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Estimating and Profit

Discussion in 'Lawn Mowing' started by MJL1929, Dec 30, 2005.

  1. MJL1929

    MJL1929 LawnSite Member
    Posts: 14

    I plan on starting up next summer and have been working on the business plan. So far for basic estimating, I have decided to add overhead with mileage for each location plus any other additional services. However, I am wondering what profit percentage I should shoot for? What do you guys typically go for?
  2. promower

    promower LawnSite Bronze Member
    Posts: 1,232

    This is a tough question to answer because different companies have different expenses and overhead. You should figure out how much your buisness will cost per hour to break even. Including all expenses, taxes, insurance all that. Figure in unforseen expenses that will undoubtly come up. I know if I can gross just over $40 per man hour I can make an average profit and stay in buisness, I am usually between $45-48 per man hour including all drive time and other down time. Like I said though my profit percentages could be completely different from what you will need to make off each job. This is probably a question that only you will be able to answer.

    P.S I'm not far from you, I'm in madison WI, I visit milwaukee frequently, we should grab some lunch when I'm in the area sometime.
  3. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,839

    Like Matthew said, that's a totally arbitrary thing. And most LCOs (on and off of lawnsite) wouldn't know their true profit margins if you asked them. But I think it's fairly typical to aim for about 20% profit margin. Some people have established themselves a reputation where they can make much more than 2o% profit margin. But I don't think that's very many LCOs. I think for now you'd be safe to go with 20% and then adjust that later if you feel you can get more or are taking too much.
  4. Landscape25

    Landscape25 LawnSite Member
    from Florida
    Posts: 199

    You also have to consider the tax factor. Being a sole-proprietor is expensive.
  5. Randy J

    Randy J LawnSite Bronze Member
    Posts: 1,124

    If I'm reading your post correctly MJL, you've already done the hard work - figuring what your cost of doing business is. At that point, while I am not a fan of basing pricing on what everyone else in the market is doing, you do need to consider it. Find out what the average market price is in your area, the subtract your cost of doing business. The difference should be your profit margin. Of course you can fluctuate your pricing from average market pricing depending on how you want to compete. Do you want to be the low-cost, no frills, mow and go service? If so, you'll need to price below the average market price - leaving less profit margin per job, but (hopefully) making it up in number of jobs. Or do you want to compete based on quality? If so, you'll probably be able to price yourself slightly above the average market price. This will probably get you more profit per job, but then you'll probably have less jobs - due to pricing and the time it will take to do a "quality" job over a mow and go job.
  6. irishgoldcleanups

    irishgoldcleanups LawnSite Member
    Posts: 65

    question to all what would you charge on a leaf cleanup that is on a 1/3acre plot took 9 hours one man and ten yards of leaves? thourogh job all beds and shrubs completely cleanedout
  7. gvillgrasscutter

    gvillgrasscutter LawnSite Member
    Posts: 4

    i cannnot charge less than $40 per job and that's for a 1/4 or 1/3 acre lot. here are the extras:
    > 8 miles from my home
    lots of edging and trim work

    look at it this way,
    Assume there are 2000 hours of work each year, if you want to make 80K a year than you have to charge $40 an hour plus your costs.
  8. Randy J

    Randy J LawnSite Bronze Member
    Posts: 1,124

    9 hours X (your cost of doing business + desired profit) + leaf disposal fee = proper charge.

    The hardest part of owning and running a small business is determining what it costs you to sell your product. Unfortunately, you'll never know if your profitable, or be able to maximize your profits if you don't know. But once you have a handle on your costs, the rest of the formula is easy, and it's easy to determine what you should charge for such a job.

    No one can give you an exact answer to your question, because no one else knows your cost of doing business, what your desired hourly profit is, leaf disposal fee, or going market rates for your area. If you need some pointers on determining your cost of doing business, email me at rdj1@iland.net. I'd be glad to provide you some tips on that.

    PMLAWN LawnSite Gold Member
    Posts: 3,535

    Our goal for maintenance work is 12% (Which I will add we did not hit this year)
    And that is using standard business accounting. Your costs are meaning less to this number. (the %) the actual number will change as costs do but the % will always stay the same. Profit margin is the last thing you add to your pricing, Add up everything else first including what YOU will get paid. When all else is added than add the Profit. ( by the way profit is not what you get paid.)
    BUT don't just add 10% to your cost or you will profit less than you want
    Say it costs you $90 an hour to do business x 10% = $9 or pricing at $99.00
    But if you take 99x 10% you get $9.90 See the problem (profit is only 9% this way)

    So take $90 divided by 90% and you get $100 as your pricing

    Or say you want 12% which make your cost 88% of your price
    So take $90 divided by 88% = 102.27 as your price.

    Good luck and happy 06
  10. muddstopper

    muddstopper LawnSite Silver Member
    Posts: 2,342

    PM your math doesnt always work for figureing your pricing. You are correct that profit margin is figured by inverting the %age. Your example of inverting the 10%, which is 90%, and then dividing into your cost, will give you a profit margin of 10% But the number you came up with is not necessary the price of your product, it is the price you must charge to maintain your profit margin. Where the math doesnt work for figureing your pricing is when you are wanting a profit margin of 100%. Try inverting that and dividing into your cost and you will end up with zero as your price. Before we get into a long discussion on this subject, view this thread. http://www.lawnsite.com/showthread.php?t=90332&highlight=figure+profit

    Profit is the amount of money you made after all cost. If you know all your cost, including overhead, depreciation, etc. You add the percentage of profit to 100% and then mulitply that number to the total cost. ex, 10% profit= 10%+100%=110%X total cost and that will give you your priceing. You will end up with a profit of 10% but that will not be your profit margin. Since most business dont work on 100% profit margins your math does work for figureing your pricing as long as one understands that the final price is not % of profit that you have made, but is a ratio of how much money was spent to obtain the gross sales. Profit and Profit Margin are two different terms with two different meanings. Where you math doesnt work is when you want a 100% profit.

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