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How do I figure my COSTS?

Discussion in 'Business Operations' started by Signature Services, Apr 19, 2005.

  1. Signature Services

    Signature Services LawnSite Member
    Posts: 43

    Hey guys, I bet this has already been asked somewhere but how do I figure my costs? I mean, now that gas prices has gone up and such. Do you consider travel fuel costs, oil, trimmer line, the outright purchase price, etc?

    I am going to be the 'boss' this year and just want to arrive at a fair hourly cost figure. Thanks.
  2. tinman

    tinman LawnSite Bronze Member
    from ga
    Posts: 1,348

    Since you are evidently new....it's hard to calculate. But once you get going, track every penny you spend, every minute you work on each job, etc. Do a search for "what to charge" also. There's general #'s.....$1 per minute is popular & can be realistic goal for most any biz.
  3. rclay11541

    rclay11541 LawnSite Member
    Posts: 100

    Okay bear with me here my spelling sucks but i have a degree in accounting from hofstra.

    An easy way for you to figure this is as follows:

    Lets say here's what you spent to cut grass TODAY:

    You cut 15 lawns
    (these numbers are obviously very round)
    40$ in gas for the truck and mowers
    10$ in 2 cycle oil
    5$ in string
    50$ in employee time
    all these costs = A

    15/A equals your variable costs

    Add up your total fixed costs such as auto insurance, liablility insurance, addvertising expensies, rent, any financing, etc etc.(basicly anything you had to buy to be in business)

    Add all this up and divide it by the numer of lawn cuts you think you will do this year that equals B

    For one time costs like the purchase of a new mower or weed wacker you have to guess how many lawns you will cut until that pice of equipment needs to be replaced so lets say your going to 1000 lawn cuts out of a weed wacker. The price of the weed wacker divided by 1000 equals your price per lawn for that pice of equipment. Do that for all your equpiment including trucks, trailers mowers, etc.

    A+B+ Above depreciated expenses equal your cost per cut.

    Hope that helps and if not give me a hollar and ill try to explain myself better.
  4. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    You have asked the FIRST Question each n every member MUST have asked themselves at one point (hope fully withing the first month of business)

    Get a good accounting program .... QB is a VERY GOOD start .... this will help track your cost .... after 1 year you will have a "base" .... than 2 years ....on n on ... from here you have a foundation related the ability & soundness of your business

    Good Luck

    DIRECT COST: costs of doing business are those expenses that happen because labor was applied, equipment and vehicles were put into action, materials were used and work was done.

    Direct costs are usually easy to document and predict when you know how much time a project will take and what equipment and materials will be needed.

    INDIRECT COST: costs that follow with direct labor
    · Payroll taxes
    · Employee benefits & Insurance
    · Fuel consumption
    · Depreciation
    · Repairs and other on-the-job costs.

    Payroll taxes, benefits and insurance can be easily estimated
    Indirect costs related to equipment are tougher to predict.
    Fuel consumption can vary greatly
    Repairs are often unexpected.

    OVERHEAD COST: expenses that support the operation of a business.
    · Rent for facilities, utilities, advertising, property taxes, storage, insurance on buildings, office expenses and other "behind the scenes" costs that in some cases take place simply because time went by.
    · Take place even when no work was done.

    Direct costs happen when work is done and labor is applied. The workers come in to work, and as soon as they turn the key in the ignition, direct costs and indirect costs follow them and stay with them all day.

    Overhead items of expense that support the operation.

    ANALYZING JOB COSTS. Labor and indirect costs represent the bulk of expense for most contractors and dwarf true overhead costs by comparison.

    Remember ==> BASE your price on these cost + a fair profit ..... don't BID a job based on what the other guy got or what your buddy is getting .... adjust your price as your cost adjust & grow ..... grow sound & fair ....do a good reliable service & you will succeed
  5. woodycrest

    woodycrest LawnSite Senior Member
    Posts: 435

    What is considered a 'fair profit'?
  6. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    Fair Profit ..... fore me is 10-15% of Gross .... this is NOT my Salary .... that is part of the gross ..... in reality .... my companies "Profit" last year was 5.8% .... but I also paid off $30K of debt
  7. walker-talker

    walker-talker LawnSite Platinum Member
    from Midwest
    Posts: 4,771

    Definetely track your time on the job and not just in your head. Everyday I head out, I print a route list. Has the order of the jobs with names and addresses. I write down my start time and stop time. I can figure how much I spend driving on the route. Take notes like, "talked to client 10 minutes". Write your starting and ending mileage on your vehicle. Figure how much gas your mower eats per hour. Figure gas mileage on your vehicle. I have even gone as far document how much time mowing, edging, trimming and blowing on each job. Do this and compare it to your estimates. Now, when I go and give an estimate I estimate each of these jobs. Add them together to get the total time spent on a job and multiply that by your minute charge. Last year I did pretty good and documented about 75% of the time. At the end of the year add them all up and come up with an average and adjust charges for the following year. It came become tedious, but such is business......just the nature of the beast....so to speak.

    Good luck
  8. RyanD

    RyanD LawnSite Member
    Posts: 178

    Can I piggy back on this and ask how you figure expenses that are a monthly charge such as insure for truck or truck payment? Or how about yearly expenses for liability insurance? It is pretty easy to figure out how much you are going to spend on gasoline in a hour but on liability insurance?
  9. tinman

    tinman LawnSite Bronze Member
    from ga
    Posts: 1,348

    Get a stop watch...definitely
  10. ArizPestWeed

    ArizPestWeed LawnSite Bronze Member
    Posts: 1,457

    Just send me a thousand dollars and I'll figure it out for ya

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