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Started By
Message
How to Make Money Cutting Grass?
Posted on 6/28/09 at 3:20 pm
Posted on 6/28/09 at 3:20 pm
My friend owns his own lawn business. He cuts about 40 yards and does some landscaping. Of course he makes more money landscaping but my question is this, how can he factor in the depreciation of his tools into the charge for his customers. I'm trying to help him out.
My thinking is that he should set aside a certain amount of money each week for depreciation and upkeep of his tools. Figure out how long they last and then divide the amount to replace by that time and call it depreciation.
I know there has to be other ways he can make more money or write things off other than just the expense of replacing his tools. So I am asking for suggestions on how to properly structure his company and finances.
My thinking is that he should set aside a certain amount of money each week for depreciation and upkeep of his tools. Figure out how long they last and then divide the amount to replace by that time and call it depreciation.
I know there has to be other ways he can make more money or write things off other than just the expense of replacing his tools. So I am asking for suggestions on how to properly structure his company and finances.
7
Posted on 6/28/09 at 4:00 pm to get em tigers
This sounds like way too much work for a lawn cutting business. His most expense asset is maybe the mower? Which can probably be repaired for most issues?
No need to worry about depreciation. The dude just needs to not spend all his profit, so that when it's time to replace/repair he's got the money.
No need to worry about depreciation. The dude just needs to not spend all his profit, so that when it's time to replace/repair he's got the money.
Posted on 6/28/09 at 4:57 pm to HurricaneDunc
quote:
His most expense asset is maybe the mower?
Probably the truck and trailer.
This post was edited on 6/28/09 at 4:58 pm
Posted on 6/28/09 at 6:54 pm to Crazy4OU
The IRS will tell you how long and for how much you can depreciate certain types of assets for tax purposes. You can search their website for the tables ect. or probably Google some of the answers. This will offset some of his income with depreciation expense when paying taxes. On his personal books he should probably just use the same depreciation method as the gov't unless he plans on selling the company or anything of that nature.
Also, when it comes to tools there are "repairs" which allow an asset to continue operating effectively and doesn't change its level of effectiveness, life span, or purpose. Those are also expenses on the tax return. Then there are Improvments which can extended the life of an asset or increase it's effectivness ect. "Improvements" effectively create a new asset and are capitalized and then depreciated over the life of an asset; Not all at once like "repairs"
Kind of confused about the factoring depreciation into the cost for his customers. I guess he can have an itemized breakdown for his customers showing how much of the cost is for gas/labor/future repairs or whatever. I assume he is a cash basis business versus an accrual basis business. If you have any more questions feel free to post, hope it helps.
Also, when it comes to tools there are "repairs" which allow an asset to continue operating effectively and doesn't change its level of effectiveness, life span, or purpose. Those are also expenses on the tax return. Then there are Improvments which can extended the life of an asset or increase it's effectivness ect. "Improvements" effectively create a new asset and are capitalized and then depreciated over the life of an asset; Not all at once like "repairs"
Kind of confused about the factoring depreciation into the cost for his customers. I guess he can have an itemized breakdown for his customers showing how much of the cost is for gas/labor/future repairs or whatever. I assume he is a cash basis business versus an accrual basis business. If you have any more questions feel free to post, hope it helps.
This post was edited on 6/28/09 at 7:09 pm
Posted on 6/29/09 at 12:24 am to BaylorTiger
quote:
The IRS will tell you how long and for how much you can depreciate certain types of assets for tax purposes.
I don't think the OP was asking a tax question, seemed more of a pricing question. Seemed as if he was trying to calculate actual depreciation of assets so that funds were available to replace worn out equipment when new equipment was needed.
Posted on 6/29/09 at 5:06 am to TigerDeacon
I guess using those methods he's not going to have enough info to do the calcualtion until something breaks or wears out.
Posted on 6/29/09 at 6:46 am to BIGWORMK
quote:
I don't think the OP was asking a tax question, seemed more of a pricing question. Seemed as if he was trying to calculate actual depreciation of assets so that funds were available to replace worn out equipment when new equipment was needed.
You raise a good point I was just trying to answer based on
quote:
I know there has to be other ways he can make more money or write things off other than just the expense of replacing his tools. So I am asking for suggestions on how to properly structure his company and finances.
So, To answer the question raised by Deacon...I imagine that most of the equipment he uses will have a manual and those manuals will have a life expectancy by something like hours/miles/starts and that could be a more realistic life span to estimate depreciation/amount to save instead of the governments estimate; if they don't have anything like that in the manual you can use the warranty/guarantee(hopefully in years)made by the company as a guestimate for the deprecation life span/amount to save. I was just suggesting that the IRS has expected use/life of several different classifications of assets and that might not be a bad place to start since you have to use those for tax purposes.
quote:
I guess using those methods he's not going to have enough info to do the calcualtion until something breaks or wears out.
Sorry I don't follow. Definitely wanna give this guy the right answers though.
This post was edited on 6/29/09 at 7:03 am
Posted on 6/29/09 at 8:04 am to get em tigers
One of the things I see small business guys do, that just murders them... is they are tool crazy. They just use any excuse to buy a new power tool or mower or anything like that. It destroys their profits.
Make sure your friend isn't buying something new when the shine of the old one wears off.
Make sure your friend isn't buying something new when the shine of the old one wears off.
Posted on 6/29/09 at 8:13 am to HurricaneDunc
quote:
His most expense asset is maybe the mower? Which can probably be repaired for most issues?
yea but some of the really nice zero turn radius mowers can be ~10k
Posted on 6/29/09 at 10:38 am to get em tigers
most importantly, try to get the payments cash, so he wont have to file as much taxes on the income.
Posted on 6/29/09 at 11:17 am to coloradoBengal
quote:
One of the things I see small business guys do, that just murders them... is they are tool crazy. They just use any excuse to buy a new power tool or mower or anything like that. It destroys their profits.
So true. I've seen it time and time again.
Posted on 6/29/09 at 12:01 pm to lsu xman
quote:
most importantly, try to get the payments cash, so he wont have to file as much taxes on the income.
Yeah, and be sure to wear a mask when you rob a bank so that the FBI doesn't get a good picture of you.
Posted on 6/29/09 at 12:01 pm to TigerDeacon
Oh and it's not armed robbery if the gun's not loaded.
(Please note: These last two posts are not legal advice . . . just sarcasm)
(Please note: These last two posts are not legal advice . . . just sarcasm)
This post was edited on 6/29/09 at 12:02 pm
Posted on 6/29/09 at 11:08 pm to get em tigers
(no message)
This post was edited on 6/29/09 at 11:10 pm
Posted on 6/29/09 at 11:28 pm to horndog
If he is trying to 'include' depreciation into the "price" he will be charging for his service, then why not:
1) figure out the general expected life his tools
2) use basic straight line depreciation
3) figure out how much depreciation is incurred each time he mows a lawn
4) add that amount to his price.
It didn't sound like he wanted to know about the tax reasons for depreciation.
1) figure out the general expected life his tools
2) use basic straight line depreciation
3) figure out how much depreciation is incurred each time he mows a lawn
4) add that amount to his price.
It didn't sound like he wanted to know about the tax reasons for depreciation.
Posted on 6/30/09 at 9:15 am to get em tigers
quote:
does some landscaping.
$$$$$$$$$$$
My cousin use to have just a lawn service. I helped him get started into Landscaping, talked with him two days ago. Hes got one job for $50K and one for 70K. Now he does sod, beds and sprinkler systems, but hes making well. An like I told him, grass cutting is for a few months, in Btr you can plant container plants 12 months out the year....
Posted on 6/30/09 at 5:37 pm to TigerDeacon
quote:
Oh and it's not armed robbery if the gun's not loaded.
This post was edited on 6/30/09 at 5:38 pm
Posted on 6/30/09 at 9:27 pm to get em tigers
He needs to use the MACRS depreciation schedule. Can recoup 100% of the basis value of the equipment in a certain time period. (I think his would be 5-7 years.) The depreciation is a yearly tax credit.
Posted on 6/30/09 at 9:53 pm to get em tigers
As a sidebar, he should look at automatic sprinkler repair work. Eventually automatic sprinkler systems crap out. A little digging, a little plumbing .. around here it's $65 / hour plus materials.
Posted on 6/30/09 at 9:56 pm to lakeviewtiger
Not a credit, a deduction (that he may not be able to utilize), fwiw. Big difference. Poodlebrain will come school everyone if he sees the thread.
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