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View Full Version : new business, need help with pricing


Shoreline
09-21-2009, 10:01 PM
Hi all, I am just starting a new property care company in Southwestern Ontario. My hourly goal for will be $50 per person on the job. I will be starting out just by myself so I know that will make the jobs take a bit longer. My specific questions right now are how do you price for the following:

1 General Fall cleanup
2 Gutter cleaning
3 Winterizing a summer home/cottage

I also need to get an idea of how much to charge for fertilizing. Your help will be greatly appreciated!

Thanks,
John

jhawk60
09-22-2009, 03:38 PM
Every company, every job, and every area is different. You can't base your prices solely off what someone else would charge for a job. Someone in your area may be able to help with the going hourly rate for labor, but the rest of the items that need to be addressed when figuring out a price are something only you can calculate.

Only you can determine how much of what material you will need and how much, if any, you need to mark them up. You must know what equipment you will be using on a job and how much it costs to run, maintain, and replace it. Only you know how much you need to cover gas, vehicle, estimating time, insurance etc. Only you can determine what percentage of profit you want your business to generate. And only you can know how long it will take you to complete a job.

How did you set your goal of $50.00 per hour? Did you take into account all of the costs associated with running the business, the profit margin you hope to achieve, and the wage you feel you should receive for operating a business, or does $50.00 per hour/per man just sound like a good number? What if you get the $50.00 per hour, but you find out it is costing $51.00 per hour to run the business? I'm not saying it would, I'm saying if you don't know the costs then it's just a shot in the dark.

I am not trying to discourage you in any way shape or form. I am simply stating that if running this business is what you want to do, you have to know every cost associated with its operation in order to make it a profitable enterprise.

Determine your costs and put them in this formula:

((labor + material + tool charge + overhead) x (1 + profit margin) x hours to complete job = price

That is how you come up with prices.

If someone tells you they are charging $75.00-$125.00 for fall cleanups how does this help you? You don't know the size of the properties, the number of trees on them, the equipment being used, or whether the person is running a successful company, barely staying afloat, or working for beer money.

I know it can be frustrating and at times it would be nice for someone to tell you "if you are doing this, you charge this much", but it doesn't work that way, and if it did, then you wouldn't really be running a business now, would you?

par4landscaping
09-29-2009, 08:57 PM
John, I agree with jhawk, you need to take into account all your costs and I like his formula. Also, since you are a new business, do you have a web site? If not, I have a company that I am using that can really help. They do a professional job (turnkey) and it inexpensive (Link Light Hosting)

Jhawk, I may start using this myself. Thanks.

MUDFLAP
09-29-2009, 09:47 PM
Just ask them what they are paying now(most commercials will tell you) then tell them your rate would be slightly higher,but you have been driving by their place for a few weeks on your way to other customers, and noticed their current LCO is doing a shabby job, and list off a few specifics (shouldnt be hard to spot a few things on your way in from the parking lot)hand them your card, and tell them to call you 60 days before their current contract expires(this will give you time to work them before it renews) be breif, get in and out, i have found this tactic works about 30% of the time, but dont be surprised when some other LCO pulls the same stunt on you the following year,its dog-eat-dog my brother.

MUDFLAP
09-29-2009, 09:54 PM
and as far as mulch goes, if you have a place to store it, buy in bulk after a good rain,you will get 20% more from a wet yard than you will a dry yard.

jhawk60
09-30-2009, 01:05 AM
John, I agree with jhawk, you need to take into account all your costs and I like his formula. Also, since you are a new business, do you have a web site? If not, I have a company that I am using that can really help. They do a professional job (turnkey) and it inexpensive (Link Light Hosting)

Jhawk, I may start using this myself. Thanks.

You are welcome, though what I wrote as a formula is what most anyone will tell you needs to be done to determine prices. I just think it is easier for people who are unfamiliar with the business side of the industry to "get it" when they see it written as a mathematical formula. It doesn't matter if you are mowing lawns, selling elephant ears at a fair, or running a hotel, knowing your costs is the only way to insure your effort is not futile.

I sincerely hope I did not scare John away, and I understand that if you didn't sit down and figure all of this stuff out before you start pricing jobs you will scratch your head and look for answers as to how much to charge. I've been there, and so has probably most on this site. You don't want your prices so high that you don't get the work and you don't want to get the work and then find out you worked for peanuts. However, if you have a grasp on the proper pricing structure, you can at least eliminate the working for peanuts option. If you appear to be pricing things on the high side and not getting much work, you can look at your costs and possibly find ways to cut them.

Many of the people that come into this industry for a while and then disappear entered with a "this will be a piece of cake, I'm going to be raking in the dough" attitude. At the beginning, to them at least, this appeared to be the case... then they look at their bottom line. They tell their buddies they are getting tons of lawns and making (let's use) $45.00 an hour! In actuality the company is grossing $45.00 per hour of billable time before expenses. Once a major expense hits such as vehicle repair, equipment needs replaced, etc. they look at the bottom line and realize the money is not there for that... BOOM, out of business. With others it's a more gradual thing and they start wondering, since they make so much while they are on the job, why they can't seem to be able to put anything away. Then they start thinking about how much time they spend driving from job to job, how much is spent estimating and doing paper work, how much has gone out for fuel for the truck and equipment, how much they have spent to maintain everything... the list goes on, but they start to figure out that they are not making $45.00 an hour, they are making $10.00. They can try to fix this but it can be very hard. They can try raising their prices, but may find that they got all their customers only because they were so cheap. They can try adjusting their route, but can they stay afloat long enough to get rid of the distant customers and find replacements within a reasonable distance. They can try scrimping on maintenance and repairs, but then they run the risk of... BOOM, out of business. Most in these circumstances simply just give up, figuring it's not worth it. The only way to avoid this is to know your costs before you price your jobs... or mow for 86 year old ladies in Florida.


If John wants to know what he should charge for fall cleanups I would suggest he does a run through. Measure his property, count the trees, run the equipment as he would doing the work, figure how long it will take to load and unload leaves, drive to where he is going to dump (or at least Google map the time and distance), time everything. Figure the costs associated with the above work, and equipment, add in the hours of overhead (annual cost of insurance, licenses, office supplies, indirect labor, apparel, advertising... etc divided by the number of hours you expect to work during the year), and add in his profit. Break this down into a price per 1,000 square feet and use that to figure his estimates for jobs. For his winterizing he can make a list of the normal tasks that need to be done for a winterization, allow a reasonable amount of time to complete each task, price the materials needed, total the hours and multiply it by his overhead figure, total it all up and add the profit. This gives him a base to start with and it can then be adjusted according to the specifics of the job (number of sinks, toilets, and such).

To me, telling someone what to charge, as opposed to explaining how to price something, is the perfect time to use the "Give a man a fish, he eats for a day... teach a man to fish, he eats for life" saying.

I offer my rambling advice freely, and the OP can choose to heed it, or ignore it. Which ever he chooses I wish him the best in his endeavor.

Shoreline
09-30-2009, 08:38 AM
Hi guys, thanks for all the above information!

JHawk, the formulas you have presented is exactly what I need in order to figure out my costs and pricing. Very valuable information and I thank you for sharing it freely. I currently work for a towing company but business has been extremely slow this year and I'm more of an entrepreneur myself anyway. I've always enjoyed mowing lawns and working with that type of equipment. I know I have a lot to learn about this specific business but with help and a lot of hard work, I should be able to make a go of it. I'll try to share my experiences and help others on this board as I'm able to. I appreciate the help that's been posted so far.

John

MUDFLAP
09-30-2009, 10:12 AM
i guess i should read the thread BEFORE i start spouting off, my answer had nothing to do with the question - sorry, jhawk has you pointed in the right direction, his post should be a STICKY.