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  #41  
Old 01-02-2013, 05:41 PM
coolluv coolluv is offline
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Location: Atlanta
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Quote:
Originally Posted by Sean Adams View Post
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...
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  #42  
Old 01-02-2013, 06:38 PM
wz2p7j wz2p7j is offline
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Join Date: Jan 2009
Posts: 50
Mow at $35/hr and Make Money - No Way

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
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3 GMC 4500's
3 GMC 2500's
3 21' trailers
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5 60" Exmark riders
1 60" Exmark walk behind
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  #43  
Old 01-02-2013, 06:47 PM
Sean Adams Sean Adams is offline
 
Join Date: Jun 1999
Location: Pennsylvania
Posts: 3,623
Quote:
Originally Posted by wz2p7j View Post
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.
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  #44  
Old 01-02-2013, 06:54 PM
AintNoFun AintNoFun is offline
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Location: Northeast
Posts: 1,771
Quote:
Originally Posted by Sean Adams View Post

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..
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  #45  
Old 01-02-2013, 07:08 PM
Sean Adams Sean Adams is offline
 
Join Date: Jun 1999
Location: Pennsylvania
Posts: 3,623
Quote:
Originally Posted by AintNoFun View Post
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....
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  #46  
Old 01-02-2013, 07:14 PM
djagusch djagusch is online now
LawnSite Gold Member
 
Join Date: Mar 2006
Location: MN
Posts: 3,430
Quote:
Originally Posted by wz2p7j View Post
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.
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  #47  
Old 01-02-2013, 07:49 PM
wz2p7j wz2p7j is offline
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Join Date: Jan 2009
Posts: 50
Quote:
Originally Posted by Sean Adams View Post
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
__________________
1 GMC 6500
3 GMC 4500's
3 GMC 2500's
3 21' trailers
1 26' trailer
9 72" Exmark riders
5 60" Exmark riders
1 60" Exmark walk behind
1 34" Trim mower
1 16' Jacobsen
1 11' Jacobsen
Some other stuff ...
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  #48  
Old 01-02-2013, 08:38 PM
Duekster Duekster is offline
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Join Date: Jan 2007
Location: DFW, TX
Posts: 7,971
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.
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  #49  
Old 01-03-2013, 09:13 AM
Efficiency's Avatar
Efficiency Efficiency is offline
LawnSite Bronze Member
 
Join Date: Apr 2011
Location: zone 6
Posts: 1,003
Quote:
Originally Posted by wz2p7j View Post
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
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If this post seems mean, it's probably because I'm drunk posting. Maybe my next one will be better...
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  #50  
Old 01-03-2013, 12:01 PM
snomaha's Avatar
snomaha snomaha is offline
LawnSite Senior Member
 
Join Date: Jan 2004
Location: midwest
Posts: 496
Quote:
Originally Posted by Sean Adams View Post
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.....
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