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Figuring out cost of doing business?

Discussion in 'Business Operations' started by bart may, Mar 7, 2008.

  1. bart may

    bart may LawnSite Senior Member
    from montana
    Posts: 273

    I sadly admit that after doing business for over 15 years I have never really sat down and figured out what my costs are and what I need to charge. I am a mowing and spraying business. I actually do pretty well but am afraid that probably 60% of my customers are making me money and the other 40% are just breaking even. I need your help determining how to figure out what are factors I should include for finding out what it costs me to mow.

    I know that I need to know what is my labor rate, equipment cost per hour. ect...

    Please include any ideas on how you figured out your cost of doing business.

    thanks in advance.
  2. capetan

    capetan LawnSite Member
    Posts: 226

    if you file a tax return every year you should know how much you spend on your business ...... divide your costs in to sales and thats your percentage .... iam i missing something
  3. bart may

    bart may LawnSite Senior Member
    from montana
    Posts: 273

    Thanks for the help. So with that percentage. What exactly does that tell me? I'm trying to figure out what I need to charge per lawn. The reason that some are so low is that I started mowing in High School without all the expenses we currently have. I haven't adjusted some of those lawns near enough over the years. What would I need to do to figure out what it's costing me per hour to operate my business?

    Thanks again for any help.
  4. capetan

    capetan LawnSite Member
    Posts: 226

    heres a few expenses :
    gas for the truck
    gas for the equipment
    service and upkeep/repairs for the equipment
    *business/equipment insurance
    office supplies
    wages for employees
    sub contractor fees
    this probably isnt all expenses but you get the idea
    iam not sure if you do landscaping or just lawns but anyway
    figure out what percentage of sales come from mowing
    then figure out your total expenses, then you multiply the total expenses by the percentage of sales that come form mowing...... giving you the net profit you made from mowing divide that figure by the number of clients, and then you know how much each client is worth to you :)

    if 70% of your profit comes from mowing, then 70% of your expenses are contributed to mowing

    hopefully this doesnt sound to confusing
  5. rmmllc

    rmmllc LawnSite Member
    Posts: 222

    Get Quick books and have a CPA or book keeper teach you how to do job costing or something more simple- this will help a lot- Glad you are thinking about this though, you will improve just by being aware of this.
  6. GraZZmaZter

    GraZZmaZter LawnSite Senior Member
    Posts: 740

    Hire a good CPA.
  7. rmmllc

    rmmllc LawnSite Member
    Posts: 222

    "GOOD" being the key word! There are lots of CPA's out there, but look for one that will advice you, not just plug in numbers.

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