Mike Andes audits a $1.9M landscaping company earning only $53k profit. Labor costs are crushing them at 70% of revenue, with a bloated $705k office payroll. He prescribes cutting admin, building systems, and improving crew efficiency to hit healthier 10-15% margins.
Questions this video answers
Approximately $1.9 million.
$53,000 profit, approximately a 3% profit margin.
About $380,000 in profit.
Approximately $705,000 per year.
$28,000 per year.
Chapters
Hey, everyone. Usually, my name is Mike Andes, founder of Augusta Lawn Care. We do over $50 million in annual revenue mowing grass. But today, My name is Dr. Diagnosis, and we are on the case. Southern Landscapes Property Management. Is that legally compliant? I have no idea. I just know you will make more money. Oh, no. You need to shut the door. Lost eight grand a month property. So it's gonna be hard to get get past that. If we had a gun to our head, we would do it. That was bad. That was a bad day. It's doing almost $1.9 million in annual revenue. Let's go. Now, bottom line, or the profit is $53,000. Now, if you take $53,000 and you divide it by $1.9 million, you get approximately a 3% profit margin. I'm glad that we're making some money, but a 3% profit margin really tells me that the business is extremely vulnerable. $50,000 is like one person's wages, and you want to be at least 10% profitable. The average, unfortunately, in home services is under 10%. Ideally 15% is really where you want to be at. And if you want to be exceptional, I want to be trying to get to 20% profit margin. Now, for Southern Landscapes, if we were going to try to achieve 20% profit margin, that would be about $380,000 in profit that we would be trying to get to the bottom line on that $1.9 million. Now we have $1.9 million in revenue. I then say, okay, cost of goods sold, that is the direct labor, that is the materials. And as the subcontractors that go into the actual job, that does not include any office and admin expenses, et cetera. Down here we got the office. This is what's called SG&A typically, but that's the general administrative expenses. So we got their payroll and their wages down here. $705,000 and a little bit too high, in my opinion, because that's like what I'm just going to round. Approximately about 35% of revenue is going out the door to just the office and admin expense for wages only. Get this. If I actually go up above here, I can actually see, okay, where is their rent? I'm looking for rent and lease. Okay, so it's actually right below here. Sorry. It's $28,000 for their rent per year. So about $2,500. 90. Not bad. But again, now we're starting to get almost to 40% of revenue is going to office and admin. Because included in this Also is like my rent expense, but also back on the back here we got utilities. I have to throw that in there. I'm really uncomfortable having 40% of revenue going out the door to admin. I typically want my admin cost to be somewhere between 10 to 15% of revenue. At Augusta Lawn Care we shoot between 8 and 12% using Command center that takes all the phone calls and does a lot of the admin work for the owner. But in general you kind of want to stay in this 10 to 15% range. When it comes to admin costs, this business is mostly commercial maintenance, which means a lot of this is lower margin work. Your prices are usually a little bit lower on these massive commercial jobs. What is the actual cost up here up of their wages out in the field? We have about $600,000 in wages that is going to the frontline team. Again, this is something that I look at before going out for the turnaround. I don't know this for sure. I have a feeling some of these wages down here are actually costs from the team out in the field. I believe that some of these are actually W2 employees. And then up here they have contractors they can't pay. The 1099 probably shouldn't be doing that. Just going to guess, but let's just assume that they're subcontractors. So potentially maybe not 35% of their reven is going to just the admin cost. They probably have way too many admin staff for this size of business. I believe that if I combine these two things as the wages up top here that they're considering as subcontractor and I combine that with the total cost down here below for their other wages that come to about $1.3 million, all wages combined. If I take 1.3 million, divide that by our total revenue of 1.9, 70% of revenue is going to wages of some sort. I think we're bloated on admin. I want to actually see what it's really costing us to have five or six people in the office all the time. It's extremely expensive. I don't want that under 15% if at all possible. The only way the admin should be going above 15% in my opinion is if you're growing very, very fast. So unless you're growing a lot, I want this admin cost of wages, rent and utilities that to be under 15%. I also just cannot fathom how we can be profitable on $1.3 million in wages on a $1.9 million business. That only leaves $600,000 for every other expense besides wages. And on this side of business, it's going to be sizable. So that's the quick diagnosis, the prescription cut admin staff. And to do that, we're going to create systems. Number two is we're going to try to make our crew out in the field more efficient. And, and third thing that I'm going to be digging into is are there wages being paid under the table? Are these actual contractors? And if so, can we make them more efficient to be able to produce more revenue without paying more wages? Watch this video here. If you want to see me actually go to Southern Landscapes Property Management and turn that bad boy around.
