How Not to Run an RV Park

4X4Dodger wrote:


Well RVParkowner ...

However you are mistaken about the IRS demanding that you make a profit. Amazon has yet to be profitable. What the IRS does demand is careful bookkeeping and accounting. You can lose your shirt for all they care as long as you are in compliance with the Tax Code.

As for my credentials to look at a business and see what is going on. That among other things is how I made a living for many years. And a very good one. I have taken more than one struggling company (Corp) from near bankruptcy to profitability. In one case in a mere 18 months. (This was a wholly owned subsidiary of Maxtor)

Most recently I have been working in helping Chinese companies move their factories to areas of the world with cheaper labor costs especially in SE Asia.

I think my business credentials at least equal yours.

Well said.:W

dodge guy wrote:
Don't forget that up that way, even in the NW, things are more laid back and relaxed. No one gets upset or worries over the little things. What's strange to us is normal everyday life for them.

This is exactly my take on it. We've been to Alaska and the business owners are much more laid back along with customers. They'll close on the spur of the moment to take a few days break for themselves.

We have no idea the situation at the RV park being analyzed. There are many RV parks that have the capacity to hire multiple workampers and as compensation provide them with a free site. Since those workers are not paid and generally work much less than a 40 hour week, it is both necessary and financially prudent to hire extra staff. That staffing doesn't cost anything but the site and it is in the park's best interest to keep each individual's tasks to a minimum so they will enjoy their stay and consequently stay on for the season.
Other parks have more customers than sites, they turn people away. These parks need to keep as many sites as possible available for paying guests so they often hire fewer workers and pay them for longer hours and more work during those hours.
We have no idea what is involved in running the park in question. They may have cabins and need housekeeping staff. They may have a store needing staff. They may sell tours, rent ATVs, run in park activities and on and on. All those take labor. Heck, they may just want the park to look great and have a full time staff dedicated to flowers, mowing lawns, raking leaves, pruning bushes and keeping the grounds in top shape.
Perhaps the management has run that operation for many years and knows their client needs a bit better than someone who just drove in from who knows where. I know I have evolved my management practices over the years. I do things now I never would have thought of doing when I first got into the business. And, on the other hand, stopped doing things I thought were great ideas when I got started.
Maybe this park does succeed in spite of itself, but that is still succeeding and that counts for something.
As for IRS rulings on business vs hobby, the IRS requires a business be run with the intent to make a profit and requires a business to have made a profit in three of the last five years if the losses in that business are used to offset taxable gains from other activity. (you can't run a business continually at a loss to lower your tax obligation). If that business did not make a profit in three of the previous five years the IRS deems it a hobby and write offs become limited to the amount necessary to offset any income from that hobby . These rules do not apply to corporations other than subchapter S corps. Also horse breeding and racing is treated differently.

I won't doubt your credentials based on what your experience... certainly is more than mine. Not sure how you know Amazon is or isn't profitable, but that's neither here nor there I guess.

Certainly seems like, based on what you described, that the businesses are not as efficient as they should be or could be without an increase of personnel. Certainly they have lost business, as you've shown. I would suspect that is a somewhat consistent pattern.

I could only guess as to the rationale, but it's their business so I guess they can choose how they want to execute it. But, from the description, it doesn't seem to be effective.

Mike

dodge guy wrote:
Don't forget that up that way, even in the NW, things are more laid back and relaxed. No one gets upset or worries over the little things. What's strange to us is normal everyday life for them.

Tell that to Bill Gates, Howard Schultz or John Warnock (founder of Adobe Systems) All NW companies.

I am pretty sure they would heartily disagree with you.

Old-Biscuit wrote:
Those 2 examples just go to show that they are not run the WAY you would do it.

BUT that doesn't mean they aren't profitable........you do not have access to their books.

I don't like the way CW does business so I don't shop there but they are still in business

Please take the time to read my last post to RVparkowner on this subject. And the follow-up about Peavey Electronics.

And you are right, they MAY be profitable, but that does not mean they are AS Profitable as they COULD be. And frankly I don't really need access to their books. After so many years in business I have a pretty good idea what things cost businesses and to estimate income, apply some well known formulas for profitability and come to a pretty close conclusion in many instances. What I don't know is their debt load and or debt servicing needs without actually consulting with them. But even with those taken out of the equation (and those are both negatives in this instance) it is easy to get close with some well educated guesses.

And as I asked above: Do you really believe that what I describe are actually GOOD business practice? If you did I'd be shocked.

Those 2 examples just go to show that they are not run the WAY you would do it.

BUT that doesn't mean they aren't profitable........you do not have access to their books.

I don't like the way CW does business so I don't shop there but they are still in business

Don't forget that up that way, even in the NW, things are more laid back and relaxed. No one gets upset or worries over the little things. What's strange to us is normal everyday life for them.

I had to chuckle at some of the responses. I appreciate All responses whether they agree with me or not. But Does anyone including RVPark owner REALLY believe that what I have described is GOOD business practice?

That would be foolish.

It really doesn't take all that long to look at a business, understand it's operating schedule, It's product and demographics, it's peak business times, it's manpower, and it's manpower requirements or put another way how many man/hours per day/week/month are needed to get that business to run efficiently and cover reasonable hours of operation.

I have seen during my time in business more than a few companies that have succeeded IN SPITE of bad management and poor economic decisions. Some of that is Market based and timing. A good example is Peavey Electronics of Meridian MS. Owned by Hartley and Melia Peavey and was basically a Hobby turned into a business in 1965.

They had many challenges along the way and made many questionable decisions that cost them money and business. But they have succeeded to become one of the worlds largest music oriented electronics firms. But they needed help of many people along the way including outside consultants.

If you ever met Hartley and Melia you would never guess that they were the type to run such a corporation. But while Hartley is named as CEO it is Melia who made and influenced most major decisions. So in any meeting with them you must be speaking (indirectly) to her. and if you did not understand that fundamental issue about this particular business woe to you. Sadly Melia died in 1998.

Just for fun google him and see for yourself how a CEO of a very successful business can be so clueless in many many ways.

And that example is just one of many I could cite of how just because you may be the owner of a very successful business doesn't necessarily mean you actually run it with any degree of competence. Luckily for Peavey (in the 80's) it had some very qualified and smart managers to save Hartley from himself.

I met them in the 80's when I was called in to consult on bringing a new product (for them) to market...an electronic keyboard. The meetings with Hartley and Melia would really have opened your eyes to how emotional decisions can seriously hamper a company's business. And that just OWNING a business doesn't necessarily make you an expert on how to run one with competence to the fullest degree of it's potential.

So with that in mind just because one may own an RV park doesn't necessarily mean that park is run to peak efficiency or well managed. And it certainly doesn't mean that it is living up to it's profit and growth potential.

westernrvparkowner wrote:

JFNM wrote:
The business MAY be a tax write off for the owner! :-)

I remember a story from a few years ago. A rich fellow bought a ranch and hired an old hand to run it. At the end of the first year, the old hand showed the owner that he had made a bit of money and the owner was furious. Told him to never, ever turn a profit again.

The entire "tax write off" thing is basically urban legend. The IRS requires a business to periodically earn a profit, otherwise it is considered to be a hobby and the expenses against that hobby are not eligible to be written off. Furthermore, the maximum write off against a loss would be the highest marginal tax rate, currently 39.6 percent. Thus even a tax write off would still amount to a 60.4 percent real loss, not very good business. Yes, there are ways to massage the tax code in your favor. You can buy items within your business that are really primarily for personal use and write them off. You can push tax obligations into the future by taking depreciation and the like. But the IRS eventually gets their money and just plain running a business at a loss isn't a tax strategy.
And what is wrong with a business having employees? How is the OP so involved in the day to day operation of that park allowing him to KNOW that having 7 employees is too many, assuming of course the lawn maintenance person was actually an employee of the park and not an outside contractor who mows the park on Tuesday? I know I have more than that and I consider myself to run a very lean operation.

Well RVParkowner you and I don't often agree, but in this case you are right about one thing and that is the Urban myth of the tax write off as business. This is usually only the domain of those businesses that have Billions of dollars in cash that needs to be spent and they can ride out the non-proitable years of a business startup.

However you are mistaken about the IRS demanding that you make a profit. Amazon has yet to be profitable. What the IRS does demand is careful bookkeeping and accounting. You can lose your shirt for all they care as long as you are in compliance with the Tax Code.

As for my credentials to look at a business and see what is going on. That among other things is how I made a living for many years. And a very good one. I have taken more than one struggling company (Corp) from near bankruptcy to profitability. In one case in a mere 18 months. (This was a wholly owned subsidiary of Maxtor)

Most recently I have been working in helping Chinese companies move their factories to areas of the world with cheaper labor costs especially in SE Asia.

I think my business credentials at least equal yours.