PDA

View Full Version : Man hour rating (Job Costing)


Ghopper3345
12-31-2012, 12:34 PM
after running some of your job costing reports where does your man hour rating come in at? This report is after doing work at a customers house less labor and less material. Im right around the $60.00 per man per hour mark. I know everyone has different overhead and what they have to make but just seeing where i come in

thanks for the help and happy new year

ReddensLawnCare
12-31-2012, 12:55 PM
So your employee is costing you 60/hr? If i read that correctly then you are extremely high. My employed cost me 14.70 after hourly rate plus payroll and what not. I charge around 50 per man hour depending on the job when I'm not on site
Posted via Mobile Device

Ghopper3345
12-31-2012, 01:10 PM
No I am making $60.00 after labor and material. so i would be alittle higher than you. what is the avefage for fertilizer does anybody hit $100.00?????

cpllawncare
12-31-2012, 02:41 PM
It seems that everybody is trying to wrap everything into their labor rate thus coming up at 60 per man hr, from what I can figure most labor rates should come in at around 40-50 per man hr depending on pay rates and such, 35-40 being a start up with little overhead and 40-50 being an established company. Of course their are all kind of variables but these seem to be a general guideline. I can tell you these guys touting 60+ per man hr must not need much new work cause even the established companies around here aren't getting those kind of rates most are in the 45-50 range.

Sean Adams
12-31-2012, 02:59 PM
It's always going to be difficult to compare apples to apples. I work with one landscape business owner who is dominating his area because his expenses in general are so low - no facility rent, vehicles and equipment paid for, low labor rates. When we determined what he needed to charge per man per hour to break even, he was in the $24 per hour range.

The area in which he works in general seems to have most companies charging somewhere in the vicinity of $42 per man per hour.

As you can imagine, he can come in with his bids in the $35 per man per hour range, charge a much lower price, and still make a significant profit.

cpllawncare
12-31-2012, 03:16 PM
Sean, you pretty much hit it right on, For some reason these guys are trying to make $30+/hr plus expenses, not realistic imop. Customers aren't stupid, when you qoute 60 per man hr your gonna get laughed at most likely, I had one local LCO tell me he was getting 70 per man hr I just laughed and walked off.

Ghopper3345
12-31-2012, 03:57 PM
well then what would your average of rev. per hour for a 2 man crew like about 80.00? even if you are just charging a flat rate for something like mowing at 40 per cut?

Sean Adams
12-31-2012, 04:06 PM
No one can give you this answer. Only you, through breaking down your numbers, can determine what you should be charging per man per hour.

This is a rough example, but follow me here....

Company 1 has 4 employees. They have two trucks that cost the company $500 a month each. All of their equipment is financed and that costs them another $1,000 a month. They rent a garage for $800 a month. They pay all of their employees $15 per hour. They pay an accountant to do their payroll, they spend a lot of money on advertising and in general, the business is unorganized and not very efficient - neither are the employees.

Company 2 also has 4 employees and two trucks and the same equipment, but the trucks are paid for and so is the equipment. They do not rent a garage space and all of their employees are paid $12 per hour. The owner does all of the payroll work and they use the internet and word of mouth to advertise their business, which costs them next to nothing. ON top of that, the company is run well and the employees rarely waste time.

If company 1 and company 2 are going to bid on the same mowing job for example, who do you think can bid less?

Company 2

If company 2 can bid less and provide as good (if not better) service than company 1, who is going to get the job.

Company 2 all day long....

Ghopper3345
12-31-2012, 04:41 PM
so how much 1 one guy bringing in for the company per hr 30-40

Sean Adams
12-31-2012, 04:46 PM
I'm sorry, I don't understand what you are asking

djagusch
12-31-2012, 05:31 PM
No one can give you this answer. Only you, through breaking down your numbers, can determine what you should be charging per man per hour.

This is a rough example, but follow me here....

Company 1 has 4 employees. They have two trucks that cost the company $500 a month each. All of their equipment is financed and that costs them another $1,000 a month. They rent a garage for $800 a month. They pay all of their employees $15 per hour. They pay an accountant to do their payroll, they spend a lot of money on advertising and in general, the business is unorganized and not very efficient - neither are the employees.

Company 2 also has 4 employees and two trucks and the same equipment, but the trucks are paid for and so is the equipment. They do not rent a garage space and all of their employees are paid $12 per hour. The owner does all of the payroll work and they use the internet and word of mouth to advertise their business, which costs them next to nothing. ON top of that, the company is run well and the employees rarely waste time.

If company 1 and company 2 are going to bid on the same mowing job for example, who do you think can bid less?

Company 2

If company 2 can bid less and provide as good (if not better) service than company 1, who is going to get the job.

Company 2 all day long....

What happens to company 2 when all the paid off equipment is worn out? Do they either:

Raise rates to cover new costs?

Take money out of their already lower net?

Remember when they lower their rate do to equipment being paid off they are not putting money aside for replacement due to the lower rate.

Doing payroll in house should cost the owner money also either paid to himself or a employee. Doing it yourself and lowering your rate due to it doesn't cost money says your time isn't worth anything. Paying an account reduces the risk of doing something incorrect and also gives you more time to sell or improve biz systems.

Sean Adams
12-31-2012, 05:44 PM
What happens to company 2 when all the paid off equipment is worn out? Do they either:

Raise rates to cover new costs?

Take money out of their already lower net?

Remember when they lower their rate do to equipment being paid off they are not putting money aside for replacement due to the lower rate.

Doing payroll in house should cost the owner money also either paid to himself or a employee. Doing it yourself and lowering your rate due to it doesn't cost money says your time isn't worth anything. Paying an account reduces the risk of doing something incorrect and also gives you more time to sell or improve biz systems.

It was a very quick, very rough example just to give some insight, but you are correct, the only thing constant are variables when it comes to expenses, employees, etc... As far as doing payroll in house, years ago this did not make much sense but with the software that exists today, it does not make sense to overpay an accountant who is just plugging your numbers into similar software themselves. Payroll entry is a much less painful process (and considerably less time) that it was just a few years ago.

djagusch
12-31-2012, 06:11 PM
I guess my payroll for 7 or less employees runs $50/month and another $70 for the qtrly deal. They also do the year end taxes for under $300. So under accountant expense of $1,250 it's under .3% of total sales and always answer questions I have. For the cost and service I recieve it's not worth it in my situation. ADP and have contacted me in the past giving quotes what was much higher so I don't know if I have a rare accountant(cpa) that is reasonably priced or not.

cpllawncare
12-31-2012, 06:27 PM
I guess my point was, I think some over estimate their worth, just because you own the company doesn't automatically make you worth $60 an hour.

coolluv
01-01-2013, 08:57 AM
No one can give you this answer. Only you, through breaking down your numbers, can determine what you should be charging per man per hour.

This is a rough example, but follow me here....

Company 1 has 4 employees. They have two trucks that cost the company $500 a month each. All of their equipment is financed and that costs them another $1,000 a month. They rent a garage for $800 a month. They pay all of their employees $15 per hour. They pay an accountant to do their payroll, they spend a lot of money on advertising and in general, the business is unorganized and not very efficient - neither are the employees.

Company 2 also has 4 employees and two trucks and the same equipment, but the trucks are paid for and so is the equipment. They do not rent a garage space and all of their employees are paid $12 per hour. The owner does all of the payroll work and they use the internet and word of mouth to advertise their business, which costs them next to nothing. ON top of that, the company is run well and the employees rarely waste time.

If company 1 and company 2 are going to bid on the same mowing job for example, who do you think can bid less?

Company 2

If company 2 can bid less and provide as good (if not better) service than company 1, who is going to get the job.

Company 2 all day long....


No offense...but this is a terribly ignorant post that in my opinion is why most lawn boys fail. Don't give out bad advice or information if you have no clue what you are talking about.


Dave...

coolluv
01-01-2013, 09:06 AM
It's always going to be difficult to compare apples to apples. I work with one landscape business owner who is dominating his area because his expenses in general are so low - no facility rent, vehicles and equipment paid for, low labor rates. When we determined what he needed to charge per man per hour to break even, he was in the $24 per hour range.

The area in which he works in general seems to have most companies charging somewhere in the vicinity of $42 per man per hour.

As you can imagine, he can come in with his bids in the $35 per man per hour range, charge a much lower price, and still make a significant profit.

That's all well and good until that same company has to grow to keep up with demand and is forced to have that facility to rent and all of the overhead that comes with growth.

You don't price your jobs for where you are...but for where your headed. If not you soon realize you can't afford to grow without raising prices....and those customers who are used to that low price will look elsewhere when you raise them to where they should have been in the first place.

You advocate the typical road to failure so often seen around here and on this site. BTW....just because equipment is paid for doesn't mean you don't have to replace it and the overhead for that just goes away. You lack the basic understanding of how a business works and you pass that ignorant information on to new guys without a clue. Stick to managing a website not doling out bad business advice.

Bad advice.


Dave...

Darryl G
01-01-2013, 10:12 AM
I think you're being a bit harsh on Sean, but you make some good points as well. My goal is to have lower expenses AND to get away with charging more by providing exceptional service. The challenge is in finding the customers who are seeking that level of service.

coolluv
01-01-2013, 11:18 AM
Well, when you see post after post after post over the years stating...."I have no overhead because my equipment is paid for". it gets tiring after a while.

I haven't found those trucks that run forever...nor equipment that runs forever. Whether new or used the overhead remains relatively the same. You pay upfront or you pay out over the years in repairs. In the end it comes out the same.

I was just at an NTB getting new tires on my truck. Talked to the manager about the maintenance for the property. She said they just replaced the old landscape company with a new company because they raised their rates 20%.

Now why do you think that they had to raise their rates 20%? Pretty big jump don't ya think. They were probably lowballing the job and either breaking even or not making much of a profit and were forced to raise rates by such a large percentage.

Then along comes the next newbie and the cycle continues. Price your work for where you need to be so when you get where your going you are not scrambling to make a profit.

I know of a local guy (my neighbor) who after 13 years of being in business is downsizing to himself and a helper....after having 4 crews and over 250 accounts. Why? because everything he owns is wore out and junk and he is to the point of making less money than if he was a smaller company.

Why? Because he is cheap. Has a route full of bi-weekly's and cheap customers. He is busy as hell....works 7 days a week....constantly fixing junk and broke down. He is the perfect example of "I have no overhead because everything is paid off." mentality.

You can go broke working your @$$ off or you could go broke laying on the couch.

I know of other supposed successful companies around me that appear successful....but can barely make pay role from week to week. You would never know from looking at them.


Problem is most companies have the "I gotta grow fast mentality" and then soon realize that once the get what they wanted.....the I don't have any overhead reality kicks in and they are gone.


Harsh? Maybe.....but it gets under my skin.


Dave...

Duekster
01-01-2013, 11:28 AM
It's always going to be difficult to compare apples to apples. I work with one landscape business owner who is dominating his area because his expenses in general are so low - no facility rent, vehicles and equipment paid for, low labor rates. When we determined what he needed to charge per man per hour to break even, he was in the $24 per hour range.

The area in which he works in general seems to have most companies charging somewhere in the vicinity of $42 per man per hour.

As you can imagine, he can come in with his bids in the $35 per man per hour range, charge a much lower price, and still make a significant profit.

What happens when he needs a new truck or new equipment. Even if your stuff is paid for you have to charge for the next piece of equipment.

I would not put 40K in the bank and not expect a return on my investment? :nono:

Darryl G
01-01-2013, 11:48 AM
Yeah. A lot of guys make an initial investment in vehicles and equipment and fail to consider recouping those costs. I have a friend who makes it his goal to bid 20% less than the competition and to make it up in volume. I'd rather be 20% over the competition and sell myself on quality and service. He has a lot of work but there are times when he can't afford to put gas in his trucks without asking his wife for some money (she has an unrelated retail business). The other thing I see is guys starting out under capitalized, to the point that a $500 truck or equipment repair puts them out of business.

Sean Adams
01-01-2013, 01:32 PM
No offense...but this is a terribly ignorant post that in my opinion is why most lawn boys fail. Don't give out bad advice or information if you have no clue what you are talking about.


Dave...

You do not price or bid based on where you are "headed", you bid based on where you are. I have owned and operated 7 figure lawn & landscape businesses and I work closely with business owners who generate as little as $100,000 per year and several who generate over $5,000,000 per year.

If you would like to discuss this point by point, I'm game. This is nearly 25 years of doing.... and doing successfully I might add.

If you take a scenario like I described, a business owner with little overhead and expense (either by luck, circumstance or choice), the absolute BEST move he or she can make is to take advantage of that scenario, penetrate a market and as the business grows (and expenses and debt service), so do their prices.

I did not suggest that a market bearing $42 per hour means that this business owner should charge $20 per hour. I stated that he is able to come in at $35 an hour and grab those customers because his rate is lower.

You mistakenly assume that his quality of work is lower or that he is a lowballing-here-today-gone-tomorrow novice who hasn't taken into account that his equipment and trucks are paid for. In fact, a portion of his $35 per man hour rate does recover his money out of pocket, and in one year I might add.

You stated that my advice is why there is failure on this site and in this industry. In fact, the advice I give is what ultimately separates the winners who succeed from the guys who are always whining about not being able to grow their business or make any money.

You can turn your nose up at work if you don't get your price because you think there is a certain way to do business. THAT is why many do not succeed. There are so many variables that go into determining a price, things I did not even discuss, but if you want to we certainly can.

If you understood business or math you would quickly be able to determine that his pricing model gives him significant room for growth without tipping the scales.

And please @coolluv, keep in mind, I am talking about a real business here, not one where you pass out a bunch of flyers in March, cross your fingers and then add up what happened at the end of the year.

So, at $35 per man per hour, this business owner is marketing and advertising year round, working on his business, not in his business. Consistently seeking out new opportunities and new clients for his business.

He successfully bids out at $35 per hour per man. This is a simple example.... Taking an average middle income residential northeast property where he provides 28-30 mowings, mulch, fertilizing, clean-ups and shrub maintenance, with only 2 employees servicing this property the entire year (excluding COGS at an average 25% mark-up), there will be a total of 40 hours spent on ths property, or 80 man hours, totaling $2,835.00 in revenue.

But let's just say that BOOM-POW, as @coolluv suggests, his business suddenly is exploding and now he has to finance trucks, finance equipment, hire more people and rent a facility to work out of for the following season.

Oh no!!! Now what? Well, let's see....

This business owner has several options:

1.) Continue running a real business where he is soliciting new work year round and as the business grows, so does his price point for NEW clients....hmmm

2.) Determine what these new expenses will cost his business and determine how he can recover these new expenses and still profit which will not be difficult or costly.

Follow me here @coolluv....

He has to finance 2 new trucks at $500 a month each, a new facility he has to rent at $800 a month, and new equipment that he has to finance at $800 a month - total additional expense is $31,200 per year.

Since he has 215 working days and has determined that he has 9 billable hours per day to sell for the season, he knows he has $1,935 hours to sell. With 4 employees at his rate of $35 per hour per man that means he was in the ballpark of generating $271,000 in revenue.

Now for the sake of math and to make this easy (again without considering the multitude of variables that matter such as efficiency, organization, AR recovery, etc...) let's say that all is remaining exactly the same as the previous year in regard to clients, work, etc...

If said business owner was generating $271,000 in revenue based on $35 per man per hour and now just to COVER the new expenses of trucks, equipment, facility that adds on another $31,200 in cost, that means he would need to now generate $302,200 in revenue.

So he has two choices:

1.) Being that he determined the previous year he needed $24 an hour per man to cover expenses, overhead, etc... and he was billing out 4 employees at $35 per hour, that means that pre-tax he was generating $44 per hour in profit for the 1,935 hours sold. He profited $85,140. So now he can keep all the same and take the hit of losing profit of $31,200 due to expansion or...

2.) He can determine what he now needs to charge per hour per man to stay at the same profit level and cover these new expenses. Keep in mind he was charging $35 per hour per man. Doing the math (again, assuming he has secured NO NEW CLIENTS), he would need to generate $302,200 in revenue instead of $271,000. He has 1,935 hours to sell for 4 employees. That means $302,200 divided by 1,935 hours or $$156 per hour total (for 4 guys) or $39 per hour now per man.

Hmmm....

Guess what, looking good so far.

Now he has 2 new trucks, a facility, new equipment and in order to maintain his profit fro the previous year he only needs to bill out at $39 per hour per man now. What was the going rate in his market?

$42 per man per hour.

Not only has he grown his business (in terms of new equipment, trucks, etc...) but he is still a less expensive alternative to his competition.

But let's be real here.... This guy is running a REAL BUSINESS. He is not going to incur these expenses unless warranted, which means he was out marketing and advertising and getting new clients, which means even more revenue than before.

So ya see @coolluv, my advice is not incorrect, in fact, it is spot on. It is a matter of how one runs their business, follows their numbers, becomes lean and mean when and where necessary and grows based upon new opportunity and revenue, not based on wanting a shiny new truck.

Before anyone goes poking holes in my examples above, I was using elementary examples and numbers to prove a point. I am well aware of losing customers to raising prices, the economy, lowballers, competition, etc... But my point is, when you run your business the right way - being organized, constantly advertising, taking care of your clients, finding/training/motivating quality employees, knowing your numbers and understanding you should be operating a blue-collar business in a white-collar fashion, success is imminent.

cpllawncare
01-01-2013, 01:42 PM
I'm so glad to see some of you guys get it, Dave you sound like me on some of the other threads, I get so sick of reading guys post about how they "have no overhead" It's impossible to run a business with zero overhead. My biggest guestion that I've yet to get answered is from a "general" standpoint what is the best balance of debt, obviously I'm going to get "NO DEBT" answers and that would be nice, but I truly believe it's a balance issue for someone like me who is trying to grow their business. I don't want to fall into the undercapitilized catagory OR the to much debt burden catagory, so there must be a middle catagory. I've sat down and ran my numbers over and over I have not come up with a good number for contuined growth, I know I can't charge $60 per man hr though and continue to grow, new work would come in so slow I would end up drowning, that's where I figured 45 per man hr for a two man crew figured about right. I still make a decent profit but it's not so high that it scares away potential new clients. I can close about 60% of my deals with this number.

cpllawncare
01-01-2013, 01:51 PM
Well dang Sean answered my question. Thanks.

djagusch
01-01-2013, 01:55 PM
I'm so glad to see some of you guys get it, Dave you sound like me on some of the other threads, I get so sick of reading guys post about how they "have no overhead" It's impossible to run a business with zero overhead. My biggest guestion that I've yet to get answered is from a "general" standpoint what is the best balance of debt, obviously I'm going to get "NO DEBT" answers and that would be nice, but I truly believe it's a balance issue for someone like me who is trying to grow their business. I don't want to fall into the undercapitilized catagory OR the to much debt burden catagory, so there must be a middle catagory. I've sat down and ran my numbers over and over I have not come up with a good number for contuined growth, I know I can't charge $60 per man hr though and continue to grow, new work would come in so slow I would end up drowning, that's where I figured 45 per man hr for a two man crew figured about right. I still make a decent profit but it's not so high that it scares away potential new clients. I can close about 60% of my deals with this number.

My banker put the debt issue to me like this. He has never seen a mid to high growth company do so without adding debt. You just can't do it.

Very slow or steady sales you can get the debt down but takes discipline to do so.

What I have noticed is some companies do the high growth for a yr or 2. Then see them flatten the growth or slightly retract (during this time I think they are thinning the bad accounts out and managing to get debt down). Then you see the high growth again. Sort of a cycle, each level I think takes different turns in the buisness system they need in place or change to adapt for the next growth cycle.
Posted via Mobile Device

Sean Adams
01-01-2013, 01:59 PM
Well dang Sean answered my question. Thanks.

No problem. I am not trying to pick on @coolluv, but I have learned over the years that the guys who "think" they know how to run a business are actually worse off than those who admit they don't know.

Interestingly enough, I am a big proponent of financing as much as possible - using OPM to grow your business, but only if someone knows how to run a business, manage employees, advertise effectively and sell their service. So the idea of having "no overhead" is fine, if that happens to be your scenario, and if it is, good for that person and they should take advantage of that, as long as they are able to recoup their initial investment.

Growth in this business is relative - its based on decisions made moving forward and the sacrifices one is willing to make to allow for sustainable growth.

Getting 10 new mowing clients does not warrant 2 new zero turns and a shiny new truck, but unfortunately many people look at it that way.

I can't say this enough - know your numbers.

coolluv
01-01-2013, 02:23 PM
You do not price or bid based on where you are "headed", you bid based on where you are. I have owned and operated 7 figure lawn & landscape businesses and I work closely with business owners who generate as little as $100,000 per year and several who generate over $5,000,000 per year.

If you would like to discuss this point by point, I'm game. This is nearly 25 years of doing.... and doing successfully I might add.

If you take a scenario like I described, a business owner with little overhead and expense (either by luck, circumstance or choice), the absolute BEST move he or she can make is to take advantage of that scenario, penetrate a market and as the business grows (and expenses and debt service), so do their prices.

I did not suggest that a market bearing $42 per hour means that this business owner should charge $20 per hour. I stated that he is able to come in at $35 an hour and grab those customers because his rate is lower.

You mistakenly assume that his quality of work is lower or that he is a lowballing-here-today-gone-tomorrow novice who hasn't taken into account that his equipment and trucks are paid for. In fact, a portion of his $35 per man hour rate does recover his money out of pocket, and in one year I might add.

You stated that my advice is why there is failure on this site and in this industry. In fact, the advice I give is what ultimately separates the winners who succeed from the guys who are always whining about not being able to grow their business or make any money.

You can turn your nose up at work if you don't get your price because you think there is a certain way to do business. THAT is why many do not succeed. There are so many variables that go into determining a price, things I did not even discuss, but if you want to we certainly can.

If you understood business or math you would quickly be able to determine that his pricing model gives him significant room for growth without tipping the scales.

And please @coolluv, keep in mind, I am talking about a real business here, not one where you pass out a bunch of flyers in March, cross your fingers and then add up what happened at the end of the year.

So, at $35 per man per hour, this business owner is marketing and advertising year round, working on his business, not in his business. Consistently seeking out new opportunities and new clients for his business.

He successfully bids out at $35 per hour per man. This is a simple example.... Taking an average middle income residential northeast property where he provides 28-30 mowings, mulch, fertilizing, clean-ups and shrub maintenance, with only 2 employees servicing this property the entire year (excluding COGS at an average 25% mark-up), there will be a total of 40 hours spent on ths property, or 80 man hours, totaling $2,835.00 in revenue.

But let's just say that BOOM-POW, as @coolluv suggests, his business suddenly is exploding and now he has to finance trucks, finance equipment, hire more people and rent a facility to work out of for the following season.

Oh no!!! Now what? Well, let's see....

This business owner has several options:

1.) Continue running a real business where he is soliciting new work year round and as the business grows, so does his price point for NEW clients....hmmm

2.) Determine what these new expenses will cost his business and determine how he can recover these new expenses and still profit which will not be difficult or costly.

Follow me here @coolluv....

He has to finance 2 new trucks at $500 a month each, a new facility he has to rent at $800 a month, and new equipment that he has to finance at $800 a month - total additional expense is $31,200 per year.

Since he has 215 working days and has determined that he has 9 billable hours per day to sell for the season, he knows he has $1,935 hours to sell. With 4 employees at his rate of $35 per hour per man that means he was in the ballpark of generating $271,000 in revenue.

Now for the sake of math and to make this easy (again without considering the multitude of variables that matter such as efficiency, organization, AR recovery, etc...) let's say that all is remaining exactly the same as the previous year in regard to clients, work, etc...

If said business owner was generating $271,000 in revenue based on $35 per man per hour and now just to COVER the new expenses of trucks, equipment, facility that adds on another $31,200 in cost, that means he would need to now generate $302,200 in revenue.

So he has two choices:

1.) Being that he determined the previous year he needed $24 an hour per man to cover expenses, overhead, etc... and he was billing out 4 employees at $35 per hour, that means that pre-tax he was generating $44 per hour in profit for the 1,935 hours sold. He profited $85,140. So now he can keep all the same and take the hit of losing profit of $31,200 due to expansion or...

2.) He can determine what he now needs to charge per hour per man to stay at the same profit level and cover these new expenses. Keep in mind he was charging $35 per hour per man. Doing the math (again, assuming he has secured NO NEW CLIENTS), he would need to generate $302,200 in revenue instead of $271,000. He has 1,935 hours to sell for 4 employees. That means $302,200 divided by 1,935 hours or $$156 per hour total (for 4 guys) or $39 per hour now per man.

Hmmm....

Guess what, looking good so far.

Now he has 2 new trucks, a facility, new equipment and in order to maintain his profit fro the previous year he only needs to bill out at $39 per hour per man now. What was the going rate in his market?

$42 per man per hour.

Not only has he grown his business (in terms of new equipment, trucks, etc...) but he is still a less expensive alternative to his competition.

But let's be real here.... This guy is running a REAL BUSINESS. He is not going to incur these expenses unless warranted, which means he was out marketing and advertising and getting new clients, which means even more revenue than before.

So ya see @coolluv, my advice is not incorrect, in fact, it is spot on. It is a matter of how one runs their business, follows their numbers, becomes lean and mean when and where necessary and grows based upon new opportunity and revenue, not based on wanting a shiny new truck.

Before anyone goes poking holes in my examples above, I was using elementary examples and numbers to prove a point. I am well aware of losing customers to raising prices, the economy, lowballers, competition, etc... But my point is, when you run your business the right way - being organized, constantly advertising, taking care of your clients, finding/training/motivating quality employees, knowing your numbers and understanding you should be operating a blue-collar business in a white-collar fashion, success is imminent.

Thats not how you presented things in your original post. I commented on your flawed posts and I stand by my statements.

You also assume that the business owner is sitting on mountains of cash in your above example. How many are starting a business that can walk away in one year and work on the business. You provide an unrealistic example as your explanation for doling out bad advice in your original posts.


I'm not going to argue with you.

Dave...

Sean Adams
01-01-2013, 02:33 PM
Thats not how you presented things in your original post. I commented on your flawed posts and I stand by my statements.

You also assume that the business owner is sitting on mountains of cash in your above example. How many are starting a business that can walk away in one year and work on the business. You provide an unrealistic example as your explanation for doling out bad advice in your original posts.


I'm not going to argue with you.

Dave...

I didn't think you would argue with me. That being said, my original post was a few sentences long without detail or explanation - I was participating in a discussion, not teaching a class, therefore, there was nothing flawed about my initial post. And who said the business owner was sitting on mounds of cash? Not me. And where does it indicate that it is his first year of business? Nowhere.

With all due respect, I think you need to recognize who you are criticizing before you proclaim things to be inaccurate, wrong, etc...

coolluv
01-01-2013, 02:57 PM
I didn't think you would argue with me. That being said, my original post was a few sentences long without detail or explanation - I was participating in a discussion, not teaching a class, therefore, there was nothing flawed about my initial post. And who said the business owner was sitting on mounds of cash? Not me. And where does it indicate that it is his first year of business? Nowhere.

With all due respect, I think you need to recognize who you are criticizing before you proclaim things to be inaccurate, wrong, etc...

I live in the real world. Most people that come to this forum are interested in starting a business because they either lost a job and can't find another due to the economy or are following a passion or dream. Most don't have unlimited funds to purchase all the equipment they need or have the amount of money it takes to advertise to get the results you specify.

I know of several local businesses that have grown fast and are very successful. But they did so with hundreds of thousand of dollars of initial investment to be able to market the business and buy the necessary equipment. That's not the norm. I'm sure you have ran and help others run businesses that are successful. But your example was not of a new business as you stated. But you gave the impression (To me at least) that that was the case.

Your participation in the discussion not teaching a class was misleading at best. YOU are held to a higher standard as you are the expert here. I don't have your credentials only my real world experience. I used to worry about lowballers but I have come to realize that those customers are not the customers I want. I started with what most start with.....A truck and a few mowers and very little money. It took me 3 years just to break even. I'm not bank rolled or rich. I started this because of losing a job and not being able to find one for a long time. I have always worked out doors and enjoy doing so. I enjoy what I do now.

But it takes time to grow and learn from mistakes ....and make enough money to make ends meet. Most are like me and are learning as they grow. If I had a huge amount of cash to start with...well yeah I would be a lot further along. But like me most don't. So I stand by what I said.


Dave...

Sean Adams
01-01-2013, 04:19 PM
I live in the real world. Most people that come to this forum are interested in starting a business because they either lost a job and can't find another due to the economy or are following a passion or dream. Most don't have unlimited funds to purchase all the equipment they need or have the amount of money it takes to advertise to get the results you specify.

I know of several local businesses that have grown fast and are very successful. But they did so with hundreds of thousand of dollars of initial investment to be able to market the business and buy the necessary equipment. That's not the norm. I'm sure you have ran and help others run businesses that are successful. But your example was not of a new business as you stated. But you gave the impression (To me at least) that that was the case.

Your participation in the discussion not teaching a class was misleading at best. YOU are held to a higher standard as you are the expert here. I don't have your credentials only my real world experience. I used to worry about lowballers but I have come to realize that those customers are not the customers I want. I started with what most start with.....A truck and a few mowers and very little money. It took me 3 years just to break even. I'm not bank rolled or rich. I started this because of losing a job and not being able to find one for a long time. I have always worked out doors and enjoy doing so. I enjoy what I do now.

But it takes time to grow and learn from mistakes ....and make enough money to make ends meet. Most are like me and are learning as they grow. If I had a huge amount of cash to start with...well yeah I would be a lot further along. But like me most don't. So I stand by what I said.


Dave...

You are obsessed with the idea that I am referring to this kind of success based on having a lot of money to start with. I did not start with any money. In fact, didn't even have a truck - had to borrow my Mom's station wagon, return it every night with gas and cleaned inside and out.

The young man I am referring to did not start with any money either. He is in his 5th year of business.

In 2013 you do not need money to advertise a business in this industry. Give me $200 and some time and I can grow a business as big as I want it to be. It's about effort, salesmanship, and technology.

You have the very unfortunate and misguided belief that it takes money or being bankrolled to be a success or grow a business....once again, very incorrect.

Blades Lawn Maintenance
01-01-2013, 04:59 PM
Dang Sean...Mind blown!!!

ReddensLawnCare
01-01-2013, 08:18 PM
Cooluv not trying to be a jerk but you often give opinions and insight on things you know nothing about. If i had to guess i would say you are solo. I have one full time and one part time employee so by no means am i large but i am succesfull. The only debt i own is my truck for the company. Started with a Troy built riding mower and now has close to 85k in assets and i am proud of that. Sean's original and sequential post have all been spot on and correct even if you don't see it. Someone in your position really has no ground to stand on when you are arguing with someone like Shaun. If you had facts or EXPERIENCE to support your post then i think your opinions state here would be more respected. Just saying for future reference
Posted via Mobile Device

Duekster
01-01-2013, 09:13 PM
Well Sean,
your further discussion is spot on and does clear up the initial post. On the forum there are many people that post that all their equipment is paid for and do not have any overhead. They charge rates like the lawn boy using daddy's mower just to make some pocket change. Some are people looking to suppliment their regular job, some are semi retired, or in college. You get the point.

If I made a 40K investment I would look ROE and earning my cap rate too. Often you can get an improved ROE with leveraging and many people do not get that. Thank you for making that point. WACC i know :) and IRV.

coolluv
01-02-2013, 01:29 AM
Cooluv not trying to be a jerk but you often give opinions and insight on things you know nothing about. If i had to guess i would say you are solo. I have one full time and one part time employee so by no means am i large but i am succesfull. The only debt i own is my truck for the company. Started with a Troy built riding mower and now has close to 85k in assets and i am proud of that. Sean's original and sequential post have all been spot on and correct even if you don't see it. Someone in your position really has no ground to stand on when you are arguing with someone like Shaun. If you had facts or EXPERIENCE to support your post then i think your opinions state here would be more respected. Just saying for future reference
Posted via Mobile Device



Can you be more specific?


Dave...

coolluv
01-02-2013, 01:39 AM
You are obsessed with the idea that I am referring to this kind of success based on having a lot of money to start with. I did not start with any money. In fact, didn't even have a truck - had to borrow my Mom's station wagon, return it every night with gas and cleaned inside and out.

The young man I am referring to did not start with any money either. He is in his 5th year of business.

In 2013 you do not need money to advertise a business in this industry. Give me $200 and some time and I can grow a business as big as I want it to be. It's about effort, salesmanship, and technology.

You have the very unfortunate and misguided belief that it takes money or being bankrolled to be a success or grow a business....once again, very incorrect.

Well can you walk me through the process of the startup to the Real Business and the timeline to becoming the Real Business....and the $200 marketing campaign?


Dave...

DaveyBlue32
01-02-2013, 02:47 AM
Can you tell the folks with too much time on there hands or what... Bra... You can't teach an old dog new tricks, and that fella ain't the sharpist tool in the shed, should be ringing resiliently in your ears... All you need is an ugly Dodge and a three wheeled walkbehind... And high prices... It helps if you speak Latin and know a lot about plants too. Here's business 101 ... With 10,000 dollars... I go buy 4 ... $500. Dollar walkbehinds... I got 8000. For oil and belts and beer... 2 of the 4 run good any given day... I wonder around town and cut 10 lawns @ 65 per cut...that takes me 6 hours...I spend 1 hour drinking beers and hitting the other 2 with a wrench so they run too. So.... 650 a day...your helper gets 100. Plus sum beer... 300. Goes in your cigar box in the shed... And 200 goes to you old lady... This plan works for like 5 years....because I change oil/filters like a man possed... If your doing the math it went for more.....beer! Three days a week and praying for rain... Let it rain, let it pour, dear lord let the grass go sum more....
Posted via Mobile Device

TriCityLawnCareLLC
01-02-2013, 08:22 AM
Thats not how you presented things in your original post. I commented on your flawed posts and I stand by my statements.

You also assume that the business owner is sitting on mountains of cash in your above example. How many are starting a business that can walk away in one year and work on the business. You provide an unrealistic example as your explanation for doling out bad advice in your original posts.


I'm not going to argue with you.

Dave...

Dave, I side with Sean in that you sound very ignorant in your claims-No offense.

You are obsessed with the idea that I am referring to this kind of success based on having a lot of money to start with. I did not start with any money. In fact, didn't even have a truck - had to borrow my Mom's station wagon, return it every night with gas and cleaned inside and out.

The young man I am referring to did not start with any money either. He is in his 5th year of business.

In 2013 you do not need money to advertise a business in this industry. Give me $200 and some time and I can grow a business as big as I want it to be. It's about effort, salesmanship, and technology.

You have the very unfortunate and misguided belief that it takes money or being bankrolled to be a success or grow a business....once again, very incorrect.

I started with $0. I bought Sean's book when i first started and it helped a lot. Going into year 5 and with some work that we've already signed for next year, we are over the $100k/yr in gross revenue. At this point it's just myself and a part-time helper but I've been working all month on putting systems into place to make us more efficient and to keep costs low.

I financed a mower half-way through my first season and once it was paid off I financed another one (just this year). Both at zero percent interest. I also believe in buying newer reliable equipment bc down-time sucks. I have two trucks and 05' and and 07'. one is paid for the other i bought this year with 62kmiles and a brand new boss plow-to me it was a dumb idea not to do, especially for the price i got on it. NOW, the truck and mower are the only debts my business has currently, and both of the machines make me enough money to pay the monthly payments and profit.

I guess my point is to @coolluv, that I am not sitting on mounds of dough, I did start with absolutely nothing ($0) and we are at a very successful part of our business. I try to keep things as lean and mean as possible. To prove Sean's point, I am able to come in less than other guys, get the work and still profit more than they could. IT can be done and I'm trying to do it.:usflag::usflag:

djagusch
01-02-2013, 08:42 AM
Well can you walk me through the process of the startup to the Real Business and the timeline to becoming the Real Business....and the $200 marketing campaign?


Dave...

Based on how he figured going in house for payroll /accounting. The $200 marketing campaign is website doing it yourself (it is easier these days but remeber his background), online ads (craigs and such), article writing and submitting, seo stuff. All this a guy can do himself pretty well and not spend money for a pro to do it. But just like the accountant, how do you value your time?

The answser of when your in a real biz goes more to when you run the biz, not being the biz.

I think sean is basically saying he is paying himself xyz in salary. Part of those duties is managing which is sales/accounting/hr/purchasing/marketing. It doesn't matter how much time is spent in one as long as they all get done. Until the biz grows to a certain point he is very much the biz and saves money others may outsource. It works great if you can do it and still make a profit. But at a certain point one person can't wear all the hats and you need to hire for those spots which hopefully the expense spreads over more hrs which doesn't affect the rates as much.
Posted via Mobile Device

BeachysLawn
01-02-2013, 12:24 PM
You do not price or bid based on where you are "headed", you bid based on where you are. I have owned and operated 7 figure lawn & landscape businesses and I work closely with business owners who generate as little as $100,000 per year and several who generate over $5,000,000 per year. . .knowing your numbers and understanding you should be operating a blue-collar business in a white-collar fashion, success is imminent.

This post was the best on Lawnsite, period.

Sean Adams
01-02-2013, 01:38 PM
Sorry I didn't respond sooner guys.

First of all, I don't want to bash @coolluv - the more I have read through everything I think I get his overall point. No disrespect meant from me towards him.

He is right when he says that a lot of people hop into this industry on a whim. You can't fault them all, as learning from the ground up is often the best way to learn. But that's the key point here....as long as they learn. There are plenty of people that hinder this industry because they figure out a few things and think it is clear sailing from there.

I can't fault a solo operator who uses old equipment, his own personal truck, stores things in his garage and avoids every possible expense that he can. This is America afterall, and as long as he is falling within the confines of the law, who am I to beat him down or ridicule him?

But....

When it comes to this industry as a whole, yes, many changes need made. There is no barrier to entry. You can wake up, dust off your own lawnmower, print out some business cards, buy a gas can and within days (sometimes hours), bang, you're in business.

Can an electrician or plumber do that? Not really.

Does our industry need to do something about this? Yes, probably. Will the industry ever change in this regard? Not as long as consumers themselves have the choice of who to hire.

Now could we insist that testing and licensing become a part of this game? I guess so, but where to begin?

I have been thinking for some time now that creating some sort of online education for this industry makes sense - education that teaches people who are TRULY serious how to start, operate, grow and manage a respectable, professional, profitable business.

From what I have encountered there are so many guys in this industry who are truly craftsmen - EXCELLENT at working "in" their business. They know how to do the work very, very well. The problem is, this is probably only 25% of the challenge.

We've all seen it before, and our industry is no exception. A guy is really good at making pizza. He likes cooking. He doesn't want to work for someone else making $9 an hour, so he opens his own pizza shop. How many pizza shops are for sale right now on Craigslist? Plenty.

Why?

Because they know how to make pizza, but they have know idea how to run a business.

I admire everyone in this industry for the most part, because it is a lot of hard work and usually goes unappreciated. I genuinely respect guys like @tricitylawncarellc who start with nothing, take necessary steps to educate themselves, and keep pushing forward knowing they don't know it all, but they are hungry to learn and keep moving forward knowing that in time, the hard work and sacrifice will pay off.

I think every business owner here would be genuinely surprised if they sat down and figured out all of the waste that goes on in their business - from money spent that does not need to be spent, to inefficiencies out in the field, to bidding too low and the list goes on. Those who are continually working to improve, organize and make their business a well-oiled machine are the ones who can come in "lower" than most, still produce a quality service and make that often-elusive coin at the end.....profit.

Sean Adams
01-02-2013, 01:55 PM
$200 for marketing and advertising to build a business....

Before I begin, I'm going to say that hunger, desire and the refuse-to-lose attitude that goes along with the mere $200 is absolutely necessary.

So it's 2013, people look for everything they want and need online for the most part, so there needs to be a presence online. You need a website.

Wait, don't websites cost like $2,000 or something? Besides, how many people know how to build a website?

Wait....it's easy. It's called Wordpress.

1.) Buy a domain name for your business - $6.99.

2.) Go to wordpress and set up a site - free.

3.) Direct your domain name to your wordpress site - $13.00.

4.) Get 5,000 flyers made (assuming you will make it look right and say the right things, not just a grocery list of services you provide) - $79.00.

5.) Get 1,000 business cards made at a vistaprint.com site for $34.99.

6.) Build your google local page - an ABSOLUTE MUST - free.

7.) Place a business card sized ad in your local newspaper in the areas you intend to service - small newspaper - usually a once a week publication - $10.00 (weekly).

8.) Create a facebook page for your business and actually build it and use it - free.

9.) Email friends and family and let them know you are in business and ask them to spread the word.

10.) Get 8 large yard signs made from vistaprint.com and strategically place them in high-traffic areas - $55.99

Total spent $199.97

Now I know better than anyone that it is the tendency for people on this site to go out of their way to poke holes in what I just said.

But please read my first few sentences. With a $200 budget, you can get a lot further in 2013 than you could in the year 2005 even.

It still comes down to your willingness and desire to get off your rear-end and do all of this - relentlessly. Passing out flyers, shaking hands, passing out business cards, telling people about your facebook page, placing signs, building your own site.... Effort.

coolluv
01-02-2013, 06:41 PM
Sorry I didn't respond sooner guys.

First of all, I don't want to bash @coolluv - the more I have read through everything I think I get his overall point. No disrespect meant from me towards him.

He is right when he says that a lot of people hop into this industry on a whim. You can't fault them all, as learning from the ground up is often the best way to learn. But that's the key point here....as long as they learn. There are plenty of people that hinder this industry because they figure out a few things and think it is clear sailing from there.

I can't fault a solo operator who uses old equipment, his own personal truck, stores things in his garage and avoids every possible expense that he can. This is America afterall, and as long as he is falling within the confines of the law, who am I to beat him down or ridicule him?

But....

When it comes to this industry as a whole, yes, many changes need made. There is no barrier to entry. You can wake up, dust off your own lawnmower, print out some business cards, buy a gas can and within days (sometimes hours), bang, you're in business.

Can an electrician or plumber do that? Not really.

Does our industry need to do something about this? Yes, probably. Will the industry ever change in this regard? Not as long as consumers themselves have the choice of who to hire.

Now could we insist that testing and licensing become a part of this game? I guess so, but where to begin?

I have been thinking for some time now that creating some sort of online education for this industry makes sense - education that teaches people who are TRULY serious how to start, operate, grow and manage a respectable, professional, profitable business.

From what I have encountered there are so many guys in this industry who are truly craftsmen - EXCELLENT at working "in" their business. They know how to do the work very, very well. The problem is, this is probably only 25% of the challenge.

We've all seen it before, and our industry is no exception. A guy is really good at making pizza. He likes cooking. He doesn't want to work for someone else making $9 an hour, so he opens his own pizza shop. How many pizza shops are for sale right now on Craigslist? Plenty.

Why?

Because they know how to make pizza, but they have know idea how to run a business.

I admire everyone in this industry for the most part, because it is a lot of hard work and usually goes unappreciated. I genuinely respect guys like @tricitylawncarellc who start with nothing, take necessary steps to educate themselves, and keep pushing forward knowing they don't know it all, but they are hungry to learn and keep moving forward knowing that in time, the hard work and sacrifice will pay off.

I think every business owner here would be genuinely surprised if they sat down and figured out all of the waste that goes on in their business - from money spent that does not need to be spent, to inefficiencies out in the field, to bidding too low and the list goes on. Those who are continually working to improve, organize and make their business a well-oiled machine are the ones who can come in "lower" than most, still produce a quality service and make that often-elusive coin at the end.....profit.

Thank you for the post and understanding where I'm coming from. I may have jumped the gun in my post and I'm man enough to admit when I'm wrong.




No disrespect to you either Sean.


Dave...

wz2p7j
01-02-2013, 07:38 PM
Avg $15/hr payroll including crew leader and overtime in busy season

Purchase $14,000 mower and dispose of for, say, $4000 after 2500 hours (if lucky) that's $4/hr

Mower gas, a little over a gallon/hr - call it $4

Repair and maintenance on all equipment, mowers, trucks trailers about $5/hour

Purchase a truck for say, $35,000 and dispose of it for $10,000 after 150,000 miles - that's about $2.5/ man hour (assume 3 man crew, 15 miles per day)

Truck gas per day/man hour - about $1 (again assume 3 man crew, 15 miles per day)

So, let's add it up

$15 labor
$5 mower depreciation
$4 mower gas
$5 repair maint on all equipment
$2.5 truck depreciation
$1 truck gas
$32.5 Total

Charging $35/man hour with those expenses results in a return of about 7.1%. You'd be better off playing the stock market.

Note that my numbers are all direct costs. They apply to a small company, a big company, a leveraged company or your auntie's left nipple, it doesn't matter.

On top of that, real companies have real fixed expenses. For example:

Office manager - $20,000
Rent - $24,000
Insurance - $20,000
Utilities - $6,000

At a 7% gross profit margin you'd need to do about $1,000,000 in business just to cover your fixed costs.

Maybe I don't know what I'm talking about but I own 2 landscape companies (only one shown in my sig, need to update it) doing about $1 mil yearly each and have a masters degree in business.

Chris

Sean Adams
01-02-2013, 07:47 PM
Avg $15/hr payroll including crew leader and overtime in busy season

Purchase $14,000 mower and dispose of for, say, $4000 after 2500 hours (if lucky) that's $4/hr

Mower gas, a little over a gallon/hr - call it $4

Repair and maintenance on all equipment, mowers, trucks trailers about $5/hour

Purchase a truck for say, $35,000 and dispose of it for $10,000 after 150,000 miles - that's about $2.5/ man hour (assume 3 man crew, 15 miles per day)

Truck gas per day/man hour - about $1 (again assume 3 man crew, 15 miles per day)

So, let's add it up

$15 labor
$5 mower depreciation
$4 mower gas
$5 repair maint on all equipment
$2.5 truck depreciation
$1 truck gas
$32.5 Total

Charging $35/man hour with those expenses results in a return of about 7.1%. You'd be better off playing the stock market.

Note that my numbers are all direct costs. They apply to a small company, a big company, a leveraged company or your auntie's left nipple, it doesn't matter.

On top of that, real companies have real fixed expenses. For example:

Office manager - $20,000
Rent - $24,000
Insurance - $20,000
Utilities - $6,000

At a 7% gross profit margin you'd need to do about $1,000,000 in business just to cover your fixed costs.

Maybe I don't know what I'm talking about but I own 2 landscape companies (only one shown in my sig, need to update it) doing about $1 mil yearly each and have a masters degree in business.

Chris

That's one "man". And I am not sure your numbers make sense regardless. Maybe I am not understanding what you are getting at, but keep in mind every scenario is different, with different expenses, different types of work being done at different prices, with different number of employees working at different speeds with different types of equipment, not to mention how well your routing, scheduling and field efficiency is handled.

It also depends on how many weeks you are working in a season and how many true "billable hours there are in a working day.

AintNoFun
01-02-2013, 07:54 PM
Company 1 has 4 employees. They have two trucks that cost the company $500 a month each. All of their equipment is financed and that costs them another $1,000 a month. They rent a garage for $800 a month. They pay all of their employees $15 per hour. They pay an accountant to do their payroll, they spend a lot of money on advertising and in general, the business is unorganized and not very efficient - neither are the employees.

Company 2 also has 4 employees and two trucks and the same equipment, but the trucks are paid for and so is the equipment. They do not rent a garage space and all of their employees are paid $12 per hour. The owner does all of the payroll work and they use the internet and word of mouth to advertise their business, which costs them next to nothing. ON top of that, the company is run well and the employees rarely waste time..



company 2 is like most small companies that think that just because the owner is doing the work (payroll in this case) it doesn't have a cost. but your working for free and taking away from time that could be dedicated to better suited tasks. at least go work for another company, at least you'll get compensated for your time..

Sean Adams
01-02-2013, 08:08 PM
company 2 is like most small companies that think that just because the owner is doing the work (payroll in this case) it doesn't have a cost. but your working for free and taking away from time that could be dedicated to better suited tasks. at least go work for another company, at least you'll get compensated for your time..

Everything an owner does has a cost, but as an OWNER you are not merely trading hours for dollars. With every task performed, with every day that passes, you are building equity in a company that you OWN. On top of that, no one assumed or suggested that an owner who does his own payroll works for free. It's difficult for an owner to pay himself hourly, which is why I suggest most owners pay themselves a set salary. Yes, at times that owner is working for less money than he should, but owners get perks that employees do not, on top of the access to profit and the equity previously mentioned.

I am not suggesting anyone micromanage their business, but when a business is starting out and in the initial growth stages, saving money on an accountant makes perfect sense. On top of that, when an owner learns the accounting software their company uses, it is that much easier for them to teach an office employee when the time comes to hire one.

But if you want to go and get a job working for someone else, I guess that is your option....

djagusch
01-02-2013, 08:14 PM
Avg $15/hr payroll including crew leader and overtime in busy season

Purchase $14,000 mower and dispose of for, say, $4000 after 2500 hours (if lucky) that's $4/hr

Mower gas, a little over a gallon/hr - call it $4

Repair and maintenance on all equipment, mowers, trucks trailers about $5/hour

Purchase a truck for say, $35,000 and dispose of it for $10,000 after 150,000 miles - that's about $2.5/ man hour (assume 3 man crew, 15 miles per day)

Truck gas per day/man hour - about $1 (again assume 3 man crew, 15 miles per day)

So, let's add it up

$15 labor
$5 mower depreciation
$4 mower gas
$5 repair maint on all equipment
$2.5 truck depreciation
$1 truck gas
$32.5 Total

Charging $35/man hour with those expenses results in a return of about 7.1%. You'd be better off playing the stock market.

Note that my numbers are all direct costs. They apply to a small company, a big company, a leveraged company or your auntie's left nipple, it doesn't matter.

On top of that, real companies have real fixed expenses. For example:

Office manager - $20,000
Rent - $24,000
Insurance - $20,000
Utilities - $6,000

At a 7% gross profit margin you'd need to do about $1,000,000 in business just to cover your fixed costs.

Maybe I don't know what I'm talking about but I own 2 landscape companies (only one shown in my sig, need to update it) doing about $1 mil yearly each and have a masters degree in business.

Chris

That is how I have figured it also in the past.

I have had people talk about how they take the expenses of the biz side and divide by the billed hours for that year. Then take those numbers for figuring out a hourly rate.

That way averages out the trimming, shrub, leaf blowing, labor times and such and averages it out. How I have and you figure out the cost is by looking at the most expensive machine ($14k ztr) and don't take in account for trimming, etc which costs less per hour. I guess our way we never underestimate while their way takes historical averages for their biz to bid tighter.

wz2p7j
01-02-2013, 08:49 PM
That's one "man". And I am not sure your numbers make sense regardless. Maybe I am not understanding what you are getting at, but keep in mind every scenario is different, with different expenses, different types of work being done at different prices, with different number of employees working at different speeds with different types of equipment, not to mention how well your routing, scheduling and field efficiency is handled.

It also depends on how many weeks you are working in a season and how many true "billable hours there are in a working day.

The discussion surrounded "man hour rates" so I normalized everything to one man hour. The assumptions were stated as a 3 man lawn crew on a route of about 15 miles total drive time for the crew per day.

I can assure you the numbers "make sense." "Efficiencies" are really irrelevant. If you quote at $35/man hour but your efficiencies are, say, 1.3, you're effectively quoting at $45.5/MH, not $$35/MH. Since quoting is never exact, there needs to be a feedback loop like tracking your times over the course of a season to modify the contract for next year as necessary.

Chris

Duekster
01-02-2013, 09:38 PM
Some bid jobs will hit high but only cause the job went as planned or easier than planned.

There is a risk reward factor you have to account for when bidding. Lawn mowing has little risk and little reward.

Efficiency
01-03-2013, 10:13 AM
Avg $15/hr payroll including crew leader and overtime in busy season

Purchase $14,000 mower and dispose of for, say, $4000 after 2500 hours (if lucky) that's $4/hr

Mower gas, a little over a gallon/hr - call it $4

Repair and maintenance on all equipment, mowers, trucks trailers about $5/hour

Purchase a truck for say, $35,000 and dispose of it for $10,000 after 150,000 miles - that's about $2.5/ man hour (assume 3 man crew, 15 miles per day)

Truck gas per day/man hour - about $1 (again assume 3 man crew, 15 miles per day)

So, let's add it up

$15 labor
$5 mower depreciation
$4 mower gas
$5 repair maint on all equipment
$2.5 truck depreciation
$1 truck gas
$32.5 Total

Charging $35/man hour with those expenses results in a return of about 7.1%. You'd be better off playing the stock market.

Note that my numbers are all direct costs. They apply to a small company, a big company, a leveraged company or your auntie's left nipple, it doesn't matter.

On top of that, real companies have real fixed expenses. For example:

Office manager - $20,000
Rent - $24,000
Insurance - $20,000
Utilities - $6,000

At a 7% gross profit margin you'd need to do about $1,000,000 in business just to cover your fixed costs.

Maybe I don't know what I'm talking about but I own 2 landscape companies (only one shown in my sig, need to update it) doing about $1 mil yearly each and have a masters degree in business.

Chris

wouldnt it be more accurate to split all your expenses into 1 of 4 categories?
direct variable
direct fixed
indirect variable
indirect fixed

snomaha
01-03-2013, 01:01 PM
Everything an owner does has a cost, but as an OWNER you are not merely trading hours for dollars. With every task performed, with every day that passes, you are building equity in a company that you OWN. On top of that, no one assumed or suggested that an owner who does his own payroll works for free. It's difficult for an owner to pay himself hourly, which is why I suggest most owners pay themselves a set salary. Yes, at times that owner is working for less money than he should, but owners get perks that employees do not, on top of the access to profit and the equity previously mentioned.

I am not suggesting anyone micromanage their business, but when a business is starting out and in the initial growth stages, saving money on an accountant makes perfect sense. On top of that, when an owner learns the accounting software their company uses, it is that much easier for them to teach an office employee when the time comes to hire one.

But if you want to go and get a job working for someone else, I guess that is your option....

Good discussion on a relevant topic.

My experience has been that between start-up and $1,000,000 in revenue the owner is wearing many hats and takes sweat equity in lieu of a fair market wage. Once that 1m in revenue hits you better be profitable and paying yourself a fair market wage because you no longer can handle all the functional roles of the business - seems like around the 20 employee mark this happens.

The next jump from 1m - 3.5m in revenue is tough. You are adding management infrastructure to continue to grow which drives down profitability. I think this is one of the most important points i discuss with my accountant - you have to have capital in the business to survive the push from 1m - 3.5m. Live off your wage and leave the profit in the company to fund growth. This is also the point when many realize that managing the balance sheet is just as important as managing the P & L statement. Try and get a line of credit increased or consolidate equipment debt if your balance sheet is out of whack - banks don't like it!

just my 2 cents for now.....

jrs.landscaping
01-03-2013, 02:38 PM
Good discussion on a relevant topic.

My experience has been that between start-up and $1,000,000 in revenue the owner is wearing many hats and takes sweat equity in lieu of a fair market wage. Once that 1m in revenue hits you better be profitable and paying yourself a fair market wage because you no longer can handle all the functional roles of the business - seems like around the 20 employee mark this happens.

The next jump from 1m - 3.5m in revenue is tough. You are adding management infrastructure to continue to grow which drives down profitability. I think this is one of the most important points i discuss with my accountant - you have to have capital in the business to survive the push from 1m - 3.5m. Live off your wage and leave the profit in the company to fund growth. This is also the point when many realize that managing the balance sheet is just as important as managing the P & L statement. Try and get a line of credit increased or consolidate equipment debt if your balance sheet is out of whack - banks don't like it!

just my 2 cents for now.....

Very true statements :clapping:

The business owner oversees everything from maintenance to books until it become necessary to put other people into those roles.

rbljack
01-03-2013, 05:28 PM
this is a great discussion that im following closely. I started tracking my numbers a bit closer last year using an excel spreadsheet, so i can start to break down my numbers and see where Im at...and where im going. My resisdential crappy mower broke last season, so i went out and financed a new honda hrc 21 inch mower (most yards i do are smaller) and im very happy with it. Long story made short, at some point, that mower will have to be replaced. So even after its paid for, there still has be a way to replace that mower down the road, so it must be calculated into the man hours cost. Im taking notes yall....LOL.

Im taking a lot from this posting, so thanks to everyone for their contributions and points of view.

debt free or paid for equipment does allow you to be more competivite on your prices, but you still have to break down your numbers and determine what your costs are, and from there, determine what you want your profit margin to be based on where you are currently at. interesting..... and makes sense. As time goes by and the buisness grows (hopefully) the numbers game continues, and you must be staged to grow with the buisness and the grass that we mow...LOL.

Sean Adams
01-03-2013, 06:12 PM
It is a great topic and hopefully this thread is read by many - good info @snomaha

cpllawncare
01-03-2013, 10:33 PM
I'm currently bidding landscaping jobs at 45/mhr with a 20% markup any subs prices and a 10% markup on materiel handling cost and take the total and add another 10% for uh oh factor so far it's worked out good, we dont get every job we bid but the ones we do get we make decent money. The market here won't really bear much more than that, I've been told on a few occasions we are high but it was a fair bid they just didn't have the budget. I think when you break down your prices within reason for the customer and educate them it makes them feel better about your bidding. I had a phamplet made up about RED FLAGS in the contracting industry and give it to the customer and tell them weather they choose us or not please be careful about the so called "Low price leader" and that great price usually comes with the long term consequence of a poor job. Just today, I was ask to bid on a repair job because the customer got a great deal but can't get in touch with the contractor to fix the poor workmanship he did.

Duekster
01-03-2013, 10:44 PM
Well Some one spank me if I am wrong but Vander Kooi has some good info on mark ups and how to bid work.

lawnpropm
01-04-2013, 03:33 AM
Cant beat free info thats valid and relevant! Lawnsite needs more threads like this...Subscribed
Posted via Mobile Device

GSO LAWNEN4CER
01-04-2013, 05:24 AM
A easy way to think of it is!

When you grow or expand,the profit level will drop as you expand.But as you expand the profit level will slowly catch back up. This will continue as you grow the business. Its a cycle that ALL business go through,its no way around it.