Originally Posted by foreplease
Welcome Blade Runners, LLC. That is a doozie of a first question! Interestingly, the answers are among the first things you need to know and understand in order to build a lasting profitable business with fairly predictable (and repeatable) results. How quickly and how well you are able to scale (grow) your business will depend on sales as well as accurate expense forecasting - and the discipline to follow your plan. The more thoroughly you plan, the easier it will be to follow.
There will be expenses you did not anticipate. Try to not ignore or forget any you should have known about. 32vid and Bryan provided good basic lists. To those you need to add something for advertising. The less experience you have the more you will tend to underestimate the annual amount you will spend on advertising IMO. Telephone service is another cost. Administrative costs - let's start with the time it takes you or someone to do all the things to find and invoice work that customers do not expect to see on their invoices - need to be figured in at some wage. Otherwise, after mowing and trimming for 7-8 hours several days a week you will find yourself coming in early and staying late to visit customers, prepare estimates, and send out invoices. Keep in mind people are not going to begin to call simply because you got some equipment and filled out papers at the courthouse
Employees, when you get to the point of needing any, are a huge cost that needs to be anticipated, covered with dollars of sales, and justifiable everyday. It is important to do this legally: withholding and later remitting payroll taxes; paying your part of their FICA; paying for workman's compensation insurance, unemployment taxes. Eventually some of your people will deserve and expect paid time off, which is a cost - one you cannot invoice, obviously, since they are not working during those hours. At some point you may need to provide health insurance (don't forget your own whether it is deductible for taxes or not). Overtime: you will have to pay time-and-a-half for hours worked above 40. You will continually ask yourself if it is better to do that or add more employees, or work more hours yourself. For rough planning purposes, you can assume employee fringe benefits, which are costs to you, will amount to between 23% and 30% of the hourly wage or salary you pay them.
In structuring your fees, think in terms of fixed versus variable costs. Ask yourself which costs you will have whether or not your next estimate turns into a job. Those are fixed costs. Costs you incur only because of the job you are currently doing are variable costs. JC had some good points about determining profitability and planning for it. What you are essentially trying to do is exceed your break even costs by as much as possible with, I'll say it, as little work as possible. Knowing this, every job you take absolutely needs to make a margin able contribution to your overhead.
Now here is the kicker many people do not take into account: if you are clearing 20% on your average mowing job the two ways you make identical progress toward your annual break even point are
1) increase sales by $100
2) reduce annual expenses by $20
Which is easier? Which is more important? They are both important. Neither is easy.
Foreplease, thanks for the indepth info!!!! Definelty things to consider for the long haul!! If you dont mind me asking how long have you been in business and how many employees do you have on average?