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Net Profit?

Discussion in 'Business Fundamentals' started by timberseal, Dec 3, 2008.

  1. timberseal

    timberseal Senior Member
    from 46385
    Messages: 247

    Curious where your net profit falls (% wise) for those in the business of snow removal (not subs). I just read a for sale ad for a company doing 1.8 million a year in business with a net profit of $237K. That seems LOW.... what is that around 8% net on gross sales?

    I've been in business for 13 years now and we're just starting to get into snow plowing again. That would make me sick to see a 8% net though considering what would be involved in doing $1.8 million in business :cry: We net around a 35 to 40% net and it's been similar in other businesses I've been involved in as well.

    BTW ~ The above company was for sale for $750,000
     
    AdvancedDiesel likes this.
  2. snow patrol

    snow patrol Senior Member
    Messages: 163

    It's 13% not 8%; and yes its still low. Historically we average between 60% to 70% GP. By the time we clean it up we net closer to 45% to 55%
     
    AdvancedDiesel likes this.
  3. timberseal

    timberseal Senior Member
    from 46385
    Messages: 247

    Oops my bad.... yes 13% and yes thats still horrid.
     
  4. M&M

    M&M Senior Member
    Messages: 312

    Most businesses in our country would kill to have 13% margins. Take a look at financial reports of public companies. Yes I know, this is a small business and it's apples to oranges but I can tell you that 99% of snow plowing companies would love to see $230K at the end of the snow year. You are right that it is a lot of effort to generate 1.8 in sales but I'm sure the owner (the guy bringing home the $230K) has a large staff that handles the heavy lifting. Generally, you can sell a business at 3 times net profit plus property/plant/equipment.
     
  5. timberseal

    timberseal Senior Member
    from 46385
    Messages: 247

    They were based out of Chicago so I suppose $230K over 4 to 5 months isn't bad (for the chief anyway) but to have a small business model yielding 13% just seemed rediculous. I can understand large corps having lower net profit percentages as they're often reliant on higher volume sales but it stinks to see that in the service industry.
     
  6. dannyslawn

    dannyslawn Senior Member
    Messages: 106

    Our snow operations net between 39% and 50%.
     
  7. Neige

    Neige Sponsor
    Messages: 2,197

    Net profit is a tricky thing. You guys that are saying above 20%, are you getting a full time salary during this period. I am sure that the owner of that company was drawing a large salary during those winter months.
     
  8. JD Dave

    JD Dave PlowSite Fanatic
    Messages: 11,045

    These threads are a little like comparing blade sizes, no one uses the same ruler.:D
     
  9. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    You can MAKE money plowing snow?
     
  10. snow patrol

    snow patrol Senior Member
    Messages: 163

    Good point! If the owner take $100K in salary, that alone translates into about 5.5%. Also, if you run your snow plowing as an extension of a bigger business; say landscaping, then the numbers will be much different than if you are strickly a snow control company. I.e. your overhead (rent, insurance, phone, utilities, advertising, administrative, etc.) for the year will be spread across both the snow season and the landscaping season (12 months) as apposed to just the snow season (3-4 months).
     
  11. snowman55

    snowman55 PlowSite.com Addict
    Messages: 1,071

    net is what the company made... not the owner who runs it. Net is whats left after you pay all expenses including depreciation and all salaries including the owners. it drives me crazy to see guys say they net 40% it connot be true. if it was the industry would be flooded buy other companies with capital. now maybe 1 guy has gravy accts and is making a killing but if that was industry standard capital would flow into the industry dropping prices. law of economics.
     
  12. Hunter9

    Hunter9 Member
    Messages: 64

    x2, net profit is always "Net" after 100% of all company expenses are considered. Running 50, 60 or 70% is impossible....unless maybe you are Google :)
     
  13. dannyslawn

    dannyslawn Senior Member
    Messages: 106

    I'm glad I came back to read this thread again. Our snow operations nets between 39% and 50%. This figure accounts for all overhead, saleries, cost of sales,short term debt, long term debt, and every other outlay of money associated with getting the job done. When that's all said and done that 39% to 50% that's left goes into my pocket. I'm the owner of the company and when all else is paid then it's my turn for a pay day. So I guess in if you want our real net it would be 0%.
     
  14. snowman55

    snowman55 PlowSite.com Addict
    Messages: 1,071

    you are correct Danny. but to compare to other business standards you should set a salary for you. not as owner but for the position you hold a CEO should make 6 figures. what would it cost you in wages to replace you and you were a silent owner? that is the figure you should use as a salary and deduct as an expense.

    dept is not an expense. interest on that debt is. You also have to figure deprecation as an expense(roughly 15% of all assets)
     
  15. creativedesigns

    creativedesigns PlowSite.com Addict
    Messages: 1,929

    Hmmm, not sure 'bout that one Mick? LOL
     
  16. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    Sometimes I wonder. But probably a good topic for another thread.
     
  17. JMHConstruction

    JMHConstruction PlowSite.com Addict
    Messages: 1,036

    I'm going to bring this 8 year old thread back to life. Do any of you guys on here now net anywhere close to this?? I'm talking real net, after salary and EVERYTHING has been paid. If so, is it because I'm so small, subcontracting, don't get much snow, or maybe all 3 that I don't net this? I RARELY net anything, let alone 40+% some of these guys are saying. I get paid, don't get me wrong, but not much is profited with my snow operations after job costs and overhead. Maybe I need to get my own accounts next year (too late now), and actually make some money.
     
  18. Philbilly2

    Philbilly2 2000 Club Member
    Messages: 2,550

    This sums the reason I no longer have a snow operation in my company... I loved to do it, my accountant did not.

    I believe the margins could be there if you structure properly, and have the right market and niche, but in my case, the construction side was better to just let idle and do small winter work than screw with the plowing.

    We still go out on big snows to play hero at the schools and hospitals that we service on a day to day basis as we have the larger equipment that they don't. When they need us, my guys can still get the regular wages that they typically get, so it is just the day to day operations for me.
     
  19. Philbilly2

    Philbilly2 2000 Club Member
    Messages: 2,550

    And on another note, the OP was speaking about 13% profit...

    I had an estimator working at a company that I worked at years ago tell me he shoots to make 20% on jobs and is happy to make 10%. 10% profit at the end of the day keeps lights on, people employed, and is a in the black number... The boss my not get a new truck that year, but at 10% PROFIT on every job he estimates, we will all still have a place to work tomorrow.

    That kinda stuck with me when I went out on my own.

    I try to make a little bit a lot of times, not a lot once...
     
    FredG likes this.
  20. JMHConstruction

    JMHConstruction PlowSite.com Addict
    Messages: 1,036

    I pay for pretty much all my "yearly overhead" in the 8-9 months of normal work. Then we basically do the snow removal to keep my main employee somewhat busy and to keep paying my salary. Some years I definitely turn a profit, but usually maybe net 4-5%. I'm adding a truck this year, so we will see how that helps. I enjoy doing it, and the guys like the little extra income. I'll keep doing it and maybe keep growing, but I don't see every making a 40-50% net profit. Maybe one day payup