View Full Version : cost of doing business

11-01-2004, 07:49 PM
can't help but notice that there are a lot of questions about what to charge for your time. I can give you an example of what my cost are and you can go from there. I run a four man crew including myself. I pay my men $10.00 an hour,state and fed. unemployment cost,fica,medicare and workman comp cost 26.34% bringing cost to $12.63. Then add lia. ins.at $.75 bringing total to $13.38. We use 62" Toro ZTRs which I figure the cost and main. at $8.00 per hour,trans portation at $1.25, depreciation at .84 and non productive time at $2.97( I figure we have a 20% down time between jobs etc.). Now add advertizing at .47, rent and utilities at $1.42 and fuel at $2.00. This gives me a total of a little over $30.00 an hour.This is close but not all. I charge $45.00 an hour and figure a season at 4,800 hours for a total gross income of $216,000.00. Don't sound to bad except that my share, using these figures, comes to about $70,000.00. Except it never actually comes to that, more like aroud $60,000.00 then taxes and I wind up with about $53,000.00. Boy we are getting rich, I wish. So if you think this is a get rich quick deal then you are wrong , it is a decent living ,controling your own life in an enjoyable atmosphere. If you are charging less than around $45.00 per man hour then you are hurting yourself and everyone else in the business. Sorry for running on so long but people need to know that this is a business and needs to be run like one and pay taxes like one.

green with envy
11-01-2004, 08:44 PM
Old Turf, I did'nt think you ran long!! I thought you were clear and to the point! I know I wont get rich doing this but I like my boss now!!

Welcome to Lawn site


kickin sum grass
11-01-2004, 09:57 PM
You mean we won't get rich at this.
oops to late.......... You should have told me that before I bought that vacation home.........not
:dizzy: :waving:

kickin sum grass
11-01-2004, 10:01 PM
Thats the worst part of this business is having to sit down and keep going over your numbers to stay profitable. It is a have to but hate to situation. Make sure you know where every penny is spent. Even the equipment that is paid for or being paid for cost you something in repair, maintenance, and don't forget replacement.

11-01-2004, 11:05 PM
This is nothing more than someone once again who knows their cost, has business experience, and has carefully analyzed it and has it dialed in. There is more work, administrative and otherwise here than what many lco's ever put into their business in a lifetime. Speaking of which, the ofice and administrative expenditures were not even MENTIONED here. So, as I say, THIS is a fine example of just what this thread is entitled...the cost of doing business. I can certainly respect (and admire) the work that went into these numbers for this post. Here in Michigan though, our hourly cost per $10 per hour employee is much higher.
Thank you for this post, and I hope that many of our younger entrepeneurs read it.

11-02-2004, 12:42 AM
last year it cost me $29.07 per hour to do business, but since I downsized this year, only worked one employee part time, and really watched my budget it only costs me $9.09 per hour and I have a profit of 65.87%, compared to last years 26.18%. HUGE difference!!!

11-02-2004, 01:49 AM
About 5 years ago I started thinking about how much time I personally spend on the tasks that aren't directly billed. examples: billing, collecting, banking; record-keeping, bookkeeping, tax preparation; equipment and truck maintenance and repair; writing bids, estimates; disposal of lawn waste by composting, burning limbs, hauling to the city compost facility; for that matter, the time sitting in the truck driving from job to job. I came up with a figure that I really can hardly believe:

For a week in which I do 40 hours of billable work, I think I average about 25 hours on the unpaid tasks.

I consider that a cost, and finally I assigned a value (very low) of $15 an hour to that, for purposes of including that time when figuring my cost of doing business.

How do the rest of you do this?

Mark McC
11-02-2004, 07:00 AM
This year and next, I'm a workaholic, so I don't drive myself nuts trying to figure out what I net per hour. Third year, I'll start thinking about such things. All I'm concerned with is whether I'm making a living.

I do my estimates based on $40 per man hour, but I maybe should shoot for $45.

Island Lawn
11-02-2004, 07:28 AM
last year it cost me $29.07 per hour to do business, but since I downsized this year, only worked one employee part time, and really watched my budget it only costs me $9.09 per hour and I have a profit of 65.87%, compared to last years 26.18%. HUGE difference!!!

Thay's a mighty tight belt you have there.

Mine cost me just under $18 w no employee!
I bid @ $45, but it's hard going)

I'm figuring somewhat less than 2000 hrs per yr
I assume your somewhat above that, and therefore can spread your overhead more...

am i kachin on?

Richard Martin
11-02-2004, 08:53 AM
I'm not seeing (and rarely see here at Lawnsite) any mention of corporate taxes. I'm going to assume that no-one here is incorporated for the purpose of discussion.

When you guys figure your profits are you also taking into account that you have to pay yourself? I know that it is usually only associated with PLCs, LLCs and INCs but it is also an invaluable tool for determining whether or not you are making money as a businessman or just working for yourself.

I asked a friend of mine (I reference him often here at Lawnsite) how much he was paying himself. He has 2 employees in addition to himself and they all work together. He said, "whatever is left over". I said that nice but how do you know if your business is making any money. He said because his bills were paid and there's money left after that. We went on about this for about 10 minutes before I gave up. He could not grasp the concept that he would have to assign himself either a theoretical salary or an hourly pay in order to determine profitability of his business.

I pay myself the same as I would pay someone else to do the same job.


Crew leader = $15 per hour
Office worker = $10.00 per hour
Mechanic = $15.00 per hour

I know that this is getting finite with the numbers but it is what you have to do to determine profitability as a sole proprietor. You can also add in the 1/2 of FICA if you really wanted to get technical. There is no other way. If you were to actually sit down and run these numbers you might be suprised at the results.

Eric 1
11-02-2004, 11:14 AM
Great thread! this is the kind of stuff i like to see.

p.s. Runner, I am reading

Mark McC
11-02-2004, 02:14 PM
last year it cost me $29.07 per hour to do business, but since I downsized this year, only worked one employee part time, and really watched my budget it only costs me $9.09 per hour and I have a profit of 65.87%, compared to last years 26.18%. HUGE difference!!!

Understand the difference in per-man hour, but what about revenues to you? Are you taking more money home?

One of the things some seem to get caught up in is margins. Yeah, the margins are better for smaller operations, but what about net income for the owner? Higher margins do not always translate into higher profits.

11-02-2004, 03:21 PM
Understand the difference in per-man hour, but what about revenues to you? Are you taking more money home?

One of the things some seem to get caught up in is margins. Yeah, the margins are better for smaller operations, but what about net income for the owner? Higher margins do not always translate into higher profits.

for me, it did translate into a high profit. I have made (taken home) so far this year 107% more than I did last year. I am about 19% less in gross though. I have really cracked down big time on expenses.

11-02-2004, 04:47 PM
Sounds like you inluded most of the overhead but like someone else said, what about administrative tiime? It's a low profit margin biz because of all the expenses. Is 10 bucks their start pay or top out pay?

Island Lawn
11-04-2004, 04:49 PM

good thread

11-04-2004, 06:03 PM

You said your gross revenue is around $216,000 and gross profit to you is $60,000. That's about 28% gross profit to the business. If you looked at your expenses real close and squeeze out out some un-necessary costs you should be able to get that profit figure up close to 40%. It's not easy, but 40% profit in this business is attainable

PR Fect
11-04-2004, 06:29 PM
Very good post. I have learned one other thing this year. My cost's are lower because I do not run a crew. But why if in my area they get $45 per man hour(and they do) for the company's with employees, should I charge less just because my costs are less? I learned we where cutting ( no pun intended) our selfs short. Same job and quality of work should pay the going rate. One man show or big LCO.

all ferris
11-04-2004, 07:04 PM
Do you think people would bat a lash if you charged a buck or 2 more than 45/hr? If you think about it, for every $1 per hour more you charge you make an extra $4800 per year. I have raised prices and not one of my customers have said a word. This is very good thread and I hope more of the "new" guys read this and stop asking stupid questions about how much they should charge on a certain job. Oldturf has taken the time to figure out his costs. I don't understand why the people asking how much to charge can't figure out their costs and do the bid on their own. If you break it all down as Oldturf has done you can't really go wrong if you know how much time it takes to do a job. If you can't figure out how long a job is going to take then you shouldn't be bidding.
Thank you

11-04-2004, 09:00 PM
I aim for $60+ per man hour (minimum) & that includes travel time between jobs, not just "on site" time. We have to pay $56/hr shop rate here for maintenance on our machines, we need to make that & more. Not to mention the $$$1000's of dollars we've got invested in trucks/trailers/mowers/handheld equip. Got to pay for that!


11-04-2004, 09:29 PM
Excellent thread here.....has anyone here checked out the latest "Pro" Magazine that came in the mail the other day. It is a definate must read for those that don't know their numbers, especially newbies.

11-04-2004, 10:03 PM
yup, good articles in there about guys crunching numbers

11-04-2004, 10:04 PM
Is everyone else seeing 20% downtime between jobs?

11-05-2004, 12:46 AM
We spend at least 20% of the time in the truck each day. No one mentioned the paid holidays and vacations that good employees deserve and are use to. A $10 per hr. employee costs at least $20 for each hour working on a jobsite ( $10 + taxes,tags, accessories and dealer prep.)

PR Fect
11-05-2004, 09:47 AM
Envision, can we get that Pro article on-line?

11-05-2004, 10:12 AM
Great thread!

Has anyone tried to look at their business from a cash flow perspective instead of allocating overhead? If you: pay yourself a salary, include capital investments as cash outlays, and include depreciation as a cash equivalent, the method brings a different light to the business.

Your equipment investments are highlighted and the real impact on the profitability is calculated. It also pinpoints the unplanned costs that are typically hidden (i.e. equipment maintenance).

Accountants can make anything look good. Just think of Enron where the earnings were excellent but it was really a house of cards. Cash is what we really want and even Wall Street is putting more emphasis on Cash Flow Analysis rather than relying on Income Statements and Balance Sheets.

11-05-2004, 09:46 PM
Unfortunately, I can look at numbers and not run them.. Thanks for providing this data. It helps us newbies to figure out how(if) we can make money. Attached is a .pdf of the numbers from Excel.

Did I capture the labor right? You show 4800 billable hours. 4 guys totaling 4800 billable hours is 1200 per year or just over a half of a year (2080 work hours in a calandar year). 5 guys at 4800 billable hours is 960 hours a year or less than 1/2 a year. I trued up the work hours to 5760 (4800*1.2 for non-productive time) for the sake of calculating wages and benefits.

Can you help me understand your ZTR transportation expenses? You have $8.00 per billable hour or $38,400 (at 4,800 billable hours). Given that we have calculated fuel below, what does this consist of? It would seem to me that this would be replacement cost of equipment.

Also deprecation is a non cash expense so I am not sure how it is applicable in this calculation. It is useful in computing taxes but that is acutally a benefit in minimizing tax exposure.

I added a $1.00 per hour for other "shop" supplies .. trimmer line, trash bags, oil, blade sharpening, etc.

Thanks again for the info.. it is definately helpful to us newbies..

My kid is sittin here watching me and loves this little guy so I have to put him in there..... :cool2:

11-05-2004, 09:50 PM
Attachment is not working but here are the numbers

Total Hours Per Hour Extended
Hours Rev Exp % Margin
Revenue 4,800 $45.00 $216,000
Wage 5,760 $10.00 $57,600 27%
Benefits $2.63 $15,149 7%
Liab Ins $0.75 $3,600 2%
ZTR's $8.00 $38,400 18%
Dep $0.84 $4,032 2%
Rent $0.47 $2,256 1%
Utilities $1.42 $6,816 3%
Fuel $2.00 $9,600 4%
Misc $1 $4,800 2%
Owner Sal/withdrawls $11 $52,800 24%
Total $195,053 90%
Net $20,947

11-05-2004, 10:38 PM
Envision, can we get that Pro article on-line?

I looked on their website and they only have the TOC. Here is their website: www.promagazine.com (http://www.promagazine.com). I could retype every article but I honestly don't have the energy! :drinkup:


11-06-2004, 01:06 AM
Not sure if you can get the article on line but if you go to the site you can sign up for a free subscription. They always have good articles about the ones who do it right.

11-06-2004, 02:24 AM
GREAT THREAD!!! ..hope this recycled post I made to an earlier discussion adds to this one.

As long as your aware of all your costs - Wages -YOURS INCLUDED-, payroll taxes, Licenses, business taxes, liability insurance, worker's comp, vehicle fuel, equipment cost (truck, trailer, mower, line trimmer, blower, etc.) equipment operating expense (oil, filters, belts, blades, grease, replacement parts, maintenance time ...to do all of the above), vehicle operating expense ( insurance, tires, oil, service, etc.), travel time to and from the jobs, overhead ( facility rent, utilities, phone, advertising, sales expense, billing expense), debt service on your loans, etc., etc., etc. you can START to figure how to set your price.

How is your cash flow? Can you pay your wages, gas bill, repairs, etc. while you WAIT on your money? Are you saving any money from your operation to pay cash for your next round of equipment/ vehicle purchases? If not, you'll just have to go back into debt to reload.

Is mowing your main income? Are you generating enough revenue during your mowing season to make it through the off season ? Do you have health insurance, vacation, retirement or any other sort of benefits ?

What is your gross margin on an individual job? ... what is it on your entire book of business? Are you aware of which of your jobs are under producing YTD? Have you analyzed them as to why they are losers? Do you know which jobs are the most profitable ...and why ... so you can repeat that elsewhere? Do you have accurate job records so you can compare production times to your job estimates to see if your estimating model is accurate?

The point of my essay that there is alot more to this industry that many of people in it recognize. If you are a knowledgeable business person who has a more efficient operation and is kickin' my butt ...MORE POWER TO YOU !!!

It is very distressing to those of us in the industry who have businesses that are providing careers to people that the public's perception of the cost/value of our service is driven down by those who do not take the time and effort to educate themselves on how to run a profitable operation.

There is always a segment of the consumer market who will opt for the cheapest thing out there and there is a never ending stream of cutters that will try to supply them.

Having said all of that, you need to base your price based on your cost to produce the work and your desired profit margin. You MUST begin with being able to accurately estimate the LABOR HOURS to do the work. I have a production standard for everything...mowing, edging, line trimming, pruning etc. I MEASURE what is there and do the math.

I am sure this is over kill for a one man operation...BUT ... how can an operator quote prices without any knowledge for what their product / service costs them to produce?

You MUST BE PROFITABLE to survive. If your are breaking even, you are going broke...it just takes a long time. You have to do some research on your expenses and costs to establish an overhead baseline, build a business budget (based on $$$) then prepare a job budget (of labor hours) and then MANAGE the work to hit your desired profit margins.

11-06-2004, 09:49 AM
great post Geezer

Island Lawn
11-06-2004, 12:27 PM
I am sure this is over kill for a one man operation...

I respectfully disagree.


We solos need to know too...
I find my concerns to be very much the same, except for the "non-solo" parts.