PDA

View Full Version : The Bottom Line


MOturkey
07-01-2006, 10:45 PM
You know, I don't think there is a day that goes by that someone on this site doesn't mention "highballers", "lowballers", maybe even some "noballers.":rolleyes: What doesn't seem to crop up very much is what the definition of either really is.

We all realize it is important to know our operating costs, but I suspect there are many who really don't. I also suspect that when figuring only operating costs, the cost per square foot of grass cut is probably more consistent throughout the industry than we would think.

My reasoning is this, let's take both ends of the spectrum, say a college student with a Home Depot 21, and a Weedeater brand trimmer and a solo operator with a 60 inch ZTR, and top-of-the-line commercial equipment. Now, at first one would think there is no way their operating costs are in no way similar. They aren't, when considering only the total numbers, but obviously, the operator with the heavy equipment is going to be immensely more efficient. He will cut acres of grass while his competitor with the 21 cuts a few square feet.

Now, I'm not comparing apples to oranges, I realize there are times and places where specialized equipment is more efficient than the biggest tool in the box. I'm simply saying that no matter what type of equipment one uses, it costs SOMETHING to cut each square inch of turf. The trick is to figure out how much.

Most of us, from what I read on here, seem to use time as a basis for costs, in other words, cost figured as $/hour. This makes sense for most of us, because if we can figure out how long a job will take, and know what it costs us to operate that length of time, then we can figure our gross profit fairly quickly.

I think many people, especially those new to business, tend to notice the costs that jump out at you, such as fuel, but might overlook routine maintenance, or blade wear. Each second your mower, or tow vehicle, or even string trimmer is in operation, it costs something.

Depreciation is another big factor. All your equipment is worth less today than it was yesterday, no matter whether you use the best, or the cheapest. In theory, the best will last the longest, but as the equipment becomes more expensive, the depreciation becomes a bigger factor.

Fixed costs, or overhead are probably the biggest variable among operators. For example, my equipment is in my garage as we speak. Some of you may have a shop at a separate location, paying either rent and/or insurance on that location. Bigger operators may have an office complete with full time employees. Figured by the hour, overhead actually decreases with the size of the business. For example, the electric bill on your shop will be the same whether you are mowing 5 hours a week, or 200 hours.

Solo operators are in a different class than those with crews, as we don't have workman's comp, SS, Medicare, unemployment, and wages to worry about. For that reason, on a one on one basis, there is no way a large company can operate as efficiently as a solo operator. The difference is, the solo guy is limited to what he can do, as there are only so many hours in the day. The guy with multiple crews will realize far less profit per hour, but will more than make it up by having a lot more hours in the day.

Now, I've mentioned a lot about costs, but even for those who know their costs perfectly, they must decide what kind of profit margin they desire. I believe, by figuring actual costs, and estimating things like depreciation, I am netting 60 to 65%, so theoretically, I could charge half what I am currently charging and still turn a profit. However, I don't really desire to do this for $5 an hour.

Supposing even that everyone's costs were the same, you are still going to have lowballers, and highballers. For example, I know a lady that mows a community cemetery not far from here. She has been mowing it for many years, and is probably in her 80's by now. The past few years, her daughter and other family members have been helping. Now, this is a large cemetery, probably 5+ acres. I think, just the past year or so, they have finally broken the $200 fee level. She runs Murray mowers, and her granddaughter told me that she has to buy a new one about every 3 years. With 2 people mowing (she buys smaller deck mowers, because of getting between the headstones), trimming, etc, they are putting in approximately 12 MAN HOURS mowing this cemetery.

But, this lady grew up when 50 cents per hour was a good wage, so I'm sure if she clears $5 an hour, she probably feels she is making good money.

I think what we need to stress to everyone we have contact with in this business, is that along with knowing costs, you need to realize you can make a decent wage and don't have to do this for peanuts.

The bottom line is this: It is impossible to compete directly with someone who is willing to accept a smaller one.

Sandgropher
07-01-2006, 11:05 PM
I think a lot of older people dont care about the money its just something to do when they are semi-retired, it keeps them active, here they all become gardeners charging $15 an hour when every bodys else is between $25-$40 an hour for weeding etc, i lot of businesses advertise gardeners wanted, would suit pensonier etc.(cash money no paper work)payup

Its funny how a lot of people ring up people charging lower rates, its an old trick to advertise $15 an hour then work twice as slow as the $30 an hour guys both cost the same money at the end of the day, i have two unemployed guys in my local paper who do this, these days i just give a price for the job so they cant compare hourly rates.:)

TURF DOCTOR
07-01-2006, 11:07 PM
Good Post But The Harm Some Do Is To Destroy What Me And A Lot Of Others Work So Hard To Get Being A Small Biz Owner Running One Being Professinal Lowballers Hurt The Biz.

Scotts' Yard Care
07-01-2006, 11:10 PM
People need to accept that different areas tolerate different price structures.
Our area has a pain level of about 20 bucks for an average residential and if you try to raise rates, which we did, one of the other 35+ lawn services will
take your work. So the only real question remaining is whether a company can be profitable given this parameter. The terms scrub, lowballer and mow joe are meaningless when discussing prices and what should be charged for a lawn. The only guys I would put in this class are those who do shoddy work
or are dishonest and unreliable. I have seen more new guys this spring than I have seen in the previous years since we moved to this area. How many will remain to build up the industry is a good question.