Diminishing returns on employees

Discussion in 'Lawn Mowing' started by K.Carothers, Dec 25, 2004.

  1. K.Carothers

    K.Carothers LawnSite Bronze Member
    Posts: 1,124

    By myself I can produce $50/hr in cutting revenue. If I add an employee, what should the cutting revenues be? I can't see it jumping to$100/hr in cutting revenues. I guess a better way of asking this question would be how much revenue should an employee produce?
     
  2. J&R

    J&R LawnSite Senior Member
    Posts: 835

    If two can get the work done in half the time that's 100.00 hr. but the truth is 2 can get the work in in about 2/3 the time.
     
  3. osc

    osc LawnSite Senior Member
    Posts: 502

    I had accounts I started doing by myself several years ago. One of those accounts took me 6 hours solo. I added one man and it cut the time down to 3 hours and 45 minutes on a good day with no problems. I added a third man and it took us 2hrs. 45 min. You would expect 3 men to cut the time into a third of the solo act but it doesn't.
    What did I do? I put the other two guys in there own truck and trailer with 2 61" walk behinds with velkes. When we pulled up to an account with 2 trucks and three 61" mowers. When the job was 80% done I would send the other 2 guys in their own truck down the road to the next job while I weed whipped and blew off walks etc. Granted, I did most of the real physical work but I liked it. Our efficiency grew.
    This worked out pretty well as we worked 4 ten hour days instead of 5 eights and mowed 12 to 1500 dollars in grass per day. Fridays I would mow solo and do around 600 and Saturday 350 in a few hours. Sunday was off unless rain messed us up.
    Once my employees hit 40 hours they were done for the week. They made 7 bucks an hour at 80 hours = $560 X 124% payroll tax + 694.00 per week in total payroll expense. They helped me bring in 5500 - 6000 dollars per week plus I had my solo work, for about 28 weeks per year.
    What did they make me per hour? It's hard to tell with any accuracy. I looked at it as in total revenue dollars minus expenses. I was more interested in what I made per hour. Example: if we cut 1500 in grass in a ten hour day I took out labor at 7x2x10x124% tax = $173.60 and fuel at around $25.00 = $1301.40 divided by my ten hours to supervise and work my can off gave me $130 an hour. I wrote my equipment off a long time ago, advertising was usually none and billing admin etc., well look, I 'm saying I made that much per hour then I wrote off everything I could make fit after that that but those expenses were mostly add ons.

    I had a great business and made over 6 figures a year. I am now in the golf business but sometimes I still miss how easily we made money in lawn business. Golf is kind of tough right now.
     
  4. K.Carothers

    K.Carothers LawnSite Bronze Member
    Posts: 1,124

    Thanks for the detailed response. Did you only specialize in grass cuttigs-no extras? And I noticed you added 24%, did this cover all taxes,insurance, workmans comp etc. on your employees? I know as an employer you match 7.65%(ss)
    what are the other percentages? I had to pay 5.19% for workmans comp when I owned a pizza business is it similiar in this business?
    Thanks
     
  5. Precision

    Precision LawnSite Silver Member
    Posts: 2,995

    I am not there (YET) but from what some longer term people have explained to me, it is difficult to make the jump from solo to 2 or 3 man team if you don't plan on expanding past that.

    One man, (owner) is usually the most effiecient (most motivated). Adding a helper will get you 50% increase in productivity. Adding a second helper will get you 40% more productive. Let me explain. If you can do something in 10 hours with a helper you should get it done in 6.5 hours (but that is 13 man hours) A third helper brings it to 4.5 hours. Still at about 13 man hours. It seems like a losing game.

    The advantage come in 2 ways. First you are now (3 man team) able to more than double the weekly production. If monday took 10 hours, it now takes 4.5 hours. So you can double your revenue.

    Second advantage, you pay yourself $25 -35 per hour, you pay them $7-12 and fixed expenses are barely changed and variable expenses don't change much. So if you are billing at $50 per hour (2000 hrs in a year solo) is $100,000 billed with (@$25 net $50k to you) (using your numbers) Billing double gets you (@$12x2) an extra $55k (less additional expenses) call it $40K net to you. So by hiring 2 guys you almost doubled your salary.

    Later hire 2 more guys to replace yourself and do $250k in revenue, stop doing production. still make $80K
     
  6. Olylawnboy

    Olylawnboy LawnSite Senior Member
    from Oly Wa
    Posts: 312

    An old saying is "two together can do the work of three alone" and over the years I've found it to be rather acurate.....
     
  7. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    no matter how you slice it you will make more with more employees. if you have the work to keep them busy, and bill accordingly.
    just don't have them standing around. you will need to think about how to do it affectively.

    we also will stagger guys similar to sated above.
     
  8. osc

    osc LawnSite Senior Member
    Posts: 502

    24% is a figure I used regularly to calculate total payroll expense but I think the actual expense was a little less. Example: worker's Comp varied year to year.
    We also did installs and landscape maintenance. I tried to schedule big jobs before the grass started growing or in the middle of the summer when the turf needed a break. One of my best years was 1999, a horrible drought for the midwest. We didn't have any rain out days and we did landscape jobs for 2 weeks when it was too dry to mow.
     
  9. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    osc
    we do the same as far as installs go.
    early spring, and late fall. here we don't get the mid summer break. so from easter to laborday almost no installs for us.
     
  10. Norm Al

    Norm Al LawnSite Bronze Member
    Posts: 1,227

    if you double your work load 2 people can do it! but most people add an employee and dont add enough work!
     

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