I know that early on in a busines it is difficult to create a budget and to put in stone what certain things will cost. As a few years pass you will become more and more accurate because you can look at trends and clearly "guess" what your variable expenses will be.
That being said, here is some quick math....
1.) If you have 250 working days a year and you have 9 billable hours per day to sell that means you have a total of 2,250 billable hours to sell PER MAN.
* Please understand that the definition of a billable hour is time on the client's property - not drive time, lunch time, nonsense/inefficient time which you pay out in labor often times....
2.) So let's say that you look at all of your expenses - accounting, legal, advertising, fuel, maintenance, materials, insurance, labor, etc.... (there are more than this obviously, but I am just stating a few) and you determine that you are going to spend $150,000... that means
3.) You take that $150,000 and you divide it by the total number of billable hours you have which is 2,250. Doing that math you determine that you need to charge clients NO LESS than $66.67 per hour.
4.) Now if you have 2 people doing the work in the field, you divide the $66.67 by the 2 guys and now you arrive at $33.33 per hour per man that you need to charge your clients per hour JUST TO COVER COSTS
5.) Now let's assume you want to make a 25% profit margin on each billable man hour - that means you would need to take $33.33 multiplied by 25% which gives you a billable hourly rate of $41.66 per man.
The beauty of this math is that you should be able to be very close to determining the gross revenue you can generate for the year by taking 2,250 hours and multiplying that by $83.32 (two men at $41.66 per hour), which would then total $187,470 in gross sales, which leaves you with a pre-tax profit of $37,470, which does not include your salary which is already accounted for in the expenses.
Please keep in mind this is very crude math. There are a lot of ways to determine and break down your expenses and how to recover them.
The process is this:
1.) Make a budget for the year to determine your projected expenses
2.) Determine how you will recover the costs/expenses
3.) Estimate accordingly (expense + profit)
4.) Go back and track estimates to make sure they are being done in the amount of time you projected the work to take
5.) Always tweak until you get it right
Former Owner of LawnSite.com & PlowSite.com
Lawn & Landscape Business Owner Since 1989
The Lawn Letter: http://www.thelawnletter.com
My Blog: http://www.lawnbusinessreport.com
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