Understanding the Business You're Really In — Part 3
- Eric McQuiston, PLA
- 12 hours ago
- 5 min read
The Biggest Financial Mistake Landscape Contractors Make
By Eric R. McQuiston, PLA
I was recently talking with a contractor who'd built a solid, respected company over the past several years. I asked him, almost in passing, how he paid himself. He shrugged like it was the easiest question I'd asked all day.
"I just take whatever is left."
I've heard some version of that sentence more times than I can count, and I understand exactly why it feels reasonable. You own the company. Shouldn't whatever's left over belong to you?
Yes — but not in the way most contractors think. And that one shrug of an answer is quietly responsible for more burned-out owners and misleading financial statements than almost anything else in this trade.
We've spent the first two articles building a framework — Direct Costs, Overhead, and Profit — and talking about how Overhead actually gets recovered. This article tackles the piece that trips up almost every owner once the first two ideas start to sink in: where does your own paycheck fit into all of that?
The trouble is that many contractors, without ever meaning to, blend two completely different things together: what they're paid for the work they do, and the profit they earn for owning the business. Once you understand why those are not the same thing, you'll start looking at your company's health in a whole new light.
The Owner Wears Every Hat in the Building
Unlike a larger operation with a full org chart, the owner of a landscape company rarely does just one job. Monday you're installing irrigation. Tuesday you're running the skid steer. Wednesday you're meeting a prospective client on their back patio. Thursday you're estimating a new project. Friday you're paying bills, chasing down a supplier, reviewing payroll, and mediating whatever crew disagreement started at 6:45 that morning.
In a single week, you might be your own field labor, equipment operator, designer, estimator, salesperson, project manager, office manager, and president — sometimes all before lunch on Thursday. Each of those roles has real value. Each one would cost you real money if somebody else were doing it.
The Business Doesn't Care Who's Holding the Shovel
Here's a question I like to put to contractors, because it tends to cut straight through the confusion: if someone else did the work you did today, would your company have to pay them?
Of course it would. If someone else installed the irrigation, ran the skid steer, designed the landscape, built the estimate, sold the job, or managed the crew — you'd write them a check without a second thought. So why should your own labor be any different, simply because your name happens to be on the building?
It shouldn't be. Your company should account for your time exactly the way it would for any employee doing that same job — no better, no worse, and definitely no "we'll figure it out later."
Let the Work Tell You Where the Cost Belongs
One rule has served me well for a long time: the work determines where the cost goes, not the title on your business card.
Spend the day on the crew, hands in the dirt? That's Direct Labor. Running equipment on a project? That belongs to the job it's working on. Spend the day estimating, designing, selling, managing people, paying bills, or meeting clients? That's Overhead. Your paycheck simply follows the work you actually did — nothing more, nothing less, and definitely not "whatever's left in the account on a Friday."
Why This Distinction Actually Matters
Picture two landscape companies, side by side. Both do $1.5 million a year. Same crews, same materials, same quality of work. The only difference between them is how the owner handles their own paycheck.
The first owner pays himself a fair wage for the roles he actually performs. The second just takes whatever's left at the end of the year. On paper, that second company looks noticeably more profitable — a real feel-good number to stare at in December.
But is it, really? Ask yourself what happens the day that second owner retires, gets sick, or finally hires someone to take over estimating and sales. Suddenly the company has to start paying real people, real wages, for all the work the owner used to quietly absorb for free. That "profit" evaporates almost overnight — not because the business changed, but because it was never actually there. It was an illusion built on unpaid labor, and unpaid labor has a funny way of sending the bill eventually.
Salary and Profit Are Not the Same Bank Account
This is where the lines get blurry for a lot of contractors, so let's draw them clean.
Your salary compensates you for the work you performed. Profit compensates you for owning the business — for the capital you invested, the risk you assumed, the loans you personally guaranteed, the equipment you bought, and the reputation you spent years building.
One pays the employee. The other rewards the owner. Sometimes that's the same person cashing both checks, but they should never be treated as the same source of money.
A Healthy Business Pays the Owner Twice
I know that sounds strange the first time you hear it, but stay with me.
A healthy company pays its owner fairly for the work they perform — Direct Labor if you're installing, Overhead if you're estimating or managing. Then, after every direct cost is covered and every dollar of overhead is recovered, the business should still produce a reasonable profit on top of that. That profit belongs to ownership, not employment, and the two should never lean on each other to look healthy.
Why This Changes the Questions You Ask
Once you separate your paycheck from your profit, something shifts. Instead of asking "how much can I pull out of the company this month," you start asking "what does it actually cost to run this business, and am I recovering that cost honestly?" Instead of staring at an empty account wondering where everything went, you start evaluating whether your pricing was ever telling you the truth in the first place.
That shift in thinking — quiet as it sounds — is what separates companies that survive a rough year from ones that don't.
Closing Thoughts
A healthy landscape company should be able to pay every employee fairly, pay the owner fairly for every role they perform, recover every dollar it costs to operate, and still earn a reasonable profit — all at the same time. If your business can't do all four, the problem usually isn't your paycheck. It's that the company isn't charging enough to cover what it actually costs to run.
Healthy companies invest in better equipment. They keep good people. They survive the slow years. They can finally take a real vacation without the whole operation falling apart in their absence.
And there's one truth worth remembering long after you've finished reading this: a business that depends on its owner working for less than their labor is worth isn't really profitable — it's just quietly borrowing against that owner's future. That debt always comes due eventually, whether it shows up as burnout, a fleet that never gets replaced, a retirement account that never gets funded, or simply never being able to step away from the company you built.
A truly healthy business pays for the work it takes to run it, rewards the risk of owning it, and leaves the company stronger than it found it. That's the difference between owning a job and owning a business.
Looking Ahead
In the next article, we're going one layer deeper. We've talked about what Direct Costs are, how Overhead gets recovered, and now how your own paycheck fits honestly into that picture. But there's still a question none of that answers: are the base numbers you're building all of this on even accurate to begin with? A $25-an-hour employee rarely costs your business $25 an hour. We'll look at exactly why — and what to do about it.
~ Eric
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