How's my bid?

[dmk395]

Here is the situation.

Approximately 100feet of edging, and 8 yards of mulch will be put down. My mulch cost will be about $200. There are some bushes but not too many wide open areas, but overall not too bad a job. I am thinking of quoting him at $650 for labor and supplies. I could do the whole job in about 12 hours.How does that sound?

[joshua]

that sounds great to me. about $37 a hour if i'm right after costs.if its a 1 man crew. still good if another guy at $10 a hour.

[lawrence stone]

I dunno can you live with 32.3% (my estimated labor and equipment cost is $20/hr)gross profit margin?

Do you know how to figure gross profit margin?

[Barkleymut]

$25 for a yard of mulch? Is that money tree mulch?

[dmk395]

Well my accounting knowledge is limited but getting better, as I am taking another class next semester at school.
Nevertheless I think Gross Profit would be

Sales Revenue
-CGS
--------
GP

So 650-200=450=GP

roughly 30.7%
The problem I have is getting mulch. None of the nurseries or mulch places give landscapers much of a deal. By picking up the mulch myself I can save a few dollars a yard, but with a pickup truck it really isn't even worth it. Where does everyone else get mulch?

[cst51]

If I were doing the mulching job I would charge about 450.00. (Just mulching!!) I charge 55.00 a yard to Supply and Apply.

[lawrence stone]

Originally posted by dmk395
Well my accounting knowledge is limited but getting better, as I am taking another class next semester at school.
Nevertheless I think Gross Profit would be

Sales Revenue
-CGS
--------
GP

So 650-200=450=GP

roughly 30.7%


WRONG!!!! WRONG!!!AND MORE wrong!!

You forgot to include one important thing:

Where did you include your labor, equipment and overhead costs?

Save your money and join the stonelist. Exactly why would you pay some "professor" who has been sheltered by ivory
towers for knowledge? How many commercial, residental, and
sports fields does he manage? Has he been in business for 14 years? Does he have to meet a payroll on a weekly basis
and submit taxes every three months?

[Skookum]

dmk395,

I am in the same boat as you on mulch. There are a few places I could buy wholesale mulch, but it would cost more in time and fuel and truck expense to go get 5 yards at a time in my dump truck. I do not put down enough annual mulch to get it delivered bulk, and if I did then I would need a loader to load it all the time, not to mention the mess of having it around. So, it is in my better "big picture" interest to just buy mulch retail from the local garden and landscape centers as well.

This year my loose hardwood mulch will cost me $26.00 a yard. Here in town you can buy bagged cypress mulch from Wal-mart for $22.00 a yard where the local nurseries want about $45.00 a yard. Nice thing about this bagged cypress method is that there are two Wal-marts here, one on each side of town, so it is way too easy to get a load without all the driving time.

I have maintenance accounts that I charge $125.00 per yard installed, a few of those accounts I charge a little less at $75.00 a yard. If someone calls and wants just mulch delivered this year, I am charging $31.00 a yard plus a $60.00 delivery fee for 1-5 yards. If they want it installed, I am charging $76.00 - $125.00 as per site requirements plus the $60.00 per 1-5 yard load delivery fee.

I use both the bagged and loose mulch at different accounts. I can put down the bagged mulch much faster than the loose. If you have not thought about that, and there is a Wal-mart or home center near you, it might help trim your mulching time and boost your profit end.

All in all though, I think you your bid sounds reasonable to me. I am not in your market though. Main thing is that your happy getting that amount.

Good luck

[Edited by Skookum on 03-19-2001 at 11:01 AM]

[LScom Addict]

According to Professor Stones methodology I would be forced to make money by charging $865 for this bid. Thank you Professor Stone.:)Based upon the 12 hr work day proposed here, as a solo operator I have based my findings per the following. $22/hr labor, $8/hr over-head = $1.25/hr insurance, $3.50/hr equipment on this job only(my equipment is paid for, replacement costs only), $1/hr equipment storeage w/ util., $2.75/hr operating expenses(fuels, oils, etc.), $40 delivery fee, $65/day rental for bed shaper.

Here were my calculations. $200 for mulch, $200 mark-up, $264 labor, $96 over-head, $5/yd delivery ($40), $65 renatl fee back charged to customer.

[Greenkeepers]

Larry-

You need to go back and check your accounting books. You want to slam someone when you are WRONG WRONG WRONG.......

Gross profit is exactly what DMK said.

Sales
- COGS
------------
= Gross profit

- operating expenses (sga, salaries, ins, equip, etc...)
-------------
= Income from operations

+ or - other income and expenses (interest, other etc...)
-------------

= NET INCOME

So to correct yourself you need to ask about net income and not gross profit. Salaries and wages can be considered COGS but usually only in a manufacturing environment which we are not in. So therefore they would be in SGA (selling,general and administrative).....

Just thought that you should have the story straight before you go and slam people and tell them the wrong info....

[lawrence stone]

Originally posted by LS.com Addict
According to Professor Stones methodology I would be forced to make money by charging $865 for this bid. Thank you Professor Stone.:)Based upon the 12 hr work day proposed here, as a solo operator I have based my findings per the following. $22/hr labor, $8/hr over-head = $1.25/hr insurance, $3.50/hr equipment on this job only(my equipment is paid for, replacement costs only), $1/hr equipment storeage w/ util., $2.75/hr operating expenses(fuels, oils, etc.), $40 delivery fee, $65/day rental for bed shaper.

Here were my calculations. $200 for mulch, $200 mark-up, $264 labor, $96 over-head, $5/yd delivery ($40), $65 renatl fee back charged to customer.

Very good addict someone in this class is actually paying attention.

Ok know we have a total job cost to the contractor of $569.00 and a sell price of $865 we now have an acceptable
gross profit margin of 34.2% thats high enought to make some
money but still at a point of being competitive.

[lawrence stone]

Originally posted by Greenkeepers
Larry-

You need to go back and check your accounting books. You want to slam someone when you are WRONG WRONG WRONG.......

Gross profit is exactly what DMK said.

Sales
- COGS
------------
= Gross profit

- operating expenses (sga, salaries, ins, equip, etc...)
-------------
= Income from operations

+ or - other income and expenses (interest, other etc...)
-------------

= NET INCOME

So to correct yourself you need to ask about net income and not gross profit. Salaries and wages can be considered COGS but usually only in a manufacturing environment which we are not in. So therefore they would be in SGA (selling,general and administrative).....

Just thought that you should have the story straight before you go and slam people and tell them the wrong info....

Sorry Mike I was refering to gross profit margin.

[Greenkeepers]

Larry-

OK.. Kinda my bad from forgetting your first post on this mentioned margin and then through the others it got dropped and was mentioning gp...


DMK-

One other thing that you'll need take into consideration is your fixed and variable costs when figuring your estimates as well as your financial position overall....

[Skookum]

If I might chime in here a little. In my opinion it is great to know what sort of profit margin you wish to get, want or need, but you have to be realistic to your market and your needs as well. It is really hard to set at home and make any profit margin at all! If your not working then you are losing a chance at any profit margin. In some situations, I feel sometimes it is more of a gut feeling on what to try and get as a profit -vs- spitting out a formula made price to fit the ideal profit margin.

Sometimes, as a smaller company or sole operator, you might have to work for a smaller profit margin. This is usually more frequent at a startup senerio, but can also include large or established comapanies as well. It is not a perfect world by any means at all. It has been stated before that doing business by the book, like a true text book college or business school senerio, does not work in the real world in the long run due to all the unforeseen hurdles.

Of course, everyone has to make those decisions as they see fit for themselves.

[Edited by Skookum on 03-19-2001 at 01:22 PM]

[dmk395]

Thanks for pointing that out Greenkeapers. Also the overhead of one company versus another is rather different, you must take that into account.

[syzer]

Originally posted by dmk395
[B]
--------
GP

So 650-200=450=GP

roughly 30.7%


Two simple questions, how did you come u with 30.7%? Also what is COGS?

[dmk395]

Chris,
I am not an expert in accounting but, Cost of good sold i believe would be how much the product (mulch cost). Total revenue is obviously the price for the whole job. I got 30.7 % by dividing the material cost into the sales revenue, a little less than a third. However I didnt average in any fixed costs like (gas, insurance etc.) My advice to anyone is to take an accounting course. I took one last semester at college, but need to brush up a bit. In september I will take another one, to further my knowledge.

[syzer]

Thanks DMK, I was looking for that but didn't see where the cost was divided into the gpm.

However using that formula if you are charging 450.00 for that job it looks to come out as a 44.4% profit margin? This is way wrong, so I don't know if something is shooting over my head here or what. When I divide 200 by 650 I am getting 30.7% pm, so I did get the same figure there, but what am I missing. Unless I am over picking this thing apart and making something really simple really complicated.

[Clinton D. Wagner]

<TABLE>
<B>Hi DMK395...If I may, In your first Post you said...</B>
<BR>
<BR>
<B>Quote.....Approximately 100feet of edging, and 8 yards of mulch will be put down.
My mulch cost will be about $200. There are some bushes but not too
many wide open areas, but overall not too bad a job. I am thinking of
quoting him at $650 for labor and supplies. I could do the whole job in
about 12 hours.How does that sound?</B><BR>
<BR>
<BR>
<B>And in your last Post you said.....Chris, </B><BR>
<B>I am not an expert in accounting but, Cost of good sold i believe would
be how much the product (mulch cost). Total revenue is obviously the
price for the whole job. I got 30.7 % by dividing the material cost into the
sales revenue, a little less than a third. However I didnt average in any
fixed costs like (gas, insurance etc.) My advice to anyone is to take an
accounting course. I took one last semester at college, but need to
brush up a bit. In september I will take another one, to further my
knowledge.</B>
<BR>
<BR>
<B>Just remember that This is not intended to replace any personal skills or information
you may be using now. It is only intended to help you with your judgement in your bidding.
<BR>
<BR>Ok Here we go...</B>
<BR>
<B>In The Last post you show that you got 30.7% by dividing the material cost into the sales
revenue (TOTAL BID), and from what I see from the other post you are calling this GROSS
PROFIT, It's not GROSS PROFIT, it is the percentages of what you are bidding not what
you have left over.</B>
<BR>
<B>The goal in pricing is to mark up the cost of your materials sufficiently to give you a large enough margin to cover all your expenses and still give you a PROFIT not a "GROSS PROFIT". Each company has got to work out and know what his "GROSS MARGIN" is. It may be 26%, 30%, 40%, 50%, 60%, 70% and so on..
<BR>
<BR>
<B>There are a surprising number of landscape contractors who believe there are only two steps to the pricing process; add a PROFIT on the cost and then charge anything above this that the market will bare.</B>
<BR> <B>Margin, or gross margin, is the difference between total job (total sales) and the cost of those jobs (or sales) </B>
<BR><B> For Example:</B>
<BR>
<table border>
<th colspan=5><B>If you sold the Job for $650.00 dollars</B><tr>
<th> </th><th> </th><th> </th><th><B></B></th><th><B></B></th><tr>
<td>Total sales of the job was</td><td>$650.00</td><td></td>
<td><B></B></td><td></td><tr>
<td>And the cost of materials was</td><td>$ 200</td><td></td>
<td><B></B></td><td></td><tr>
<td><B>Then Margin was</B></td><td><B>$ 450</B></td><td></td>
<td><B></B></td><td></td><tr>
</table>
<BR><B>Margin may be expressed in dollars or as percentages, margins are always stated as a percentage of job (or sales) in the example above, the margin would be 45% ($450 is 69% of $650.00)</B>
<BR>
<B> if you purchased materials for $200 and priced them for sale at $650.00, your mark-up would be $450.00. This represents a mark-up of 3.25% ($650 divied by $200) in other words, if your business required a 45% margin in order to show a profit, which it may, your average mark up would be 3.25%. Here again, if the margin on sales is not significantly large, there will be little or no profit for the company or owner.</B>
<BR>
<B>Some businesses require a higher margin than others in order to be profitable. This is because the cost of operating is different for each contractor and can vary tremendously if the operating expenses in your business are comparatively low, then a lower margin will still yield you an acceptable profit. </B>
<table border>
<b>The following comparisons illustrate this point.
<BR>
<th colspan=5><B>Business "A" versus Business "B"</B>
<tr>
<th>Summary</th><th></th><th>Business "A"</th><th></th><th>Business "B"</th><tr>
<td>Total Sales</td><td></td><td>100%</td><td></td><td>100%</td><tr>
<td>Gross Margin</td><td></td><td>60%</td><td></td><td>35%</td><tr>
<td>Operating Expenses</td><td></td><td>43%</td><td></td><td>19%</td><tr>
<td><B>NET PROFIT</B></td><td></td><td><B>17%</B></td><td></td><td><B>16%</B></td>
</table>
<B>Many a business fails to make an expected profit because it's owner figures that if his mark-up is X percent then his margin will be X percent too. But we can readily see from the above preceding examples that such is not the case.</B>
<BR>
<B>"We did the work", now it's time to pay the bill's and see how we came out on the job...</B>
<BR>
<table border= TABLE BORDERCOLOR= "#FF6347">
<th colspan=5><B>Breakdown of job</B><tr>
<th>Summary</th><th>ToTals</th><th>Percentage</th><th><B></B></th><th><B></B></th><tr>
<td>Total income</td><td>$650.00</td><td>100%</td>
<td><B></B></td><td></td><tr>
<td>paid out for Materials</td><td>$200.00</td><td>30.7%</td>
<td><B></B></td><td></td><tr>
<td>paid out for labor Cost</td><td>$120.00</td><td>26.6%</td>
<td><B></B></td><td></td><tr>
<td>paid out in overhead cost 18%</td><td>$117.00</td><td>35%</td>
<td><B></B></td><td></td><tr>
<td><B>What did you Net</B> </td><td>$213.00</td><td><B>Thats 32.7% of the total bid</B></td>
</td></tr>
</table>

<B>Well how did you do...if we add up the cost and the profits we can see that</B>
<B>200 + 120 + 117= $437 dollars, $437 divided by $650= 67% of the total bid, then 100% - 67%= 33% NET....not gross net, unless you still got to pay more bills from your net... "did you get what you needed? is it to high or is it to low ?</B>
<BR>
<BR>
<B>What should you make if you bid a job for $650.00 ?, well what is your Margin........</B>
<BR>
<BR>
<BR><B>Now note that in no way am I saying to bid by just doing a mark-up on cost of materials, but it is a good way to see if your bid is going to give you the amount you need to stay in the Biz....</B>
<BR>
<BR>
<B>P.S. When I was contracting I liked to get all my cost of materials, labor hours X rates, put on something for my overhead and then divide the total by 0.740740</B>
<BR>
<BR>
<B>Example: materials $200 plus labor of $120 = $320 X 18% for overhead = $57.60 = total cost $377.60 divided by 0.740740 = $508.95, round off $509.00 would be my bid, that gave me a 39% margin or I could say that I mark-up the job cost 2.545%, note $200.00 X 2.545 = $510.00 </B>
<BR>
<BR>
<B>What this would tell me was! that I may just get beat on this bid...For I know that some will bid this job by the cy @ 48.00 a cy = $384.00 and some will mark-up @ 1.70 to 2.00 % on the low side...But Hey I know what my Margins are and what my overhead is, and what I want to NET...</B>
<BR>
<B>Note that we did not cover the edging....LOL</B>
<BR>
<B>Are You SWAGING?? Bid smart don't S.W.A.G. Work your bids out to every little detail....</B>

<BR>
<B>Good Luck !!!</B>

</TABLE>

[Ricky]

WOW! This hillbilly is impressed. What about you Homer?

[dmk395]

HA, now I am really confused!

[dmk395]

Clinton,


I like your analysis, but in concluding am I correct to say that my bid was higher than yours? please explain if I am wrong

[lawnman_scott]

DMK do you work alone, no employees? If so and you have the time, and will make money it seems like a good bid.I dont think to highly of all the formulas, too many variables.

[Clinton D. Wagner]

<table>
<B>DMK....You are correct...
You Bid $650.00
My Bid $510.00
You Net $213.00 - 32.7%
I Net $132.00 - 26%

Your bid looks good, so does my bid.
You may even get the job and find out
that they had two other bids at over
$800.00 each...

Noone Likes a lot of Forumlas in bidding
But we do got to know how to find the right
Margins and the right mark-ups if we want
to stay in the BIZ....</B>
</table>

<b>Good Luck, and good bidding</B>

[awm]

Like ma daddy use to say,ya problems all started when you learned to read an cipher.Lead you to an early grave.

[syzer]

Clinton, you are the man thank you for that very informative post. That is exactly how I want it, every detail spelled out so I know exactly what I am making. Trying now to figure out everything you typed and apply that to my business. Thanks again.

[lawrence stone]

Originally posted by syzer
Clinton, you are the man thank you for that very informative post. That is exactly how I want it, every detail spelled out so I know exactly what I am making. Trying now to figure out everything you typed and apply that to my business. Thanks again.

Oh he really knows his stuff all right.

He uses a labor rate of $10/hour that is after all the burdens of employment so that means the actual pay is
$6/hour. That is w/o any benefits health 401k anything.

Just where do you find $6/labor?

If you are doing the job yourself you obviously don't like
think very highly of yourself since you are working from min. wage.

80% of you new guys will fail in less than two years.

BTW free advice is as good as what you paid for it.

[turfquip]

unbelievable....

ignorance abounds

[syzer]

Stone:

Regardless of his #'s I'm talking about how it is all broken down and the method he used to come about the information. I don't care is its 1.00 an hour for labor, that doesn't effect the use of the calculations used to arrive at the %'s needed for the costs.

[Clinton D. Wagner]

<table>
<b>Chris.....Thank you for seeing the info. for
what it is and I can only hope that more will
use it so they don't become part of that 80%
in the next two years.

Stone....Happy Landding!

Good Luck and Good Bidding</B>
</table>

[Edited by Clinton D. Wagner on 03-21-2001 at 12:54 PM]