estimating overhead

Discussion in 'Starting a Lawn Care Business' started by cuttinggrassiscool, Jan 5, 2006.

  1. cuttinggrassiscool

    cuttinggrassiscool LawnSite Member
    Posts: 71

    hi. i am just trying to get a ruff idea of costs versus net to see how much work i would need to make x dollars profit. i know their isn't a science to this and id rather put expenses high, so that the return is better than expected. so here goes i figured 24 mows a year, 4 dollars for fuel per cut(truck and equipment) and 6 per yard per cut toward maintenance and depreciaition. i also guessed at 1000 for general liability insurance, is this reasonable.i didn't include truck as i use it personally so i pay insurance either way. thanks for the help
     
  2. PMLAWN

    PMLAWN LawnSite Gold Member
    Posts: 3,535

    RED FLAG RED FLAG!!!!!

    Get rid of this thinking as it is the perfect way to go broke!
    Everything, and I mean EVERYTHING that you use in your business MUST be payed for by your business. Including--Pens and pencils, copy paper, tools, computer, office space, phone, bank charges, accounting fees, license fees, blades, trimmer line, oil, time to advertise, time to invoice, time to do maintenance, time to put out the fires, tires on truck and trailer, truck and trailer (t&t) lic., t&t maintenance, t&t insurance, insurance on mowers, cost of mowers and all equipment, cost of trailer,

    And I am missing a lot, Do a search on "costs- pricing- overhead- profit.

    Nothing you use is ever "payed for". It can only be, and MUST be, payed for by the money it produces.
     
  3. befnme

    befnme LawnSite Bronze Member
    Posts: 1,413

    i am with pm get commercial ins on you r vehicle and trailer . i pay 1700.00 per year with equipment , trailer ,and truck . that is gen liab. , replacement , and auto .
     
  4. GreenUtah

    GreenUtah LawnSite Senior Member
    from SLC, UT
    Posts: 866

    I'd also add that you need to figure the costs on these items on a yearly basis then take those costs and spread them over only the months that you are working with that piece of equipment. For instance, if you have a 30 week mowing window, a $10k piece of equipment that carries a $350 per month payment ($4200 per year) then you must account for that payment($560 per month, roughly) during your working months at a higher rate to make up for the non working months, a must in any seasonal business. This is true for every fixed cost in your business, insurance, phones, equipment, licensing, etc. If your pricing scheme and volume cannot support the "real" numbers, you must make a change or have your business implode. Don't "loan" equipment and services to your business, it either can pay for them or it's model fails.
     
  5. cuttinggrassiscool

    cuttinggrassiscool LawnSite Member
    Posts: 71

    i may very well be missing something but allow me to clarify a bit to make sure that we all are on the same page. i am a nearly 19 year old college student who is doing this part time out of his personal vehicle which has combination plates( i thought they were just what they sounded like but perhaps i am wrong?). so if this is to fold or not i will be paying the same truck insurance bill. in my state the trailer license fee is 10 dollars annually, as such in a broad cost analysis i felt it unimportant. i know i have missed things, however i tried to make the other numbers a tad high to make up for these odds and ends. i do not think that i can compete with the best companies in my town and still concentrate on college, so thats not really my intent, i would like to be a step above the uninsured fly by night lawn boy though.... thanks for the help.
     
  6. Landscape25

    Landscape25 LawnSite Member
    from Florida
    Posts: 199

    Your personal vehicle insurance will not cover you while on business. It is not a matter of just having insurance. I have an artisan surcharge for mine. I can go to up to 5 jobs a day with this and it is less than 100.00 extra for 6 months, and that portion of the insurance is a deduction. If you are going to a lot of jobs you should get commercial as suggested and your company may not offer the artisan surcharge anyway.
    In all reality you will probably be fairly uncertain of overhead until you have finished a full year. I was taught to divide your gross sales by your overhead to come up with a percentage. So say your gross was 1,000.00 and overhead was 300.00. Your overhead would be 30%. So the next year when you come up with a price you figure that you need to add 30% onto your direct costs just for overhead. If you want 15% profit in addition you would add that in too. So once you have your direct costs you can divide that by
    .65.. Or if you have a calculator that does margins put the cost amount in (don't forget tax, if you are paying it) and put in 35 margin. If you are starting out like myself, I can not charge for the full overhead yet ( it is still unreasonable at this point) because I would probably have little chance of getting jobs, or it is less or no profit.
    I think it takes a few years to really get an accurate percentage because you have to build the business. In the first couple of years the overhead will not be very accurate compared to future years when things are more stabilized.
     
  7. cuttinggrassiscool

    cuttinggrassiscool LawnSite Member
    Posts: 71

    OK i will look into the artisan surcharge or something similar. I'm still a bit confused as to what the combination plates are for, maybe their is some sort of combination insurance. if i insure it commercially, may guess would be that i would only be covered when driving business related and that too would do no good?. i will look into this all though and thank you for the guidance.
     

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