Episode Transcript
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SPEAKER_00 (01:02):
And welcome to the
PoolKay Podcast Show.
In this episode, I'm going totalk to you about a little bit
about a kind of mock poolservice.
A lot of people ask, you know,can you make money in pool
service and is it a goodindustry to jump into?
And I think it's probably a goodidea for me to do like a mock
tax return based on a partialpool service route or a
(01:25):
part-time route out there to seeif it will benefit you to get
into the industry.
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(01:46):
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Now there are going to be a lotof numbers in this podcast, so
stick with it because you'regoing to get a true sense of
kind of a real net income aftertaxes in the pool service
industry.
So if you're really thinkingabout getting into the industry,
this is something that you canutilize.
(02:08):
If you're in the industry, ofcourse, you can kind of relate
to this and get some ideas forexpanding based on some of these
numbers that I'm throwing outhere that are realistic in one
sense, but of course, this is akind of mock podcast, so they're
not real tax return numbers froman actual business.
But I think you're going to geta really good sense for the
(02:29):
profitability of pool service ifdone correctly with a good
monthly service rate.
And of course, with the costbeing kept down somewhat, even
though you're going to deductthe cost, you can't just go
crazy and not worry about thecost of business.
It's really difficult to escapepaying income taxes on anything,
(02:50):
and you're going to have to payincome tax whether you're
self-employed or if you work fora company and they take
deductions out.
So one thing that you reallyneed to know is that the money
you report in is going to betaxable depending on different
aspects or you know factorswould be your total tax amount
(03:10):
you're going to get.
But there's some ballparkfigures I'll throw out here.
Nothing is accurate.
I'm not a CPA, and these are alljust kind of estimates to give
you an idea of the profitabilityof a pool service business, and
if it's something that you wantto jump into.
Now I'm going to say that anyservice business is pretty
profitable because of thedeductions you can take off of
(03:33):
your total gross income.
And I'm going to give you anexample here of just some
basics.
This is going to be based on a45 pool route, service route,
pool service business.
So I guess part-time, not quitefull-time.
You'd have to get it to about 70pools to be about full time.
(03:53):
So you're just doing 45 poolsand you're not doing anything
else.
You're not doing any repairs orasset washes to keep it simple,
and it's just the monthlyincome.
So you're gonna charge 185 amonth, and you you have 45
accounts, and that brings you to$99,900 a year, or this is say
$100,000 a year in income.
(04:14):
And this is you know fairlyreasonable in Los Angeles County
and other areas to get this kindof income based on a partial
route or a smaller pool route,which is like about a four-day
work week here for this poolroute, and maybe six hours a
day, I would say, or maybe alittle bit less.
And it's a pretty good income.
(04:37):
And what makes it good is thatyou're gonna deduct a good
portion of everything you putinto the business.
If you want to start with yourtruck, you can do either the
cost or the mileage deduction.
And if you do the mileagededuction, I suggest you get an
app that tracks the mileageaccurately.
(04:57):
There's a lot of them out there,like mile IQ, and QuickBooks
also tracks your mileage foryou.
And it's a good way to make surethat you're reporting the
mileage accurately.
If you ever were to get audited,now there's a lot of talk about
incorporating or being a soleproprietor.
If you incorporate, there aresome benefits.
You have some protections fromliability.
(05:19):
You also understand thatcorporations get audited a lot
less than individual taxreturns.
So you're also getting auditedas a corporation or smaller
because there's a lot of leewayin corporations as far as
write-offs and different ways ofreporting, but there is a cost
involved, the filing cost of$800a year.
(05:41):
So that's something to consider.
But you will have to make achoice of how you're going to
file when you start yourbusiness.
And I would suggestincorporating for the cleanest
way to run your business, in myopinion.
And you can do that prettyeasily with a CPA.
You could do it yourself, butI'd rather hire somebody to do
(06:01):
it properly because you can filethe paperwork incorrectly, which
I've known people to do, andthen they're a little bit of
trouble at that point.
So an LLC is fine.
I actually use a C Corp formyself because I do a lot of
business out of state as well,so that's why I formed a C Corp.
And it's something that you justhave to talk to your CPA about
(06:23):
what the best way to set up yourbusiness.
And then you have to decide ifyou're going to do the mileage
or the expense deduction on yourvehicle because you can't switch
it once you start one way or theother.
So just keep that in mind aswell.
That if you do the expenses orthe mileage, you can't flip-flop
and go back and forth.
(06:43):
In a lot of cases, especiallylike in California, the mileage
will probably be better than astandard deduction.
And just for sake of argument,I'm going to say that you drive
18,000 miles a year, and that's70 cents a mile, and then the
deduction for that will be about12,600 for 18,000 miles of
(07:04):
business miles.
Versus if you did the standarddeduction, maybe it'll be around
7,500 or 8,000, depending on allthe costs associated with your
vehicle.
And if you drive less miles, youdefinitely would want to
probably do the vehicle expensededuction.
So if you had 100,000 grossincome, you would take the
12,600 and you would deduct thatfrom there.
(07:26):
Let's just say you had someoffice expenses and you had
other expenses that were about$5,500.
You could take that off yourtaxes too.
You can do any kind of rentsthat if you rent anything, you
can deduct that as well.
Let's just say that your truckwas in the shop, you rented a
truck for a week, and that coststwelve hundred dollars to rent
(07:48):
that, and maybe there's someother rental charges in there as
well.
Your chemical costs, let's justsay that you spent$15,000 on
chemicals to make it simple.
And even if you bill thecustomers for chemicals,
anything like phosphor removeror chlorine or even the acid,
you still deduct that as abusiness expense because you
(08:08):
paid for those chemicals, andthe income from that is going to
be reflected on the income fromyour pool route.
And so all the chemical costsyou're going to deduct,
regardless if the customer paidfor them or if you use those as
a maintenance dose for theirpool, all those are deducted as
well.
Any kind of equipment, let'sjust say that in that 5,500 was
(08:32):
some new equipment that youpurchased, and you can split
that up between office expensesand equipment.
That was the number I gave outearlier.
And then there's some taxes andlicenses that you pay for.
Let's say that's$500, and then$300 for other kinds of expenses
that go along with yourbusiness.
(08:52):
And you know, let's just bringthat up from$300 to$500 just to
make it kind of even.
Uh covering like insurance andthings like that.
So altogether, your totalexpenses is$36,600, and your net
profit is$63,400.
Now your CPA takes it from herebecause they're gonna do stuff
(09:16):
like with the Social Securitypayment that you have to make,
and you can deduct some of that,also self-employed from your
gross from your net profit, Ishould say, and then your tax
bracket may vary depending on ifyou take the center deduction or
all those things, but inreality, you're gonna figure to
(09:36):
pay with California.
We have pretty high state taxes,and I would say between your
federal taxes and your statetaxes, you're somewhere around
$7,000 a year, roughly off ofthat net profit of$63,400, which
(10:12):
is about$135 a week if you wantto break it down weekly.
So your income taxes for yourbusiness is about$135 a week for
45 pools, bringing in$100,000 ayear, even with that tax burden,
because if you work forsomebody, you're gonna pay taxes
anyway, you can't escape that.
(10:33):
I would say that theprofitability of the pool
service business is reallyunmatched out there by a lot of
by any service business, in myopinion, and is something that
requires very little startupcost.
And as you can see, by theamount of money you're making,
with even just the basicdeductions, you're really very
(10:55):
profitable even after payingyour income taxes, your federal
and state.
And so there are costs involvedin that, but you can throw a
pretty good chunk of thatmileage deduction back into your
(11:20):
net.
And let's just say then if youwere going to do all the
subtraction here and then theaddition of some profit back in
from some expenses that you cankind of put back in as net
income because you're not goingto use all of that, but let's
just say again the 64,000,63,400, and then I'm gonna minus
(11:42):
7,000 from that for your taxes.
That's 56,400.
So 56,400.
And let's just throw a third ofthe mileage uh right off back
into that.
So let's just put 3,000 back onand then put 3,000, that's
59,400 divided by 12.
(12:03):
That's about 4,950 a month,close to 5,000 a month.
Net income after all of yourexpenses, your supplies, your
all the cost of operations, andthen your tax burden.
And by the way, you should bepaying quarterly taxes so you
don't get penalized on that.
(12:23):
And so doing 45 pools a weekwill bring in about five
thousand dollars.
Now, this is not anything thatyou can take home and say it's
100% accurate, but I think itfalls within a reasonable level
of accuracy with the incomebased on the averages out here
and how much money you canactually take home after
(12:45):
everything with the pool servicebusiness, working really just
four days a week and part-timeat 45 pools.
That would be roughly 11 pools aday, Monday through Thursday,
with Fridays off, or Fridayworking Friday having Mondays
off.
11 pools would take you probablyif you start at 8 o'clock, you'd
be done by noon, 1 o'clock everyday.
(13:06):
And to me, that's what Iconsider a part-time job, and it
brings in pretty substantialamount of money.
Now, of course, you can doublethat by doubling the size of
your route, and then you woulddouble your income, you would
double your expenses andeverything, and your tax burden,
but of course, your income wouldgo up as well.
If you just wanted to add 10more pools to that, you would
(13:27):
actually bring in a lot moreincome as well.
And I know in a perfect world,this example would show that
everyone's reporting all themoney they make, but according
to the latest data from the IRS,there's about$539 billion in
under-reported income, and a lotof that, of course, is in the
(13:49):
service industry, where a lot ofthe income is just not reported
on the taxes, and it's you knowvery difficult, I think, for the
IRS to track everyone down.
And again, I mentioned that soleproprietors they're the ones
that they actually single outfor audits under Schedule C.
And it seems like if youincorporate, you probably have a
(14:11):
better chance of not beingaudited, even if you don't fudge
on your taxes, that's not goingto be an issue for you.
I think there are a lot ofreasons why you shouldn't
under-report your taxes.
A lot of that has to do withpotential for investing later.
If you under-report your incomeand you don't report all your
(14:32):
all your earnings, you don't getcredit for that, of course.
And if you wanted to buy, let'ssay, an investment property or
something of that sort, youwould need to have your income
verified.
Although there are DSCR loansnow where the loan is based on
the rental income of theproperty and not on your income
taxes, so that is not acompletely valid point, and it's
(14:57):
something that a lot ofinvestors are not even using
their income taxes when theywhen they purchase an investment
property nowadays.
And also there are other thingslike Social Security.
If you don't report your income,you're going to draw less Social
Security later on because that'sbased on the income you reported
(15:17):
on your taxes.
So there are some reasons.
Of course, you'll sleep betterat night if you report your
income.
And with the amount ofdeductions you're able to take
anyway, it really doesn't make alot of sense not to try to keep
accurate books and report yourincome as it comes in.
With the deductions, of course,lowering your total taxable
(15:40):
income down or your net incomeor your net gross income.
This is one reason why Irecommend a good CPA because
they can find ways to save youmoney, they can give you ideas.
If you're gonna buy a new truck,they can help you maximize those
deductions on the followingyear's taxes.
Maybe they can maybe theythey'll advise you to bring your
(16:02):
spouse on as an employee, eventhough you pay double taxes, it
might be worth it in that case,or your CPA may recommend
getting an employee, hiringsomebody, giving them some
accounts, and then using that onyour taxes as a deduction as
well.
You'll be making more moneybecause you'll have an employee
out there, plus you can deductthe expenses associated with
(16:22):
that.
And I think it's not a bad ideato try to find a CP that
specializes in self-employedsmall businesses that can really
advise you on your beststrategy, you know, vehicle
expenses or the mileagededuction, what deductions are
something that you could take.
Like, for instance, you couldtake a home office deduction on
(16:44):
your taxes, but you gotta becareful because a lot of people
get audited with their homeoffice deduction.
But you can deduct a portion ofyour utility bills for that in
that case.
If you can prove that you useyour home office, of course, a
percentage of time for yourbusiness, and these are all
things that, of course, youwould talk to a professional
about.
I was just trying to give youkind of a mock idea of a typical
(17:07):
service business and what toexpect as far as profitability.
And you can see with a smallamount of pools, with a good
service, weekly service rate ormonthly service rate, I should
say, with just the typicalexpenses, you can do pretty well
out there, and it's something toconsider when you start your
small business.
(17:27):
How much profit is actually inthat business, how much can you
actually make, how much are theexpenses, and what is the total
amount of profit.
And with pool service, I thinkone aspect that kind of trumps a
lot of different businesses isthe fact that it's scalable.
You can do the same amount ofwork, same amount of hours,
bring on an employee or two,scale your business to where
(17:51):
you're double or triple theamount of money you're making,
but still working the sameamount of hours, and then you
would still be extremelyprofitable because again, the
more you expand, the moresupplies and costs that are
involved, the more deductionsyou have on the income that
you're bringing in as well.
So it's all relative based onthe fact how much of money
(18:13):
you're bringing in, how much areyour expenses that you're
writing off, and how much you'renetting.
But it's one of those industrieswhere you can scale it to a
point where you can bring in bebringing in two times, three
times, four times your incomewhile still working in the same
amount of hours each week.
If you're looking for otherpodcasts, you can find those on
(18:34):
my website.
If you go to the banner,swimming poollearning.com as the
site.
If you click on the podcast iconon the banner, there'll be over
1800 or close to that podcastyou can bring down and listen to
at your leisure.
And if you're looking for mycoaching program, you can learn
more about that atPoolGuyCoaching.com.
Thanks for listening to thispodcast.
(18:54):
Have a great story of your week,and God bless.