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Business costs

Discussion in 'Starting a Lawn Care Business' started by greenchoppers, Sep 3, 2009.

  1. greenchoppers

    greenchoppers LawnSite Member
    Posts: 162

    Hello Forum Members,

    I have been thinking about how to calculate my REAL costs of cutting any one particular yard. Obviously, I know the fuel costs for driving to and operating equipment at the site. But how do you guys calculate the real cost to operate your equipment?

    I have a 48" Toro ZTR and can obviously figure out about how much fuel I will burn operating the ZTR for a single minute, hour, day etc. I am struggling to find ways to calculate the costs of owning the machine, operating the machine (less gas), and on top of that providing and paying for an operator to drive that machine.

    I need some help trying to figure this out so that I can plan for the financial health of my business and its future endeavors. Any help given is appreciated.

    Thanks. This forum is a great tool for our industry.
  2. mowerbrad

    mowerbrad LawnSite Fanatic
    Posts: 6,273

    I was having a talk with my toro/stihl dealer a while ago and we were talking about how to calculate the costs of operating a ztr. He was saying that for their demo units they figure for every hour the machine runs it costs $10. That $10 include depreciation of the mower and maintenance costs of the mower. Now the mower that we were talking about was a 60" toro (about $11000 new) so you would have to adjust that number for smaller and larger mowers.

    As for insurance on the mower, if you run the mower 4 hours per day for 5 days for 7 months out of the year you would put about 600 hours on the mower. And if you pay $800/year for general liability insurance (which should cover your mower) that would mean that you are paying about $1.30/hour for insurance.

    To have an employee to run the mower you just need to know how much you will be paying them an hour. If you figure your employee is paid $10/hour then to run the mower is another $10/hour.

    So when you put this all together your operating costs of this mower with an employee would be $21.30/hour minus fuel costs of the mower. With the fuel costs added in (mower using 1.25gal/hour and fuel costs of $3.50/gal) the hourly cost of running that mower would be $25.68/hour. Now this price is just to run ONE mower, so when you get into running multiple mowers and equipment, you can see how the price increases so significantly.
  3. FYS777

    FYS777 LawnSite Silver Member
    Posts: 2,305

    thank you mowerbrad, this was very informative, made me do some more thinking!!! if thats possible for me.:laugh::)
  4. SangerLawn

    SangerLawn LawnSite Senior Member
    from indiana
    Posts: 736

    If you have workmanÂ’s comp it is based on your payroll. That also needs added in.
  5. mowerbrad

    mowerbrad LawnSite Fanatic
    Posts: 6,273

    This is true. Since I actually don't have any employees I don't have workman's comp. But it really isn't a "huge" expense when you compare it hourly to other costs.

    So to figure this expense out hourly....

    If your employee works an average of 40 hours per week at $10 per hour, he would be making $400/week. Workmans comp for a job such as this would cost 2%-3% of the employees weekly pay roll. So each week for the 40 hours the employee worked you would pay about $10/week (2.5% of payroll) for the workmans comp. And when you divide that $10/week by the 40 hours the employee worked, you would be able to figure out that it would cost $0.25/hour for workmans comp on just one employee. So just add that cost onto the previous number and you will come out with the total hourly price to run a ztr, which should be about $26/hour with fuel.
  6. mommacutz

    mommacutz LawnSite Member
    Posts: 120

    I just recieved a quote from http://www.bearwiselandscapers.com/ 4.2% and I thought that was a good deal in Florida. I guess I should really check around.:hammerhead:
  7. g21

    g21 LawnSite Senior Member
    Posts: 326

    I really don't recommend figuring your equipment costs like that. You will not be competitive and it is really inaccurate. You should either be "expensing" out your mowers or "depreciating" them over a period of time, ( 3 years or so) It goes under your "equipment ever-heads" in your P&L. Don't go crazy trying to figure out the hourly costs of using different pieces of equipment. It will severely distort your bid hourly rate. I have given you a link on how to calculate your manhour rate.

    If you need any further help, don't hesitate to ask.

    good Luck.

  8. mommacutz

    mommacutz LawnSite Member
    Posts: 120

    Great info thanks :cool2:
  9. hackitdown

    hackitdown LawnSite Silver Member
    Posts: 2,505

    There have been loads of threads on this question. But this is the way I think of the mower cost, and some of the assumptions I use:

    Purchase price: $8,000
    Planned useful life: 2,500 hrs
    Sale price after use: $2,000
    Cost to run for 2500 hrs: $6,000, or $2.40 per hour
    Fuel costs me about $1.25 per hr (this year)

    Those are the big ones...but that is just the beginning. There is interest on the loan. You need to add in the cost of maintenance and repairs, which can be all over the place, and tough to forecast. DIY service, or dealer service. OEM parts, or aftermarket. Regular maintenance, or just sometimes.

    Anyway, for me, it all adds up to about $5 per hr. But remember, that is just the mower.
  10. topsites

    topsites LawnSite Fanatic
    Posts: 21,653

    I like hackitdown's formula, that's a pretty good analogy of things, although it doesn't
    include maintenance but still, that's the way to figure these things.

    As for the truck, you also gotta figure tires, maintenance, insurance, etc.
    For myself, I find 50 cents a mile an easy figure to deal with, for starting out and even today
    that's what I use now that's just me, but it eliminates a lot of headache, 50 cents a mile, done.
    Can't tell you if it will work for you, but I thought I'd mention it...

    The trailer...
    I figure open ones last about 10-12 years, because the wooden boards start to falling apart, you might get 12-14 maybe 15 years out of it.
    They cost around $1,500 new, so $100 a year cost, plus $100 a year on tires, lucky us that's about all they need.
    So $200 a year for the trailer, roughly speaking, unless you get an enclosed then I don't know.

    Last edited: Oct 23, 2009

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