Figuring out costs

Discussion in 'Business Operations' started by SullysAllSeasons, Jan 19, 2013.

  1. SullysAllSeasons

    SullysAllSeasons LawnSite Member
    Posts: 16

    So I have been working in the industry while at the same time slowly building my business. I am going full throttle this year but have a few things holding me back...now I may have put the chicken before the egg here but last fall my local Toro dealer had some good deals paired with 0% for 48 months, I bought a 60" Z with collection system, 48" Grandstand and a Giant Vac truck loader. Now that I have the equipment I need to figure my hourly costs in order to get make what I need to pay the bills and stay profitable. I honestly never really paid attention as I just bought my old mower out right to make some beer money and was never really worried about the pay back. I think I have a good idea of what I need to do so if you guys could give me some pointers if I;m wrong....here we go

    So I know I will need to break this down per piece of equipment as some things are not always used, such as the bagger. For examples sake though this is what I think....
    I paid roughly $23,000 for the package, now assuming I run the whole package 30 hours a week and want it "paid off" in 3 years do I just take the number of mowing weeks in 3 seasons, multiply it by 30hrs and then divide the 23k by whatever the number ends up being?? And then just apply the same formula for each piece since things like the bagger and truck loader will only be working 1/4 the time?? I'm no math wiz, barley passed it in high school lol, but am I on the right track?? Any help or suggestions would be greatly appreciated!
     
  2. SullysAllSeasons

    SullysAllSeasons LawnSite Member
    Posts: 16

    FORGOT SOMETHING....

    I totally forgot to add, I do not currently have a shop but feel like I should be charging like I do so I can get one. How do you go about figuring out how to add that in. Maybe a dumb easy question but you will never know if you dont ask!
     
  3. JContracting

    JContracting LawnSite Bronze Member
    Posts: 1,878

    Don't forget to include your overhead. Figure out the best you can what you'll burn in fuel (I have it calculated what I burn per mile), and then you have insurance, office supplies, advertising budgeting, dump fees, repairs & maintenance, phone, the list goes on. Plus what you want to profit and what you need to make to pay personal bills, personal vehicle, house payment, student loans, credit cards, etc.

    When I calculate out my expenses for the upcoming year I prefer it to just know what I have to have per week, per month, and per year, rather than per hour, knowing per hour is very important and I always know what it costs per hour to operate, but I don't always have 40 "billable" hrs in any given week. That's where knowing how much per week or month you must make. For any maintenance work I aim for $75/man hr and hustle hard on the job to get that.
     
  4. SullysAllSeasons

    SullysAllSeasons LawnSite Member
    Posts: 16

    Yea for sure overhead as well, but I kinda figured those calculations would work out the same. I have a per mile cost down on my truck and trailers. You make a good point about what you need to make daily/monthly, but I know what my bills are and what I want to make, just wondering how to make sure I am achieving that, maybe the same questions and maybe Im over looking th answer but is there some sort of formula to throw all these numbers into and come out with a solid number in the end???
     
  5. xclusive

    xclusive LawnSite Bronze Member
    Posts: 1,052

    The formula you are looking for has to be developed by you because everyone has a different operating costs and profit needs. The key is knowing what it costs you to run per hour/minute and then figuring out if that $40/week house is making or costing you money. I have my costs broken down to the minute so I can price my work accordingly. For example, I know that my $40/week house takes 17 minutes to finish (from the time I arrive til the time I pull away) and it costs me $25 so that gives me a $15 profit.
     
  6. fastlane

    fastlane LawnSite Senior Member
    Posts: 347

    This is a good example of why everyone needs to figure their own cost per hour. - Eclusive - Is the cost of $25 per 17 minutes for 1 person or a crew of 2 or 3 ?
     
  7. JContracting

    JContracting LawnSite Bronze Member
    Posts: 1,878

    I should note I don't have anyone working for me on maintenance but on installs I usually have help and labor costs are definitely factored in. I'd like to be able to change that this year though. Hopefully the workload will come with my advertising campaigns
    Posted via Mobile Device
     
  8. djagusch

    djagusch LawnSite Platinum Member
    from MN
    Posts: 4,202

    Even doing it your self you should have a labor cost figured. Otherwise when you add employees that account won't make you the money it should.
    Posted via Mobile Device
     
  9. JContracting

    JContracting LawnSite Bronze Member
    Posts: 1,878

    I do have it figured in. My pricing is still in the correct range, however, maintenance work takes a little bit longer than a 2, 3, 4 man crew. I know that when I add employees for maintenance I know what I need per man hour.
     
  10. cpllawncare

    cpllawncare LawnSite Silver Member
    Posts: 2,659

    WOW! I keep seeing these crazy man hr numbers on here, $75/mnhr? REALLY? your really quoting your labor rate at $75/mnhr? how much are you paying your guys 40-50/hr?
     

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