully payed for equipment purchases? 
We gross around 200k with a 3 man crew and one estimator.Im trying to figure out about how much profit i should aim for this year. We grossed 50k for the first quarter and i must admit i dont heave much to show for it .
Last year would have been a great profit year but i spent most of it buying up new equipment some of which i am depreciating and some i wrote off completly .
As the years roll by id like to settle into a comforatable fair profit .
Any suggestions?
I would like to hear how much you guys are taking home .
I personally think about one forth of the gross should be a good take home for my buisness. That figure would include sound new equipment i purchaseand completly pay for .So if i had a profit of 50,000 and i bought a 30,000 bucket truck, my take home would only be 20,000. I still concider that a profit of 50,000 .Yall get my drift?


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## Redbull

What you "take home" is your salary and should be included in your overhead projections. Your profit margin is above and beyond whatever your overhead is. I shoot for 20% personally.


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## darkstar

*Profit*

So you pay your self a salery , and then shoot for a 20% gain or profit .
Might i ask how many men/women you have working for you ?
Ive only been in biz for my self for four years so im just starting to get above the water. 
I started with a pick up and a chainsaw and alot of climbing exp.Now we have a bucket truck 3 chippers 2 dumps loader etc etc. 
I have not had any salery as of yet perhaps 9000 a year.
Anyhow things are changing but i dont think i could project a firm salery for me yet, soon though.
I recon any good buisness owner should have a salery of above 50,000.If i had that i would still have no profit whatso ever. Dark


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## Redbull

See, thats the thing, I am a two man show, myself and my groundman. All of my equipment is paid for except my pickup. 20% is what I am shooting for this year. 2006 will be my first year as a full time business. When I figured what my hourly rate needed to be, I included a salary for myself as part of the overhead, so that my hourly rate would include my salary as well as a 20% profit margin. That 20% is what money I have to go back into the business for equipment or whatever.


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## Redbull

It sounds like you need to refigure your overhead costs and get down what you need to be making either daily or hourly in order to pay the bills. This includes paying your personal bills. Whats the point of working if you aren't making a living.


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## Treeman14

What's a "profit margin?" :monkey:


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## darkstar

*Profit*

I hear you . Well i need only about 1000 a month to pay all my bills .All the equipment is paid for . My mortage is cheap, my yellow page add is expensive. 
What im really asking here is basically:
How much growth should i continue hoping for as opposed to how much i take home. [[[Running a 4 man crew]]]]. I dont see how we will ever run 2 crews in the near future .

Whats the average take home for a small time tree service owner like me ?


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## Redbull

I think it depends on the growth of your company on a yearly basis. A single crew can only do so much work in a year, so you're limited by time. You can cut out any "fat" or excessive overhead, and charge more to increase your profit, but with a single crew, you are limited to the amount of work ya'll can do. Efficiency is the key to higher profits, IMO.


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## Redbull

This is my first year full time, and I included a $40K salary into my overhead costs for the first year. Now the hard part is making that happen by generating enough work.


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## treeminator

my profit margin is 90% +/-. some people on this board don't believe me, but it's true. i'm not originally from the tree biz, maybe that's why, who knows.

i use a 3 man crew (myself, groundsman, climber). a $1,000 tree yields approx. $900 profit.

$1,000 sale
-$72 two guys, 4 hrs of labor ($8/hr and $10/hr)
-$5 sales commission
-$23 gas and misc.
----------------------
= $900 profit


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## Nickrosis

Treeman14 said:


> What's a "profit margin?" :monkey:


I hear that! We do a pretty good job of spending that...



treeminator said:


> my profit margin is 90% +/-. some people on this board don't believe me, but it's true. i'm not originally from the tree biz, maybe that's why, who knows.
> 
> i use a 3 man crew (myself, groundsman, climber). a $1,000 tree yields approx. $900 profit.
> 
> $1,000 sale
> -$72 two guys, 4 hrs of labor ($8/hr and $10/hr)
> -$5 sales commission
> -$23 gas and misc.
> ----------------------
> = $900 profit


   

:notrolls2: 

And to think that I doubted clearance about this one...


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## treeminator

Nickrosis said:


> And to think that I doubted clearance about this one...



ok...think about it. how long does it really take to teach someone how to properly use a chainsaw? 1 hour? you guys are paying way too much for your employees. anyone with a half a brain can be a groundie. and a climber is nothing but a groundie with spikes and rope.

tell them they are out of a job if they don't help you sell tree work for the upcoming week. watch how fast and willing they are if they know their wallets are in jeapordy. that's when you give them $5 per account + the chance to work on it for the hourly rate.


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## Jack Green

*profit margin !!!*

Thats not a profit margin thats profiteering ya spiv ! it doesn't sound like youve got any profesional respect for your co-workers. If you treat your men like that then it probably shows in the finished product . whitch is ok if your dismantling a tree and all of your men survive . but what pride is taken in your pruning operations ? . A good reputation takes a long time to get but can be lost overnight


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## Nickrosis

treeminator said:


> ok...think about it.


YOU'RE FULL OF CRAP.

Profit = Revenue - Expenses

Your equation is:

Profit = Revenue - Selected Expenses

You're completely ignoring your wage, the cost of equipment, insurance, taxes, etc. While I know you're a troll, I'm still amused. I'm certain you don't report a 90% profit when you file your taxes. If you file your taxes.


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## Redbull

Nickrosis said:


> YOU'RE FULL OF CRAP.
> 
> Profit = Revenue - Expenses
> 
> Your equation is:
> 
> Profit = Revenue - Selected Expenses
> 
> You're completely ignoring your wage, the cost of equipment, insurance, taxes, etc. While I know you're a troll, I'm still amused. I'm certain you don't report a 90% profit when you file your taxes. If you file your taxes.



WOW NICK, you took the words right out of my mouth, almost verbatim. Where do these guys come from? :deadhorse:


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## Treeman14

Nick, you said it yourself: :notrolls2: Just put him on ignore.


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## trevmcrev

Treeman14 said:


> Nick, you said it yourself: :notrolls2: Just put him on ignore.



Ignore???

I like reading this guys posts.

Its kinda like reading the comics in the newspaper.

Good for a laugh, something funny amongst all the seriousness of this profession.

Trev


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## aagro

This is my first post so bear with me if it winds up in the wrong thread. . .
Re: profit margins- our company seems to deliver a consistent 25% return in addition to our salaries. This was not the case when we started the business due to the enormous initial investment (we don't like debt). 
The price of diesel, insurance, benefits, and good wages for long time employees will start affecting our bottom line I expect. . .


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## Newfie

When handled judiciously, debt can be the successful businessman's best friend. It sucks though when it weighs on your mind as to whether or not you can sustain enough work to make equipment payments.


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## Nickrosis

Newfie said:


> When handled judiciously, debt can be the successful businessman's best friend.


Thanks to our government for that. When you consider taxes, a lot of poor financial decisions turn good.


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## BlueRidgeMark

treeminator said:


> -$72 two guys, 4 hrs of labor ($8/hr and $10/hr)



This is either bad math or illegal employment practices. $8 per hour paid to an employee will cost you in the neighborhood of more than $9 per hour once you add in all the taxes the employer is required to pay.


That's IF you don't have *any* employee benefits like paid holidays, vacations, or health insurance.

Those all add to your overhead, and unless you are operating illegally, they DO come out of your pocket.

BTW, are you guys talking about a profit MARGIN or a MARKUP? They are not the same.

If your expenses are 1,000 and you charge $1,300, you have a 30% MARKUP. Cost * markup = price.

But your MARGIN is 23%. Margin = (Price - Cost)/Price.

At least according to GAAP.


Poor accounting practice has killed a lot of small businesses.


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## Newfie

BlueRidgeMark said:


> This is either bad math or illegal employment practices. $8 per hour paid to an employee will cost you in the neighborhood of more than $9 per hour once you add in all the taxes the employer is required to pay.



BRMark, treeminaturd is a tard who recruits at burger joints. Every here the phrase "Too stupid to work at BK"? Well they work for the treeturd.


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## BoesTreeService

*Question for Treeminator*

Where do I get in line for free equipment, advertising and insurance?


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## Timbrcutr

*I figure all my overhead plus 30% and that is easy at time's and impossible at time's where I live in Washington state you hear the phrase feast or famine alot. I know guys that have long term accounts that do well one charges 200 an hour for a 40 an hour climber and he's known for chasing you down as your leaving and throwing 700 to 1000 bucks at ya for a bonus. Speed efficiency safety and employees that work well together is all I know to keep going. Alway's do a little more for customers and keep your guys paid well and paid weekly and have at least 2 trucks 2 chippers a good stump grinder and lots of connections.*


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