Don't know what to charge? Let me help.

Discussion in 'Landscape Architecture and Design' started by tthomass, Apr 14, 2007.

  1. tthomass

    tthomass LawnSite Gold Member
    from N. VA
    Posts: 3,496

    I just replied to a post lending some helpful insight on this commonly asked question. First, I'm a professional landscaper, not an accountant but if you "burn this into your brain" you can make it through this season and into the next.

    Example.
    A) Question to remember: How much do I charge to put down 10 yards of mulch that costs me $20 per yard?

    MONTHLY OVERHEAD EXAMPLE:
    +Truck payment $1,000
    +Insurances $1,000
    +Wages $6,000
    +Rent $1,000
    +Gas and some other expenses that you CAN calculate $1,000
    =$10,000
    =$10,000 MONTHLY OVERHEAD PAYMENT

    $10,000 MONTHLY OVERHEAD PAYMENT / 4 weeks = $2,500 per week OVERHEAD PAYMENT

    $2,500 per week OVERHEAD PAYMENT / 5 business days = $500 per day OVERHEAD PAYMENT

    So what we've got here is a need of $500 NET ( NET = $ after expenses ) per day just to cover operating expenses and break even.

    Back to the mulch question. Costs $20 per yard and "what do I charge". Well if its plain old mulch I am around $90 per yard that leaves me $70 per yard to put towards my "$500 per day OVERHEAD PAYMENT". So 10 yards = $900 - $200 cost of mulch = $700 - "$500 per day OVERHEAD PAYMENT" = $200 profit for the day.

    Did I break even there? Sure. I had a lady/tire kicker call me wanting 2 yards of mulch. I told her $500 over the phone as not to waste my time driving to her home and explained thats weeding, edging etc. She then asked how much if we don't do the edging etc, I said $500. Needless to say I did not hear back from her. Was there decent $, sure, but there is no such thing as a "quick" job. Its 1/2 day or full day after you do the running around and prep between jobs. Say I did the usual $90 per yard and instead of covering a 1/2 day "OVERHEAD PAYMENT" of $250 I come out with $140 after only the cost of mulch. I just paid her $110 for me to work..........no thanks, I just lost $.

    Back to the mulch again. This time its in the back yard, up some steps, around the dog poop, through a fence and up a hill. Lets just say that 10 yards was going to be a 1 day job. Now with the added complexity of the job it will actually take me 1.5 days. My "OVERHEAD PAYMENT" is now $750 after adding the extra 1/2 day. So remember before, I was leaving with $200? Now I just paid $50 to the customer for me to work......no thanks, I just lost $.

    I use mulch as it is a very simple thing we can all relate to for an example. I do understand that sometimes you need help to get a "feel" for the market such as bidding a commercial job vs a residential job. ****FIRST**** know your overhead and break it down. Don't forget to make a profit and don't forget that profit isn't just for todays thrill but also tomorrows truck you may need to buy or Bobcat or transmission that blows up when its not convienent for you.

    Keep ^^^^^^this^^^^^^ in the back of your head and you'll get a feel for the industry and where your prices are. If you do, I look forward to your future "look at my new truck" post.

    Hope this helps some of us rookies, I'm going to bed. :drinkup:
     
  2. Coffeecraver

    Coffeecraver LawnSite Senior Member
    from VA.
    Posts: 793

    You are :dizzy: and in no time will be out of business with your calculations
    :hammerhead:
     
  3. Ford Guy

    Ford Guy LawnSite Member
    Posts: 36

    his calculations look good to me, keep in mind it does say MONTHLY OVERHEAD EXAMPLE
     
  4. tthomass

    tthomass LawnSite Gold Member
    from N. VA
    Posts: 3,496

    Mr. Norm........this is nothing more then trying to help some folks on here figure where they need to be $ wise to keep from working for free or at cost. There are MANY more variables that can be added to this, especially dependent upon the diversity of the company. This is probably 3rd grade math in reality but a VERY basic understanding of cash flow.

    At least I'm trying to help someone get a start vs making a useless comment that doesn't bring any light to a question many people seem to have.

    My business is just fine thanks.
     
  5. JD657757

    JD657757 LawnSite Member
    from chicago
    Posts: 78

    I think that was a great post. I agree I will not waste my time chaseing around after a $100 here and a $100 there. If you do this you will not last long in this business.:weightlifter:
     
  6. Lawnworks

    Lawnworks LawnSite Fanatic
    from usa
    Posts: 5,407

    Unless of course you do 10 -20 $100 jobs a day.

    A good lesson for newbies, would be don't sink yourself in debt!! Another way to lessen your overhead per day is to work 6-7 days a week.
     
  7. Bustus

    Bustus LawnSite Member
    Posts: 181

    I agree, many people go and buy the best of the best right away, hire many employees, and then wonder where their profits are. Grow with demand!
     
  8. Duekster

    Duekster LawnSite Fanatic
    from DFW, TX
    Posts: 7,961

    I don't calculate wages as OH directly but the point is pretty much right on.

    Lets say you have 4K in Monthly over head.

    That's 48,000. and I have 6 employees. I need to make about $4.00 per hour on these guys to cover over head.

    I pay them 10.00 per hour and my burden is @45% so they cost me 14.45 per hour plus the $4.00 I need to make for over head.

    I also round up some but I have to get about $20.00 hour per man 2080 hours per year just to keep the doors open.
     
  9. haybaler

    haybaler LawnSite Senior Member
    from ma
    Posts: 511

    please explain? I thought it was a very good post. please have some kind of objective argument or keep it to yourself.
     
  10. Lawnworks

    Lawnworks LawnSite Fanatic
    from usa
    Posts: 5,407

    How do you get 14.25? I was figuring closer to $11.25 for a $10 an hour employee. That includes matching social security, matching medicare, and 5% workman's comp.... which comes to 12.5%. How do you come up w/ your 45% burden?
     

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