View Full Version : Diminishing returns on employees
12-25-2004, 12:48 PM
By myself I can produce $50/hr in cutting revenue. If I add an employee, what should the cutting revenues be? I can't see it jumping to$100/hr in cutting revenues. I guess a better way of asking this question would be how much revenue should an employee produce?
If two can get the work done in half the time that's 100.00 hr. but the truth is 2 can get the work in in about 2/3 the time.
I had accounts I started doing by myself several years ago. One of those accounts took me 6 hours solo. I added one man and it cut the time down to 3 hours and 45 minutes on a good day with no problems. I added a third man and it took us 2hrs. 45 min. You would expect 3 men to cut the time into a third of the solo act but it doesn't.
What did I do? I put the other two guys in there own truck and trailer with 2 61" walk behinds with velkes. When we pulled up to an account with 2 trucks and three 61" mowers. When the job was 80% done I would send the other 2 guys in their own truck down the road to the next job while I weed whipped and blew off walks etc. Granted, I did most of the real physical work but I liked it. Our efficiency grew.
This worked out pretty well as we worked 4 ten hour days instead of 5 eights and mowed 12 to 1500 dollars in grass per day. Fridays I would mow solo and do around 600 and Saturday 350 in a few hours. Sunday was off unless rain messed us up.
Once my employees hit 40 hours they were done for the week. They made 7 bucks an hour at 80 hours = $560 X 124% payroll tax + 694.00 per week in total payroll expense. They helped me bring in 5500 - 6000 dollars per week plus I had my solo work, for about 28 weeks per year.
What did they make me per hour? It's hard to tell with any accuracy. I looked at it as in total revenue dollars minus expenses. I was more interested in what I made per hour. Example: if we cut 1500 in grass in a ten hour day I took out labor at 7x2x10x124% tax = $173.60 and fuel at around $25.00 = $1301.40 divided by my ten hours to supervise and work my can off gave me $130 an hour. I wrote my equipment off a long time ago, advertising was usually none and billing admin etc., well look, I 'm saying I made that much per hour then I wrote off everything I could make fit after that that but those expenses were mostly add ons.
I had a great business and made over 6 figures a year. I am now in the golf business but sometimes I still miss how easily we made money in lawn business. Golf is kind of tough right now.
12-25-2004, 04:22 PM
Thanks for the detailed response. Did you only specialize in grass cuttigs-no extras? And I noticed you added 24%, did this cover all taxes,insurance, workmans comp etc. on your employees? I know as an employer you match 7.65%(ss)
what are the other percentages? I had to pay 5.19% for workmans comp when I owned a pizza business is it similiar in this business?
12-25-2004, 08:25 PM
I am not there (YET) but from what some longer term people have explained to me, it is difficult to make the jump from solo to 2 or 3 man team if you don't plan on expanding past that.
One man, (owner) is usually the most effiecient (most motivated). Adding a helper will get you 50% increase in productivity. Adding a second helper will get you 40% more productive. Let me explain. If you can do something in 10 hours with a helper you should get it done in 6.5 hours (but that is 13 man hours) A third helper brings it to 4.5 hours. Still at about 13 man hours. It seems like a losing game.
The advantage come in 2 ways. First you are now (3 man team) able to more than double the weekly production. If monday took 10 hours, it now takes 4.5 hours. So you can double your revenue.
Second advantage, you pay yourself $25 -35 per hour, you pay them $7-12 and fixed expenses are barely changed and variable expenses don't change much. So if you are billing at $50 per hour (2000 hrs in a year solo) is $100,000 billed with (@$25 net $50k to you) (using your numbers) Billing double gets you (@$12x2) an extra $55k (less additional expenses) call it $40K net to you. So by hiring 2 guys you almost doubled your salary.
Later hire 2 more guys to replace yourself and do $250k in revenue, stop doing production. still make $80K
12-25-2004, 08:30 PM
An old saying is "two together can do the work of three alone" and over the years I've found it to be rather acurate.....
12-25-2004, 08:48 PM
no matter how you slice it you will make more with more employees. if you have the work to keep them busy, and bill accordingly.
just don't have them standing around. you will need to think about how to do it affectively.
we also will stagger guys similar to sated above.
24% is a figure I used regularly to calculate total payroll expense but I think the actual expense was a little less. Example: worker's Comp varied year to year.
We also did installs and landscape maintenance. I tried to schedule big jobs before the grass started growing or in the middle of the summer when the turf needed a break. One of my best years was 1999, a horrible drought for the midwest. We didn't have any rain out days and we did landscape jobs for 2 weeks when it was too dry to mow.
12-26-2004, 07:51 AM
we do the same as far as installs go.
early spring, and late fall. here we don't get the mid summer break. so from easter to laborday almost no installs for us.
12-26-2004, 10:32 AM
if you double your work load 2 people can do it! but most people add an employee and dont add enough work!
12-26-2004, 10:45 AM
that's not really true. if the two share one vehicle and one route, then they cannot double thier load.
you have two sharing ride time etc.
you split the route, then two can double the workload.
12-26-2004, 05:41 PM
it depends on your route and what your properties are like and how good your helper is.
If you have a day that is only 3 properties the increased efficiency of having 2 people should make you more than twice as procuctive. Or if you have stops that have 3-5 lawns with no driving that also makes it so you can double production.
Besides if you have two trucks you have double drive time as well, not to mention double gas bills.
12-26-2004, 06:10 PM
You are also paying an employee to ride the truck...so make suer you remember drive time not just mowing time when you are trying ot figure deminishing return
12-26-2004, 08:59 PM
if 1 guy completes this amount of work with the travel time figured into his day,,,,,,then 2 guys with travel time will equal the same acomplishments!
12-26-2004, 10:42 PM
You could cut the time spent at each lawn in half with a helper, but due to drive time, it is unlikely that you will double your output of lawns for the day.
12-29-2004, 03:28 AM
There are theoretically improvements and then there is reality. On the jobsite, your employee might cut your workload down 35-40 percent. Then you have to factor in drive time (two butts in seats instead of one), time you spend instructing and directing instead of working, various delays that come with employees (late for work, etc), absenteeism throwing your schedule into chaos, etc. You also are in a seasonal business and you may find yourself struggling to keep him busy, laying him off, or paying him when he's doing marginal work. It's tough unless you find a special person, or as so many are doing, break the law and cut corners.
The bigger the jobs the more an employee saves you in terms of time and the more it pays to have an employee. The more physical the type of work, the more it pays to have employees.
I have found that I do about the work of a two man employee crew by myself, but then I have the profit motive they do not. Working as a helper, with the boss there to closely supervise them, they will do more like 75% of the work that you can do. But of course that varies. The smart, hardworking, hustling ones wind up working for themselves.
Tn Lawn Man
12-29-2004, 11:16 AM
It has been my experience that if you have an employee that works as hard as you do you can double your profit.
However, an employee that works as hard as you do is like finding a diamond mine...rare.
I have found that the average "good" employee will work about 2/3 as hard as you do.
Therefore, they are worth the expense if:
You pay them accordingly
You keep them busy....downtime will eat your lunch
12-29-2004, 11:37 AM
Bruce32- Good points!
Are you a solo operation and if so how's business?
12-29-2004, 11:54 AM
Depending on how full your routes are. But one man crews will be more efficient then 2 man crews. But 2 man crews will get more done. If you can at all possible complete all work with one man then that is the way to go.
I think a very good way to run a 2 crew operation. Is to send one guy to maintain the accounts that don't have a lot of trimming. And take another employee with you to maintain the lawns with more landscaping etc. I have noticed on the jobs with more trimming, the cutter and the trimmer, blower gets done about the same time.
The reasons not to send the employees together. First, they are more likely to goof off. Second, This would allow you to sit your but on a mower all day and never have to touch the trimmer or blower. You could be a real jerk and never lift the gate again too :)
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