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environment
12-09-2004, 12:05 AM
ok, I dont mean to be nosy, but I have been working on my overhead costs all day long today, and I must be too high, something must be wrong, I am coming up with $87.68 per hour in total, that includes profit margin. Now it would be pretty tough to push that, I mean it breaks down to $1.46 a minute, now if a lawn takes a half hour thats $43.80

What kind of numbers do you guys have if you wouldnt mind sharing

YardPro
12-09-2004, 12:20 AM
the numbers are always shocking.
most people do not reazize thier actual overhead (it includes all non billable labor, etc.) is.
what is just your overhead recovery per hour?

environment
12-09-2004, 12:50 AM
well i broke it into sections
Maintenance division
maintenance equipment $22.18 per hour

office (computer, advertising, parking, etc.) $35.36 per hour

Employees $30.14 per hour

Total for Maintenance $87.68 per hour
$ 1.46 per minute


Construction division
Construction Equipment $34.02 per hour

Office $35.36 per hour

Employees $37.69 per hour

Total for Construction $107.07 per hour
$ 1.78 per minute


Interiorscape
equipment $ 7.91 per hour

office $ 35.36 per hour

employees $ 30.14 per hour

total $ 73.41 per hour
$ 1.22 per minute


complete business overhead $ 197.44 per hour
$ 3.29 per minute

Fantasy Lawns
12-09-2004, 01:01 AM
First lets make sure that we are comparing "apples to apples"

DIRECT COST: costs of doing business are those expenses that happen because labor was applied, equipment and vehicles were put into action, materials were used and work was done.

Direct costs are usually easy to document and predict when you know how much time a project will take and what equipment and materials will be needed.

INDIRECT COST: costs that follow with direct labor
∑ Payroll taxes
∑ Employee benefits & Insurance
∑ Fuel consumption
∑ Depreciation
∑ Repairs and other on-the-job costs.

Payroll taxes, benefits and insurance can be easily estimated
Indirect costs related to equipment are tougher to predict.
Fuel consumption can vary greatly
Repairs are often unexpected.

OVERHEAD COST: expenses that support the operation of a business.
∑ Rent for facilities, utilities, advertising, property taxes, storage, insurance on buildings, office expenses and other "behind the scenes" costs that in some cases take place simply because time went by.
∑ Take place even when no work was done.

Direct costs happen when work is done and labor is applied. The workers come in to work, and as soon as they turn the key in the ignition, direct costs and indirect costs follow them and stay with them all day.

Overhead items of expense that support the operation.

ANALYZING JOB COSTS. Labor and indirect costs represent the bulk of expense for most contractors and dwarf true overhead costs by comparison.

Can we agree on the above statements ??

environment
12-09-2004, 01:16 AM
not in those exact orders but ya
in my labor costs i have employee expenses such as employee benefits, insurance, taxes

office has parking, advertising, computer equipment, phones

and when i say construction or maintenance equipment that is where i fit the rest, vehicles, machinery etc. and of course all there wear and tear costs, fuel, operation, etc.

Fantasy Lawns
12-09-2004, 01:20 AM
So .. with this in mind ... Direct n In-Direct cost relate .... DIRECTLY to Labor ... ... While Over- Head .... which has a reflection with in the "business' it's self ... ie say I rent a building (over head) which cost me 10k per year n I have a yearly gross of $100k .... rent .... my overhead is 10% of yearly related to that gross ..... say my yearly gross was $200k ....well already I cut that percentage to 5%

It is gonna be real .... hit n miss ... to determine one's "over head" cost with out some "history" to compare to

Another sample .... say your yellow page ad is $130 per month or $1560 year .... this is a cost which I must pay .... EVEN if I do NO business .... this is true Over Head .... cost which occur EVEN WITHOUT business (income) occurs

So in this sample that $1560 is 1.5% ... base on a gross of $100k or .75% if my gross was $200k

THIS is the true HIDDEN PROFIT which LCO's whom grow into multiple crew .... dream on .... for it is Over Head Cost which decline as a business Increase it's Gross ... n Yes True .... As one grows they will spend more on over head cost .... BUT it will not OR sould not be a greater percentage

Again ie ....rent .....advo n such budgets should increase as one grows .... BUT the greater GROSS alllows them to lower the percentages .... so give greater Profit

THIS is Why Larger LCO's can do a job at a lower cost .... they gain "Scales of Economy" .... Granted there will be waste .... fore those whom don't "Run" the numbers .... don't get Me wrong .... ##'s crunching is the Start ... It begins to show One the Way

Employee benfiets n such are ==> In Direct Cost

Fantasy Lawns
12-09-2004, 01:25 AM
Remember TRUE Over Head Occurs EVEN thou NO BUSINESS has happen or You did not or your employees did NOTHING .... Over Head happens when you are sitting at home .... RIGHT NOW .... at 1am Your True Over Head Cost are still going On ... Unless you work 24/7/365 ..... There MUST be Some time when workers ...."Sit Idle" .... Cost which Occur During this time is .... Over Head

environment
12-09-2004, 01:26 AM
ya but will people pay $43 for a half hour of work, keep in mind I am 21 years old, I have been working in this field sice I was 6, and I have a degree in Horticulture, but its difficult getting credibility with brand new clients. Would I sound insane asking that much

I mean for a site that takes an hour thats $87

Fantasy Lawns
12-09-2004, 01:31 AM
NO ... this is gonna sound OLD but the only STUBID Question is the One NOT Asked ..... gonna find >>>LOTS of Opinion on the Board ... BUT Your are Curious N asking what most should ask them selve .... Each Week ..... Month n Year ....

So GOOD fore You to try n see where you are heading ... How Can I Cut Cost is something I ask My Self Every Week

Richard Martin
12-09-2004, 04:48 AM
ya but will people pay $43 for a half hour of work,
I mean for a site that takes an hour thats $87

It all depends on how many employees you are talking about. If the numbers are for 10 employees then it is not out of line. If the numbers are for 1 employee then you have a problem.

Example:

I used to manage a gas station for Southern Maryland Oil company. The company headquarters were in a large multi-level buiding. They had people all over the place doing this and doing that. They had a large computer room with huge banks of computers. A wild guess would be that it cost them $1,000,000 (probably much more) a year to pay the employees, maintenance, mortgage etc..

Now if my station had to pay those office expenses by itself then it would have gone out of business. But it didn't. The expenses were shared with 23 other stations, a tanker fleet, fuel oil deliveries etc.

I was charged (on paper) $12,000 a year in administrative costs. We were open 18 hours a day, 364 days a year. That breaks down to $1.83 an hour.

I think you need to break your numbers down a little farther and see what the per employee costs are.

I also have trouble seeing $35 an hour of office expense for every hour an employee works in the field.

NC Big Daddy
12-09-2004, 08:05 AM
ya but will people pay $43 for a half hour of work, keep in mind I am 21 years old, I have been working in this field since I was 6, and I have a degree in Horticulture, but its difficult getting credibility with brand new clients. Would I sound insane asking that much

I mean for a site that takes an hour thats $87


You almost had me! Since you were six huh? Here's my advise...Go to college take a few business classes, learn what "Overhead" really is. I'll tell you like I'vie told many others...My MBA works harder that my Turf grass degree ever did.

YardPro
12-09-2004, 08:12 AM
well i broke it into sections
Maintenance division
maintenance equipment $22.18 per hour

office (computer, advertising, parking, etc.) $35.36 per hour

Employees $30.14 per hour

Total for Maintenance $87.68 per hour
$ 1.46 per minute


Construction division
Construction Equipment $34.02 per hour

Office $35.36 per hour

Employees $37.69 per hour

Total for Construction $107.07 per hour
$ 1.78 per minute


Interiorscape
equipment $ 7.91 per hour

office $ 35.36 per hour

employees $ 30.14 per hour

total $ 73.41 per hour
$ 1.22 per minute


complete business overhead $ 197.44 per hour
$ 3.29 per minute


this seems super high.
how can you have a $22.00/hr cost on your maintenance equipment.
if you only have one employee then you're paying $44,000.00/year on equipment??????

if you're 21 and starting out i really think you're figuring the numbers wrong.

twins_lawn_care
12-09-2004, 09:21 AM
I am probably not along the same lines as the full time guys, but have been also reviewing the "actual" numbers of running my business as well. Working part time in it still, I budget the year for 250 hours (25 weeks at 10 hours per) this is less than actual, but to get my "what I need to charge hourly" rate, I use it. without equipment and labor, my costs are $6.70 an hour. Then, depending on what equipment I will use, I worked out the per minute charge for each piece. Did the same thing for the truck, and then I add in my labor. Then I add up my actual costs, determine how it relates to the job, and add on a profit for the company. Doing this makes it very easy to bid jobs once the actual time is known, and so a more valuable tool in evaluating how profitable lawns I currently do are, and which ones I need to charge more on.
Getting the per minute charge on the equipment is basically taking the cost of the tool, adding in maintenance of it, and gas consuming, and diving it all out for the expected life of the tool.
So for an average lawn, my over head is ($6.70), where I would drive 10 minutes ($3.50), mow for 30 minutes with a push mower ($1.56), trim for 10 ($0.34), and blow off for 5 ($0.11), and using ramps ($0.05), and labor ($15.00) my total expenses would be $27.26. this is with 0 profit. so if I charge $30.00, I'll profit $2.74, or 9.13%. If I charge $35.00, I'll profit $7.74 or 22.11%.
it may not be 100% correct in all of my cases, but is a good check on what I am charging.
if anything, i am learning everyday, and this system is 100% better than guessing, which is what I started with last year!

tonygreek
12-09-2004, 10:09 AM
"ya but will people pay $43 for a half hour of work, keep in mind I am 21 years old...
I mean for a site that takes an hour thats $87"

do you quote people hourly rates or per job rates? in our minds, it works out to be the same. in the consumer's mind, one might seem significantly cheaper (per job) than the other. if you tell them "that edging will take you a half hour, so i'll charge you $47" might send them into a tizzy, but they've asked you there for a reason, such as they don't have the time to do it. if you look at the job, figure it in your head, and tell them "$47 dollars for the whole job", the resistance should be less, and the outcome might be predominantly based upon semantics.

for a very loose comparison, in my prior life we bid a project that came in at approximately $3m. we got the gig and all went well. if the break-out of man hours would have been submitted, it would have shown that we our bill-rate for a fresh out of college kid was $165 on up to our partners being billed at $500. comparing the 2 different manners of bidding (total bid vs. hourly break-out), one is much more palatable than the other.

environment
12-09-2004, 10:21 AM
maybe this will help, here are all my maintenance equipment pieces

Redmax String Trimmer (2)
Redmax Back Pack Blower (2)
Push Blower
36" Bobcat Mower
48" Bobcat Rider
54" Bobcat Mower
Dethatcher
Fert. Spreader
Sprayer
Landscape barrels
F350
Cargo Trailer
Mower extras
Fisher V-Plow


now here are my office pieces

Computer
Printer
Phones
Computer software
Advertising
Parking
Misc.
Labtop
Labtop Printer
UnitedEnvironment.com


and finally, here are my labor
Maintenance GM $12 per hour $12.92 after expenses
Maintenance Laborer $8 per hour
Maintenance Laborer $8 per hour $8.61 after expenses

now keep in mind this is only for maintenance, there is still construction and interiorscape, but to figure out my maintenance overhead these are my factors, now if I remove UnitedEnvironment.com and its main components it brings my office down to
$24.08

which makes my maintenance expenses
76.40 per hour
or 1.27 a minute

Mueller Landscape Inc
12-09-2004, 10:34 AM
well i broke it into sections
Maintenance division
maintenance equipment $22.18 per hour

office (computer, advertising, parking, etc.) $35.36 per hour

Employees $30.14 per hour

Total for Maintenance $87.68 per hour
$ 1.46 per minute


Construction division
Construction Equipment $34.02 per hour

Office $35.36 per hour

Employees $37.69 per hour

Total for Construction $107.07 per hour
$ 1.78 per minute


Interiorscape
equipment $ 7.91 per hour

office $ 35.36 per hour

employees $ 30.14 per hour

total $ 73.41 per hour
$ 1.22 per minute


complete business overhead $ 197.44 per hour
$ 3.29 per minute

These numbers can't be right. How many employees are in this model?

Figuring overhead rquires you to forcast how many production hours you have to sell. With a business just starting out, you will probably not be able to sell all those hours your first year which will mean that your overhead costs will be a much higher percentage of the production hours sold, therefore you will not make much or any money. That's why it will take average 5 years to turn a profit with most business's.

How many production hours are you figuring on your mainenance equipment? How many hours are available for your season? What type of equipment? Remember a backhoe has a higher replacement costs than a 21" mower. If you combine the two and average, you will be charging to much for the 21" and not enough for the backhow.

Mueller Landscape Inc
12-09-2004, 10:42 AM
maybe this will help, here are all my maintenance equipment pieces

Redmax String Trimmer (2)
Redmax Back Pack Blower (2)
Push Blower
36" Bobcat Mower
48" Bobcat Rider
54" Bobcat Mower
Dethatcher
Fert. Spreader
Sprayer
Landscape barrels
F350
Cargo Trailer
Mower extras
Fisher V-Plow


now here are my office pieces

Computer
Printer
Phones
Computer software
Advertising
Parking
Misc.
Labtop
Labtop Printer
UnitedEnvironment.com


and finally, here are my labor
Maintenance GM $12 per hour $12.92 after expenses
Maintenance Laborer $8 per hour
Maintenance Laborer $8 per hour $8.61 after expenses

now keep in mind this is only for maintenance, there is still construction and interiorscape, but to figure out my maintenance overhead these are my factors, now if I remove UnitedEnvironment.com and its main components it brings my office down to
$24.08

which makes my maintenance expenses
76.40 per hour
or 1.27 a minute

In the above example, your GM is "management" unless he is actually doing the work too. So he would be figured as overhead and his costs will be added to all production hours as a percentage. The actual workers are figured as part of the job costs. The way you are figuring this model, all three of these guys will be on the job doing the actaul labor which means that $76.40 per hour is for 3 guys which is more reasonable or $76.40 divided by 3 is; $25.47 per manhour. So in any given work day, you will have 24 production hours you can sell.

environment
12-09-2004, 10:45 AM
yes all three are on site working

Mueller Landscape Inc
12-09-2004, 10:51 AM
yes all three are on site working

Ok! Then your actual manhour rate is; $25.47 if all the numbers are correct and all those production hours will need to be sold.

trails end lawn
12-09-2004, 02:06 PM
What is United Environment.com ????

YardPro
12-09-2004, 02:16 PM
You almost had me! Since you were six huh? Here's my advise...Go to college take a few business classes, learn what "Overhead" really is. I'll tell you like I'vie told many others...My MBA works harder that my Turf grass degree ever did.

awesome advise.

i truly believe that most lco's fail due to poor business skills.

YardPro
12-09-2004, 02:19 PM
boy you've got it all screwed up.

environment
12-09-2004, 02:38 PM
well, telling me I got it all screwed up doesnt help me much, how could i fix it, I dont exactly have the time or money right now to dive back into a few college classes for business skills, thats why I am here asking for help

YardPro
12-09-2004, 05:20 PM
sorry bout that

here's a sample of what you need to do.

for your maintenance equipment.

take EACH piece of equipment individually.
take it's purchase price and divide it by it's useful life. (2000hrs for example)
that's the equipment costs, then add in fuel consumption, wearable items (blades, string, belts, etc) and life long repairs (in the 2000hr timeframe).

so you have a $7000.00 mower plus $1500 in repairs (high estimate)
that's $4.20/hr
then do the same for each piece of equipment.

then take a single operator and add his cost (his wages, plus taxes, insurance, sick leave and any other bunuses or perks and an average of non billable hours) to the cost of the machine he's using.

take a $12.00/hr operator. figure in $8.00/hr in overhead and put him on a mower.

he costs you $24.20/hr to work.

figure $10.00/hr for vehicle to transport ( if more than one person are there, do not add the truck to the other people).

this brings his total to about $35.00/hr

if you are getting $60.00/hr he's making you $25.00/hr.

you will do this with easc crew member, and the tools they use on a job.

this will get your net overhead recovery figure.


this help?????

environment
12-09-2004, 09:06 PM
i wish i could show you my actual overhead spread sheet so you could get a better grasp of what i have, but i actually have a great deal of what you described up top, but yes that helps a good deal, it fills in the gaps for me.

I end up with $31 per man hour.

MacLawnCo
12-10-2004, 11:10 AM
find a local chapter of SCORE or go to your local SBA office. they will steer you in the right direction.

Norm Al
12-10-2004, 11:17 AM
overhead?
http://media.big-boys.com/files06/bbpics/pic0371.jpg

YardPro
12-10-2004, 11:35 AM
i wish i could show you my actual overhead spread sheet so you could get a better grasp of what i have, but i actually have a great deal of what you described up top, but yes that helps a good deal, it fills in the gaps for me.

I end up with $31 per man hour.

sounds like you are an overhead heavy company.

if you did it on excel email it to me and i'll look over it.

rodfather
12-10-2004, 11:57 AM
i truly believe that most lco's fail due to poor business skills.

I would tend to concur 100% with that statement.

My company is where it is today from my business knowledge, not how fast I can mow or being able to recognize every type of grass there is on the properties we maintain.

DennisF
12-10-2004, 12:31 PM
i truly believe that most lco's fail due to poor business skills.


This statement can't be emphasized enough. The SBA and SCORE as well as many other business support organizations have estimated that 97% of all business failures are the result of poor management of the business. It doesn't matter how good you are at your craft...if you don't know how to run "the business end" of the business, you will probably fail.

Fantasy Lawns
12-10-2004, 01:54 PM
Yes this is the cold hard truth .... that of every 10 small businesses, 7 will survive their first year, 3 will still be going after 3 years, and only 2 will remain after 5 years.

I'd have to say that I see that most failures occour from "tunnel vision" ..... we wake up one day n believe in a dream so much that we can not take criticism in the correct lite .... (I'm talking in general NOT in reference to this thread)

Those whom slowly go out of business is due in part on one's own refusal to believe something is wrong ..... many forget one very important factor in any business .....the competition

In dismissing the competition .... we fail to identify the vary base of our economy .... if you can not be competive in your market you will fail ...... ssoooo MANY don't know their own numbers ..... which in turns forces them to ask ..... how much too charge for this or why are my cost so high

the primary reason for failure of startups within three years is usually...management's failure to act, or management's failure to react, or management's failure to plan