cost of doing business

Discussion in 'Lawn Mowing' started by oldturf, Nov 1, 2004.

  1. oldturf

    oldturf LawnSite Member
    Posts: 221

    can't help but notice that there are a lot of questions about what to charge for your time. I can give you an example of what my cost are and you can go from there. I run a four man crew including myself. I pay my men $10.00 an hour,state and fed. unemployment cost,fica,medicare and workman comp cost 26.34% bringing cost to $12.63. Then add lia. $.75 bringing total to $13.38. We use 62" Toro ZTRs which I figure the cost and main. at $8.00 per hour,trans portation at $1.25, depreciation at .84 and non productive time at $2.97( I figure we have a 20% down time between jobs etc.). Now add advertizing at .47, rent and utilities at $1.42 and fuel at $2.00. This gives me a total of a little over $30.00 an hour.This is close but not all. I charge $45.00 an hour and figure a season at 4,800 hours for a total gross income of $216,000.00. Don't sound to bad except that my share, using these figures, comes to about $70,000.00. Except it never actually comes to that, more like aroud $60,000.00 then taxes and I wind up with about $53,000.00. Boy we are getting rich, I wish. So if you think this is a get rich quick deal then you are wrong , it is a decent living ,controling your own life in an enjoyable atmosphere. If you are charging less than around $45.00 per man hour then you are hurting yourself and everyone else in the business. Sorry for running on so long but people need to know that this is a business and needs to be run like one and pay taxes like one.
  2. green with envy

    green with envy LawnSite Member
    Posts: 219

    Old Turf, I did'nt think you ran long!! I thought you were clear and to the point! I know I wont get rich doing this but I like my boss now!!

    Welcome to Lawn site

  3. kickin sum grass

    kickin sum grass LawnSite Senior Member
    Posts: 628

    You mean we won't get rich at this.
    oops to late.......... You should have told me that before I bought that vacation home.........not
    :dizzy: :waving:
  4. kickin sum grass

    kickin sum grass LawnSite Senior Member
    Posts: 628

    Thats the worst part of this business is having to sit down and keep going over your numbers to stay profitable. It is a have to but hate to situation. Make sure you know where every penny is spent. Even the equipment that is paid for or being paid for cost you something in repair, maintenance, and don't forget replacement.
  5. Runner

    Runner LawnSite Fanatic
    Posts: 13,494

    This is nothing more than someone once again who knows their cost, has business experience, and has carefully analyzed it and has it dialed in. There is more work, administrative and otherwise here than what many lco's ever put into their business in a lifetime. Speaking of which, the ofice and administrative expenditures were not even MENTIONED here. So, as I say, THIS is a fine example of just what this thread is entitled...the cost of doing business. I can certainly respect (and admire) the work that went into these numbers for this post. Here in Michigan though, our hourly cost per $10 per hour employee is much higher.
    Thank you for this post, and I hope that many of our younger entrepeneurs read it.
  6. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    last year it cost me $29.07 per hour to do business, but since I downsized this year, only worked one employee part time, and really watched my budget it only costs me $9.09 per hour and I have a profit of 65.87%, compared to last years 26.18%. HUGE difference!!!
  7. mbricker

    mbricker LawnSite Senior Member
    Posts: 505

    About 5 years ago I started thinking about how much time I personally spend on the tasks that aren't directly billed. examples: billing, collecting, banking; record-keeping, bookkeeping, tax preparation; equipment and truck maintenance and repair; writing bids, estimates; disposal of lawn waste by composting, burning limbs, hauling to the city compost facility; for that matter, the time sitting in the truck driving from job to job. I came up with a figure that I really can hardly believe:

    For a week in which I do 40 hours of billable work, I think I average about 25 hours on the unpaid tasks.

    I consider that a cost, and finally I assigned a value (very low) of $15 an hour to that, for purposes of including that time when figuring my cost of doing business.

    How do the rest of you do this?
  8. Mark McC

    Mark McC LawnSite Bronze Member
    Posts: 1,565

    This year and next, I'm a workaholic, so I don't drive myself nuts trying to figure out what I net per hour. Third year, I'll start thinking about such things. All I'm concerned with is whether I'm making a living.

    I do my estimates based on $40 per man hour, but I maybe should shoot for $45.
  9. Island Lawn

    Island Lawn LawnSite Senior Member
    Posts: 632

    Thay's a mighty tight belt you have there.

    Mine cost me just under $18 w no employee!
    I bid @ $45, but it's hard going)

    I'm figuring somewhat less than 2000 hrs per yr
    I assume your somewhat above that, and therefore can spread your overhead more...

    am i kachin on?
  10. Richard Martin

    Richard Martin LawnSite Fanatic
    Posts: 14,700

    I'm not seeing (and rarely see here at Lawnsite) any mention of corporate taxes. I'm going to assume that no-one here is incorporated for the purpose of discussion.

    When you guys figure your profits are you also taking into account that you have to pay yourself? I know that it is usually only associated with PLCs, LLCs and INCs but it is also an invaluable tool for determining whether or not you are making money as a businessman or just working for yourself.

    I asked a friend of mine (I reference him often here at Lawnsite) how much he was paying himself. He has 2 employees in addition to himself and they all work together. He said, "whatever is left over". I said that nice but how do you know if your business is making any money. He said because his bills were paid and there's money left after that. We went on about this for about 10 minutes before I gave up. He could not grasp the concept that he would have to assign himself either a theoretical salary or an hourly pay in order to determine profitability of his business.

    I pay myself the same as I would pay someone else to do the same job.


    Crew leader = $15 per hour
    Office worker = $10.00 per hour
    Mechanic = $15.00 per hour

    I know that this is getting finite with the numbers but it is what you have to do to determine profitability as a sole proprietor. You can also add in the 1/2 of FICA if you really wanted to get technical. There is no other way. If you were to actually sit down and run these numbers you might be suprised at the results.

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