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Is it mostly maintenance or landscaping you do? for commercial or domestic clients. If materials are involved some small business get the client to pay for them directly to the suppliers so they are not included in your turnover. Business may expect VAT charged on your work as they can claim it back but for domestic clients they are paying 20% extra for no benefit.
Disagree that domestic clients pay 20% Vat for no benefit. Being VAT registered means we can recover some of our running costs which are then reflected in the prices charged.
They're still not getting any "benefit" from the VAT charge....... at the most,if they're lucky, they won't end up paying any extra on the final bill however from my experience, VAT traders always cost more in the end.
We did go through a phase of getting private customers to pay for their own materials, but the biggest problem with that was that it was making our VAT bill bigger as we had nothing to offset against our earnings. We maintain in the spring-autumn and landscape through the winter. Private and Business customers are on our books.
Do 'petrol costs' have that much impact on your profitablity, Phil - especially as the price of petrol is 25% down on 4 months ago? There will always be running costs when tools are involved. By far the largest overhead are wages.
That was a huge overhead, however I am trialling electric equipment at the moment. We took an electric strimmer for a test drive yesterday, and have been solely using electric hedge cutters for 2 years. So as well as being quieter than our competition, we are cheaper to run.
Phil, I can understand fuel being a major transport cost, but how much of an overhead are you talking about for machinery fuel - as a % of T/O ?
When you say 'electric' - are you investing in battery based equipement ?
If so, what brand(s) have you used and what are your views ?
I review all costs and expenses every year to see if I can reduce these.
One of the biggest savings can be made by switching insurance companies, if you have a mini fleet policy as an example and only two or three people who drive it would probably be cheaper to switch to individual policies or shop around for cheaper fleet policies. Same applies with EL and PL.
Can you negotiate better trade prices for material? Speak to your main supplier and also their competition , a few percent off the trade prices can really help with your profitability.
I also create a budget of all projected spend for the coming year and by reviewing the previous years projection against actual again you can spot where you over or under spent.
Make sure you chase up any slow payers and keep a tight control on your cash flow.
Being smaller doesn’t always mean being cheaper in terms of running costs.
Have you reviewed your prices you charge? These should be raised every year. Do you factor in a percentage profit per job? If each job isn’t profitable why? Review all of your regular clients and drop the under performing ones.
Whilst not a saving as such, review your advertising and marketing spend for the coming months, make sure that every £ spent on advertising brings a real return.
Bringing your turnover down to below the VAT threshold wouldn’t make you anymore profitable, yes on paper you may appear slightly cheaper for daily labour rates but in real terms you will be lose more! Its all about working smarter.
Thank you. We do review our rates and off set against expenses etc. Will have to watch this space and see how it works out